EXHIBIT 10.38
AGREEMENT
THIS AGREEMENT ("Agreement") is executed as of this 1st day of November 1999,
by and between THE RICEX COMPANY, a Delaware corporation ("RiceX"), and
BIOCEUTICS, INC., a Delaware corporation ("BioCeutics").
A. RiceX is a producer of nutritionally dense ingredients and
related products (the "Products").
B. BioCeutics has been formed to engage in the distribution and sale
of nutraceutical products involving nutritionally dense ingredients, and
desires to obtain a supply of nutritionally dense ingredients and an
exclusive arrangement with RiceX for the sale of nutritionally dense
ingredients to the entire human market on the terms set forth below.
C. RiceX is willing to grant BioCeutics a right of first refusal to
acquire its nutritionally dense ingredients and to grant BioCeutics an
exclusive arrangement with RiceX in the entire human market on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and for other
valuable consideration, the parties agree as follows:
1. SALE OF PRODUCTS. RiceX agrees to sell its Products
identified in EXHIBIT "A" attached hereto to BioCeutics on the terms and
subject to the conditions of this Agreement. BioCeutics shall be entitled to
a "most favored customer" status, exclusive of samples (which shall be free).
The price to be charged to BioCeutics for its purchase of any Products shall
be that price which is published in the RiceX standard price sheet or the
price negotiated with other customers for like quantities and like Products,
whichever is less ("PRICE");PROVIDED, HOWEVER, that for a period of one year
from the date hereof, RiceX shall sell its Products to BioCeutics at a five
percent (5%) discount from the Price, to the extent the Products are to be
resold to existing customers of RiceX, all of which are identified IN EXHIBIT
"B" attached hereto. All payments due to RiceX hereunder shall be paid to
RiceX in United States dollars not later than thirty (30) days following the
date of the applicable invoice from RiceX. All Products delivered to
BioCeutics shall be F.O.B. RiceX's plant of origin of the Products, and upon
delivery to the proper carrier title and risk of loss and delay shall pass to
BioCeutics. RiceX shall deliver Products to the common carrier specified by
BioCeutics within ten (10) days after the date for which delivery of Products
is requested in a purchase order from BioCeutics, and shall assist BioCeutics
in arranging any desired insurance (in amounts that BioCeutics shall determ
ine) and transportation to any destinations specified in writing from time to
time by B ioCeutics. All insurance premiums and other expenses relating to
such transportation and delivery shall be at BioCeutics' expense, RiceX
further agrees that it shall maintain its existing pricing margins (selling
price minus cost of goods sold) in effect throughout the term of this
Agreement.
2. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. RiceX hereby grants to
BioCeutics a right of first refusal (the "Right of First Refusal") to
purchase all of the RiceX Products not already under contract to RiceX
non-human/feed customers.
(b) EXERCISE RIGHT OF FIRST REFUSAL. In order to
exercise the right of first refusal granted to it hereunder, RiceX will
provide BioCeutics with production surplus for the remainder of calendar year
1999, and will notify BioCeutics on or before April I and October I of each
year commencing in 1999 of the amount of estimated production of Products
during the following six (6) calendar months. Thereafter, on or before May I
and November I of each year commencing in 1999, BioCeutics shall inform RiceX
in writing of the amount of each Product that BioCeutics is willing to
purchase during the following six (6) calendar months. (By way of example,
BioCeutics shall notify RiceX on or before November 1, 1999 of the amount of
each Product that BioCeutics is willing to purchase for the six (6) months
commencing January 1, 2000 to June 30, 2000.) To the extent that BioCeutics
commits to purchase RiceX Products, RiceX shall be obligated to manufacture
and supply such Products, and BioCeutics then shall be obligated to purchase
the Products on a take or pay basis. In addition, should BioCeutics commit to
purchase a certain quantity of RiceX Products per month, but elects to take
delivery of a lesser amount, RiceX shall be paid for the total contracted
production but will deliver the additional Products as and when directed by
BioCeutics during the ensuing twelve (12) month period. Should BioCeutics
fail to direct delivery of said production during the ensuing twelve (12)
month period, BioCeutics shall FORFEIT PREPAID funds and the right to receive
the Product.
(c) SALES TO OTHER CUSTOMERS. In the event that
BioCeutics does not elect to purchase all of the estimated semi-annual
production of RiceX, RiceX then shall be entitled to sell the balance of its
production to other customers, but not to customers in the human market.
Notwithstanding the foregoing, if BioCeutics declines to sell to any customer
in the human market, BioCeutics will notify RiceX and, if BioCeutices
CONSENTS (IN WRITING), RICEX SHALL be entitled to sell to such human market
customer.
