PROPRIETARY DEVELOPMENT, RIGHT OF FIRST REFUSAL AND ACQUISITION AGREEMENT
This PROPRIETARY DEVELOPMENT, RIGHT OF FIRST REFUSAL AND ACQUISITION
AGREEMENT ("Agreement"), effective June 1, 2003 (the "Effective Date"), is made
by and between SinoFresh HealthCare, Inc., a corporation organized and existing
under the laws of Delaware and having its principal offices at 000 Xxxx Xxxxxx
Xxxxx Xxxxxxxxx, XX 00000 (hereinafter "HealthCare"), and SinoFresh Research
Laboratories, LLC, a limited liability company organized and existing under the
laws of the State of Delaware and having its principal offices at 000 Xxxx
Xxxxxx Xxxxx Xxxxxxxxx, XX 00000 (hereinafter "Research").
WHEREAS, Research is in the business of discovering and developing new
chemical entities designed to cure sinus-related diseases;
WHEREAS, HealthCare is in the business of developing, manufacturing and
marketing proprietary drugs designed to cure sinus-related diseases;
WHEREAS, HealthCare would like to engage Research to render research
and development services to HealthCare in connection with sinus-related diseases
and Research is willing to provide such services;
WHEREAS, HealthCare desires to obtain a right of first refusal to
acquire the rights to commercialize products created through Research's research
and development;
WHEREAS, the Parties wish to create an alliance that permits such
efficient and effective development and licensing.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and intending to be legally bound hereby, HealthCare and Research hereby
agree as follows:
1. Definitions.
Each of the capitalized terms used in this Agreement (other than the
headings of the Sections) shall have the meaning indicated in this Agreement.
1.1 The term "Agency" as used herein means any governmental regulatory
authority responsible for granting health or pricing approvals, registrations,
import permits, and other approvals required before a Product (defined below)
may be tested or marketed in any country. The term Agency includes the Food and
Drug Administration ("FDA").
1.2 The term "Commercially Reasonable Efforts" as used herein shall
mean those efforts consistent with the exercise of prudent scientific and
business judgment as applied to other research, development and
commercialization efforts for products of similar scientific and commercial
potential within the research programs and relevant product lines of such Party.
1.3 The term "Products" as used herein shall mean any new or useful
process, patent rights, data, information, inventions, discoveries, manufacture,
compounds, compositions of matter, improvements, claims, formulae, processes,
trade secrets, technologies and/or know-how (including confidential data and
Confidential Information), to the extent relating to, derived from and useful
for the manufacture, use or sale of a compound or a product, including, without
limitation, synthesis, preparation, processes and techniques, control methods
and assays, chemical data, toxicological and pharmacological data and
techniques, clinical data, medical uses, product forms and product formulations
and specifications, whether patentable or unpatentable, that is conceived or
first reduced to practice or demonstrated to have utility during the term of
this Agreement by Research.
1.4 The term "Party" means HealthCare or Research and, when used in the
plural, shall mean HealthCare and Research.
1.5 The term "Research Management Committee" or "RMC" as used herein
shall mean the committee described in Section 2.1 hereof.
1.6 The term "Research Program" as used herein means any and all
research and development activities of Research. The Research Program and the
timeline therefor shall be more fully described in a separate document to be
delivered by HealthCare no later than December 30, 2003.
1.7 The term "Third Party" shall mean any party other than HealthCare
or Research or an Affiliate of either of them.
2. Development.
2.1 A Research Management Committee (the "RMC") will be established
which will be responsible for the management of the Research Program. The RMC
will prepare and review the annual research plans, monitor the progress of
Research in performing the Research Program and determine whether the research
milestones as set forth therein have been successfully completed. The RMC will
be comprised of five (5) members, with one (1) representative appointed by
HealthCare and four (4) representatives appointed by Research. The RMC shall be
co-chaired jointly by the Project Leaders as defined in Section 2.4 below.
