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**Amended and Restated ExclusiveSupply Agreement**

** **by andamong  

**NuSil Corporation**aCalifornia corporation

** SiTech, Inc.**aCalifornia corporation

and

** Mentor Corporation**aMinnesota corporation

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**July 6, 2004**

** **

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** **

**EXCLUSIVE SUPPLY AGREEMENT:  Page 1**

 

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|                                    | **TABLE OF CONTENTS**                                                                  |
|-----------------------------------------|----------------------------------------------------------------------------------------|
| **Section  **                 | ** Page**                                                                         |
| ** **                              |                                                                                   |
| 1...... DEFINITIONS.                    | 1                                                                                      |
|                                    | 1.1      AffectedMaterial.                                    | 1 |
|                                    | 1.2      Affiliate.                                           | 1 |
|                                    | 1.3      ApplicableRequirements.                              | 2 |
|                                    | 1.4      DeliveryDate.                                        | 2 |
|                                    | 1.5      EffectiveDate.                                       | 2 |
|                                    | 1.6      EquivalentMaterial.                                  | 2 |
|                                    | 1.7      FDA.                                                 | 2 |
|                                    | 1.8      Improvements.                                        | 2 |
|                                    | 1.9      InitialMaterials.                                    | 2 |
|                                    | 1.10    InitialMonth.                                                   | 2 |
|                                    | 1.11    Long-TermImplantable Materials.                                 | 2 |
|                                    | 1.12    MarketSegment.                                                  | 2 |
|                                    | 1.13    Material.                                                       | 2 |
|                                    | 1.14    Mentor.                                                         | 2 |
|                                    | 1.15    Non-Long-TermImplantable Materials.                             | 2 |
|                                    | 1.16    NuSil.                                                          | 2 |
|                                    | 1.17    Products.                                                       | 2 |
|                                    | 1.18    QualifiedAlternative Supplier.                                  | 2 |
|                                    | 1.19    Supplier.                                                       | 3 |
|                                    | 1.20    Term.                                                           | 3 |
|                                    | 1.21    TransferAgreement.                                              | 3 |
|                                    | 1.22    Year.                                                           | 3 |
|                                    |                                                                                   |   |
| 2...... SALE AND PURCHASE OF MATERIALS. | 3                                                                                      |
|                                    | 2.1      Delegationof Supplier's duties to SiTech.            | 3 |
|                                    | 2.2      Supplyof Materials.                                  | 3 |
|                                    | 2.3      Specifications;Regulatory Compliance; Manufacturing. | 6 |
|                                    | 2.4      PurchaseOrders; Forecasts.                           | 8 |
|                                    | 2.5      Fulfillmentby NuSil.                                 | 8 |
|                                    | 2.6      Labelingand Packaging.                               | 9 |
|                                    | 2.7      Delivery.                                            | 9 |
|                                    | 2.8      Supplier'sCompliance Certificate; Invoice.           | 9 |
|                                    | 2.9      Rejectionand Inspection of Material.                 | 9 |
|                                    |                                                                                   |   |
| 3...... PRICES, TERMS AND PAYMENTS.     | 10                                                                                     |
|                                    | 3.1      CertainDefinitions for Computation Purposes.         | 10 |
|                                    | 3.2      PriceList.                                           | 11 |
|                                    | 3.3      MostFavored Nation Pricing.                          | 11 |
|                                    | 3.4      Creditsagainst Purchase Price.                       | 12 |
|                                    | 3.5      Booksand Records; Reports.                           | 12 |
|                                    | 3.6      AnnualReport*.*                                      | 12 |
|                                    | 3.7      Audits*.*                                            | 13 |
|                                    | 3.8      PriceAdjustments.                                    | 13 |
|                                    | 3.9      Methodof Payment.                                    | 14 |
|                                    | 3.10    PastDue Amount.                                                 | 14 |

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page i**

 

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|                                                         | **TABLE OF CONTENTS (CONT'D)**                                                       |
|--------------------------------------------------------------|--------------------------------------------------------------------------------------|
| **Section  **                                      | ** Page**                                                                       |
|                                                         |                                                                                 |
| 4...... PARTIAL TERMINATION AND PENDINGDISPUTES.             | 14                                                                                   |
|                                                         | 4.1      Failureto Supply.                                  | 14 |
|                                                         | 4.2      TerminationRight.                                  | 15 |
|                                                         |                                                                                 |   |
| 5...... TERMINATION, RIGHTS, AND OBLIGATIONSUPON TERMINATION | 15                                                                                   |
|                                                         | 5.1      Term.                                              | 15 |
|                                                         | 5.2      Terminationfor Cause.                              | 15 |
|                                                         | 5.3      Terminationby Supplier.                            | 15 |
|                                                         | 5.4      MentorPurchase of SiTech Assets.                   | 15 |
|                                                         | 5.5      Liabilityof Mentor upon Termination for Default.   | 16 |
|                                                         | 5.6      Liabilityof Supplier upon Termination for Default. | 16 |
|                                                         | 5.7      Effectof Expiration or Termination.                | 16 |
|                                                         | 5.8      Returnof Property.                                 | 16 |
|                                                         | 5.9      EnumeratedRemedies not Exclusive.                  | 16 |
|                                                         | 5.10    Continuationafter Expiration of Initial Term.                 | 16 |
|                                                         |                                                                                 |   |
| 6...... REPRESENTATIONS, WARRANTIES ANDCOVENANTS.            | 16                                                                                   |
|                                                         | 6.1      VendorAudit Rights.                                | 16 |
|                                                         | 6.2      NoRights Created.                                  | 17 |
|                                                         | 6.3      Rights,Power, Authority and Binding Obligation.    | 17 |
|                                                         | 6.4      Compliancewith Law.                                | 17 |
|                                                         | 6.5      FulfillmentFacilities.                             | 17 |
|                                                         | 6.6      NoInfringement.                                    | 17 |
|                                                         | 6.7      ProductionCapacity.                                | 17 |
|                                                         | 6.8      ConfidentialInformation.                           | 17 |
|                                                         | 6.9      Dutyto Keep Books and Records.                     | 18 |
|                                                         | 6.10    IntellectualProperty.                                         | 19 |
|                                                         | 6.11    Warranties.                                                   | 19 |
|                                                         | 6.12    Reportsby Mentor.                                             | 19 |
|                                                         |                                                                                 |   |
| 7...... INDEMNIFICATION..                                    | 19                                                                                   |
|                                                         | 7.1      Indemnificationby Mentor.                          | 19 |
|                                                         | 7.2      Indemnificationby SiTech.                          | 19 |
|                                                         |                                                                                 |   |
| 8...... MISCELLANEOUS.                                       | 20                                                                                   |
|                                                         | 8.1      EffectiveDate and Implementation.                  | 20 |
|                                                         | 8.2      Amendmentand Waiver.                               | 20 |
|                                                         | 8.3      GoverningLaw and Legal Actions.                    | 21 |
|                                                         | 8.4      Noticeand Reports.                                 | 21 |
|                                                         | 8.5      EntireAgreement.                                   | 21 |
|                                                         | 8.6      Severability.                                      | 21 |
|                                                         | 8.7      Relationshipof Parties.                            | 21 |
|                                                         | 8.8      Delegationof Duties.                               | 21 |
|                                                         | 8.9      Assignment.                                        | 21 |
|                                                         | 8.10    Publicityand Press Releases.                                  | 22 |
|                                                         | 8.11    ForceMajeure.                                                 | 22 |
|                                                         | 8.12    Counterparts.                                                 | 22 |

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page ii**

 

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**Amendedand Restated Exclusive Supply Agreement**

**            This Amended and Restated ExclusiveSupply Agreement**(the "Agreement") is dated forreference purposes as of  July 6, 2004, and effective asof the "Effective Date" identified below, by and among **NUSILCORPORATION**, a California corporation ("NuSil"); **SiTech, Inc**.,a California corporation that is wholly owned by NuSil ("SiTech"and, collectively with NuSil, the "Supplier"), and **MentorCorporation**, a Minnesota corporation ("Mentor"),with reference to the following facts:

**         Recitals:**

A.                **AlchemyEngineering, LLC**, a California limited liability company doingbusiness under the fictitious business name of "SiTech" ("Alchemy"),is an Affiliate of NuSil.

B.                Mentor and Alchemy executed that certain Exclusive Supply Agreementdated effective September 16, 1997 (the "Original Supply Agreement"),pursuant to which Alchemy has manufactured and sold to Mentor certain Materials(as defined in Section 1.13 below) which are used by Mentor in the manufacture of its Products (as defined in Section 1.17 below).

C.                In order to provide Mentor with a means of assuring itself a continuingsource of supply of the Materials, NuSil and Alchemy entered into an Option andAsset Purchase Agreement with Mentor dated effective as of September 16, 1997(the "Option Agreement") pursuant to which Mentor was grantedan option to purchase the assets of Alchemy, and Mentor has given notice of theexercise of such option. 

D.                Mentor and NuSil have now agreed that the rights of Mentor under theOption Agreement should be transferred to SiTech, Inc., a newly formed,wholly-owned subsidiary of NuSil ("SiTech"), in exchange forthe agreement of NuSil and SiTech to supply the Materials  toMentor for a period of twenty (20) Years.

E.                 Mentor, NuSil and SiTech are therefore executing this Agreement in orderto replace and supersede the Original Supply Agreement and to memorialize (1)the terms and conditions on which SiTech and NuSil jointly and severally agreeto produce and supply the Materials after the assignment of the OptionAgreement to SiTech, and (2) Mentor agrees to acquire such Materials from NuSiland  SiTech following theacquisition by SiTech of the assets of Alchemy.  

**        AGREEMENTS:**

**       Now, Therefore**, inconsideration of the premises and the mutual promises and covenants set forthbelow, NuSil, SiTech and Mentor mutually agree as follows:

**1.    DEFINITIONS.**

For purposes of this Agreement, (a) the wordsand phrases defined in Section 3.1 below shall have the meanings ascribed to them in that Section and (b) the following terms and phrases shall have the meanings set forth below:

**1.1             AffectedMaterial. ** Any Material that Supplier is unable to supply to Mentor(a) at the time and in the quantity required by this Agreement or (b) inconformity with the specifications for such Material and in compliance withApplicable Requirements.