(d) TERM. The term of this right of first refusal
(and of this Agreement) shall be for ten (10) years commencing on the date
hereof and continuing until November 1, 2009. In addition, provided that
BioCeutics is not then in material default under this Agreement, BioCeutics
shall have the option to extend the term of this Agreement for four (4)
periods of five (5) years each. Such extensions shall occur automatically
unless BioCeutics gives written notice to RiceX at least ninety (90) days
prior to the expiration of the initial term or each renewal term that it does
not elect to extend the term of this Agreement.
3. EXCLUSIVE RIGHT TO SELL.
(a) EXCLUSIVE RIGHT TO SELL. Subject to meeting
the minimum purchase requirements set forth in paragraph 3 (c) below, RiceX
hereby grants to BioCeutics the exclusive right to sell Products which
include RiceX ingredients to the entire human market, including current
customers of RiceX. During the term of this Agreement, no one other than
BioCeutics, shall sell Products for the human market, except as provided in
paragraph 2(c) above. In addition, in the event anyone contacts RiceX with a
business opportunity for the human market, RiceX shall forward that inquiry
to BioCeutics.
(b) MINIMUM PURCHASE REQUIREMENTS. The exclusive
rights granted to BioCeutics under paragraph 3(b) of this Agreement (but no
other rights granted hereunder) shall terminate in the event that BioCeutics
purchases less than $2,000,000 (not including sales to customers indicated on
EXHIBIT "B" ATTACHED HERETO) OF PRODUCTS through December 31, 2000, or
$5,000,000 of Products in 2001. Thereafter, the exclusive rights granted to
BioCeutics hereunder shall be subject to minimum purchases of $6,000,000 in
2002, $7,200,000 in 2003, $8,640,000 in 2004, and increasing thereafter at
the rate of five percent (5%) per annum from 2005 through the remaining term
of this Agreement. All purchases in excess of the required minimum per year
shall be carried over to the following year, and BioCeutics' obligation to
meet such minimum purchase requirements is subject to RiceX manufacturing
sufficient Product to allow BioCeutics to meet such minimum purchases.
(c) LICENSE FOR TRADEMARKS. In addition to the
exclusive right to sell described in this paragraph, so long as BioCeutics is
not in default hereunder, RiceX hereby grants to BioCeutics an exclusive
license to use the trademarks "MiraChol" and "MaxE" BioCeutics also shall be
required to imprint the RiceX trademark brand on all products incorporating
RiceX Products sold by BioCeutics during the term of this Agreement. RiceX
agrees that it is the holder of the trademarks ("Trademarks") mentioned in
this paragraph, and that the sale and use of the Products and the Trademarks
will not infringe any person's right. RiceX shall indemnify and defend
BioCeutics against any and all such infringement claims, demands, actions,
losses, damages, fines, penalties, costs and expenses (including reasonable
attorneys' fees). BioCeutics acknowledges that RiceX's right in the
Trademarks are subject to an existing security interest in favor of a lender.
(d) TERM OF EXCLUSIVE RIGHT TO SELL AND EXCLUSIVE
LICENSE TO USE TRADEMARKS. The term of the exclusive rights granted to
BioCeutics hereunder shall be for the term of this Agreement (including
extensions) as provided in paragraph 2(d) above.
(e) PAYMENT FOR EXCLUSIVE RIGHT. In consideration
for granting the exclusive rights and license to BioCeutics hereunder,
BioCeutics shall pay to RiceX the following:
(i) A royalty of two percent (2%) of
BioCeutics' gross receipts. For purposes of this Agreement, the term "gross
receipts" means the total receipts received by BioCeutics and its affiliates
who are involved in the sale of nutraceutical products from all sources, but
shall be net of freight charges and other similar costs and shall exclude
refunds for merchandise returned which were previously included in gross
receipts, allowances or adjustments granted to customers to the extent that
these were previously included in gross receipts, transfers of merchandise
from warehouse to warehouse provided that such transfer was not for the
purpose of delivery of merchandise sold, merchandise returned to vendors, and
sales, use, gross receipts, excise and like taxes which are added to the
selling price of merchandise at the point of sale and paid for by the
customer,
(ii) BioCeutics shall keep full and
complete records and books of account reflecting all sales and business
transactions in order to enable RiceX to ascertain the royalty payments due
hereunder. BioCeutics agrees to keep all records pertaining to gross receipts
at its main office for a period of not less than three (3) years following
the date on which BioCeutics submits its report of gross receipts based on
such records. BioCeutics also shall prepare and deliver to RiceX within
thirty (30) days after the end of each calendar quarter a true written
statement signed by BioCeutics or its duly authorized officer or agent
showing in such form and detail as RiceX shall reasonably specify the
elements and amounts of gross receipts during such calendar quarter or
fraction thereof. With said statement for each calendar quarter, BioCeutics
shall pay to RiceX the amount of royalty due for such calendar quarter. If
BioCeutics shall fail to prepare and deliver, within the time above
mentioned, any statement of gross receipts or other related information
required hereunder, RiceX may elect to treat BioCeutics' failure as a breach
of this Agreement. RiceX also may elect to conduct an audit of all books and
records of BioCeutics which in any way pertain to or show gross receipts.
