Master Agreement
This Master Agreement (the "Agreement"), dated effective as of December 29, 2000
(the "Effective Date"), is by and between FIRST SCIENTIFIC CORPORATION, a
Delaware corporation with its principal place of business at 0000 X. 0000 Xxxxx,
Xxxxx, Xxxx 00000, and any existing or future subsidiary thereof (the
"Company"), and PHARMULATIONS, L.C., a Utah limited liability company with its
principal place of business at 0000 Xx. Xxxxx Xxxxx, Xxxxx, Xxxx 00000
("Pharmulations").
RECITALS:
A. The Company and Pharmulations have entered into that certain Consulting
Agreement dated October 1, 1998, as amended and restated on December
29, 2000 (the "Consulting Agreement"), pursuant to which Pharmulations
is assisting the Company in the role of chief scientific advisor and
advising the Company with respect to the Company's existing products,
proposals for improving such products, and regulatory testing and
compliance issues for such products.
B. The parties acknowledge that new products that Pharmulations, its
members or employees may from time to time after the date hereof invent
will be outside of the scope and terms of the Consulting Agreement, and
if the Company desires rights to such new products it is required to
purchase such rights.
C. In the event of such a purchase of rights in new products, it is the
parties desire that Pharmulations, its members or employees who may be
the owner/inventor of such new products transfer all of its or their
interest in the products in such a fashion so that the transfer is one
that, where possible, could qualify under Section 1235 of the Internal
Revenue Code.
D. Therefore, the parties desire to enter into this Agreement to establish
common terms and conditions for the development by Pharmulations
and purchase by the Company of all rights to new products, including
(i) all modifications, improvements and enhancements thereof, whether
made by the Company or Pharmulations, and (ii) the right to use,
manufacture and sell such new products, which are not "Services" or
"Works" as described in the Consulting Agreement and which will be
implemented through individual Product Identification Agreements
("Product Identification Agreements") under this Agreement
(collectively, the "Products"). This Agreement, by itself, does not
implement any business transaction and does not create an obligation
on either party to enter into any Product Identification Agreement or
Purchase Agreement (except as required by the terms of the Product
Identification Agreement).
AGREEMENTS:
1. Product Identification Agreements.
1.1. Product Identification Agreements and Contents. The parties
may negotiate one or more Product Identification Agreements
following execution of this Agreement, substantially in the form
attached as Exhibit A hereto. Each Product Identification
Agreement shall be signed by duly authorized representatives of
both parties and shall contain at least:
(1) a statement of the Product(s) which are being assigned;
(2) a detailed written description of the Product(s) ;
(3) a time schedule as to delivery of the Product(s) and the
Company's acceptance of the Product(s);
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(4) payment provisions that differ from the payments
provisions contained in this Agreement; and
(5) any other terms and conditions as mutually agreeable
between the parties.
1.2 Assignment and Disclosure Terms. Effective at the time a Product
that is the subject to a Product Identification Agreement is
accepted by the Company, pursuant to the acceptance procedure set
forth in the applicable Product Identification Agreement,
Pharmulations and the inventing member(s) of Pharmulations shall
execute a Purchase Agreement substantially in the form of Exhibit
B hereto, pursuant to which it shall assign to the Company all
right, title and interest in and to the Product and the Product's
formula (including without limitation all intellectual property
rights therein, and all details and know-how regarding its
formulation and manufacturing). Pharmulations shall also promptly
disclose in good faith to the Company background concerning the
Product in the Purchase Agreement. Each party shall endeavor in
good faith to perform in accordance with the specific terms of
each Product Identification Agreement and make a faithful effort
to arrive at a successful completion and transfer of the Products
described therein. Unless provided to the contrary by the Product
Identification Agreement or Purchase Agreement and to the extent
the formula for a Product that is the subject of a Purchase
Agreement may be protected by a patent, the Company shall, at its
own expense, use commercially reasonable efforts to seek to
obtain a patent for such Product. In such event, Pharmulations
shall assist in obtaining such a patent as reasonably requested
by the Company.