**1.2             Affiliate. **Any one of****(a) anycompany owned or controlled to the extent of at least fifty percent (50%) ofits issued and outstanding voting stock by a party to this Agreement and anyother company so owned or controlled (directly or indirectly) by any suchcompany or the owner of any such company, and (b) any partnership, jointventure or other entity directly or indirectly controlled by, controlling, orunder common control of, to the extent of fifty percent (50%) or more of votingpower) or otherwise having power to control its general activities), a party tothis Agreement, but in each case only for so long as such ownership or controlshall continue.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 1**

 

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**1.3             Applicable Requirements**.  Has the meaning assigned thereto in Section 2.3.1,below.

**1.4             Delivery Date.**  A date for which delivery of a Material to Mentor isproperly requested by Mentor in a written purchase order.

**1.5             Effective Date.**   May 8, 2004.

**1.6             Equivalent Material.**** **Any material that is equivalent to or substantially thesame as a Material.

**1.7             FDA. **The United States Food and DrugAdministration.

**1.8             Improvements.****  **Any change in a Material or a componentof a Material, or in the processes, procedures, methods or techniques used inits manufacture, production or assembly, that enhances the safety, efficacy orperformance of such Material or that makes such Material quicker, easier orless expensive to manufacture, assemble, distribute, store, use or dispose of.****

**1.9 **         **Initial Materials. **Those Materials that Supplier is initially supplying toMentor as of the Effective Date, and any substantially equivalent materialsthat may be supplied to Mentor by any Qualified Alternative Supplier.

**1.10         Initial Month.**The second full calendar month following the date onwhich this Agreement has been executed by each of the parties to thisAgreement.  

**1.11         Long-Term Implantable Materials. **Silicone materials that are designed tobe implanted in the human body for a period of time greater than twenty-nine(29) days.

**1.12         Market Segment.**A discrete portion of the market (defined by referenceto the territory to which Products are shipped, the type of Product shipped, orother similarly specific factors) to which Mentor sells Products containingMaterials supplied by Supplier hereunder.

**1.13         Material.**** **Any material manufactured by Supplier as set forth in **Exhibit A**to this Agreement, any variation of such material resulting from anyImprovements to such material, and any other Long-Term Implantable Material orNon-Long-Term Implantable Material that Supplier may hereafter supply to Mentorpursuant to Section 2.2 below.

**1.14         Mentor.** Mentor and/or each of its wholly-owned Affiliates.

**1.15         Non-Long-Term Implantable Materials.  **Silicone materials other than Long-TermImplantable Materials.  

**1.16         NuSil. **NuSil Corporation, a Californiacorporation, and each of its Affiliates.  

**1.17         Products.** Silicone or other synthetic implants that replace,reconstruct, expand, enhance, augment or improve the functioning or appearanceeither of human tissue or human organs or both.

**1.18         Qualified Alternative Supplier.** A person or entity that is reasonably qualified toproduce or supply a Material or Equivalent Material of the type, in thequantity, and at the same levels of reliability and quality that Supplierdelivers (or is entitled to deliver) hereunder for use in the Products marketedand sold by Mentor.

 

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**1.19         Supplier.** Collectively, NuSiland SiTech, who shall be jointly and severally liable for the performance ofthe obligations of the Supplier under this Agreement.

**1.20         Term.** A period of twenty (20) Years, measured from theEffective Date of this Agreement.   

**1.21         Transfer Agreement.  **That certain Transfer Agreement by andamong SiTech, Mentor and NuSil being executed by the parties concurrently withthe execution of this Agreement pursuant to which the Option is beingtransferred by Mentor to SiTech.

**1.22         Year.  **A period of twelve (12) consecutivemonths commencing on the Effective Date of this Agreement and on eachsucceeding annual anniversary of the Effective Date.

**2.                 SALE AND PURCHASE OF MATERIALS**

**2.1             Delegation of Supplier's duties to SiTech.** For as long as SiTech is an Affiliate of NuSil, NuSilshall delegate to SiTech all of the duties and obligations of the Supplierunder this Agreement and may assign to SiTech all of the rights and benefits ofthis Agreement, and SiTech shall accept such delegation and any such assignmentand shall perform all of the duties of the Supplier hereunder.

**2.1.1       **No such delegation or assignment shall release NuSil from itsobligations as a Supplier under this Agreement.  For as long as the duty toperform the obligations of the Supplier under this Agreement has been delegatedsolely to SiTech, NuSil shall (a) take those actions in its capacity as thesole shareholder of SiTech as are necessary or appropriate to enable SiTech toperform the duties and obligations delegated to it under this Agreement, and(b) refrain from taking any action that would impair or interfere with theability of SiTech to perform the duties and obligations delegated to under thisAgreement.

**2.1.2       **If for any reason SiTech fails to perform any of the duties andobligations of the Supplier under this Agreement, then NuSil shall immediatelyresume the performance of such duties and obligations as fully and completelyas if this Agreement were solely between Mentor and NuSil.

**2.1.3       **Mentor, upon request of Supplier from time to time, shall conductsuch tests and inspections as may be reasonably necessary in order to verifythat NuSil and its Affiliates appear to be qualified, under ApplicableRequirements and the requirements of Mentor, to supply Materials to Mentor fromfacilities other than the SiTech facilities in Irving, Texas, but no suchverification given by Mentor shall (a) constitute a certification by Mentorthat Supplier is in compliance with Applicable Requirements or (b) relieveSupplier of its obligation to comply with all Applicable Requirements or (c)constitute or be construed to constitute a waiver by Mentor of its rights torequire Supplier to remedy any noncompliance that did not come to the attentionof Mentor during any such tests and inspections, whether due to the negligenceof Mentor or otherwise 

**2.2             Supply ofMaterials.**

**2.2.1       Manufacture by Supplier.** Supplier hereby agrees to manufacture for, and deliver to Mentor, and Mentoragrees to purchase from Supplier, such quantities of the Materials listed on **Exhibit A**hereto as may be necessary to meet Mentor's requirements based upon suchwritten purchase orders and forecasts provided pursuant to Section 2.4 of this Agreement.  In the event that Mentor's requirements differ significantly (by more than 25%) from the forecasts, Mentor will promptly notify Supplier of the fact and the amount of such variance.  Supplier shall usecommercially reasonable efforts to satisfy any increases in Mentor'srequirements over its binding and non-binding forecasts as provided for inSection 2.4.1.  The parties hereto acknowledge and agree that Supplier maymanufacture or sell other products to any third party.  

 

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**2.2.2       Mentor Purchase Commitments.**  Subject to Supplier's discharge ofits obligations under this Agreement and the provisions of Sections 2.2.2A and 4 below, during the term of this Agreement Mentor (a) shall purchase solely from Supplier all Long-Term Implantable Materials (and any alternative materials having substantially the same specifications and functionality asthe Materials) required by Mentor, and (b) shall not purchase any Non-Long-TermImplantable Materials from any Person other than Supplier without first (i)delivering to Supplier a detailed written summary of the specifications andproposed purchase price of such Non-Long-Term Implantable Materials, and (ii)negotiating exclusively with Supplier, in good faith, for fourteen (14) daysregarding whether and on what terms Supplier may fulfill Mentor's requirementsfor such Non-Long-Term Implantable Materials; *provided that*,notwithstanding the foregoing:

A.                **AlternativeSupply.**  If either (1) Mentor  identifiesa Qualified Alternative Supplier for any Material for use in an identifiedMarket Segment at a cost that is less than the price charged by Supplierhereunder, or (2) a Material supplied by Supplier hereunder, in the reasonablejudgment of Mentor,does not satisfy the reasonable requirements of Mentor for quality,reliability and timeliness, then Mentorshall deliver written notice of such circumstances to Supplier, including adescription of the events or circumstances occasioning the invocation of thisSection 2.2.2A, the name and location of the proposed alternative supplier, a description of the Market Segment affected, and all other relevant circumstances.

(1)               Supplierthereafter may elect, within thirty (30) days following the receipt of suchwritten notice from Mentor, either to lower its price for such Material or tomodify its manufacturing practices to meet the reasonable requirements ofMentor, as applicable under clause "(1)" or "(2)" ofSection 2.2.2A above.  If Supplier fails, within that 30-dayperiod, either to meet the alternative supplier's price or to meet Mentor'sreasonable requirements, as applicable, then Mentor thereafter shall be releasedfrom its exclusivity commitment with respect to such Material under thisAgreement and may procure such Material from the Qualified Alternative Supplier(with respect to clause "(1)", above) or any other supplier (with respect toclause "(2)", above). 

(2)               Anelection by Mentor to procure Materials from a Qualified Alternative Supplierpursuant to clause (1) of Section 2.2.2A above shall release Supplier from itsobligations under this Agreement only with respect to those Materials beingpurchased by Mentor from the Qualified Alternative Supplier and only for aslong as Mentor elects to procure such Materials from such Qualified AlternativeSupplier.  Mentor shall be entitled at any time to resume procuring theMaterials from SiTech or NuSil in accordance with the provisions of thisAgreement provided that either SiTech or NuSil is still in the business ofproducing such Materials.  A suspension in the purchase of Materials by Mentorpursuant to this Section 2.2.2A shall not toll the term of thisAgreement or result in an extension of its term.

B.    **NuSil Electionto Discontinue. **If in any period of twelve (12) consecutive calendar months during the term ofthis Agreement Mentor's purchases of Initial Materials from one or moreQualified Alternative Suppliers ("QAS Procured Initial Materials") are, in theaggregate, more than twenty percent (20%) of the total dollar volume of itsaggregate purchases of Initial Materials, including those procured from a QualifiedAlternative Supplier and those procured from Supplier (the "Total ProcuredInitial Materials"), then Supplier may elect to deliver to Mentor a writtennotice of Supplier's intent to discontinue supplying Mentor pursuant to thisAgreement (a "Preliminary Notice"), specifying the date on which suchdiscontinuation will become effective, not less than ninety (90) days prior tosuch effective date.