Such audit may be conducted by RiceX or by its authorized representative. If
the statement prepared as a result of such audit indicates that any
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additional royalties are due, BioCeutics shall pay such royalties, plus
interest thereon at the maximum rare from the date such payment was due until
the date of payment, and in addition, in any case where the amount of gross
receipts shown by such audit is equal to or in excess of one hundred four
percent (104%) of the amount disclosed by BioCeutics' statement for the same
period, BioCeutics shall pay for the cost of the audit.
(f) INFRINGEMENT. RiceX shall use its best
efforts to prevent others from infringing upon the exclusive rights granted
to BioCeutics hereunder, but shall not be liable for such infringement, nor
shall such infringement affect any payments required hereunder.
(g) TERRITORY. This Agreement shall relate to
domestic and international sales, provided that RiceX shall be entitled to
sell Products, in bulk only, to wholesale customers located in the countries
of China, India, Indonesia, Bangladesh, Vietnam, Thailand, Myanmar,
Philippines, Brazil, Korea, Pakistan, Egypt and Malaysia, but will cease such
activity promptly after BioCeutics gives it notice that it chooses to exploit
such opportunity and substantially maintain RiceX's market share. The
exclusive right granted to BioCeutics hereunder as to international sales
shall be for a term expiring December 31, 2000. Thereafter, BioCeutics shall
have the option, exercisable by giving RiceX written notice thereof at any
time prior to February 28, 2001, to extend the exclusive rights granted
hereunder as to international sales for the remaining term of this Agreement
by giving RiceX written notice thereof accompanied by a cash payment of
$500,000.
(h) INDEMNIFICATION.
(i) RiceX agrees to indemnify BioCeutics for, and
hold it harmless from and against, any and all costs, expenses and damages
(including reasonable attorneys' fees and expenses) incurred in connection
with any suit, action or claim arising out of, or as a result of, any claims
for damages to person or property occasioned from the use of the products to
be sold by BioCeutics after the date hereof, if and only if, such damages are
caused by the Products purchased hereunder from RiceX and not any additions
to or modifications of the Products made by BioCeutics ("Additions and
Modifications").
(ii) BioCeutics agrees to indemnify RiceX for, and
hold it harmless from and against, any and all costs, expenses and damages
(including reasonable attorneys' fees and expenses) incurred in connection
with any suit, action or claim arising out of, or as a result of, any claims
for damages to person or property occasioned from the use of the products to
be sold by BioCeutics after the date hereof, if and only if, such damages are
caused by the Modifications and Additions and not the Products purchased
hereunder from RiceX.
4. DEFAULT. A party shall be in default under this
Agreement if any of the following shall occur:
(a) BioCeutics shall fail to pay any royalty due
hereunder as and when due;
(b) RiceX shall fail to manufacture Products for
sale to BioCeutics hereunder;
or
(c) Either party shall otherwise breach any term
or condition of this Agreement.
If an event of default shall occur and is not cured within thirty (30) days
after the giving of written notice thereof to the defaulting party, the other
party shall be entitled to terminate this Agreement and the exclusive rights
and exclusive license granted hereby, and pursue any and all claims for
damages. In addition, in the event that BioCeutics fails to meet the minimum
purchase requirements for December 31, 2000 as set forth in paragraph 3(c)
above, all results, reports, information and materials derived from the
clinical trials, testing and research to be undertaken by BioCeutics (which
materials and information currently are owned by BioCeutics) shall become the
property of RiceX and shall be delivered to RiceX by BioCeutics, subject to a
non-exclusive right in favor of BioCeutics to continue to use such materials
and information free of charge.
5. MISCELLANEOUS.
(a) TIME IS OF THE ESSENCE. Time is of the essence
in the performance of the parties' respective obligations herein contained.
