Amended and Restated
Consulting Agreement
This Amended and Restated Consulting 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 ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("Pharmulations"). This Agreement amends and supersedes that
certain Consulting Agreement between the parties dated effective October 1,
1998.
1. Term. The services of Pharmulations began effective October 1, 1998 and
shall continue for seventy-two months from such date (the "Consulting
Period"). This Agreement shall thereafter automatically renew for
additional one-year terms, unless either party notifies the other, at least
ninety (90) days prior to the end of a term, that it does not wish to renew
this Agreement.
2. Duties and Services. Pharmulations is assisting and shall continue to
assist the Company in the role of chief scientific advisor and shall advise
the Company with respect to all of the Company's products existing as
of the date hereof, proposals for improving such products, future products
developed pursuant to the Master Development Agreement between the Company
and Pharmulations of even date (the "Development Agreement"), and
regulatory testing and compliance issues for such products (the
"Services"), subject to the terms and conditions of this Agreement. The
parties acknowledge that the Services are being provided by Pharmulations
on a part-time, non-exclusive basis. The Company recognizes that
Pharmulations and its employees are not exclusively retained by the Company
and that it and they may be involved in activities for Pharmulations
pursuant to the Development Agreement and others during the term of this
Agreement. The Company shall not acquire rights with respect to any
products or technologies developed by Pharmulations for third parties. As a
result of its activities under the Development Agreement, Pharmulations may
from time to time in the future develop new products, which products the
Company may include in its product line. Should the Company include in its
product line products developed under the Development Agreement and unless
the parties provide otherwise in the SOW (as defined in the Development
Agreement) pursuant to which such new product is developed, Pharmulations
shall thereafter render Services (as defined above) with respect to such
new products. The Services shall be performed primarily in the state of
Utah. Pharmulations shall have each of its employees providing services to
the Company promptly execute the form of Confidentiality and Services
Agreement attached as Exhibit A hereto.
3. Intellectual Property Ownership.
3.1. Definition of Works. Pharmulations expressly agrees that
everything Pharmulations (including its employees and
independent contractors, for purposes of this Section 3) creates,
writes or develops, in the course of providing the Services to
the Company with respect to the Company's products and
technologies as of the date hereof shall be "works made for hire"
as defined by U.S. copyright law and the property of the Company,
including ideas, inventions, written materials, suggestions,
processes, techniques, and Confidential or Proprietary
Information (as defined in Section 4) with respect to such
products, whether or not published, patented, copyrighted,
registered or suitable therefor, and all intellectual property
rights therein, that are made, developed, written, conceived or
first reduced to practice by Pharmulations in part or in whole,
whether alone or with others, during the Consulting Period,
including all improvements and enhancements to such products
(collectively, "Works"). Pharmulations' previously developed
works for the Company that shall constitute "Works", as described
herein, are specifically listed and set forth in Exhibit B
hereto.
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3.2. Obligations. Pharmulations agrees to promptly disclose the
existence, properties and use of any Works to the Company.
To the extent the above "work for hire" doctrine may be legally
inapplicable for any reason, Pharmulations hereby assigns to the
Company all right, title and interest in the Works, including all
rights of patent, copyright and other intellectual property
rights, and agrees to execute at the Company's request a
subsequent document as further evidence of this assignment.
Pharmulations also agrees to assist the Company, at the Company's
expense, as reasonably requested in any efforts the Company may
make to obtain a patent or other intellectual property protection
with respect to the Works or any portion thereof.
3.3. Ownership of Rights. The Company shall be the sole owner of the
Works and all rights therein throughout the world, including
without limitation all intellectual property rights therein.
Pharmulations and the Company agree that the Company may use the
Works provided to it under this Agreement in its sole discretion.
4. Confidential Information.
4.1. Definition. "Confidential or Proprietary Information" means all
present and future confidential or proprietary information
belonging to the Company, whether in written, electronic or oral
form, and whether developed by Pharmulations or by other Company
independent contractors, employees or agents, including but not
limited to product formulations, inventions, processes, product
development information, technology, trade secrets, ideas,
business and marketing plans and information, pricing
information, product test results, customer names and data, and
all other information marked as confidential or which reasonably
should be understood to be confidential or proprietary, whether
or not so marked. However, Confidential or Proprietary
Information does not include information that Pharmulations can
show is or has become available for unrestricted public use,
without breach of this or any other agreement.