(1)    Within thirty (30) days of its receipt ofany such Preliminary Notice, Mentor may elect to adjust the quantity of theInitial Materials Mentor is purchasing from Supplier and any QualifiedAlternative Suppliers such that its purchases of the QAS Procured InitialMaterials will not exceed twenty percent (20%) of the Total Procured InitialMaterials.  Mentor shall notify NuSil of any such election (an "AdjustmentElection") within thirty (30) days of Mentor's receipt of Supplier'sPreliminary Notice.  If Mentor timely gives Supplier written notice of anAdjustment Election, then during the sixty (60) days following its delivery ofthe Adjustment Notice (the "Adjustment Period"), Mentor shall make theadjustments to its purchases of the Initial Materials being procured fromSupplier and from Qualified Alternative Suppliers to amounts such that, if itspurchases during the Adjustment Period were to continue at the same level forthe twenty-four (24) full calendar months following its delivery of theAdjustment Election (the "Remedial Period"), its QAS Procured Initial Materialsduring such 24-month Remedial Period would not exceed twenty percent (20%) ofthe Total Procured Initial Materials during the Remedial Period. 

 

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a.      IfMentor does not timely give an Adjustment Notice, or if, after timely giving anAdjustment Notice, Mentor fails during the Adjustment Period to make theadjustments to its purchases of the Initial Materials required by subparagraph 2.2.2B(1) above, then the provisions of 2.2.2B(2) below shall apply and Supplier shall beentitled to discontinue supplying Mentor under this Agreement on the effectivedate specified in the Preliminary Notice.

b.      IfMentor timely gives an Adjustment Notice and thereafter during the AdjustmentPeriod makes the adjustments to its purchases of the Initial Materials requiredby subparagraph  2.2.2B(1) above, then Supplier's Preliminary Noticeshall automatically be suspended for as long as Mentor's purchases of the QASProcured Initial Materials do not exceed twenty percent (20%) of the TotalProcured Initial Materials.

c.      Ifat any time during the 24-month Remedial Period Mentor's purchases of the QASProcured Initial Materials, in the aggregate, exceed twenty percent (20%) ofTotal Procured Initial Materials, then Supplier shall be entitled todiscontinue supplying Mentor pursuant to this Agreement by giving Mentor noticeof its intent to do so, specifying the effective date on which it shalldiscontinue supplying Mentor, not less than ninety (90) days prior to sucheffective date (a "Discontinuation Notice") at any time prior to the expirationof the Remedial Period.  If a Discontinuation Notice is not properly given bySupplier prior to the expiration of the Remedial Period, then the PreliminaryNotice shall automatically be cancelled and Supplier shall not be entitled todiscontinue supplying Mentor under this Agreement without first again giving aPreliminary Notice in accordance with the provisions of this Section 2.2.2B and affording Mentor the opportunity tomake an Adjustment Election.

(2)    If Supplier becomes entitled todiscontinue supplying Mentor pursuant to any provision of this Section 2.2.2B, then duringthe ninety (90)-day period following its receipt of any Preliminary Notice or anyDiscontinuation Notice given pursuant to this Section 2.2.2B (the "Option Period"):

a.      Mentormay elect to purchase the assets of SiTech in accordance with the terms andconditions set forth in Sections 4.1 and 5 of the Transfer Agreement(the "SiTech Purchase Option").  If Mentor elects to exercise the SiTechPurchase Option, then Mentor shall deliver to SiTech within such 90-day Option Period an irrevocable, binding electionto purchase such assets.  The purchase and sale of the SiTech assets thereaftershall close at the time, in the manner, and with such mutual deliveries as arerequired under Section 5 of the Transfer Agreement.   If Mentor failsto timely exercise its purchase option and close the purchase of SiTech'sassets in accordance with the foregoing subparagraph (a), then at theexpiration of the 90-day Option Period Supplier shall be entitled todiscontinue supplying Mentor under this Agreement.  

b.      Theparties shall also negotiate in good faith such other prices or terms for theMaterials as may be mutually acceptable to the parties, in their respectivesole discretion.  If the parties agree upon such alternative prices or termswithin such subsequent 90-day period, then (a) this Agreement shall remain infull force and effect as modified by such agreement regarding alternativeprices and terms and (b) the Discontinuation Notice shall be cancelled.  If theparties fail to reach agreement upon such alternative prices or terms withinsuch 90-day period, then Supplier may elect to terminate this Agreementpursuant to Section 5.3 below.

 

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C.                 **Suspension ofObligation.**  Mentor's obligation to purchase a Materialexclusively from Supplier and Supplier's obligation to manufacture and sellsuch Material to Mentor may be suspended for not more than ninety (90) daysafter the filing by Supplier of a Master Access File for that Material with theFDA to the extent necessary to enable Supplier or Mentor to perform suchclinical testing or other procedures as may be required by the FDA as acondition to its approval of the marketing and sale of such Material or aProduct of which such Material is a component.

**2.2.3       Materials.**  Suppliershall maintain an inventory of raw materials and finished goods sufficient toassure that at all times during the term of this Agreement Supplier can shipand deliver to Mentor within thirty (30) days a three (3) month supply of theMaterials to be purchased by Mentor pursuant to the terms of this Agreementafter taking into account shipments made during the preceding thirty (30) days(the "Minimum Inventory Level").  Upon written request ofMentor from time to time (but in all events not more frequently than once inany consecutive three (3) month period), Supplier shall provide to Mentorwithin thirty (30) days of written request therefor a list of Supplier's rawmaterials and finished goods inventory as of the last day of the last precedingcalendar month.  Mentor shall have the right, but not the obligation, toconduct an annual audit of Supplier, at Mentor's expense, to satisfy itselfthat such Minimum Inventory Level is being met.  In the event that Mentor'saudit or any Supplier report reveals that Supplier is not maintaining theMinimum Inventory Level for each necessary raw material, Mentor may, at itssole option, but shall not be obligated to purchase a three (3) month supply ofany such raw material and store such raw material at Supplier's facility at anytime when Supplier's inventory (including any inventory provided by Mentor hereunder)is below (the "Minimum Inventory Level").  Supplier shall useany such raw material purchased by Mentor prior to using any raw materialsthereafter purchased by Supplier and shall reimburse Mentor the amount ofMentor's actual cost for such raw materials upon Supplier's use of the rawmaterial purchased by Mentor.  An election by Mentor not to purchase and storean inventory of raw materials at Supplier's facility shall not excuse a defaultby Supplier in its duty to timely supply Mentor as provided by Section 2.4below. 

**2.3             Specifications;Regulatory Compliance; Manufacturing.**

**2.3.1       Product specifications. **Supplier shall manufacture the Materials in accordance with the specifications thereforto which Supplier has been manufacturing such Materials prior to the datehereof.  Supplier's Manufacturing operations shall be in conformance with therequirements of the United States Food and Drug Administration applicable toSupplier, the Quality System Regulations as promulgated or modified by the FDAfrom time to time ("QSRs"), and the requirements of other cognizantforeign, federal, state, and local regulatory authorities applicable toSupplier (collectively, the "Applicable Requirements"). Supplier shall not deviate in any way whatsoever therefrom without the priorwritten consent of a duly authorized representative of Mentor.  

A.                In the event Mentor determines that Supplier is not in compliance withApplicable Requirements, including without limitation applicable QSRs, Mentorshall promptly deliver to Supplier written notice of such non-compliance("Non-compliance Notice").  Supplier shall create and deliverto Mentor an action plan to address any such non-compliance (the "ActionPlan") within fifteen (15) days of its receipt of the Non-complianceNotice.  The Action Plan shall be mutually agreeable to Mentor and Supplier,including the time period and the action(s) necessary to correct anynon-compliance by Supplier.  In no event shall the time period set forth in theAction Plan to correct any current non-compliance exceed twelve (12) monthsfrom the date of Supplier's receipt of the Non-compliance Notice.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 6**

 

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(1)               In the event Supplier fails to cure any such non-compliance within thetime period set forth in the Action Plan, Mentor shall have the right, but notthe obligation, to terminate this Agreement pursuant to Section 5.2.5below with respect to the Affected Material or to elect to have some or all of the Affected Materials supplied by a third party supplier pursuant to Section 4 below.  

(2)               The termination of this Agreement by Mentor pursuant to thisSection 2.3.1 shall be without prejudice to any other rights and remedies Mentor may have by reason of the breach by Supplier of its obligations under this Agreement.

B.    For any changes to the specifications for any Materials requested byMentor which are not required to comply with Applicable Requirements, includingwithout limitation, applicable QSRs, Mentor shall deliver to Supplier writtennotice of such desired changes, and Supplier shall use its commerciallyreasonable efforts to implement such changes requested by Mentor.  The partieshereto agree to work together in good faith to implement any such changes tothe specifications.  Supplier shall charge for such work at rates equal to itsestablished hourly rates for the research, technical and engineering personnelactually performing such work, and Mentor shall reimburse the charges thereforpromptly upon receipt of an itemized invoice therefor.  Notwithstanding anyother provision hereof to the contrary, Supplier shall be entitled to increasethe prices for the Improved Materials containing such changed specifications bythe amount of any increase in Supplier's costs of materials and other directmanufacturing costs.

**2.3.2       Master Access File.** Supplier shall establish, file with the FDA and maintain in accordance with therequirements of the FDA a Master Access File ("Master Access File")with respect to the Materials.

A.                 Subject to Paragraphs B and C, below, upon Mentor's request, Suppliershall:

(1)   Provide Mentor with a table of contents of any other summary informationregarding the Master Access File that Mentor may reasonably request, but nothingin this Section 2.3.2 shall require Supplier to disclose any confidential information in such table of contents. 

(2)   Authorize the FDA to access on behalf of Mentor any Master Access Fileof Supplier pertaining to the Materials (*provided that*, this clause"(2)" is not intended and shall not be construed to avoid thelimitations imposed by Sections 2.3.2 B and C, below).

(3)   Provide Mentor with such information as Mentor may reasonably requestrelative to the interpretation or application of data contained in the MasterAccess File in order to support (A) any filing or application then pendingbefore the FDA or any other United States or foreign government agency, or (B)any proceedings then being conducted by or before the FDA or any other UnitedStates or foreign government agency, or (C) any pending or threatenedlitigation or other proceeding involving Materials to which Mentor is or maybecome a party. 

(4)   Certify to or on behalf of Mentor that any Materials delivered hereundermeet the specifications contained in the Master Access File and aremanufactured in compliance with Applicable Requirements.