1.3 Payment Terms. Unless the Purchase Agreement provides for
different payments to be paid by the Company to
Pharmulations, the following terms shall apply:
1.3.1 Pharmulations shall be paid earn-out payments
for each Product, in the form of a royalty of two
percent (2%) of Net Sales (as defined below) received by
the Company from the sale of the particular Product(s)
described in the Purchase Agreement, for a period of
fourteen (14) years, if a patent is obtained by the
Company for the Product(s), or seven (7) years if no
patent is obtained.
1.3.2 Said royalties shall commence on the first to occur of (i)
the date the Company first begins distributing such
Product(s) to customers or (ii) eight (8) months after the
Product is accepted by the Company; provided, however, if
the Company shall determine prior to this royalty
commencement date that it does not want to market such
Product, then the Company shall give Pharmulations notice
of such decision and no royalties, including the
Minimum Royalty as defined in Section 1.3.7 below, will
be due (Pharmulations will, however, retain the $5,000
transfer fee paid when the Company signs Section 7 of the
Product Identification Agreement and begins the eight (8)
month "Testing Period", as defined in Section 3 thereof).
In such event, the Company shall transfer back to
Pharmulations (or, if a Purchase Agreement was not yet
executed, Pharmulations shall retain) all right, title and
interest in and to the Product and Product's formula
(including without limitation all intellectual property
rights therein, and all details and know-how regarding its
formulation and manufacturing).
1.3.3 In addition, the Company shall pay Pharmulations a
transfer fee of $5,000 at the time the Company signs
Section 7 of the Product Identification Agreement and
begins the eight (8) month Testing Period, which transfer
fee shall be a credit against the first royalties due
Pharmulations as described herein.
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1.3.4 "Net Sales" shall mean all amounts actually received by
the Company from the distribution and sale of such
Product(s), less discounts, allowances and returns.
1.3.5 The Company shall pay to Pharmulations, within 45 days
after the end of each calendar quarter during the term
of this Agreement, the aggregate royalties for all Net
Sales amounts received during that quarter.
1.3.6 The Company's quarterly payment shall be accompanied by
a report setting forth the calculation of royalties due.
1.3.7 During the applicable royalty payment period described
in Section 1.3.1, the Company shall pay royalties at an
annual minimum rate of $50,000 per Product (the "Minimum
Royalty") payable in four (4) equal quarterly payments
within 45 days after the end of each calendar quarter
during the term of this Agreement, subject to offset for
payments made in previous quarters of such annual period,
so long asthe $50,000 annual minimum is met. However, the
Company may annually determine that the market or
revenue for a particular Product does not warrant
exclusive rights and the attendant Minimum Royalty. In
such event, the Company shall notify Pharmulations in
writing of its determination at least 60 days before the
end of any annual period. If the Company has not paid
Pharmulations at least $100,000 in total royalty payments
(including Minimum Royalties) at the time of such notice,
the notice shall be accompanied by a payment equal to
the difference between the royalties previously paid and
the amount of $100,000. At end of the annual period in
which such notice is given, the Company shall transfer all
right, title and interest in and to the Product and
Product's formula (including without limitation all
intellectual property rights therein, and all details
and know-how regarding its formulation and
manufacturing) back to Pharmulations, and Pharmulations
shall concurrently grant back to the Company, if the
Company so requests, a non-exclusive, perpetual, worldwide
license to use, manufacture, modify, market, promote,
distribute and sell such Product, subject to the royalty
payment provisions of this Section 1.3, except that the
royalty rate shall thereafter be three percent (3%) of
Net Sales and a reduced minimum royalty of $6,000 per
year (the "Reduced Minimum Royalty") shall apply. In the
event the Company does not pay the Reduced Minimum
Royalty, then Pharmulations may terminate the
non-exclusive license upon 30 days prior written notice
and opportunity to cure the default. The Company may
also terminate the non-exclusive license at any time, with
or without cause, upon at least 90 days' prior written
notice. The covenant not to compete provisions of
Section 7 of the Consulting Agreement shall, following a
transfer back of the interest in the Product to
Pharmulations, whether or not a non-exclusive license is
given, be inapplicable and Pharmulations shall be free to
use, manufacture, modify, market, promote distribute and
sell such Product and formula. The three percent (3%)
royalty and Reduced Minimum Royalty shall apply for a
period of the greater of ten (10) years from the
date the non-exclusive license was first granted to the
Company or the period described in Section 1.3.1, above;
after such period, the non-exclusive license for such
Product shall be deemed fully paid-up.
