[CONFIDENTIAL TREATMENT REQUESTED, CERTAIN PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION.]
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of this 25th day of June, 2004 (the "Effective Date"),
is between VITUSA PRODUCTS, INC., a New Jersey corporation, with its principal
corporate address at 000 Xxxxxx Xxxxxx, Xxxxxxxx Xxxxxxx, XX 00000 ("Vitusa")
and U.S. GLOBAL NANOSPACE, INC, a Nevada corporation, with its principal
corporate address at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, XX 00000
("USGN").
RECITALS
A. Vitusa desires to purchase the Product from USGN from time to time and
USGN desires to sell the Product to Vitusa in accordance with the terms
and conditions set forth in this Agreement.
B. USGN desires to appoint Vitusa as its nonexclusive distributor to market
the Product to Authorized Customers (as hereinafter defined) and Vitusa
accepts such appointment on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained
in this Agreement, and other good and valuable consideration, Vitusa and USGN
hereby agree as follows:
ARTICLE I
DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
1.1 Definitions. The following definitions shall apply to this Agreement.
(a) "Authorized Customer" shall mean a corporation, limited liability company
or other entity which manufactures tobacco products for retail sale.
(b) "Authorized Use" shall mean the use of the Product for tobacco filtration.
(c) "Documentation" shall mean training materials, product descriptions and
specifications, brochures, technical manuals, supporting materials and
other printed information relating to the Product, whether distributed in
print, electronic, or video format, which is made available by USGN for
use in the distribution of the Product.
(d) "Product" shall mean NanoFilterCX(TM) and any other product marketed by
USGN for use in tobacco filtration during the Term of this Agreement.
1.2 Term of Agreement; Renewal and Conditional Renewal. The "Term" of this
Agreement shall commence on the Effective Date and shall end on December
31, 2004, unless earlier terminated pursuant to Article V hereof. On that
date and on each successive last day of the Term (a "Termination Date"),
the Term shall be automatically renewed for one (1) additional year unless
either (a) one of the parties has, no less than forty-five (45) days prior
to the Termination Date, delivered written notice that the Agreement will
terminate on the Termination Date, or (b) USGN has, no less than thirty
(30) days prior to the Termination Date, delivered written notice to
Vitusa that the renewal of the Term shall be conditioned on Vitusa's
accomplishment during the next contract year (or part thereof) of certain
sales goals specified in the notice, and Vitusa shall have rejected the
conditions in a writing delivered to USGN. If Vitusa does not reject
renewal conditions specified by USGN, then the conditions will be deemed
to have been integrated into this Agreement as of the first day of the
renewal Term.
2
1.3 Appointment as Distributor. USGN hereby grants to Vitusa the non-exclusive
right to distribute the Product to Authorized Customers for Authorized Use
worldwide during the Term of this Agreement. This Agreement does not grant
USGN or Vitusa an exclusive right to purchase or sell Products and shall
not prevent either party from developing or acquiring other vendors or
customers for competing Products. Vitusa will use commercially reasonable
efforts to promote sales of the Product. USGN agrees that Vitusa may
obtain Products in accordance with this Agreement for the benefit of its
parent, affiliates and subsidiaries of Vitusa. Said parent, affiliates and
subsidiaries of Vitusa shall be entitled to order Products directly from
USGN pursuant to this Agreement. USGN shall provide Documentation to
Vitusa as reasonably requested.
ARTICLE II
PURCHASE ORDERS AND DELIVERIES
2.1 Issuance and Acceptance of Purchase Order.
(a) This Agreement shall not obligate Vitusa to purchase any Product except as
specifically set forth in a written purchase order.
(b) Vitusa may issue to USGN one or more purchase orders identifying the
quantity of Products Vitusa desires to purchase from USGN. Notwithstanding
any preprinted terms or conditions on Vitusa's purchase orders, the terms
and conditions of this Agreement shall apply to and govern all purchase
orders accepted or shipped by USGN hereunder, except that purchase orders
may include other terms and conditions which are consistent with the terms
and conditions of this Agreement, or which are mutually agreed to in
writing by Vitusa and USGN. Purchase orders will be placed by Vitusa by
fax or electronically transferred.
(c) A purchase order shall be deemed accepted by USGN unless USGN notifies
Vitusa in writing within five (5) days of the date of the purchase order
that USGN does not accept the purchase order.