(5)   Notify Mentor of the nature and extent of any deficiency alleged by theFDA to exist in the Master Access File and any actions that Supplier proposesto take to remedy any such deficiency required to be remedied to satisfyApplicable Requirements.  

B.                 Notwithstanding Paragraph A of this Section 2.3.3, as a conditionof NuSil's delivering any of the information contemplated by subparagraphs (1)through (5) of the foregoing Paragraph A, Supplier may require Mentor toexecute and deliver an appropriate confidentiality agreement or nondisclosure agreement as a condition to thedisclosure of any proprietary information requested by Mentor hereunder.

 

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C.    Notwithstanding Paragraph A of this Section 2.3.3, in no eventshall Mentor be entitled to have access to, or shall Supplier be required todisclose hereunder, any information containing Supplier's manufacturingprocesses for Materials except in the connection with the transfer of the SiTechAssets to Mentor upon exercise by Mentor of the SiTech Purchase Optioncontained in the Transfer Agreement.  

**2.4             PurchaseOrders; Forecasts.**

**2.4.1       Forecast. ** Mentorshall deliver to Supplier within five (5) days after the execution of thisAgreement by each party (a) Mentor's rolling non-binding forecast of itsrequirements for the Materials for the twelve (12) month period commencing withthe first day of the Initial Month, and (b) a written purchase order settingforth the quantities and Delivery Dates for Mentor's first purchase order ofMaterials for the sixty (60) day period commencing with the Initial Month. Thereafter, Mentor shall deliver to Supplier on a monthly basis (or at suchother intervals as Mentor and Supplier mutually agree upon, but in no eventlonger than ninety (90) days), an updated non-binding forecast of itsrequirements for the ensuing twelve (12) month period and a binding update ofits quantity requirements and purchase order for such Materials for the ensuingsixty (60) day period or such longer period as the parties agree.  

**2.4.2       Purchase Orders. **Each written purchase order shall specify the Delivery Date and shall include areference to this Agreement.  Supplier shall acknowledge within three (3)business days after receipt of any written purchase orders submitted by Mentor(a) its receipt of such purchase order,  (b) its ability or inability tofulfill the above-described sixty (60) day forecasts and (c) if it is unable tofulfill the order, the reasons why.  The terms and conditions of this Agreementwill control over any terms contained in any Mentor written purchase order,written acceptance or acknowledgement by Supplier, invoice or any otherdocument that is not expressly identified as an amendment to this Agreement andsigned by both parties.

**2.4.3       Priority of Shipments to Mentor andOther Customers.**  Suppliershall afford all purchase orders for the Materials received from Mentor equal priority with Supplier's own supplyrequirements and orders from other customers or distributors for both theMaterials, Equivalent Materials, and other similar products manufactured by Supplier.  Supplier will ship allorders for Materials, and for other products manufactured or supplied bySupplier to others, in the priority in which such orders were received, and Supplier will not place anypurchase orders for Materials received from Mentor on a back-orderstatus if Supplieris then shipping Materials, Equivalent Materials other products manufactured orsupplied by Supplierto its other customers or distributors.  In addition, if Supplier is unable tosatisfy the requirements of Mentor and of any third party whose purchase ordersprecede those submitted by Mentor, then Supplier shall not refuse or refrainfrom filling Mentor's purchase orders, but rather shall fill Mentor's purchaseorders in proportion to its Purchase Ratio as compared to the Purchase Ratio ofany such third party.  For purposes of this provision, Mentor's "PurchaseRatio" shall equal whichever of the following accords Mentor a higherallocation of Materials with respect to the competing purchase orders:  (i) theratio of Mentor's then-pending purchase order size (determined by thedollar-denominated price of such Purchase Order) to the then-pending (and earlier-submitted)purchase order size (as also determined by the dollar-denominated price of suchpurchase order) of such other third-party; or (ii) the ratio of Mentor's prior12-months' purchases to the prior 12-month's purchases of such other third-partythat submitted an earlier purchase order.

**2.5             Fulfillment by NuSil**.  Supplier may from time to time elect to have any orderfor Materials hereunder fulfilled by NuSil from NuSil's facilities, but nothingin this Section 2.5 is intended, and this Section 2.5 shall not be construed, to be in derogation of (a) the obligation of NuSil under Section 2.1 to delegate the performance of its duties and obligations hereunder to SiTech or (b) the obligation of SiTech under Section 6.7 to maintain the capacity to produce and supply the Materials to Mentor.

 

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**2.6             Labeling and Packaging**.  Supplier shall label the Materials in accordance withthe labeling specifications set forth in this Section 2.6.  Unless Mentor otherwise requests, all Materials ordered by Mentor shall be packed for domestic shipment and storage in accordance with Supplier's standard commercial practices.  Supplier will mark all containerswith necessary handling and shipping information, including but not limited toany special handling that may be required, and will provide an itemized packinglist with each shipment which shall include (a) the purchase order number(s) prominentlymarked, (b) the quantity of the Material shipped, (c) the date of shipment, (d)supplier parts number, (e) supplier parts description, (f) supplier lot number,(g) net weight and (h) the warranty period.  Mentor shall notify Supplier ofany special packaging requirements, which shall be at Mentor's expense.

**2.7             Delivery.** All Materials delivered to Mentor shall be  FOB Supplier's facilities set forth in each written purchaseorder (or, at the election of Supplier pursuant to Section 2.5 above, NuSil's facilities).  Supplier shall use its best efforts and the latest and most efficient delivery systems to deliver the Materials no sooner than three (3) days prior to the applicable Delivery Dates and nolater than the applicable Delivery Date.  Supplier shall use its best effortsto assist Mentor in arranging any desired insurance (in amounts that Mentorshall determine) and transportation, via air freight unless otherwise specifiedin writing, to any destination specified in writing from time to time byMentor.  All customs, duties, costs, taxes, insurance premiums, and otherexpenses relating to such transportation and delivery, shall be at Mentor'sexpense.

**2.8             Supplier's Compliance Certificate;Invoice.** All Materials delivered to Mentorshall be accompanied by a certificate, signed by the President or the mostsenior Quality Assurance Manager of Supplier at such time indicating that theMaterials being delivered (a) have been tested by Supplier, (b) meet thespecifications therefor and are in compliance with applicable QSRs and allother Applicable Requirements, and (c) are free from any manufacturing defects.  An invoice for the amount due for the Materials shall besent separately by Supplier to Mentor's accounts payable department.

**2.9             Rejection and Inspection ofMaterial.** Everytender of Materials must materially comply with the Material specifications therefor. Mentor may reject any portion of any shipment of the Materials which is notconforming with  suchspecifications.  In order to reject a shipment, Mentor must (i) give notice toSupplier of Mentor's intent to reject the shipment within fourteen (14) days ofreceipt together with a written indication of the reasons for such possiblerejection.  After notice if intention to reject is given, Mentor and Suppliershall both examine the Materials in question using mutually agreeable testmethods to determine the extent and existence, if any, of any nonconformity. If it is determined that the Materials in question are non-conforming, then (a)the date for payment for such Materials, as set forth in Section 3 below, shall be suspended and (b) Supplier shall, at its own cost and expense, promptly undertake to replace such nonconforming Materials and deliver conforming Materials to Mentor.  If no such notice of intent to rejectis timely received, Mentor shall be deemed to have accepted such delivery ofMaterial.

**2.9.1       **Notwithstanding Section 2.9 above, in the case of Materials having defects which Mentor could not reasonably have been discovered by diligent examination upon receipt thereof, or the physical characteristics of Materials have changed so that suchMaterial is not conforming with the specifications therefor, Mentor shall givenotice of Mentor's intent to return such Materials within thirty (30) daysafter discovery of such defects or change in physical characteristics, providedthat such notice may in no event be given later than the expiration of thewarranty period set forth in Section 6.11 below, except as otherwise provided in Section 2.9.2 below.  Upon receipt of such notice, Supplier shall provide replacement Materials to Mentor at Supplier's own expense.

 

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**2.9.2       **Notwithstanding Sections 2.9 and 2.9.1 above, Mentor may return to Supplier at any time any Material with physical characteristics that have changed such that the Material is not conforming with the specifications therefor to be reconditioned andreturned to Mentor, provided that Supplier may charge Mentor an amount notgreater than fifty percent (50%) of the original price paid by Mentor for suchreconditioned Material if the warranty period set for in Section 6.11below has expired.  If such Material's shelf life and the warranty period set forth in the Section 6.11 have not expired, Supplier shall provide Mentor with new Material at Supplier's own cost.

**2.9.3       **Except as otherwise agreed to by Mentor, Supplier shall not changein any way the specifications of the Material, or any process, material,equipment or facility use in the production of the Material without the priorwritten approval of Mentor's Quality Assurance Manager at such time.

**3.                 PRICES, TERMS AND PAYMENTS**

**3.1             Certain Definitions for ComputationPurposes.** The following words and phrases shall have the meaningsset forth below:

**3.1.1       Competitor. **EachPerson other than Mentor or its Affiliates that (a) competes with Mentor in anyMarket Segment, and (b) purchases Materials or Equivalent Materials fromSupplier or any Affiliate of Supplier for use in one or more Products of thetype which are then being manufactured or distributed by Mentor using Materialsor Equivalent Materials purchased by Mentor from Supplier pursuant to thisAgreement.

**3.1.2       Major Competitor. **ACompetitor to whom Supplier sells a Common Material in a quantity that equalsor exceeds during a single Year ten percent (10%) of the quantity of the sameCommon Material sold to Mentor during such Year.  

