DISTRIBUTION AGREEMENT
THIS AGREEMENT (the "Agreement") made this 30th day of October, 1998 by
and between X.X. Xxxxxxx North America, a division of X.X. Xxxxxxx Corporation
("Scherer"), having its principal offices at 0000 Xxxxxxx Xxxxx, Xx. Xxxxxxxxxx,
Xxxxxxx, 00000-0000 and Paracelsian, Inc. (the "Company"), having its principal
office at 000 Xxxxxxxx Xxx., Xxxxxx, Xxx Xxxx 00000.
RECITALS
1. The company has developed the BioFIT(R) quality assurance program based
on its cor competency of developing and applying bioassays and other
complimentary systems to evaluate the effects of natural compounds on
the structure and function of the human body. Xxxxxxx has developed a
means of delivering herbal products referred to as Xxxxxxx'x Softgel
Technology (as hereinafter defined) and other solid-form dietary
supplement products. Xxxxxxx is engaged in the manufacture, production
and sale of soft gelatin capsules referred to as Softgels (as
hereinafter defined). The Company and Xxxxxxx are parties to a Joint
Confidentiality Agreement dated February 5, 1998 pursuant to which the
Company has disclosed (and may in the future disclose) to Xxxxxxx
proprietary information relating to its Product (as hereinafter
defined) and pursuant to which Xxxxxxx has disclosed (and may in the
future disclose) to the Company proprietary information relating to
Softgel Technology (the "Confidentiality Agreement").
2. The Company and Xxxxxxx wish to cooperate for the purpose of making
said Delivery Forms (as hereinafter defined) for Xxxxxxx to
manufacture, market and distribute in the Territory as hereinafter
defined.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
ARTICLE I DEFINITIONS
1.1 "Affiliate" as applied to Xxxxxxx or the Company shall mean any legal
entity other than Xxxxxxx or the Company, as the case may be, in
whatever country, organized, controlling, controlled by or under common
Control with Xxxxxxx or the Company. The term "Control" means
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such entity, whether
pursuant to the ownership of voting securities, by contract or
otherwise.
1.2 "Appointment" Company hereby appoints Xxxxxxx for sales of the Delivery
forms for the Sales Territory. Xxxxxxx accepts this appointment and
agrees to act as sole distributor. Company agrees not to sell the
Product to anyone other than Company in the Sales Territory.
1.3 "Customers" shall mean any company that agrees to participate in the
BCP program and agrees to purchase up to five (5) BCP Products.
1.4 "Delivery Forms" shall mean any tablet, 2-piece hard-shell and gelatin
capsules.
1.5 "Distribution Channel" shall mean all channels of distribution.
1.6 "End Use" shall mean dietary supplements regulated under DSHEA and OTC
products.
1.7 "Finished Product" means the Product(s) development under this
Agreement, comprised of a dietary supplements, or OTC Products embodied
in the Delivery Forms and meeting the Specifications.
1.8 "NetSales" as applied to Finished Product shall mean gross sales of
such Finished Product, less transportation charges, returns and
allowances (actually paid or allowed by Company), customary discounts
(whether in case or trade), and sales or other taxes based on sales
price when included in gross sales, but not including taxes assessed on
income derived from such sales.
1.9 "Product(s)" means any product that has under gone the BioFIT(R)
Certification Program ("BCP") by the Company.
1.10 Proprietary Information" has the meaning assigned to such term in the
Confidentiality Agreement.
1.11 "Registered Trademark" shall mean a trade-xxxx BioFIT filed in the
United States Patent and Trademark office, with the necessary
description and other statements required by the act of congress, and
there duly recorded, securing its exclusive use to the person causing
it to be registered.
1.12 "Softgel Technology" means Xxxxxxx'x technology for the manufacture of
soft gelatin capsules ("softgels") for the oral administration of
herbal products having certain solubility characteristics. The Softgel
Technology included proprietary know-how relating to (i) the
development of fill and shell formulation; (ii) the
design and use of the encapsulation process to enhance stability,
solubility, bioavailability, and manufacturability of drug chemical
entities in softgels; (iii) the selection and preparation of solvents,
vehicles, excipients, surfactants, stabilizers, gelatin, plasticizers
and other components of the liquid fill and the gelatin shell; and (iv)
certain encapsulation, drying and related manufacturing techniques and
machinery for making commercial quantities of softgels.