4.2. Obligations of Confidentiality and Non-Use. Pharmulations
acknowledges that in the course of providing Services to the
Company, Pharmulations may receive and/or develop Confidential or
Proprietary Information, which shall remain the sole property of
the Company. Pharmulations agrees that, except as appropriate in
connection with the Company's business, Pharmulations shall not
at any time (i) disclose or deliver Confidential or Proprietary
Information to any person; (ii) use such information in any
manner, or (iii) use any Confidential or Proprietary Information
for the direct or indirect benefit of any person or entity other
than the Company, except as the Company may otherwise consent or
direct in writing. Pharmulations agrees to use reasonable and
diligent efforts to maintain the proprietary nature, security
and/or confidentiality of all Confidential or Proprietary
Information. Pharmulations shall also keep confidential any
information provided by any client or other third party to the
Company under obligation of confidentiality. Pharmulations shall
promptly notify the Company if Pharmulations becomes aware of any
misuse or wrongful disclosure of Confidential or Proprietary
Information by any person. All obligations of confidentiality
shall survive termination of this Agreement for a period of five
(5) years.
5. Payment Terms. In consideration of the Services and Works provided by
Pharmulations, the Company agrees to pay Pharmulations a consulting fee
that is currently in the amount of $9,000 per month (as of October 1,
2000), payable on the 15th day of each month. Such monthly amount shall
increase by $1,000 effective of each October 1 anniversary date during the
term of this Agreement. In addition, the Company may pay such annual
bonuses (stock and/or cash) as the Company determines, in its business
judgment, to be warranted, based upon Pharmulations' services and value to
the Company. The Company will reimburse Pharmulations for its reasonable
legal fees incurred in the negotiation of this Agreement.
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6. Termination.
6.1. Termination for Cause. Either party may terminate this
Agreement if the other party breaches any material term of
this Agreement and fails to correct such breach within 30 days
following written notice thereof from the non-breaching party.
6.2. Immediate Termination. The Company may terminate this Agreement
immediately in the event that:
6.2.1. Pharmulations or any of its employees commits any act
of intentional wrongdoing that materially and adversely
affects the Company or its reputation, including any act of
theft, embezzlement, obtaining funds or property under false
pretenses, gross misconduct, disloyalty or breach of trust
against the Company; or
6.2.2. ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇") becomes permanently
disabled, dies or ceases to be the owner of at least
66% of the ownership interests in Pharmulations.
The parties acknowledge and agree that ▇▇. ▇▇▇▇▇▇'▇ personal services
are material to this Agreement and that the termination provisions of
this Section are reasonable. However, in the event of termination due
to ▇▇. ▇▇▇▇▇▇'▇ permanent disability the Company agrees to continue to
pay the consulting fees described in Section 5 for a period of twelve
(12) months from the date of such termination.
6.3. Termination Without Cause. The Company may also terminate this
Agreement at any time with or without cause upon written notice
to Pharmulations, provided that the Company shall pay to
Pharmulations, in a single lump sum, an amount equal to monthly
compensation provided for in Section 5, multiplied by the lesser
of (i) twelve (12) months, or (ii) the number of months remaining
in the then-current term of this Agreement.
6.4. Effect of Termination. If Pharmulations terminates this Agreement
for a material breach by the Company under Section 6.1, the
Company shall, notwithstanding the termination, continue to pay
Pharmulations the payments described in Section 5 for a period of
twelve (12) months after such termination. If the Company
terminates this Agreement under Section 6.1 or 6.2, the Company's
payment obligations under Section 5 shall cease as of the
termination date (excluding, however, termination because of ▇▇.
▇▇▇▇▇▇'▇ permanent disability under Section 6.2.2). After
expiration or termination of this Agreement pursuant to Sections
6.1, 6.2 or 6.3, within thirty (30) days after termination of
this Agreement, Pharmulations agrees to return all documents and
tangible items in its or its employees' possession or control
that contain any part of the Works or Confidential or Proprietary
Information received or created by Pharmulations for the Company,
and destroy any additional electronic copies of such information
that are in its possession or control. The parties will continue
to be bound by all obligations described in Sections 3, 4, 7, 8,
9, 10 and 11 after the termination of this Agreement pursuant to
Sections 6.1, 6.2 or 6.3.
6.5 Termination for Future Conflicts. In the event the Company shall
announce the intent to or hereafter acquire or develop
products or technologies which may be at such time directly or
indirectly competitive with products or technologies of
Pharmulations or which Pharmulations has developed or is then
developing for third parties (the "Competing Products"),
Pharmulations shall promptly notify the Company of the existence
of the Competing Products, and related duties to third parties,
if any. Thereafter, Pharmulations shall provide to the Company
such information concerning the Competing Products as the Company
may reasonably request in order for the Company to determine
whether, in its judgment, the Competing Products would compete
with the products to be acquired or developed; provided, however,
that Pharmulations shall not be required to disclose to the
Company information which would constitute a trade secret of
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Pharmulations or violate the terms of any non-disclosure
agreement between Pharmulations and any third party. If the
Company determines that the Competing Products are directly or
indirectly competitive with the products to be acquired or
developed by the Company, then the Company may elect waive its
rights concerning the covenant not to compete with respect to the
Competing Products and to exclude Pharmulations from access to
information, whether Proprietary or Confidential Information or
otherwise, concerning the products to be acquired or developed.