**3.1.3       Customer. ** Mentorand/or any Major Competitor.

**3.1.4       Common Material.  **Withrespect to each separate Major Competitor, any Material and Equivalent Materialif such Material was sold to Mentor during a Year and the same Material or anEquivalent Material was also sold to such Major Competitor during the sameYear.  A Material or an Equivalent Material shall be a Common Material as to Mentorand any single Major Competitor in any Year only to the extent that Suppliersold such Material or an Equivalent Material both to Mentor and such MajorCompetitor during the same Year.  For example, in the following tableillustrating the Materials (designated by an alpha character) purchased byMentor or by a Major Competitor and Equivalent Materials (designated by analpha-numeric code) purchased by Major Competitors 1, 2 and 3: 

| MENTOR | COMPETITOR 1 | COMPETITOR 2 | COMPETITOR 3 |
|--------|--------------|--------------|--------------|
| A      | A1           | --           | --           |
| B      | B1           | B            | --           |
| C      | --           | C1           | C1           |
| D      | --           | D1           | D2           |
| --     | E            | --           | E            |
| --     | F            | F1           | F2           |
| --     | G            | --           | --           |
| H      | --           | --           | --           |

Materials A & A1 are CommonMaterials as to Mentor and Major Competitor 1;  Materials B & B1 CommonMaterials as to Mentor and Major Competitors 1 and 2; 

 

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Materials C & C1 are CommonMaterials as to Mentor and Major Competitors 2 and 3; Materials D, D1 & D2 areCommon Materials as to Mentor and Major Competitors 2 and 3; and Materials E, F, F1, F2 & Gare not Common Materials because they were not purchased by Mentor.Material H is not a CommonMaterial since no Major Competitor purchased it or an Equivalent Material.

**3.1.5       Unit Purchase Price. **With respect to any single Common Material, the price per unit, exclusive ofcharges made for packaging, labeling, shipping, insurance and returns, chargedto a Customer for such Common Material during a Year, computed by dividing theaggregate amount charged to such Customer for its total purchases of suchCommon Material during such Year by the total quantity of such Common Materialpurchased by such Customer during such Year.

**3.1.6       Aggregate Purchase Price.** With respect to any single Common Material, the aggregate amount charged to aCustomer for its total purchases of such Common Material during a Year,exclusive of charges made for packaging, labeling, shipping, insurance andreturns, computed by multiplying: (a) the total quantity of such CommonMaterial purchased by such Customer, by (b) the Unit Purchase Price charged tosuch Customer for such Common Material.  

**3.1.7       Actual Cost of Common Materials. ** The aggregate amount charged to aCustomer during a Year for its total purchases of all Common Materials duringsuch Year, exclusive of charges made for packaging, labeling, shipping, insuranceand returns, computed by adding the sum of the Aggregate Purchase Pricescharged to such Customer for each of the Common Materials purchased by suchCustomer during such Year. 

**3.1.8       ImputedAggregate Purchase Price. ** With respect to any Major Competitor,a hypothetical Aggregate Purchase Price that Mentor would have been charged fora Common Material during a Year had Supplier charged Mentor the same AggregatePurchase Price as Supplier actually charged such Major Competitor for suchCommon Material during the same Year, computed by multiplying the Unit PurchasePrice charged to such Customer for such Common Material by the total quantityof the same Common Material purchased by Mentor during the same Year.

**3.1.9       Imputed cost of Common Materials.**  With respect to any Major Competitorduring any Year, the sum of the Imputed Aggregate Purchase Prices calculatedfor the Common Materials purchased by such Major Competitor in such Year.  

**3.2             Price List**.  Subject to adjustment pursuant to Section 3.8 below, the initial Unit Purchase Price charged to Mentor for each Material specified in **Exhibit A**from and after the Effective Date of this Agreement shall be such prices as areagreed to by the parties within thirty (30) days of the date on which thisAgreement is signed by the parties.   

**3.3             Most Favored Nation Pricing.** At no time during the term of this Agreement willSupplier sell Common Materials to Mentor at Unit Purchase Prices which, onaverage, exceed the Unit Purchase Prices charged to any Major Competitor forall such Common Materials during such Year, taking into account only Mentor's(and not Major Competitor's) purchase volumes of such Common Materials.

**3.3.1       **Supplier shall be deemed to be in compliance with the provisions ofSection 3.3 in any given Year when, with respect to each Major Competitor of Mentor:

Σ (MP x MQ) < Σ (CP xMQ)

where, with respect to any single Major Competitor ofMentor:

A.    MP equals the Unit Purchase Price charged to Mentor for each separateCommon Material (as it pertains to each applicable Major Competitor) during theYear; and

 

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B.    MQ equals the quantity of such Common Material purchased by Mentorduring the Year; and

C.    Σ (MP x MQ) means the ActualCost of Common Materials (calculated separately for each Major Competitor)charged to Mentor, computed by adding the sum of the products of (MP x MQ) withrespect to each Common Material purchased both by Mentor and such MajorCompetitor during the Year; and 

D.    CP equals the Unit Purchase Price (calculated separately for each MajorCompetitor) charged to a Major Competitor for each separate Common Materialpurchased both by Mentor and such Major Competitor during the Year; and

E.       Σ (CP x MQ) means the ImputedCost of Common Materials (calculated separately for each Major Competitor),computed by adding the sum of the products of (CP x MQ) with respect to eachCommon Material purchased both by Mentor and such Major Competitor during theYear.

**3.3.2       **Supplier shall be deemed to be in breach of the provisions of thisSection 3.3 when, with respect to any Major Competitor of Mentor:

Σ (MP x MQ) >Σ (MQ x CP)

**3.3.3       **The formula set forth in Section 3.3.1 above shall be calculated separately for each Major Competitor each Year in order to compare the Actual Cost of Common Materials charged to Mentor for the Common Materials purchased by Mentor during the Year with theImputed Cost of Common Materials calculated for the Common Materials purchasedby each Major Competitor during such Year.

**3.4             Credits against Purchase Price.** If in any Year the Actual Cost of Common Materialscharged to Mentor exceeds the Imputed Cost of Common Materials as calculatedfor any Major Competitor during such Year, then Mentor shall be entitled to acredit against the purchase price for the next Materials purchased by Mentorfrom Supplier in an amount equal to 105% of the amount by which the Actual Costof Common Materials charged to Mentor exceeded the lowest Imputed Cost ofCommon Materials as calculated for to that Major Competitor for whom thecomputation required by Section 3.2 above produces the lowest Imputed Cost of Common Materials.   

**3.5             Books and Records; Reports.** Suppliershall keep books and records in sufficient detail to permit independentverification by a disinterested auditing firm of the compliance by Supplierwith the pricing, supply and delivery provisions of this Agreement  

**3.6             Annual Report.****    **  Supplier shall prepare and submit to Mentor within sixty (60) daysafter the end of each Year a written compliance certificate executed by itsChief Executive Officer or its Chief Financial Officer certifying that Supplierhas made each of the computations called for by Section 3.3 above for the purpose of comparing the Actual Cost of Common Materials charged to Mentor during the preceding Year with the Imputed Cost of Common Materials calculated for the Common Materials sold to each MajorCompetitor during such Year and stating that (a) the Actual Cost of CommonMaterials charged to Mentor during such Year did not exceed the Imputed Cost ofCommon Materials calculated for the Common Materials sold to any MajorCompetitor during such Year or, (b) if the Actual Cost of Common Materials paidto Mentor during such Year exceeded the Imputed Cost of Common Materials soldto any Major Competitor during such Year, (i) a computation of any credit towhich Mentor is entitled pursuant to Section 3.4 above and (ii) a revised Price List setting forth  the reductions in the Unit Purchase Price of the Materials being made to assure that Supplier will be in compliance with the provisions of Section 3.3.1 above for the Year following the Year for which the report is being submitted.   

 

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**3.7             Audits.******  Mentor shall be entitled to have an audit of the booksand records maintained by Supplier pursuant to Section 3.5 above performed no more often than once in any consecutive twelve (12) month period for the purpose of verifying the compliance by Supplier with the pricing provisions of Section 3.3 of this Agreement.

**3.7.1       **Any such audit shall be performed by a regional or nationalaccounting and auditing firm that does not otherwise perform auditing oraccounting services for Mentor and its Affiliates or for Supplier and itsAffiliates.

**3.7.2       **Such auditing firm shall submit a written report to Mentoradvising whether Supplier is in compliance with the pricing provisions of thisAgreement and, if it is not, the dollar amount by which the Cost of Materialscharged to Mentor for the Materials during the period covered by the auditexceeded the Cost of Materials charged to that Major Competitor who paid thelowest Cost of Materials during such Year, but the auditing firm shall not bepermitted to disclose to Mentor the quantities of Materials or EquivalentMaterials being purchased by any individual Competitor.

**3.7.3       **Any credit shown by such audit report to be owing to Mentor shall becredited against the next purchases made by Mentor until such credit isexhausted.

**3.7.4       **The costs and expense of any audit conducted pursuant to thisSection 3.7 shall be borne by Mentor, but if any such audit discloses that the Actual Cost of Common Materials charged to Mentor for the period covered by the audit exceeded the Imputed Cost of Common Materials as calculatedfor the Common Materials purchased by any Major Competitor for the periodcovered by such audit, and if the amount of that excess is greater than theamount of Mentor's out-of-pocket costs for the audit, then Supplier shall paythe entire out-of-pocket cost of such audit.

**3.8             Price Adjustments**.   Subject to the provisions of Section 3.3 above 

**3.8.1       Annual CPI Adjustment.** The Selling Price applicable for each Material hereunder shall be adjusted asof each Adjustment Date during the term of this Agreement to be equal to theproduct determined by multiplying (a) the Purchase Price therefor set forth on **Exhibit A**hereto, *times*(b) a fraction, (i) the numerator of which is the Indexfor the Comparison Period, and (ii) the denominator of which is the Index forthe Base Period; *provided that*, in no event shall any such adjustmentcause the Selling Price for any Year be reduced below the Selling Price ineffect in the immediately preceding calendar Year.

A.    **Definitions.**  For purposesof this Section 3.8, the term:

(1)   **"Adjustment Date"** shall mean eachJanuary 1 during the term of this Agreement. 

(2)   **"Base Period"** shall mean November 2003.  

(3)   **"Comparison Period"** shall mean the month ofNovember in the calendar Year immediately prior to the Adjustment Date.

(4)   **"Index"**shall mean the Consumer Price Index for Urban Wage Earners and Clerical Workersfor the Los Angeles/Anaheim/Riverside Area, Average Subgroup "AllItems," 1982-84=100 Base, as published by the Bureau of Labor Statistics. If such Index is no longer published, then the term "Index" shallrefer to each successor or comparable Index mutually agreed by the parties tobe authoritative, and if the parties are unable to agree, then the substitutedIndex shall be selected by the then-presiding judge of the Superior Court forSanta Barbara County upon application of either party.