Either Party, in its sole discretion, may appoint substitute or replacement
members of the RMC to serve as its representatives upon notice to the other
Party. The initial members of the RMC shall be appointed by the Parties within
thirty (30) days following the Effective Date.
2.2 The RMC shall meet at least once each quarter or such lesser
frequency as the Parties shall determine during the term of the Research
Program, at such times and places as agreed to by HealthCare and Research. The
2
Party hosting each meeting of the RMC promptly shall prepare and deliver to the
other Party within fifteen (15) business days after the date of such meeting,
minutes of such meeting setting forth all decisions of the RMC relating to the
Research Program in form and content reasonably acceptable to the other Party.
The RMC and any of its members may meet or attend meetings by telephone or video
conference. The RMC will communicate regularly by telephone, facsimile and video
conference. Meetings and telephone and video conferences of the RMC may be
attended by such other directors, officers, employees, consultants and other
agents of HealthCare and Research as the Parties from time to time reasonably
agree.
2.3 All decisions of the RMC shall be made by majority vote of all of
the members, with each member of the RMC entitled to one vote.
2.4. HealthCare and Research each shall appoint a person (a "Project
Leader") to coordinate its part of the Research Program. The Project Leaders
shall be the primary contacts between the Parties with respect to the Research
Program. Each Party shall notify the other within thirty (30) days of the
Effective Date of the appointment of its Project Leader and shall promptly
notify the other Party upon changing this appointment.
2.5 By December 30, 2003, HealthCare will provide Research with a
written description of the Research Program, such description having sufficient
detail so as to enable Research to understand the goals and objectives of the
Research Program. At the end of each quarter thereafter, Research will provide
HealthCare with written reports of progress made towards achieving the goals of
the Research Program and the path Research expects to follow in the next
quarter, such reports having sufficient detail so as to enable HealthCare to
ascertain Research's progress and Research's direction towards fulfilling the
goals and objectives of the Research Program. Research shall have sole
discretion to direct and control the Research Program and shall use Commercially
Reasonable Efforts to carry out all activities under the Research Program at its
own expense, and to complete it within the timelines approved by the RMC,
provided that neither the Research Program nor anything in this Agreement shall
constitute any warranty or covenant that the Products will be successfully
developed at all or over such timeline.
2.6 Except as otherwise provided herein, Research shall be the sole
owner of any and all Products, patent rights, data, information, inventions and
discoveries generated as a result of the Research Program. As owner, Research
shall have the right, at its option and expense and through attorneys and agents
of its choice, to prepare, file and prosecute (including any proceedings
relating to reissues, reexaminations, protests, interferences and requests for
patent extensions or supplementary protection certificates) in its own name any
patent applications with respect to any of the above owned by it and to maintain
any patents issued. In connection therewith, HealthCare agrees to cooperate with
Research at Research's expense in the preparation and prosecution of all such
patent applications and in the maintenance of any patents issued. The
obligations set forth in this Section 2.6 shall survive the expiration or
termination of this Agreement.
3
2.7 In the event that HealthCare becomes aware of any actual or
threatened infringement of any Patent Right of Research, HealthCare shall
promptly notify Research, and Research shall control alone the conduct of any
legal action or proceeding, and shall bear the actual costs and expenses of such
action.
3. Right of First Refusal and Right to Acquire the Products.
3.1 Research hereby grants to HealthCare an exclusive right of first
refusal (the "First Refusal Right") and a right to acquire (the "Acquisition
Right") the Products during the Term and throughout the Territory as provided
hereinbelow. Notwithstanding any other provision in this Agreement, by virtue of
HealthCare's payment of the Fee (defined in Section 4.1 below) to Research as
provided herein, HealthCare, pursuant to this Agreement, obtains the First
Refusal Right and the Acquisition Right to any and all Products for no
additional consideration/1/:
3.1.1 to develop, design, manufacture, distribute, advertise,
publicize, market and sell the Products, for sale to retail customers through
all channels of wholesale and retail distribution permitted hereunder; and
3.1.2 for reproduction on containers, packaging, display and
promotional material and in advertising and advertising materials for the
Products.