1.3.8 Pharmulations and its agents shall have a right, upon at
least 10 days' prior written notice, to audit the books
and records of the Company to verify Net Sales. In the
event such audit shall result in an increase of Net Sales
during the audited period of more than 5%, the Company
shall pay the reasonable costs of such audit. Such audit
right shall not be exercised more than once per year.
Audits shall be conducted in a manner that is not unduly
disruptive of the Company's business.
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1.4 Expenses. Except as provided herein or in a Purchase Agreement
or Product Identification Agreement, each party shall bear
all of its own expenses arising from its performance under this
Agreement, the Purchase Agreements and Product Identification
Agreements.
1.5 Warranties and Indemnification. With respect to each Product,
unless otherwise specifically provided in the Purchase
Agreement, Pharmulations represents, warrants and covenants that
as of the time of executing the Purchase Agreement that: (i) it
has not previously conveyed or transferred any interest in the
Product and to the best of its knowledge is the owner and
original creator of the Products, formulations and other work
delivered pursuant to each Purchase Agreement; (ii) that such
Products, formulations and other work are, to Pharmulations' best
knowledge, free from any third party liens, claims and
encumbrances and, to Pharmulations' best knowledge, do not and
will not infringe any third party patent, trade secret or
copyright rights; and (iii) it has the right and power to enter
into this Agreement and each Purchase Agreement and to grant the
Company the rights granted in this Agreement and in the Purchase
Agreements.
2. Intellectual Property Ownership, Confidentiality and Covenant Not to
Compete. Except as may be otherwise specifically provided herein
or in a Purchase Agreement, the ownership and confidentiality terms of
Sections 3 and 4 of the Consulting Agreement shall apply to the
Product concerning such Product made by it pursuant to any Purchase
Agreement. If the Company fails to accept a Product delivered to it
under a Product Identification Agreement, the parties agree that all
rights in such Product and formula for such Product shall remain with
Pharmulations and such Product shall thereafter not be treated as a
"Work" under the Consulting Agreement, but shall be a Product owned by
Pharmulations and excluded from Pharmulations' covenant not to compete
as set forth in the Consulting Agreement. If the Company accepts a
Product, the covenant not to compete provisions shall apply with
respect thereto.
3. Term and Termination.
3.1. Term and Termination. It is the intent of the parties that
this Agreement shall be concurrent with the term of the
Consulting Agreement and shall not be used after at the time the
Consulting Agreement is terminated or expires. Additionally,
either party may terminate the use of this Agreement or terminate
a Product Identification Agreement if the other party
respectively breaches any material term of this Agreement or of
the Product Identification Agreement and fails to correct such
breach within 30 days following written notice thereof from the
non-breaching party. The Product Identification Agreements and
Purchase Agreement may also contain terms related to termination
thereof.
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3.2. Effect of Termination. The terms of this Agreement as to any
Product Identification Agreement and any executed Purchase
Agreements shall survive termination of this Agreement and shall
remain in full force and effect. Additionally, any Product
Identification Agreements that have not matured into a Purchase
Agreement shall remain in effect, and the parties agree to use
good faith efforts to complete the Products thereunder in
accordance with this Agreement and the Product Identification
Agreement, including but not limited to the execution of a
Purchase Agreement therefor, unless either party elects to
terminate such Product Identification Agreement as provided for
above. If a Product Identification Agreement is so terminated,
Pharmulations shall retain all rights in the Product(s) and such
Product(s) shall be excluded from Pharmulations' covenant not to
compete.
4. Miscellaneous.
4.1. Governing Law. This Agreement is governed by Utah law
(excluding conflicts of laws provisions). The parties
consent to the exclusive jurisdiction and venue of Utah state and
federal courts in any action arising out of this Agreement. If a
dispute shall arise concerning this agreement, the prevailing
party shall be entitled to recover from the non-prevailing party
all attorneys' fees and costs incurred by the prevailing party in
connection with such dispute, regardless of whether such dispute
results in the filing of a lawsuit.