(b) FURTHER ASSURANCE. Each party agrees that upon
the request of the other it will, from time to time, execute and deliver to
such other party all such instruments and documents of further
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assurance or otherwise, and will do any and all
such acts and things as reasonably may be required to carry out the
obligations of such party hereunder and consummate the transactions
contemplated hereby.
(c) HEADINGS. The headings of this Agreement are
included for purposes of reference and convenience only and shall not limit
or otherwise affect the construction or interpretation of any of the
provisions of this Agreement.
(d) ENTIRE AGREEMENT, MODIFICATION. This
Agreement, including all exhibits, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith. No supplement, modification or amendment of this
Agreement shall be effective unless executed in writing by all of the parties
hereto.
(e) NOTICE. Whenever the service or the giving of
any document or consent by or on behalf of any party hereto upon any other
party is herein provided for, or becomes necessary or convenient under the
provisions of this Agreement or any document related hereto, a valid and
efficient service of such document shall be effected by delivering the same
in writing to such party in person, by Federal Express or other reputable
courier, by facsimile, or by sending the same by registered or certified
mail, return receipt requested, and shall be deemed received upon personal
delivery if delivered personally, by Federal Express or other reputable
courier or by facsimile, or four (4) business days after deposit in the mail
in the United States, postage prepaid, addressed to the person to receive
such notice or communication at the following address:
RiceX: 0000 Xxxx'x Xxxxxx Xxxxx
Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X XxXxxx, Xx.
Telephone:(000) 000-0000
Facsimile: (000) 000-0000
BioCeutics: Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 100 16
Attention: Xxxxx Xxxx Xxxxxx
Telephone (000) 000-0000
Facsimile: (000) 000-0000
Notice of change of address shall be given by written notice in the manner
detailed in this paragraph 5(e).
(f) COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
(g) LAW GOVERNING. This Agreement shall be
construed in accordance with, and shall be governed by, the laws of the State
of Delaware.
(h) SUCCESSORS AND ASSIGNS. Neither party may
assign any of its rights or obligations under this Agreement without the
prior written consent of the other party, which consent may be withheld in
such party's sole and absolute discretion. Subject to the foregoing, this
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(i) SEVERABILITY. In the event any portion of
this Agreement shall be declared by any court of competent jurisdiction to be
invalid, illegal or unenforceable, such portion shall be deemed severed from
this Agreement, and the remaining parts hereof shall remain in full force and
effect, as fully as though such invalid, illegal or unenforceable portion had
never been a part of this Agreement.
(J) GENDER AND NUMBER. As used in this Agreement,
the masculine, the feminine and the neuter gender, and the singular or plural
number, shall be deemed to include the others wherever the context so
indicates or requires.
(k) ATTORNEYS' FEES. In the event of the bringing
of any action by any party hereto against any other party arising out of this
Agreement, the party who is determined to be the prevailing party shall be
entitled to recover from the other party all costs and expenses of suit,
including reasonable attorneys' fees.
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(l) GOVERNING LAW, DISPUTE. This Agreement shall
be governed by and construed under the law of the State of Delaware,
disregarding any principles of conflicts of law that would otherwise provide
for the application of the substantive law of another jurisdiction. Each of
the undersigned (i) agrees that any legal suit, action or proceeding arising
out of or relating to this Agreement shall be instituted exclusively in the
Superior Court of the State of Delaware, (ii) waives any objection to the
venue of any such suit, action or proceeding and the right to assert that
such forum is not a convenient forum, and (iii) irrevocably consents to the
jurisdiction of the Superior Court of the State of Delaware in any such
suit,action or proceeding. Each of the undersigned further agrees to accept
and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the Superior Court of the State of
Delaware and agrees that service of process upon it mailed by certified mail
to its address shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding.
(m) FORCE MAJEURE. Either party shall be excused
from all obligations under this Agreement to the extent performance is
prevented by a Force Majeure. For purposes of this Agreement, a "Force
Majeure" includes only Acts of God; hurricane, tornado and other weather
conditions; labor strike, lockout or other major industrial disturbance; war,
riot, sabotage, act of public enemy, terrorist act or gang violence; serious
illness or epidemic; earthquake or other earth movement, flood or other
natural disaster; bomb blast or other explosion; fire or, government action
that prevents performance.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE RICEX COMPANY
A Delaware Corporation
("RiceX")
Name: Xxxxxx XxXxxx, Xx
By:/s/Xxxxxx X. XxXxxx
Its: Chief Executive Officer and Chairman of the Board
BIOCEUTICS, INC.
A Delaware Corporation
("BioCeutics")
Name: Xxxxxx Xxxxx
By:/s/Xxxxxx Xxxxx
Its: Vice President
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