1.13 "Specifications" means specifications for Product(s) as set forth in
Attachment A hereto, and such other specifications as are mutually
agreed in writing by the parties.
1.14 "Territory" means Xxxxxxx will maintain a marketing and distribution
network of the Product in the United States, Mexico and Canada.
ARTICLE II - CONFIDENTIALITY
2.1 CONFIDENTIALITY. Xxxxxxx and the Company agree that so long as this
Agreement shall remain in effect and for a period of 15 years
thereafter, each of them shall be bound by the terms set forth in the
Confidentiality Agreement. The Company and Xxxxxxx acknowledge that the
Confidentiality Agreement remains in force and that the terms of the
Confidentiality Agreement apply to any information only to carry out
its obligations hereunder and will not use such information for its own
benefit or for the benefit of others or in any way inconsistent with
this Agreement.
2.2 CERTAIN LIMITATIONS. The Confidentiality Agreement sets forth certain
exclusions from the definition of Proprietary Information. In addition
to such exclusion, each party shall have the limited right to use or
disclose any Proprietary Information which:
(a) is information which is required to be included in patent
applications filed hereunder or required to be provided to a
government agency in order for the Company to obtain approvals
to market the Product or for Xxxxxxx to make the Product;
provided, however, that no Proprietary Information of the
Company or Xxxxxxx will be disclosed in any such patent
application or otherwise without the prior written consent of
the other party; or
(b) is information which is requires to be disclosed to customers,
users and prescribers of Product or which is reasonably
necessary to disclose in connection with the ethical marketing
of Product; provided, however, that no Proprietary Information
of Xxxxxxx will be so disclosed without the prior
written consent of Xxxxxxx;
In each case described in this Section 2.2 (and in addition to the
provisos set forth in subsections (a) and (b) above), the party proposing to so
disclose information shall first inform the other party of the proposed
disclosure, shall use its best efforts to limit the disclosure and maintain
confidentiality to the extent possible and shall permit and cooperate with the
other party's efforts, by appropriate legal means, to limit such disclosure.
ARTICLE III - OFFER OF NEW TECHNOLOGY OF
PRODUCTS(S)AND EXCLUSIVITY
3.1 DEVELOPMENT OF NEW OR IMPROVED VARIATIONS OF PRODUCT. It is expected
that from time to time modifications, variations or improvements of the
Product will be required by the marketplace. Xxxxxxx has no obligation
to undertake development activities; however, Xxxxxxx shall have the
first right of refusal to collaborate on the development of Products
developed by Company. Xxxxxxx shall have the first right of refusal on
the marketing and distribution of any Products developed by Company.
All rights of first refusal are to be exercised within sixty (60) days
of written notification to Xxxxxxx by Company.
3.2 XXXXXXX'X EXCLUSIVITY. Xxxxxxx shall be the exclusive manufacture,
marketer and distributor of all of the Company's BioFIT(R) Product(s)
for the term of this Agreement.
3.3 COMPANY'S EXCLUSIVITY. Company shall not sell or make available the
Product(s), to any third party for manufacture, marketing and
distribution in the Territory.
ARTICLE IV - MARKETING AND PROMOTION ACTIVITIES
4.1 MARKETING AND PROMOTIONAL ACTIVITIES. Both Company and Xxxxxxx will use
their best efforts to support the BCP program as follows:
(a) Xxxxxxx agrees to undertake aggressive public relations and
marketing programs in support of the BCP program.
(b) The minimum expenditures in support of the BCP program
(advertising,
promotion, public relations, etc. which include information
promoting the BCP program) shall not be less than ten percent
(10%) of Xxxxxxx'x total marketing budget for its dietary
supplement products in the Territory.