4.2. Entire Agreement; Controlling Documents; Amendment; Waiver. This
Agreement, together with the Purchase Agreements, Product
Identification Agreements and Consulting Agreement (as amended),
constitutes the entire agreement of the parties regarding the
subject matter hereof. The terms of Sections 3, 4, 8, 9, and 10
of the Consulting Agreement are hereby incorporated herein by
reference. In the event of any conflict between this Agreement
(including the Purchase Agreements and Product Identification
Agreements hereunder) and the Consulting Agreement, this
Agreement and the Purchase Agreements and Product Identification
Agreements shall be controlling. A Purchase Agreement shall
control in the event of a conflict between the terms of such
Agreement and this Agreement or the applicable Product
Identification Agreement, and a Product Identification Agreement
shall be controlling in the event of a conflict between it and
this Agreement. Except as otherwise specifically provided herein,
this Agreement may be modified only in a written document signed
by the party sought to be bound. No waiver of any default by the
other party or the breach by the other party of its obligations
to perform hereunder shall be deemed a waiver of any future or
other defaults or breaches, even if of the same nature.
4.3. Severability. If any term of this Agreement is deemed invalid or
unenforceable by a court, the court shall modify such term
to the minimum extent necessary to make it valid and enforceable.
If the term cannot be so modified, it shall be severed and the
remainder of this agreement shall remain in full force and
effect.
4.4. Injunctive Relief. Pharmulations acknowledges and agrees that
the Confidential or Proprietary Information revealed to it
are extremely sensitive and vital to the business of the Company
and, therefore, that the remedy at law for any breach of its
covenants made in this Agreement, including the covenants not to
compete or solicit and the covenant of confidentiality, shall be
inadequate and that the Company shall be entitled to injunctive
relief, in addition to any other remedy it might have, including
damages and the right to recover reasonable attorneys' fees, if
it becomes necessary for the Company to enforce its rights under
this Agreement, without the necessity of posting bond.
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4.5. Assignment; Binding Effect. In the event the Company assigns or
grants a license in the rights to manufacture and sell
Products created and sold to the Company pursuant to a Purchase
Agreement, then Net Sales with respect to such Product shall also
include all Net Sales received by such assignee and any other
manufacturer of such Product. Neither this Agreement nor any of
the rights or obligations of Pharmulations arising under this
Agreement may be assigned or transferred without the Company's
prior written consent, except that Pharmulations may assign any
of its rights to payments under a Purchase Agreement. This
Agreement is for the benefit of and will be binding upon the
parties and their respective representatives, successors and
permitted assignees.
First Scientific Corporation Pharmulations, L.C.
By:____________________________________ By:_________________________________
Title:_________________________________ Title:______________________________
Date:___________________________________ Date:_______________________________
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EXHIBIT A
Product Identification Agreement #__
This Product Identification Agreement (the "Agreement"), dated ____________,
20__ (the "Effective Date"), is by and between FIRST SCIENTIFIC CORPORATION, a
Delaware corporation with its principal place of business at 0000 X. 0000 Xxxxx,
Xxxxx, Xxxx 00000, and any existing or future subsidiary thereof (the
"Company"), and PHARMULATIONS, L.C., a Utah limited liability company with its
principal place of business at 0000 Xx. Xxxxx Xxxxx, Xxxxx, Xxxx 00000
("Pharmulations").
RECITALS:
The Company and Pharmulations have entered into a certain Master Agreement dated
December 28, 2000 (the "Master Agreement"), which agreement establishes common
terms and conditions that could be used for the identification and purchase of
new products for the Company which will be implemented through this Product
Identification Agreement.
AGREEMENTS:
1. The product that is the subject of this Agreement is referred to as the
"___________" (the "Product").
2. The following is a detailed description of the Product characteristics:
[insert]
3. The Product will be delivered to the Company for testing on or about
___________. The Company may also review the Product and
Pharmulations' work on the Product from time to time during the
development process as it may reasonably request. Upon receipt of what
Pharmulations believes to be the final version of the Product, the
Company shall, if it is then interested in marketing and testing the
Product, immediately accept the Product by executing paragraph 7,
below and the Company will then have a period of up to 8 months (the
"Testing Period") in which to test the Product (including product
safety, effectiveness, and marketability, etc.) and determine whether
it wishes to market the Product. Upon the Company's acceptance of the
Product, the parties shall sign a Purchase Agreement in the form of
Exhibit B. The Company shall notify Pharmulations in writing at or
before the end of the Testing Period whether the Company will market
the Product or if the Product is unacceptable, supplying a detailed
description of the reasons for any finding of unacceptability. If the
parties agree that further modification of the Product may resolve the
problems leading to lack of acceptance, they shall negotiate in good
faith to mutually agree upon a process and time line for Pharmulations
to modify and resubmit the Product to the Company. If the Company
finally deems the Product unacceptable for marketing, the Company
shall transfer back to Pharmulations (or if the transfer to the
Company has not occurred, Pharmulations shall retain) all right, title
and interest in and to the Product, free and clear of any claim of the
Company.