2.2 Purchase Order Alterations or Cancellations. Prior to shipment of
Products, USGN shall accept alterations or cancellation to a purchase
order in order to: (i) change a location for delivery, (ii) modify the
quantity of Products to be delivered or (iii) correct typographical or
clerical errors providing the order has not already been specially
manufactured for Vitusa.
3
2.3 Evaluation or Demonstration Purchase Orders. USGN shall provide to Tech
Data a reasonable quantity of demonstration or evaluation Products at no
charge.
2.4 Product Shortages. If for any reason USGN's production is not on schedule,
USGN may allocate available inventory to Vitusa and make shipments based
upon a fair and reasonable percentage allocation among USGN's customers.
2.5 Proof of Delivery. USGN shall provide to Vitusa, at no charge, a hard copy
Proof of Delivery ("POD") for any drop shipment requested by Vitusa. The
POD shall be faxed to Vitusa within five (5) business days of the initial
request. If the POD is not received within the specified time, the invoice
will be considered disputed and no payment shall be made to USGN on that
invoice.
2.6 Acceptance of Products. Vitusa shall be deemed to have accepted product on
the seventh day after delivery of the Products and all necessary
documentation unless Vitusa shall have, within that period, notified USGN
of non-conformity to the purchase order. Any Products not ordered or not
otherwise in accordance with the purchase order (e.g. misshipments,
overshipments) may be returned to USGN at USGN's expense (including
without limitation costs of shipment or storage). USGN shall refund to
Vitusa within ten (10) business days following notice thereof, all monies
paid in respect to such rejected Products. Vitusa shall not be required to
accept partial shipment unless Vitusa is notified prior to shipment.
2.7 Title and Risk of Loss. Title and risk of loss or damage to Products shall
pass to Vitusa at the time the Products are delivered to Vitusa or to
Vitusa's designated carrier.
2.8 Transportation of Products. USGN shall deliver the Products to Vitusa at
the location shown and on the delivery date set forth in the applicable
purchase order or as otherwise agreed upon by the parties. Each Product
package shall be clearly marked with serial number, Product description
and machine readable bar code (employing UPC or other industry standard
bar code). Charges for transportation of the Products shall be paid by
VITUSA.
ARTICLE III
PAYMENT TO USGN
3.1 Prices. The price of the Product will be *** as modified from time to
time, ***. During the period from the Effective Date to December 31, 2004
the "***" will be *** percent (***%). After December 31, 2004 (if the
Agreement is renewed), the "***" will be *** percent (***%). USGN shall
have the right to increase or decrease its *** from time to time, upon
written notice to Vitusa given not less than thirty (30) days prior to the
effective date of such change. All orders placed prior to the effective
date of the increase or decrease, for shipment within thirty (30) days
after placement of the order, shall be invoiced by USGN at the *** of the
two prices.
*** Confidential Treatment Requested
4
3.2 Payment. Any undisputed sum due to USGN pursuant to this Agreement shall
be payable net Twenty (20) days after the invoice date. USGN shall invoice
Vitusa no earlier than the applicable shipping date for the Products
covered by such invoice. Products which are shipped internationally shall
not be invoiced to Vitusa prior to the Products being placed with a common
carrier within the destination country for final delivery to Vitusa but
would be payable within 10 days of receipt by Virtusa*. The due date for
payments directly associated with a bona fide dispute shall be extended
during any time the parties have a bona fide dispute concerning such
payment. During the time a bona fide dispute is being rectified all other
payments shall be made as per the terms in this section.
3.3 Taxes. Vitusa shall be responsible for franchise taxes, sales or use taxes
or shall provide USGN with an appropriate exemption certificate. USGN
shall be responsible for all other taxes, assessments, permits and fees,
however designated, which are levied upon this Agreement or the Products,
except for taxes based upon Vitusa's income. No taxes of any type shall be
added to invoices without the prior written approval of Vitusa.