(c) The BioFIT(R) and HERBGELS (U.S. trademark 1,863,032)(TM)
trademarks may be jointly featured in marketing and
promotional programs. However, Company ownership of the
BioFIT(R) trademark must be clearly indicated.
(d) Xxxxxxx is to provide the requirements to Xxxxxxx'x customers
adopting the BCP program to undertake marketing and
promotional support programs.
(e) All advertising and public relations materials to be utilized
are subject to the approval of both Company and Xxxxxxx which
approval will not be unreasonably withheld.
Company is to use its best efforts and services of Dr. Xxxxx Xxxxxxxx.
4.2 PRESENTATIONS TO POTENTIAL CUSTOMERS. Company and Xxxxxxx will make
joint presentations to both existing Xxxxxxx customers and potential
new customers.
4.3 ENDORSEMENTS. Company and Xxxxxxx will work to gain adoption of a
position supporting functional testing by all relevant trade
associations, including, but not limited to NNFA, AHPA, and CRN. The
ultimate goal is to receive specific endorsement of the BCP program by
all key Trade Associations.
ARTICLE V - INITIAL PRODUCTS
5.1 PRODUCT(S). The first five Products will be: St. John's Wort,
Echinacea, Saw Palmetto, Ginseng and Ginkgo Biloba (Initial Products).
Company and Xxxxxxx will mutually agree upon the next five Products
within ninety (90) days of the execution of this Agreement. Once the
Products are confirmed and amended to this Agreement, Company will
complete the development and BCP program for market introduction within
twelve (12) months from the date of the executed amendment.
5.2 CERTIFICATION FOR INITIAL PRODUCTS. Company will provide the
certifications for the Initial Products to Xxxxxxx at no charge.
Company will receive $15,000 dollars for each new certification of a
Product, up to a maximum of ten (10) new certifications for Products.
Subsequent new certifications for Products shall be based on a
predetermined cost/profitability structure to be negotiated between the
parties.
5.3 COST OF BATCH CERTIFICATION OF PRODUCT(S). Company shall be paid
$350.00 dollars per batch for batch-to-batch certification, unless this
fee does not meet minimum cost/profitability standards agreed to by
both parties. In such case, such cost for the batch to batch
certification shall be negotiated by the parties.
ARTICLE VI - MILESTONE PAYMENTS
6.1 INITIAL PRODUCT(S) MILESTONE PAYMENTS. Company will receive $50,000
dollars from Xxxxxxx for each of the first five (5) Customers to accept
the Initial Products. These payments to Company will be incremental and
will be paid upon signing of an agreement by each Customer participant.
6.2 NEW PRODUCT(S) MILESTONE PAYMENTS. Company will receive $50,000 dollars
for each new Product(s) introduced into the line, beyond the Initial
Products, upon acceptance by two (2) Customers of the Product(s).
ARTICLE VII - LICENSE/ROYALTY FEES
7.1 LICENSE. Company hereby grants to Xxxxxxx an exclusive license for the
Territory to utilize the Registered Trademarks for the use, marketing,
manufacture, sale and/or distribution of Finished Products.
7.2 TERM OF LICENCE. The term of the License granted pursuant to Article
7.1 hereof shall begin on the date hereof and remain in effect until
the expiration of this Agreement or earlier termination.
In consideration of the license granted to Xxxxxxx by Company pursuant
to Article 7.1 hereof, Xxxxxxx shall pay Company until the expiration or
termination of this Agreement, a royalty in the amount X% of Net Sales of
Finished Product by Xxxxxxx, within the Territory wherein X is
a) 2% while patents are pending
b) 3% after patents are granted
7.3 PAYMENTS. The royalties' payable hereunder shall accrue on the date of
sales of Finished Product by Xxxxxxx and shall be remitted to Company
in United States dollars. Payment shall be made quarterly within thirty
(30) calendar days following the last day of March, June, September and
December of each calendar
year. However for the Initial Period, Xxxxxxx shall pay royalties
payments on a monthly basis.