B.    **Notice of Adjustment. **Supplier shall provide Mentor written notice of the adjustments pursuant tothis Section 3.8, setting forth the computation thereof, on or before each Adjustment Date or as soon thereafter as practicable, but no delay in computing or giving notice of any adjustments shall constitute a waiver of the right ofeither party to have such adjustments made, retroactive to the applicableAdjustment Date, once such computation has been made.

 

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**3.8.2       Cost IncreasesCaused by External Circumstances.**   Supplier may adjust its prices prospectively from time totime upon delivery of written notice to Mentor specifying the amount of theincrease and the reason therefor if external factors beyond the ability ofSupplier to control affect Supplier's cost structure.  Such external factorsshall include, for example, but shall not be limited to dislocations inmaterials supply markets, changes in laws, regulations, and other governmentalrules affecting the production or sale of the Materials, and changes inspecifications requested by Mentor, but shall not include increases in thecosts of labor, materials, manufacturing costs, selling expense or overhead andgeneral and administrative expense occurring in the ordinary course of businessor as the result of changing economic conditions that are not caused byextraordinary circumstances.

**3.9             Method of Payment**.  All payments due hereunder to Supplier shall be paid inUnited States dollars on the later of (a) thirty (30) days following the dateof the applicable invoice and (b) the receipt of the applicable invoice inproper form (which form shall include (i) Mentor's purchase order number, (ii)the customer part number and (iii) the same price for the materials set forthin corresponding purchase order); *provided, however,* that in the eventMentor rejects any Materials pursuant to Section 2.9 above, payment for such rejected Materials shall be suspended in accordance with the terms set forth in Section 2.9 above until Mentor and Supplier are able to determine the extent and existence, if any, of any nonconformity of the Materials in question.

**3.10         Past Due Amount**.  Any amount due hereunder shall, if remaining past duefor thirty (30) days (*i.e.,*sixty (60) days after Mentor's receipt ofinvoice), accrue interest thereon at the rate of one and one-half percent(1-1/2 %) per month for each month or portion thereof that the amount remainsunpaid.  In the event that any invoice remains past due for more than ninety(90) days, Supplier may, at its option, require any further shipments ofMaterials to Mentor to be sent C.O.D until all past due payments have beenmade.  

**4.                 PARTIAL TERMINATION AND PENDINGDISPUTES**

**4.1             Failure to Supply.**   If Supplier (a) fails to timely deliver fifty percent (50%)of the amount of any Materials ordered by Mentor as required hereunder for anyreason other than force majeure, as measured over any period of sixty (60) ormore consecutive days, or (b) the Materials delivered by Supplier do notconform to the specifications for such Materials set forth in **Exhibit A**orare not manufactured in conformance with Applicable Requirements, includingwithout limitation applicable QSRs, then:

**4.1.1       **Mentor upon twenty (20) days' prior written notice to Supplier (solong as Supplier has not cured such default within such time) may but shall notbe obligated to elect to have such Affected Materials supplied by a third partysupplier, selected by Mentor in its sole discretion, for the next ninety (90)days (the "Third Party Period").

**4.1.2       **Upon the expiration of the Third Party Period and upon thesatisfactory completion of an audit and inspection of Supplier pursuant toSection 2.3 above, Supplier shall recommence supplying the Affected Materials to Mentor; provided, however, that if after the expiration of the Third Party Period, the audit and inspection of Supplier is not satisfactory to Mentor,Mentor may, at its sole discretion, (a) continue to have Affected Materialssupplied by a third party supplier and terminate this Agreement with respect tothe Affected Materials or (b) continue to have the Affected Materials suppliedby a third party supplier for indefinite consecutive periods of ninety (90)days until satisfactory completion of an audit and inspection of Supplierpursuant to Section 2.3 above.

 

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**4.2             Termination Right.******  If such default continues uncured for a period in excessof ninety (90) days, then the Mentor shall have the right at any time thereafteruntil such default has been cured to purchase from Supplier all of the assetsrequired to manufacture and produce the Materials at the price and on the termsset forth in Section 4 of the Transfer Agreement.  

**5.                 TERMINATION, RIGHTS, ANDOBLIGATIONS UPON TERMINATION**

**5.1             Term**.   Unless terminated for any particular Material pursuantto Section 4 above, or by either party pursuant to the other provisions of this Section 5, the term of this Agreement shall commence on the Effective Date and shall expire on the twentieth (20th) annual anniversary thereof in 2024 (the "Term").   

**5.2             Termination for Cause**.   This Agreement may be terminated in its entirety byeither party upon the occurrence of an "Event of Default" (as definedbelow) by delivering to the defaulting party at least thirty (30) days prior tothe effective date of the written notice of termination (the "Notice ofTermination") describing the Event of Default.  For purposes of thisSection 5.2, an "Event of Default" is any of the following events:

**5.2.1       **Failure by Mentor to make any payment when due and the failure ofMentor to pay such delinquent amount plus any other delinquent amounts then dueand payable within thirty (30) days of Mentor's receipt of the Notice ofTermination, excluding in each case amounts that are being disputed by Mentorin good faith;

**5.2.2       **Filing by either party hereto for bankruptcy, receivership,assignment for the benefit of creditors of all or a substantial portion of theassets of such party or other admission by such party of its inability to payits debts as they mature;

**5.2.3       **The filing of an involuntary petition for bankruptcy,reorganization, receivership or similar proceeding against either party heretowhich proceeding is not dismissed within sixty (60) days;

**5.2.4       **If either party hereto breaches any material provision of thisAgreement and fails to cure such breach within ninety (90) days of writtennotice describing the breach; or 

**5.2.5       **If Supplier is at any time not in compliance with any of theApplicable Requirements, including but not limited to QSRs, and it fails todeliver an Action Plan to Mentor pursuant to Section 2.3.1A above, or it fails to otherwise cure the non-compliance pursuant to the Action Plan delivered to Mentor pursuant to Section 2.3.1A above.

**5.3             Termination by Supplier**.  If Supplier has delivered a Discontinuation Notice toMentor pursuant to Section 2.2.2B(1)c above, then Supplier may terminate this Agreement effective at any time after the expiration of the 90-day Option Period described in Section 2.2.2B(2) above by giving Mentor not less than ten (10) day's prior written notice of its intention to do so unless the parties have reached agreement on alternative prices and terms for the continuing supply of the InitialMaterials to Mentor prior to the expiration of such 90-day Option Period.

**5.4             Mentor Purchase of SiTech Assets**.  This Agreement shall terminate upon any purchase byMentor of the assets of SiTech pursuant to the exercise of the SiTech PurchaseOption under Transfer Agreement; *provided that,* in accordance with theterms and conditions of the Transfer Agreement, to the extent that the assetsof SiTech that are purchased by Mentor pursuant to the Transfer Agreement donot provide Mentor the capacity to produce the volume of Materials thatSupplier is then supplying to Mentor (such shortfall in production capacity,the "Capacity Shortfall"), this Agreement shall remain in fullforce and effect and Supplier shall continue to be obligated to supply toMentor hereunder (a) such portion of those Materials as would be produced bythe Capacity Shortfall and (b) any other materials that were being supplied toMentor pursuant to this Agreement prior to the exercise of the SiTech PurchaseOption to the extent that there was not transferred to Mentor sufficientProduction Capacity to manufacture and supply such materials itself.  

 

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**5.5             Liability of Mentor upon Termination for Default.** Should this Agreement be properly terminated by Supplierdue to an uncured material default by Mentor, then: Supplier (a) shall beentitled to recover damages from Mentor and (b) shall have no further duty tosupply Mentor hereunder.  In such event, Mentor's optional purchase andfirst-refusal rights under the Transfer Agreement shall remain in effect for aperiod of six (6) months following the effective date of the termination ofthis Agreement and shall thereupon terminate without further notice.

**5.6             Liability of Supplier upon Termination for Default.** Should this Agreement be terminated by Mentor due to anuncured material default by Supplier, then Mentor shall be entitled (a) torecover damages from Supplier and (b) to have the right to purchase the assetsof Supplier on the terms and conditions set forth in the Transfer Agreement.

**5.7             Effect of Expiration or Termination**.  The following provisions shall survive the expiration ortermination of this Agreement: Sections 3 (to the extent of firm ordersrequired to be completed pursuant to the remainder of this Section 5.7),5.5, 5.6, 6.5, 6.7, 6.8, 6.10, 7 and 8.  Remedies for all breaches hereunderwill also survive the expiration or termination of this Agreement.  Uponexpiration or termination of this Agreement, Supplier shall continue tofulfill, subject to the terms of Section 3, all firm orders accepted by it prior to the effective date of expiration or termination, and Mentor shall be obligated to pay for all Materials ordered or delivered prior to the date of expiration or termination,subject to the terms of Section 3 of this Agreement.  Notwithstanding anything in this Section 5.7 to the contrary, in the case of termination under Section 5.2, the terminating party may elect whether obligations under firm orders will remain in effect.

**5.8             Return of Property**.  Upon expiration or termination of this Agreement, eachparty shall return to the other party any information, confidential materials,technical materials, samples, correspondence, specifications and otherdocuments or materials belonging to the other party, together with any copiesthereof (the "Properties"); *provided, however*, thateach party shall have the right to retain such Properties to perform itsobligations remaining hereunder after the expiration or termination of theAgreement.

**5.9             Enumerated Remedies not Exclusive.** The remedies identified by this Agreement as beingavailable to either party upon a default by the other are not intended to beexclusive, but shall be in addition to any other remedies available to a partyat law or in equity upon the occurrence of any such default.  The exercise ofany such remedy by a party shall not constitute an election of remedies andshall be without prejudice to the right of such party to exercise any otherremedy available by reason of a default by the other party in the performanceof its obligations under this Agreement, including the right to recover damagessuffered by reason of a breach of this Agreement by the other party withoutterminating this Agreement in whole or in part.

**5.10         Continuationafter Expiration of Initial Term.** After the expiration of the initial Term of thisAgreement, Supplier shall continue to supply the requirements of Mentor for theMaterials at the same price and on the same terms as it supplies its othercustomers for the Materials or Equivalent Materials on a year to year basis,subject to the right of either party to terminate this agreement during anysuch renewal term at any time upon six (6) months prior written notice oftermination.  