ARTICLE IV
WARRANTIES, INDEMNITIES AND OTHER OBLIGATIONS
4.1 Warranty. USGN hereby represents and warrants that USGN has all right,
title, ownership interest and marketing rights necessary to provide the
Products to Vitusa. USGN further represents and warrants that it has not
entered into any agreements or commitments which are inconsistent with or
in conflict with the rights granted to Vitusa in this Agreement; the
Products are new and shall be free and clear of all liens and
encumbrances; Vitusa and its Authorized Customers shall be entitled to use
the Products for the Authorized Use without disturbance; and the Products
conform in all respects to the Product warranties. USGN agrees that Vitusa
shall be entitled to pass through to Authorized Customers all Product
warranties granted by USGN. Vitusa shall have no authority to alter or
extend any of the warranties of USGN without prior approval of USGN. USGN
has made express warranties in this Agreement and in Documentation. EXCEPT
AS SET FORTH HEREIN OR THEREIN, USGN DISCLAIMS ALL WARRANTIES WITH REGARD
TO THE PRODUCTS, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS SECTION SHALL
SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
4.2 Proprietary Rights Indemnification. USGN hereby represents and warrants
that the Products and the sale and use of the Products do not infringe
upon any copyright, patent, trademark, trade secret or other proprietary
or intellectual property right of any third party, and that there are no
suits or proceedings, pending or threatened, alleging any such
infringement. USGN shall indemnify and hold Vitusa, Vitusa's parent,
affiliates and subsidiaries and their respective officers, directors,
employees and agents harmless from and against any and all actions,
claims, losses, damages, liabilities, awards, costs and expenses, which
they or any of them incur or become obligated to pay resulting from or
arising out of any breach or claimed breach of the foregoing warranty.
Vitusa shall inform USGN of any such suit or proceeding filed against
Vitusa and shall have the right, but not the obligation, to participate in
the defense of any such suit or proceeding at Vitusa's expense. USGN
shall, at its option and expense, either (i) procure for Vitusa and its
Authorized Customers the right to continue to use the Product as set forth
in this Agreement, or (ii) replace, to the extent Products are available,
or modify the Product to make its use noninfringing while being capable of
performing the same function without degradation of performance. If
neither of the foregoing alternatives (i) or (ii) is reasonably available,
USGN shall accept a return of the Products from Vitusa, at USGN's sole
cost and expense, and shall refund to Vitusa the full amount of the price
paid by Vitusa for said returned Products. USGN shall have no liability
under this Section 4.2 for any infringement based on the use of the
Product other than the Authorized Use. USGN's obligations under this
Section 6.2 shall survive termination or expiration of this Agreement.
5
4.3 Indemnification.
(a) USGN. USGN shall be solely responsible for the design, development,
supply, production and performance of the Products. USGN agrees to
indemnify and hold Vitusa, its parent, affiliates and subsidiaries and
their officers, directors and employees harmless from and against any and
all claims, damages, costs, expenses (including, but not limited to,
reasonable attorneys' fees and costs) or liabilities that may result, in
whole or in part, from any warranty or Product liability claim, or any
claim for infringement, or for claims for violation of any of the
warranties contained in this Agreement.
(b) Vitusa. Vitusa agrees to indemnify and hold USGN, its officers, directors
and employees harmless from and against any and all claims, damages,
costs, expenses (including, but not limited to, reasonable attorneys' fees
and costs) or liabilities that may result, in whole or in part, from
Vitusa's gross negligence or willful misconduct in the distribution of the
Products pursuant to this Agreement, or for representations or warranties
made by Vitusa related to the Products in excess of the warranties of
USGN.
4.4 ECCN/Export. USGN agrees to provide Vitusa, upon signing this Agreement
and at any time thereafter that USGN modifies or adds Products distributed
or to be distributed by Vitusa, with the Export Control Classification
Number (ECCN) for USGN's Products, and information as to whether or not
any of such Products are classified under the U.S. Munitions List.
4.5 Trademark Usage. Vitusa is hereby authorized to use trademarks and trade
names of USGN and third parties licensing USGN, if any, used in connection
with advertising, promoting or distributing the Product and will use their
best efforts to get their customers to include the USGN NanofilterCX
trademark onto each retail pack*. Vitusa recognizes USGN or other third
parties may have rights or ownership of certain trademarks, trade names
and patents associated with the Products. Vitusa will act consistent with
such rights, and Vitusa shall comply with any reasonable written
guidelines when provided by USGN or third parties licensing USGN related
to such trademark or trade name usage. Vitusa will notify USGN of any
infringement of which Vitusa has actual knowledge. Vitusa shall
discontinue use of USGN's trademarks or trade names upon termination of
this Agreement, except as may be necessary to sell or liquidate any
Product remaining in Vitusa's inventory.
6
ARTICLE V
TERMINATION; EXPIRATION
5.1 Termination.
(a) Termination With Cause. In the event that either party materially or
repeatedly defaults in the performance of any of its duties or obligations
set forth in this Agreement, and such default is not substantially cured
within thirty (30) days after written notice is given to the defaulting
party specifying the default, then the party not in default may, by giving
written notice thereof to the defaulting party, terminate this Agreement
or the applicable purchase order relating to such default as of the date
specified in such notice of termination.