ARTICLE VIII - TRADEMARKS
8.1 TRADEMARKS. Company grants to Xxxxxxx an exclusive right and license to
use the Registered Trademark and any variations thereof in which it has
an ownership interest on or in connection with the sale, advertising or
promotion of the Finished Product in the Territory. Xxxxxxx agrees to
use the Registered Trademark only in connection with Product
manufactured by Xxxxxxx. Xxxxxxx agrees to use the Trademark
consistently and legally whenever used.
8.2 Xxxxxxx agrees to identify the Registered Trademark as a trademark of
Company on all package cartons and labels and other printed materials
as may be requested by Company. Xxxxxxx shall submit copies of all
package cartons and labels and other printed materials to Company for
approval by Company before commercial use of the Trademark from the
initially approved use is proposed, all package cartons and labels and
printed materials shall be resubmitted for approval before commercial
use thereof. It shall be presumed that Company approves of such use
unless Company provides written notice of disapproval of such use to
Xxxxxxx within fifteen (15) days of delivery of such materials to
Company.
8.3 Xxxxxxx shall not use the Trademark on, or in connection with any
Finished Product after expiration or termination of this Agreement with
respect to such Finished Product, or in any other manner except as
provided herein. Xxxxxxx however shall be permitted a reasonable period
up to one (1) year following expiration or termination of this
Agreement to exhaust its supply of packaging cartons, labels and other
promotional and advertising materials using the Trademark and to
phase-in new such materials, provided that materials and Products
qualify for BCP certification.
8.4 Xxxxxxx and its Affiliates may advertise, promote, market and sell
Finished Product under any trademark(s), trade name(s) and trades dress
of their own choosing in addition to the Trademark. Company shall have
now right, title or interest in and to any such trademarks, trade names
or trades dress, so long as Xxxxxxx and its Affiliates shall have any
interest in and to any such trademarks, whether as proprietor, owner,
licensee, or licensor in any country of the world, Company shall not
adopt, use, apply for registration, register, own or acquire any such
trademarks,
trade names or trade dress, or any xxxx, name or trade dress
confusingly similar thereto, in any state or country of the world.
8.5 Company shall have the right to file any application for registration
or renewal of registration of the Trademark and shall have the right at
any time to take whatever action is necessary to defend and maintain
its rights in the Trademark.
8.6 Company warrants that it is the exclusive owner the "BioFIT" Trademark
which it is attempting to register with the United States Patent and
Trademark Office. Furthermore, Company warrants that it will indemnify
and hold Xxxxxxx harmless from any third party claims of infringement
of such Trademark.
8.7 In the event Company or Xxxxxxx learn that any Xxxxxxx trademark, trade
name or trade dress or Trademark used in connection with the
advertising, promotion, marketing or sale of Products is being
infringed by a third party, it shall promptly notify the other of such
infringement. Company and Xxxxxxx shall exclusively be responsible for
taking any action to terminate such infringement of their respective
trademarks at their sole discretion.
ARTICLE IX - LIABILITY
9.1 COMPANY WARRANTIES. While this agreement is in effect any processes
provided by Company shall:
(a) meet the Specifications for BioFIT(R) certification and will
continue, until the applicable expiration date, to conform to
the Specifications.
(b) warrants that it is the exclusive owner of the Registered
Trademark. Registration NO. _________ for the trademark
"BioFIT" which was issued by the U.S. Patent and Trademark
Office on ________, 199_.
(c) Company warranty for process for the bioassays to be provided
by Company.
ARTICLE X INDEMNIFICATION
10.1 INDEMNITY BY XXXXXXX. Xxxxxxx shall indemnify and hold the Company
harmless from and against any and all liabilities, claims, demands,
damages, costs, expenses or money judgments (including attorneys' fees)
incurred by or rendered against the Company or its Affiliates for
personal injury, sickness, disease or death or other damages which
arise out of:
(a) the intentional misconduct of Xxxxxxx with respect to its
activities with respect to Finished Product; or
(b) The breach by Xxxxxxx of its warranties contained in Section
9.1 of this Agreement.