3.2 The First Refusal Right and the Acquisition Right shall be
exercised by HealthCare in accordance with the terms and conditions contained in
this Agreement.
3.3 Term. The term of HealthCare's rights pursuant to this Agreement
with respect to the First Refusal Right and the Acquisition Right (the "Term")
shall consist of the time period commencing as of the Effective Date hereof and
ending on December 30, 2006.
3.4 Territory. The territory of HealthCare's rights hereunder (the
"Territory") consists of the world.
3.5 The First Refusal Right and the Acquisition Right as to each
Product shall be exercisable by HealthCare in accordance with the following
procedure:
3.5.1 For any and all Products, HealthCare shall be offered
the right of first refusal to acquire the Products. If HealthCare desires to
exercise its Acquisition Right relative to any or all of the Products, then
HealthCare shall notify Research in writing. Research shall concurrently make
available to HealthCare at Research's premises all materials then extant
regarding such Products, to the extent available.
3.5.2 HealthCare shall thereafter have thirty (30) days from
the date of such notice to enter into a written agreement for acquisition of any
or all of the Products.
--------
1 In the event that HealthCare elects to acquire any or all of the Products, the
consideration passing from HealthCare to Research for said Products shall be the
payment of the Fee as provided herein.
4
3.6 If HealthCare elects not to enter into an agreement with respect to
such Products, then Research shall be free to negotiate with and conclude an
agreement with any third party with respect to the rights that are incorporated
in the First Refusal Right and the Acquisition Right.
4. Fee.
4.1 On or about the 5th day of each month beginning on the Effective
Date, HealthCare shall pay Research the Fee (defined below) in exchange for the
First Refusal Right and the Acquisition Right. The "Fee" shall be determined by
mutual agreement of the board of directors of HealthCare and the RMC at a
meeting the date and time of which shall be determined the board of directors of
HealthCare.
a. Fee Reevaluation.On an annual basis beginning on the
one-year anniversary of the Effective Date and continuing until this Agreement
is terminated, the Parties hereto shall hold a meeting, the purpose of which
shall be to discuss the Fee and whether it should be increased, decreased or
remain unchanged. All negotiations held pursuant to this Section 4.1.a. shall be
held in good faith.
4.2 Within sixty (60) days of the end of the first calendar quarter and
thirty (30) days of the end of each calendar quarter thereafter, Research will
provide HealthCare with a report that details the research and development costs
for that quarter.
4.3 Research will provide HealthCare, within thirty (30) days of the
end of each calendar quarter, a good faith estimate of the research and
development costs for the next quarter. Such estimate shall be for accounting
purposes and shall not be binding.
4.4 All payments to be made under this Agreement shall be made in
United States dollars in the United States by wire transfer to a bank account
designated by the Party to be paid. In the event that any payment due under this
Agreement is not made when due, the payment shall accrue interest from the date
due at the rate of seven percent (7%) per annum; provided, that in no event
shall such rate exceed the maximum legal annual interest rate. The payment of
such interest shall not limit a Party from exercising any other rights it may
have as a consequence of the lateness of any payment.
4.5 Research will be responsible for all costs associated with the
Research Program.
5. Term, Termination.
5.1 This Agreement is in force as of the Effective Date and shall end
on December 30, 2006.
5.2 Either Party may terminate this Agreement (so long as such Party
shall not have materially breached this Agreement and such breach shall not have
been cured) in the event of material breach by the other Party, if the breaching
5
Party fails to cure the breach within ninety (90) days of receiving notice of
the breach from the non-breaching Party. Upon such cure, this Agreement shall be
deemed to be not terminated and to be in full force.
5.3 Either Party shall have the right to terminate this Agreement
effective immediately in the event the other Party files a voluntary petition in
bankruptcy, is adjudicated as bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within fifteen (15) days an involuntary petition in bankruptcy filed
against it.