4. The Purchase Agreement for the Product will contain no royalty payment
terms that differ from the Master Agreement, except as follows: [insert if
any]. Any modification of such payment terms in the final Purchase
Agreement shall require the approval of both parties.
5. Pharmulations shall give the Company the first right to review, accept and
purchase the Product, pursuant to the terms set forth in the Master
Agreement. Pharmulations shall and shall cause Xxxxxx Xxxxxx, the inventor
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of the Product, to take such additional and further reasonable action as
the Company deems advisable to further document this transfer, including
but not limited to the delivery of the details of the Product's formula.
6. There are no additional terms of agreement between the parties except as
follows: [insert]. The terms of the Master Agreement are incorporated
herein by reference, to the extent not otherwise in conflict with the terms
of this Product Identification Agreement.
First Scientific Corporation Pharmulations, L.C.
By By
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Title Title
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Date Date
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7. By signing below the parties acknowledge that: (i) Pharmulations has
submitted what it believes is the final Product, (ii) the Company has accepted
the Product, (iii) the Company is moving forward with the eight (8) month
Testing Period of the Product described in this Product Identification Agreement
and delivered by Pharmulations, and (iv) Pharmulations is due the $5,000
transfer fee, payable within 30 days of signing below.
First Scientific Corporation Pharmulations, L.C.
By By
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Title Title
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Date Date
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EXHIBIT B
Purchase Agreement #__
This Purchase Agreement (the "Agreement"), dated ____________, 20__ (the
"Effective Date"), is by and between FIRST SCIENTIFIC CORPORATION, a Delaware
corporation with its principal place of business at 0000 X. 0000 Xxxxx, Xxxxx,
Xxxx 00000, and any existing or future subsidiary thereof (the "Company"), and
PHARMULATIONS, L.C., a Utah limited liability company with its principal place
of business at 0000 Xx. Xxxxx Xxxxx, Xxxxx, Xxxx 00000 ("Pharmulations").
RECITALS:
A. The Company and Pharmulations have entered into a certain Master
Agreement dated December 28, 2000 (the "Master Agreement"), which
agreement establishes common terms and conditions that could be used
for the development and purchase of new products for the Company.
B. The Company and Pharmulations have entered into a Product
Identification Agreement #__, dated ___________, 20__ (the "Product
Identification Agreement"), pursuant to which Pharmulations has
developed and the Company has accepted the Product, as defined and
described in the Product Identification Agreement.
AGREEMENTS:
1. The product being purchased hereunder is referred to as the "_________"
(the "Product").
2. The following is a detailed description of the Product characteristics:
[insert]
3. The Product is hereby accepted by the Company.
4. There are no royalty payment terms that differ from the Master
Agreement, except as follows: [insert if any].
5. Pharmulations hereby transfers and conveys to the Company all right,
title and interest in and to the Product and the Product's
formula (including without limitation all intellectual property rights
therein, and all details and know-how regarding its formulation and
manufacturing). Pharmulations shall and shall cause Xxxxxx Xxxxxx, the
inventor of the Product, to take such additional and further
reasonable action as the Company deems advisable to further document
this transfer, including but not limited to the delivery of the
details of the Product's formula and execution of any documents
necessary or appropriate in order to transfer patents or other
intellectual property rights in the Product.
6. There are no additional terms of agreement between the parties, except
as follows: [insert if any]. The terms of the Master Agreement and
Product Identification Agreement are incorporated herein by reference,
to the extent not otherwise in conflict with the terms of this
Agreement.
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First Scientific Corporation Pharmulations, L.C.
By By
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Title Title
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Date Date
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