10.2 INDEMNITY BY THE COMPANY. Except as provided in Section 9.1, the
Company shall indemnify and hold Xxxxxxx harmless from and against any
and all liabilities, claims, demands, damages, costs, expenses or money
judgments (including attorneys' fees) incurred by or rendered against
Xxxxxxx or its Affiliates for personal injury, sickness, disease or
death or other damages which arise out of:
(a) any representation or warranty made or given by the Company or
any company Affiliate including, without limitation, those
made in Section 9.2 of this Agreement;
(b) the use by the Company of information or data developed
pursuant to this Agreement;
(c) any theory of product liability (including, but not limited
to, actions in the form of tort, warranty, or strict
liability) concerning the Product or the Finished Product; and
(d) infringement of the intellectual property rights of any third
party.
10.3 Thecompany and Xxxxxxx agree to the extent reasonably practicable and
consistent with normal insurance coverage to cooperate with each other
in the defense of any claims made by third party(ies) to which this
Section 10 applies. If wither of the parties wishes to exercise its
right to be indemnified under Section 10.1 and 10.2, such rights will
be subject to the party seeking indemnity:
(a) promptly notifying the indemnifier of the claim to be
indemnified;
(b) allowing the indemnifier, if the indemnifier so requests, to
conduct and
control (at the cost and expense of the indemnifier) the
defense of such a claim and any related settlement
negotiations; and
(c) affording all reasonable assistance to the indemnifier (at the
cost and expense of the indemnifier) and making no admission
prejudicial to the defense of such a claim.
ARTICLE XI - TERM OF AGREEMENT
11.1 INITIAL TERM. The initial term of this Agreement shall be for 18 months
from the date of first commercial shipment, provided that the first
shipment is not more than six (6) months from the date of Company's
completion of the Initial Products.
11.2 AUTOMATIC RENEWAL. During the Initial Term of this Agreement if the
royalties paid to Company are equal to or greater than $400,000
dollars, this Agreement will automatically renew for an additional one
(1) year period (Renewal Period). If during the Renewal Period,
royalties to Company are equal to or greater than $700,000 based on Net
Sales in the Territory, then the Agreement will renew for a second year
for a one year period (Second Year). Upon the completion of the Second
year this Agreement will continue to renew for additional one (1) year
periods (Additional Renewal Periods), providing that royalties paid to
Company increase by a minimum of three percent (3%) over the previous
one year period.
ARTICLE XII - TERMINATION
12.1 CERTAIN EVENTS. Either party shall have the right to terminate this
Agreement upon the occurrence of any of the following events, subject
to applicable law:
(a) Violation by either party of any of the terms or conditions of
this Agreement, including any terms or conditions set forth on
any Attachment annexed hereto, provided that the party in
violation shall be notified in writing by the other of such
alleged violation, and shall have a period of thirty (30) days
from which to rectify the same; provided further, that if at
the end of such thirty (30) day period the party in violation
is making a good faith effort to cure, a reasonable time
thereafter shall be allowed for such cure.
(b) In the event either party is declared bankrupt or insolvent,
or makes an
assignment for the benefit of its creditors, or if a receiver
is appointed or any proceedings are commenced, voluntary or
involuntary, by or against wither party under any bankruptcy
or similar law, and such status is not cured within thirty
(30) days form its occurrence.
12.2 EFFECT OF TERMINATION. The termination of this Agreement will not
affect any payment obligation or other obligation that accrued prior to
the termination of this Agreement.
ARTICLE XIII - MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Michigan without regard to its
conflict of laws provisions.
13.2 ARBITRATION. Any controversy or clam which may arise under, out of, in
connection with, or relating to this Agreement or any breach thereof,
shall be settled by final and binding arbitration in Detroit Michigan,
in accordance with then existing rules for commercial disputes of the
American Arbitration Association, an judgment upon award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof, provided that either party may apply for injunctive relief and
for damages and other appropriate relief to any court having
jurisdiction for a claimed violation of Article III of this Agreement.