(b) Termination for Insolvency or Bankruptcy Either party may immediately
terminate this Agreement and any purchase orders by giving written notice
to the other party in the event of (i) the liquidation or insolvency of
the other party, (ii) the appointment of a receiver or similar officer for
the other party, (iii) an assignment by the other party for the benefit of
all or substantially all of its creditors, (iv) entry by the other party
into an agreement for the composition, extension, or readjustment of all
or substantially all of its obligations, or (v) the filing of a petition
in bankruptcy by or against a party under any bankruptcy or debtors' law
for its relief or reorganization which is not dismissed within ninety (90)
days.
5.2 Rights Upon Termination or Expiration.
(a) Termination or expiration of this Agreement shall not affect USGN's right
to be paid for undisputed invoices for Products already shipped and
accepted by Vitusa or Vitusa's rights to any credits or payments owed or
accrued to the date of termination or expiration.
(b) USGN shall accept purchase orders from Vitusa for additional Products
which Vitusa is contractually obligated to furnish to its Customers and
does not have in its inventory upon the termination or expiration of this
Agreement; provided Vitusa notifies USGN of any and all such transactions
within fifteen (15) days following the termination or expiration date.
(c) Upon termination or expiration of this Agreement, Vitusa shall discontinue
holding itself out as a distributor of the Products.
7
ARTICLE VI
MISCELLANEOUS
6.1 Binding Nature, Assignment, and Subcontracting. This Agreement shall be
binding on the parties and their respective successors and assigns.
Neither party shall have the power to assign this Agreement without the
prior written consent of the other party.
6.2 Counterparts. This Agreement may be executed in counterparts, all of which
taken together shall constitute one single agreement between the parties.
6.3 Relationship of Parties. The Parties are performing pursuant to this
Agreement only as independent contractors. Nothing set forth in this
Agreement shall be construed to create the relationship of principal and
agent between Vitusa and USGN. Neither party shall act or represent
itself, directly or by implication, as an agent of the other party.
6.4 Confidentiality. Each party acknowledges that in the course of performance
of its obligations pursuant to this Agreement, it may obtain certain
information which is either (a) specifically marked as confidential or
proprietary or (b) of such a nature that the recipient should reasonably
understand that the disclosing party considers the information
confidential or proprietary. Each party hereby agrees that all such
information communicated to it by the other party, its parent, affiliates,
subsidiaries, or customers, whether before or after the Effective Date,
shall be and was received in strict confidence, shall be used only for
purposes of this Agreement, and shall not be disclosed without the prior
written consent of the other party, except as may be necessary by reason
of legal, accounting or regulatory requirements beyond either party's
reasonable control. The provisions of this Section shall survive
termination or expiration of this Agreement for any reason for a period of
one (1) year after said termination or expiration.
6.5 Arbitration. Any disputes arising under this Agreement shall be submitted
to arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
6.6 Notices. Wherever one party is required or permitted to give notice to the
other party pursuant to this Agreement, such notice shall be deemed given
when actually delivered by hand, by telecopier (if and when immediately
confirmed in writing by any of the other means provided herein ensuring
acknowledgment of receipt thereof for purposes of providing notice of
default or termination), or via overnight courier, and addressed as
follows:
8
In the Case of USGN:
U.S. Global Nanospace, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
In the Case of Vitusa:
Vitusa Products, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address and
the date upon which it will become effective.
6.7 Entire Agreement. This Agreement constitutes the entire and exclusive
statement of Agreement between the parties with respect to its subject
matter and there are no oral or written representations, understandings or
agreements relating to this Agreement which are not fully expressed
herein. The parties agree that unless otherwise agreed to in writing by
the party intended to be bound, the terms and conditions of this Agreement
shall prevail over any contrary terms in any purchase order, sales
acknowledgment, confirmation or any other document issued by either party
affecting the purchase or sale of Products hereunder.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be signed and
delivered by its duly authorized officer or representative as of the Effective
Date.
U.S. GLOBAL NANOSPACE, INC. VITUSA PRODUCTS, INC.
By: /s/ Xxxx Xxxxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------- ----------------------------------------
Xxxx Xxxxxxxx, CEO Xxxxx Xxxxxx, CEO
9