**6.                 REPRESENTATIONS, WARRANTIES ANDCOVENANTS**

**6.1             Vendor Audit Rights.** Mentor shall have the right and Supplier shall allowMentor access, from time to time, and upon reasonable notice and duringbusiness hours, to inspect or audit Supplier's manufacturing and storagefacility, tools, and equipment as well as Supplier's quality assurance systems,testing operations, compliance procedures, and records relating to theMaterial, to ensure compliance by Supplier with Applicable Requirements, *providedthat* in no event shall Mentor be entitled to have access to Supplier'smanufacturing processes except in the connection with the transfer of the SiTechAssets to Mentor upon exercise by Mentor of the SiTech Purchase Optioncontained in the Transfer Agreement.  Any audits shall be scheduled at normalbusiness hours upon at least fifteen (15) days prior written notice toSupplier.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 16**

 

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**6.2             No Rights Created**.  Mentor and Supplier hereby agree that nothing in thisAgreement shall confer upon either party any right, title or interest in any information,or any copyrights, trademarks, patents or trade secrets of the other party orused by the other party under license from a third party.

**6.3             Rights, Power, Authority and Binding Obligation**.  Each party hereby represents and warrants to the otherparty that it has full right, power and authority to enter into this Agreementand that this Agreement constitutes a valid and binding obligation of suchparty.

**6.4             Compliance with Law**.  Supplier represents and warrants that it is incompliance with all applicable laws and regulations (including but not limitedto environmental laws and regulations) and other orders in connection withentering into this Agreement and manufacturing and delivering the Materials. Supplier will be solely responsible for the proper disposal of any materials orwaste resulting from the manufacturing of the Materials.  Under nocircumstances shall Mentor be liable for direct, incidental or consequentialdamages result from the use, handling, storage or disposal of Materials, wasteor any other chemicals, raw materials or inputs by any affiliate, employee,agent or contractor of Supplier.

**6.5             Fulfillment Facilities**.  Supplier represents and warrants that each facility usedto manufacture the Materials or the location at which the Materials areproduced (including but not limited to each such facility owned by SiTech andeach such facility owned by NuSil, as permitted pursuant to Section 2.5, above) shall be in compliance with Applicable Requirements.  If Supplier elects to manufacture any Material from any location other than Supplier's current location on Campus Circle in Irving, Texas (or anyfacility owned by NuSil, as permitted by Section 2.5, above), then Supplier shall be solely responsible for all costs, fees expenses associated with ensuring that such alternative facility meets the foregoing requirements, including but not limited to any qualityassurance, regulatory or other production costs, fees and expenses resultingfrom such change in location (*provided**that*, the foregoing is notintended and shall not be construed to impose upon Supplier any liability forthe cost of shipping or transporting Materials from any such alternativefacility).

**6.6             No Infringement**.  Supplier represents and warrants that (a) the Materialsare free from rights or claims of any other person and Mentor's purchase andresale (or holding in inventory) of the Materials does not infringe upon orviolate any United States or foreign intellectual or industrial property rightor other right of any third party and (b) to Supplier's knowledge, there are nopatents issued by any country, or any other prior art, that invalidate or wouldinvalidate any of the patents covering the Materials.

**6.7             Production Capacity.** NuSil and SiTech each shall at all times during the termof this Agreement maintain the facilities, equipment and staff necessary toproduce the Materials in quantities sufficient to satisfy the requirements ofMentor and its Affiliates (collectively, the "Production Capacity"),but NuSil shall be relieved of its obligation to maintain Production Capacityunder this Section 6.7 for as long as the duties and responsibilities of Supplier have been delegated exclusively to SiTech and SiTech is maintaining such Production Capacity.

**6.8             Confidential Information.** From time to time during the term hereof, the partiesmay require from each other certain secret confidential information, includingknowledge, information, data, know-how, concepts, ideas, methods, processes,formulae, trade secrets, procedures, techniques and improvements and all othercompilation of information (whether or not reduced in writing or in electronicformat or whether or not patentable or copyrightable) which re or may in anyway be related to the Materials or to the respective businesses of the parties("Proprietary Information").  

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 17**

 

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**6.8.1       **The parties shall keep strictly secret and confidential and shallnot, either during or after expiration or termination of the Agreement, withoutthe other party's written consent disclose to any third parties or use at anytime after expiration or termination of this Agreement any ProprietaryInformation of the other party, excepting that either party may disclose suchProprietary Information to its employees for whom such information is necessaryfor performance of their duties.  The parties (a) shall use their best effortsto compel any parties to whom they provide Proprietary Information to keep suchinformation confidential in accordance with this Section 6.8 and (b) shall not use the Proprietary Information of the other party commercially or for any other purpose other than for the purpose contemplated by this Agreement.

**6.8.2       **The obligations undertaken by the parties pursuant to Section 6.8above shall not apply to:

A.                Such information that is generally known to the public at the time ofdisclosure to the other party (the "Recipient Party") orsubsequently becomes generally known to the public through no breach ofSection 6.6(a) above by the non-disclosing party;

B.                Such information that was in the Recipient Party's possession prior todisclosure hereunder;

C.                Such information that was obtained by the Recipient Party in good faithfrom a third party lawfully possessing and having a right to disclose same;

D.                Such information that the Recipient Party is required by court order todisclose, *provided that* any Recipient Party receiving any subpoena, orgovernmental, judicial or administrative request for any ProprietaryInformation of the other party shall notify the other party of the requestimmediately, and shall not disclose such information absent the other party'sconsent or a court order requiring such disclosure; or

E.                 Such information that the Recipient Party affirmatively demonstrates tothe other party's reasonable satisfaction, prior to any use or disclosure, thatthe Propriety Information was independently developed by the Recipient Partywithout the aid, application, reference or use in any way of informationreceived from the other party.

F.                 Within thirty (30) days following the termination or expiration of thisAgreement or the request of a party hereto, each party shall return allProprietary Information belonging to the other party and copies hereof, and anyother records containing such Proprietary Information to the other party,except that each party may retain copies of such Proprietary Information to theextent necessary to meet its continuing obligations to supply Material underthis Agreement.

G.                Mentor and Supplier acknowledge that any breach or violation of theconfidentiality provision in Section 6.8 will result in irreparable and continuing damage to the non-breaching party for which there may be no adequate remedy at law, and Mentor and Supplier agree that in the event of any such breach or violation by eitherparty, the non-breaching party shall be entitled to both damages and/orinjunctive relief.

**6.9             Duty to Keep Books and Records**.  Supplier hereby covenants and agrees to keep andmaintain at all times an accurate account of all operations within the scope ofthis Agreement for a period of at least seven (7) Years after the expiration ortermination of this Agreement, including without limitation, all of its booksand records of the sale of Materials and Equivalent Materials to Mentor and itsCompetitors, device master records, device history records, and master accessfiles.  Such records shall be kept in a manner that permits easy identificationof each Material and Equivalent Material comprising a Common Material as toMentor and any Major Competitor so as to enable NuSil's independent publicaccountants and any disinterested auditor or other third party to make and/orverify the accuracy of the computations required by Section 3.3 of this Agreement.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 18**

 

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**6.10         Intellectual Property**.  All discoveries, improvements, inventions and tradesecrets developed by Supplier in the performance of this Agreement shall be thesole property of Supplier.

**6.11         Warranties**.  Supplier warrants to Mentor that the Materials shippedhereunder (a) shall conform in all material respects to the specifications setfor in **ExhibitA**, as then in effect, and to all Applicable Requirements, includingwithout limitation, applicable QSRs regulations, as then in effect, and (b) shallmeet the specifications therefor for a period of at least six (6) months fromthe date of shipment of such Materials to Mentor.  SUPPLIER HAS NOT AUTHORIZEDANYONE TO MAKE ANY REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED ABOVE. THE FORGOING LIMITATIONS OF WARRANTIES SHALL NOT IN ANY WAY LIMIT MENTOR'SRIGHTS UNDER SECTION 7 HEREOF.

**6.12         Reports by Mentor******If at any time during the term of this Agreement Mentor ispurchasing one or more Initial Materials from a Qualified Alternative Supplierpursuant to clause (a) of Section 2.2.2A of this Agreement, then:

**6.12.1   **Mentor shallfurnish to Supplier within thirty (30) days after the end of each calendarquarter a written report setting forth for each Initial Material and forQualified Alternative Supplier from whom Mentor is purchasing such InitialMaterial (a) the quantity of such Initial Material purchased by Mentor fromSupplier and from any Qualified Alternative Supplier during the precedingcalendar quarter and (b) the amount paid by Mentor to Supplier and suchQualified Alternative Supplier for each such Initial Material during suchcalendar quarter; and .

**6.12.2   **If Mentor has made an Adjustment Election pursuant to  2.2.2B(1) above, then the reports required by Section 6.12.1 above shall be made on a monthly basis instead of a quarterly basis during the 24-month Remedial Period and shall be given to Supplier within thirty (30) days after the end of each month.

**7.                 INDEMNIFICATION**

**7.1             Indemnification by Mentor.** Mentor shall indemnify, defend and hold Supplier and itsofficers, directors, employees, and agents (collectively, the "SupplierIndemnitees") harmless from and against any and all loss, harm andliability including, without limitation, all costs, damages, settlements,claims, suits and expenses (including reasonable attorneys' fees) made againstor sustained by any Supplier Indemnitee (collectively, "Supplier Losses")arising out of or resulting from the death of, or bodily injury to, any personwhich is attributed to the use of a Material by Mentor or the incorporation ofa Material into any Mentor Product, except to the extent that such SupplierLosses are caused by Supplier conduct of the type described in Section 7.2below for which Supplier is obligated to indemnify Mentor.