5.4 The expiration or termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such expiration or termination.
The representations and warranties contained in this Agreement as well as those
rights and obligations contained in the terms of this Agreement, which by their
intent or meaning have validity beyond the term of this Agreement, shall survive
the termination or expiration of this Agreement. The provisions of Sections 6
and 7 shall survive the expiration or termination of this Agreement. Any rights
and obligations which have accrued prior to termination or expiration of this
Agreement in any respect shall survive such termination or expiration.
5.5 Notwithstanding any other provision of this Agreement, this
Agreement shall terminate upon the closing of a Change of Control Transaction
(the "Close"). For the purposes of this Agreement, a "Change of Control
Transaction" shall mean the occurrence of any of the following events: (i) the
approval by shareholders of HealthCare of a merger or consolidation of
HealthCare with any other corporation, other than a merger or consolidation
which would result in the voting securities of HealthCare outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the total voting power represented by
the voting securities of HealthCare or such surviving entity outstanding
immediately after such merger or consolidation; (ii) the approval by the
shareholders of HealthCare of a plan of complete liquidation of HealthCare or an
agreement for the sale or disposition by HealthCare of all or substantially all
of HealthCare's assets; (iii) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of HealthCare representing 50% or more of the total
voting power represented by HealthCare's then outstanding voting securities; or
(iv) a change in the composition of the Board of directors, as a result of which
fewer than a majority of the directors are incumbent birectors. "Incumbent
Directors" shall mean directors who either (A) are directors of HealthCare as of
the date hereof, or (B) are elected, or nominated for election, to the Board of
directors with the affirmative votes of at least a majority of those directors
whose election or nomination was not in connection with any transactions
described in subsections (i), (ii), or (iii) or in connection with an actual or
threatened proxy contest relating to the election of directors of HealthCare.
Provided, however, that notwithstanding any other provision in this Agreement,
any and all Products that, prior to the Close, (i) are still in the process of
being developed, reduced to practice or demonstrated to have utility, and/or
6
(ii) have not been transferred pursuant to an executed assignment of rights,
shall remain the exclusive property of Research.
6. Confidential Information.
6.1 As used herein, the term Confidential Information means information
which relates to Products or their development, manufacture, testing, Agency
Approval, pricing, marketing, sale or support and which is disclosed by one
Party hereto to the other, including, but not limited to, technical and business
information, samples of compounds, the structure or chemical identity of
compounds, the properties and utilities of compounds, manufacturing procedures,
manufacturing processes, manufacturing equipment, plant layouts, product
volumes, quality control procedures, and quality control standards.
6.2 Each Party shall retain Confidential Information of the other Party
in strict confidence and shall not, directly or indirectly, publish or disclose
it to any Third Party, or use Confidential Information for any purpose other
than the purposes of this Agreement without the prior written consent of the
disclosing Party. Each Party agrees it shall not communicate Confidential
Information of the other Party except to its employees, advisors,
representatives and contractors who have a need to know it. Each Party shall
ensure that any employees, advisors, representatives or contractors who are
placed in a position to learn Confidential Information will have been previously
made aware of the terms of this Agreement, have employment agreements or other
agreements obligating them to keep such information confidential consistent with
the terms of this Agreement and each Party shall indemnify the other Party
against the misuse of such Confidential Information by its employees, advisors,
representatives or contractors.
6.3 The obligations of confidentiality and nondisclosure shall not
apply to Confidential Information which:
a. at the time of disclosure is in the public domain;
b. after disclosure becomes part of the public domain through
no act or omission by the receiving Party;
c. as shown by written records or other competent proof was in
the possession of the receiving Party prior to disclosure or development under
this Agreement;
d. is rightly received by the receiving Party, without
obligation of secrecy, from a Third Party who was entitled to receive and
transfer such;
e. as shown by written records or other competent proof is
independently developed by employees of the receiving Party who did not have
access to Confidential Information; or
7
f. a Party hereto is compelled to disclose by a court or other
tribunal of competent jurisdiction. In this case, the compelled Party shall give
the disclosing Party prompt notice so that the disclosing Party can seek a
protective order, and shall exercise reasonable efforts to ensure that the
information is accorded confidential treatment by the court or other tribunal.