13.3 NOTICES. Any and all notices provided for shall be sent to the
respective parties at the following addresses by certified or
registered mail or sent by a nationally recognized overnight courier
service:
If to Scherer: X.X. Xxxxxxx North America
A Division of X.X. Xxxxxxx Corporation
0000 Xxxxxxx Xxxxx
Xx. Xxxxxxxxxx, XX 00000
If to the Company: Paracelsian, Inc.
222 Langmuir Lab.
Xxxxxx, XX 00000
Attention:______________
or to such other addresses as may be subsequently furnished by one
party to the other in writing. Any such notice shall be deemed
effective from the date of
mailing.
13.4 PARTIAL INVALIDITY. In the event one or more terms of this Agreement
are found to violate the provisions of any applicable statute, law or
regulation, the parties hereto shall negotiate in good faith to modify
this Agreement, but only to the extent necessary to make this Agreement
valid and enforceable, having full regard for applicable laws and the
intent and purposes of the parties entering into this Agreement.
13.5 NO IMPLIED WAIVERS. The failure of either party at any time to require
performance by the other party of any provision hereof shall in no way
affect the full right to require such performance at any time
thereafter, nor shall the waiver by either party of a breach of any
provision hereof be taken or held to be a waiver of any succeeding
breach of such provision or as a waiver of the provision itself.
13.6 ENTIRE AGREEMENT. This Agreement (together with the Confidentiality
Agreement) and all Attachments constitutes the entire Agreement between
parties relating to the subject matter of the Agreement, and this
Agreement may not be varied except in writing signed by a duly
authorized representative of each party.
13.7 ASSIGNABILITY. Neither party shall assign this Agreement other than to
Affiliates without the prior written consent of the other party.
However, in the event of any such assignment, performance shall be
guaranteed by the assignor in form satisfactory to the other party.
13.8 RELATIONSHIP OF PARTIES. The relationship between Xxxxxxx and the
Company is that of buyer and seller. Company, including its agents and
employees, shall be regarded as an independent contractor. This
Agreement does not authorize the company to be the agent or the legal
representative of Xxxxxxx for any purpose. The company is not granted
any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of
Xxxxxxx or to bind Xxxxxxx in any manner.
13.9 EXCUSED NON-PERFORMANCE. Each of the parties shall be excused from the
performance of its obligations in the event such performance is
prevented by a cause beyond the reasonable control of such party,
including without limitation, act of God; regulation or law of any
government or any agency thereof; war; insurrection or civil commotion;
destruction of production facilities or materials by earthquake, fire,
flood or storm; labor disturbance; epidemic; or failure of suppliers,
public utilities or common carriers. Such excuse shall continue as long
as the condition preventing the performance continues, plus thirty (30)
days after
the termination of such conditions.
13.10 NO HIRING WITHOUT PRIOR CONSENT. Company acknowledges that Company
would receive substantial additional value, and Xxxxxxx would be
deprived of the benefits of its work force, if Company were to hire
Xxxxxxx'x Personnel after they have been introduced to the Company by
Xxxxxxx. Therefore, during the term of this Agreement and for a period
of two (2) years thereafter, Company shall neither solicit for
employment nor hire (or permit its Affiliates to solicit for employment
or hire) an employee or consultant of Xxxxxxx (or its Affiliates) has
worked in a material capacity in the development or manufacture of the
product or whose work skills are similar to those of persons who have
worked on the development or manufacture of the Product without
obtaining the prior written consent of Xxxxxxx.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
entered into by their duly authorized representatives as of the day and year
first set forth above.
In the presence of:
X.X. XXXXXXX NORTH AMERICA,
A DIVISION OF X.X. XXXXXXX CORPORATION
/s/ XXXXXXXX XXXXXXXX By: /s/ XXXXX XXXXXX
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EXECUTIVE ASSISTANT Its: V.P. SALES & MARKETING
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In the presence of: PARACELSIAN, INC.
/s/ XXXXX X. XXXXXXX By: /s/ XXXXXXX X. XXXXXX
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V.P. OF ADMINISTRATION Its: PRESIDENT & CEO
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