**7.2             Indemnification by SiTech.** SiTech shall indemnify, defend and hold Mentor and itsAffiliates and their officers, directors, employees and agents (collectively,the "Mentor Indemnitees") harmless from and against all loss,harm and liability including, without limitation, all costs, damages,settlements, claims, suits, and expenses (including reasonable attorneys' fees)made against or sustained by any Mentor Indemnitee arising from (a) the deathof, or bodily injury to, any person on account of the Materials as a result ofnegligence or willful misconduct of Supplier or any affiliate, officer,director, employee or agent of Supplier (b) any reasonable SiTech-approvedout-of-pocket costs to Mentor and its Affiliates due to the recall of anyProcessed Material or (c) an infringement of any third party patent right,copyright right, trademark right or other intellectual property right or misappropriationof any trade secret (collectively "Mentor Losses") to theextent such Mentor Losses are caused by (x) Supplier's failure to deliver suchMaterial in accordance with Supplier's warranties set for in Section 6.11, (y) the negligence or willful misconduct of Supplier or any employee, consultant, agent or subcontractor of Supplier or its Affiliates, or (z) an breach of a material obligation of Supplier under this Agreement(collectively, a "Supplier Claim") except that, if any MentorLosses are caused in part by the negligence or willful misconduct of Mentor, thenSiTech's liability shall be in proportion to the fault of Supplier.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 19**

 

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**7.2.1       Limitations to Indemnity**.  The indemnities of Sections 7.1 and 7.2 shall not apply (a) if the indemnified party fails to give the indemnifying party prompt notice of any claim it receives and such failure materially prejudices the indemnifying party, or (b) unless the indemnifyingparty is given the opportunity to approve any settlement.  Furthermore, theindemnifying party shall not be liable for attorneys' fees or expenses oflitigation of the indemnified party unless the indemnified party gives theindemnifying party the opportunity to assume control of the defense orsettlement.  In no event shall the indemnifying party assume control of thedefense of the indemnified party without the consent of the indemnified party(which consent shall be given at its sole discretion).

**7.2.2       Settlement**.  In no event shall the indemnifying party beentitled to settle any of the above-mentioned claims without the writtenconsent of the indemnified party, which consent shall not be unreasonablywithheld.

**7.2.3       Insurance**.  Supplier, at its sole cost and expense, shallcarry and at all times during the Initial Term and any subsequent period,maintain in full force and effect the following insurance coverage:

A.                Workers' Compensation Insurance as required by Texas law;

B.                Employers' Liability Insurance as required by Texas law;

C.                General Comprehensive Liability Insurance, with contractual liabilityand property damage endorsements in the minimum amount of Two Million  Dollars ($2,000,000) each occurrenceand in the aggregate.  Such coverage shall also include coverage for businessinterruption with coverage limits and terms reasonably acceptable to Mentor.

D.                Environmental impairment liability insurance for non-sudden andaccidental occurrences, if required by applicable law or regulation.

Such insurance policies shall coverany and all Mentor Losses as provided herein for which indemnification isprovided by Section 7.2 above and Supplier shall name Mentor as an additional insured in each such policy.  Supplier, upon request of Mentor, will supply Mentor with appropriate certificates of insurance evidencing the forgoing insurancecoverage.

**8.                 MISCELLANEOUS**

**8.1             Effective Date and Implementation.** This Agreement shall not become effective until it hasbeen executed by each of the parties but, when so executed, shall be givenretroactive effect to the Effective Date and be applicable to all purchases ofMaterials by Mentor from Supplier on and after such Effective Date.  If theexecution and implementation of this Agreement occurs after the Effective Date,then Mentor shall be given a retroactive credit against its purchases ofMaterials from and after the Effective Date to reflect the adjustment in theSelling Price of the Materials that became effective as of the Effective Date.

**8.2             Amendment and Waiver**.  Except as otherwise expressly provided herein, anyprovision of this Agreement may be amended and the observance of any provisionof this Agreement may be waived (either generally or in any particular instanceand either retroactively or prospectively) only with the written consent of theparties hereto.  However, it is the intention of the parties that thisAgreement be controlling over additional or different terms of any purchaseorder, confirmation, invoice or similar document, even if accepted in writingby both parties, and that waivers and amendments of any provision of thisAgreement shall be effective only if made by non-pre-printed agreements signedby both parties and clearly understood by both parties to be an amendment orwaiver.  The failure of either party to enforce its rights under this Agreementat any time for any period shall not be construed as a waiver of such rights.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 20**

 

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**8.3             Governing Law and Legal Actions**.  This Agreement shall be governed by and construed underthe law of the State of California and the United States without regard toconflicts of laws provisions thereof.  Unless the parties hereto mutually agreeotherwise, the sole jurisdiction and venue for actions related to the subjectmatter hereof shall be the California state and U.S. federal courts havingwithin their jurisdiction the location of Mentor's principal place ofbusiness.  Both parties consent to the jurisdiction of such courts and agreethat process may be served in the manner provided herein for giving of noticesor otherwise allowed by California state or U.S. federal law.  In any action orproceeding to enforce rights under this Agreement, the prevailing party shallbe entitled to recover costs and attorneys' fees.

**8.4             Notice and Reports**.  Any notices permitted or required hereunder shall be inwriting and shall be deemed to have been delivered and received (a) whenpersonally delivered; (b) on the third (3rd) business day after the dateon which deposited in the United States mail for first-class mail delivery,postage prepaid, certified or registered mail, return receipt requested;(c) on the date on which transmitted by facsimile or other similarelectronic means generating a receipt evidencing a successful transmission, or(d) on the next business day after the day on which deposited with a regulatedpublic carrier (e.g., Federal Express) during such carrier'sregular business hours, freight prepaid, for overnight delivery, to the addressor facsimile number appearing on the signature page of this Agreement, or suchother address or facsimile number, notice of which is given in a mannerpermitted by this Section 8.3.

**8.5             Entire Agreement**.  This Agreement (and all Exhibits hereto) supersedes andreplaces the Original Supply Agreement and constitutes the entire understandingand agreement with respect to the subject matter hereof and supersede allproposals, oral and written, all negotiations, conversations, or discussionbetween or among parties relating to the subject matter of this Agreement andall past dealing or industry custom.

**8.6             Severability**.  If any provision of this Agreement is held to be illegalor unenforceable, that provision shall be limited or eliminated to the minimumextent necessary so that this Agreement shall otherwise remain in full forceand effect and enforceable.

**8.7             Relationship of Parties**.  The parties hereto expressly understand and agree thatthe other is an independent contractor in the performance of each and everypart of this Agreement, is solely responsible for all of its employees andagents and its labor costs and expenses arising in connection herewith.  neitherparty hereto shall have any express or implied right or authority to assume orcreate any obligations on behalf of or in the name of the other party or tobind to any contract, agreement or undertaking with any third party.  Neitherparty may use or assign to an Affiliate or any other third party the name,brand, logo, or trademark or any derivative thereof, of the other party withoutthe prior written consent of said other party.

**8.8             Delegation of Duties**.  Neither party may further delegate to a third party itsrespective obligations hereunder without the written consent of the otherparty.

**8.9             Assignment**.  This Agreement shall be binding upon and shall inure tothe benefit of the parties hereto and their respective successors and assigns; *providedthat*, notwithstanding the foregoing, Supplier may not delegate to any otherPerson its duties of such party hereunder, except either (a) to any Person thatacquires all or substantially all of the assets ofSupplier (whether in a merger transaction, asset purchase transaction, or otherreorganization transaction), or (b) with the prior written consent of Mentor.

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 21**

 

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**8.10         Publicity and Press Releases**.  Except to the extent necessary under applicable laws orfor ordinary marketing purposes, the parties agree that no press releases orother publicity relating to the substance of the matters contained herein willbe made without approval by both parties.

**8.11         Force Majeure**.  No liability or loss of rights hereunder shall result toeither party from delay or failure in performance caused by an event of force majeure(that is, circumstances beyond the reasonable control of the party affectedthereby, including without limitations, acts of God, fire, flood, war or governmentaction).  Obligations hereunder, however, shall in no event be excused for aperiod of longer than six (6) months.  In the event of force majeure, the partywhose performance is affected shall give prompt written notice to the otherparty stating the period of time the same is expected to continue and will useits best efforts to mitigate the effect of the event giving rise to the failureor delay in performance.  upon the occurrence of a force majeure which affectsSupplier's performance hereunder for long than six (6) months, Mentor shallhave the right, but not he obligation, to terminate this Agreement, or to electto have the affected Materials supplied by a third party supplier untilSupplier is able to resume performance.

**8.12         Counterparts**.  This Agreement may be executed in two or morecounterparts, each of which shall constitute one and the same instrument.

[*Signatures appear on following page.*]

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 22**

 

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            **In WitnessWhereof,**the parties hereto have executed this Agreement to beeffective as of the date first written above.

| **"NuSil:"**

** **

**NuSil Corporation**, a California corporation

By /s/ Richard Compton                                            Richard Compton, Chief Executive Officer

                                                                                                            Date

**Address and Facsimile No.  for Notices**:

NuSil Corporation  1050 Cindy Lane  Carpinteria, California 93013  

Facsimile No.:  (805) 566-9905

** **

** "SiTech:"**

** **

**SiTech, Inc**.,  a California corporation

By  /s/ Richard	Compton                                             Richard Compton, Chief Executive Officer

                                                                                                            Date

**Address and Facsimile No. for Notices**:

SiTech, Inc.  c/o NuSil Corporation  1050 Cindy Lane  Carpinteria, California 93013  

Facsimile No.:  (805) 566-9905 | **"Mentor:"**

** **

**Mentor Corporation**,  a Minnesota corporation

By  /s/ Adel Michael                                                Adel Michael, Vice-Chairman

                                                                                                           Date

**Address and Facsimile No. for Notices**;

Mentor Corporation  ATTN:  General Counsel  5425 Hollister Avenue  Santa Barbara, California 93111

Facsimile No.:  (805) 879-6008 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**EXCLUSIVE SUPPLY AGREEMENT:  Page 23**

 

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**EXHIBIT A**

** **

**to**

** **

**Amended and Restated Exclusive Supply Agreement**

** **

**initial Materials**

** **

** **

|                          |
|--------------------------|
| **FGB014,Me 35**         |
| **FGB014-1,Me 31**       |
| **FGB015,Bar 37**        |
| **FGB015-1,Bar 31**      |
| **Gel2167/2168,3:1**     |
| **Gel2167-1/2168-1,1:1** |
| **Gel2167-2/2168-2,1:1** |
| **HCE4735**              |
| **HCE4750**              |
| **MED6-6605,RTV,30**     |
|                          |

** **

** **

|                         

Initials of Supplier |                         

Initials of Mentor |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|