6.4 Termination of this Agreement or any other agreement between
HealthCare and Research shall not affect the secrecy and restrictions on use
obligations under this Section which shall survive indefinitely. Upon
termination of this Agreement, the receiving Party shall return to the
disclosing Party or destroy any Confidential Information in tangible form in its
possession, except that the receiving Party shall not destroy Confidential
Information required to be retained in order to comply with applicable law, rule
or regulation.
6.5 The receiving Party shall also be entitled to disclose the other
Party's Confidential Information (i) that is required to be disclosed in
compliance with applicable laws or regulations (including, without limitation,
to comply with Securities and Exchange Commission, in accordance with Generally
Accepted Accounting Principles, or stock exchange disclosure requirements) or by
order of any governmental body or a court of competent jurisdiction; (ii) as may
be necessary or appropriate in connection with the enforcement of this
Agreement; (iii) as required in furtherance of a Party's obligations under this
Agreement; (iv) as may be necessary to Third Parties in connection with business
transactions with the Parties, provided, that such Third Parties shall be bound
by a confidentiality agreement obligating them to keep such information
confidential consistent with the terms of this Agreement; (v) as may be required
otherwise provided that a Party give the other Party an outline of the material
to be disclosed and such other Party shall consent to such disclosure; and (vi)
as may be necessary for the conduct of clinical studies; provided, that the
Party required to disclose such information shall use Commercially Reasonable
Efforts to obtain confidential treatment of such information by the agency or
court or other disclosee to the maximum permitted extent under law, and that, in
the case of disclosures under (i) shall provide the other Party with a copy of
the proposed disclosure in sufficient time to allow reasonable opportunity to
comment thereon.
6.6 Each Party shall be entitled, in addition to any other right or
remedy it may have, at law or in equity, to an injunction, without the posting
of any bond or other security, enjoining or restraining any other Party from any
violation or threatened violation of this Section.
7. General Terms & Conditions.
7.1 Representations and Warranties. Each Party hereby represents and
warrants to the other Party as follows:
a. Such Party is (i) a corporation or limited liability
company ("LLC"), as the case may be, duly organized, validly existing and in
good standing under the laws of the state in which it is organized, (ii) has the
8
corporate or LLC power and authority and the legal right to own and operate its
property and assets, to lease the property and assets it operates under lease,
and to carry on its business as it is now being conducted, and (iii) is in
compliance with all requirements of applicable law, except to the extent that
any noncompliance would not have a material adverse effect on such Party's
ability to perform its obligations under this Agreement.
b. Such Party (i) has the corporate or LLC power and authority
and the legal right to enter into this Agreement and to perform its obligations
hereunder, and (ii) has taken all necessary corporate or LLC action on its part
to authorize the execution and delivery of this Agreement and the performance of
its obligations hereunder. This Agreement has been duly executed and delivered
on behalf of such Party, and constitutes a legal, valid, binding obligation,
enforceable against such Party in accordance with its terms.
c. All necessary consents, approvals and authorizations of all
governmental authorities and other persons required to be obtained by such Party
in connection with the execution, delivery and performance of this Agreement
have been and shall be obtained to the extent possible.
d. Notwithstanding anything to the contrary in this Agreement,
the execution and delivery of this Agreement and the performance of such Party's
obligations hereunder (i) do not conflict with or violate any requirement of
applicable laws or regulations or any of the terms of its certificate of
incorporation or by-laws or LLC agreement and (ii) do not and shall not conflict
with, violate or breach or constitute a default or require any consent under any
contractual obligation of such Party.
7.2 Applicable Law/Jurisdiction.
This Agreement is acknowledged to have been made in and shall
be construed, governed, interpreted and applied in accordance with the laws of
the State of Florida, without giving effect to its conflict of laws provisions;
any disputes under this Agreement shall be subject to the exclusive jurisdiction
and venue of the Florida state courts and the Federal courts located in Florida,
and the Parties hereby consent to the personal and exclusive jurisdiction and
venue of these courts. Each party hereby waives its rights to a jury trial for
all disputes hereunder.
7.3 No Waiver.
The failure of either Party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other Party.
9
7.4 Assignment.
Except as expressly provided herein, neither Party may assign
any of its rights or delegate any of its duties pursuant to this Agreement
without the prior written consent of the other Party, except (but subject to the
prior written consent of the other Party, which consent shall not be
unreasonably withheld) to affiliates and parent companies and to any Third Party
that assumes ownership or control of all or substantially all of the assigning
Party's business; provided that such assignment shall not release the assignor
of its obligations and liabilities hereunder.
7.5 Severability.
If any provision of this Agreement is held to be invalid or
unenforceable, all other provisions will continue in full force and effect, and
the Parties will substitute for the invalid or unenforceable provision a valid
and enforceable provision which conforms as nearly as possible with the original
intent of the Parties.
7.6 Independent Contractor.
Nothing contained in this Agreement shall be deemed to
constitute a partnership or joint venture between Research and HealthCare, or to
constitute one as the agent of the other. Both Parties shall act solely as
independent contractors, and nothing in this Agreement shall be construed to
give either Party the power or authority, express or implied, to act for, bind,
or commit the other Party.
7.7 Entire Agreement.
The Parties acknowledge that this Agreement sets forth the
entire Agreement and understanding, commitment and undertaking (oral or written)
of the Parties as to the subject matter hereof. This Agreement may be amended
only by a written document signed by authorized representatives of both Parties.
No Party shall have the right to offset or reduce any amount payable under this
Agreement as a result of any other agreement between the Parties hereto or their
affiliates.
7.8 Notices.
Any payment, notice or other communication pursuant to this
Agreement shall be sufficiently made or given on the date of mailing if sent to
such Party by facsimile on such date, with paper copy being sent by first class
mail, postage prepaid, or by next day express delivery service, addressed to it
at its address below (or such address as it shall designate by written notice
given to the other Party).
In the case of Research:
SinoFresh Research Laboratories, LLC
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
10
In the case of HealthCare:
SinoFresh HealthCare, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
with a copy to:
Xxxxx X. Xxxx, Esq.
The Xxxx Law Group, PLLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
7.9 Alternative Dispute Resolution Provision.
a. The Parties recognize that a bona fide dispute as to
certain matters may arise from time to time during the term of this Agreement
which may relate to either Party's rights and/or obligations hereunder. The
Parties agree that they shall use all reasonable efforts to resolve in an
amicable manner, any dispute which may arise.
b. If the Parties are unable to resolve such dispute within
thirty (30) days, either Party may, by notice to the other Party, have such
dispute referred to the respective nominees of the parties designated below.
Such nominees shall attempt to resolve the referred dispute by good faith
negotiations within thirty (30) days after such notice is received. The
designated nominees are the President for Research and the Chief Executive
Officer for HealthCare.
c. If the designated nominees are not able to resolve such
dispute within such thirty (30) day period, then the Parties shall select a
mediator to aid them in resolving such dispute. If both Parties do not agree to
pursue mediation or, pursuant to such mediation, the Parties do not resolve
their dispute, the Parties shall at such time initiate arbitration with the
American Arbitration Association, by three arbitrators, with one arbitrator
mutually agreed to by each of Research and HealthCare, and the third arbitrator
selected by such arbitrators. The arbitration proceedings shall be held in
Florida.
d. Notwithstanding the above, the complaining Party reserves
the right to seek injunctive relief or other relief, in court of competent
jurisdiction, if, at its election, the complaining Party believes that immediate
relief is necessary to protect its business interest.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
11
RESEARCH:
SINOFRESH RESEARCH LABORATORIES, LLC
---------------------------------------------
By:
Its:
HEALTHCARE:
SINOFRESH HEALTHCARE, INC.
---------------------------------------------
By:
Its:
12