Alternatively, the Company may notify Pharmulations of its
determination that the products to the acquired or developed
compete with the Competing Products, at which time Pharmulations
shall have two (2) options:
6.5.1 Pharmulations may elect to terminate this Agreement. Should
Pharmulations elect to terminate this Agreement, then
(i) the Company shall pay the consulting fee described in
Section 5 for a period of twelve (12) months from the date
of such termination, (ii) within thirty (30) days after
termination of this Agreement, Pharmulations shall return
all documents and tangible items in its or its employees'
possession or control that contain any part of the Works or
Confidential or Proprietary Information received or created
by Pharmulations for the Company, and destroy any additional
electronic copies of such information that are in its
possession or control and (iii) the parties will continue to
be bound by all obligations described in Sections 3, 4, 7
(but excluding all prohibitions set forth herein on
Pharmulation's production, marketing, distribution or sales
of the Competing Products), 8, 9, 10 and 11 after the
termination of this Agreement.
6.5.2 Pharmulations may elect to cease its production, marketing,
sales or any other form of distribution of the
Competing Products and/or terminate its relationship(s) with
any third parties concerning the Competing Products. In such
event, Pharmulations shall (i) provide the Company with such
information as it shall reasonably request for the Company
to determine that Pharmulations has ceased its production,
marketing, sales or other distribution of the Competing
Products and/or terminated its relationship(s) with any
third parties concerning the Competing Products and (ii)
Pharmulations shall execute an addendum to this Agreement
pursuant to which the Competing Products shall become
subject to Section 7 hereof.
7. Covenant Not to Compete.
7.1. Covenant Not to Compete. During the term of this Agreement and
for twelve (12) months thereafter, Pharmulations covenants
that it will not compete in any manner, directly or indirectly,
including participating as an advisor, principal, agent, owner,
consultant or employee, with the business of manufacturing,
marketing, distributing or selling products that compete,
directly or indirectly, with products developed or sold by the
Company during the term of this Agreement anywhere in the world;
provided, however, that the foregoing covenant (i) does not apply
to any of the projects, products or inventions identified in
Exhibit "C" attached hereto, and (ii) does not apply to
Pharmulations present or prior work with cranberries. The Company
agrees to keep and maintain the contents of Exhibit "C"
confidential and will not disclose the same to any third party
without the prior consent of Pharmulations or as required
pursuant to service of process.
7.2. Scope of Restrictions. Pharmulations acknowledges and agrees
that (a) the foregoing restrictions are reasonable and are
properly required for adequate protection of the business and
good will of the Company, given the Confidential and Proprietary
Information that it has obtained and will be obtaining from the
Company and the fact that its services are of a special and
unique character that have a particular value to the Company; (b)
that the Company has a legitimate business purpose in requiring
Pharmulations to abide by the above restrictive covenants; and
(c) that the Company has a worldwide market for its products and
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that the worldwide geographic scope of this covenant is therefore
reasonable. Section 7.1 is intended to be construed as a series
of separate covenants, one for each city, county, state, country
or geographic area in the territory described above. Except for
geographic coverage, each such separate covenant shall be deemed
identical in terms.
8. Warranties. Pharmulations represents and warrants that (i) it is able to
perform the Services and grant the rights specified in this Agreement and
does not have any present understanding or agreement with anyone else
which restricts or interferes with its ability to perform such Services and
grant such rights; and (ii) it will not violate any rights, including
intellectual property rights, of any third party in providing information,
Services or Works to First Scientific. If First Scientific expands its
product lines or business in such a way that it becomes competitive with
Pharmulations' other development and consulting activities, Pharmulations
will give prompt notice to First Scientific and the parties will negotiate
in good faith to resolve such issues.
9. Indemnification.
9.1. By Pharmulations. Pharmulations shall indemnify, defend and hold
the Company harmless from and against any and all costs,
losses, liabilities and expenses of any type whatsoever
(including reasonable attorneys' fees to enforce this
indemnification) arising out of Pharmulations' grossly negligent
or intentionally wrongful activities and omissions.
9.2. By the Company. The Company shall indemnify, defend and hold
Pharmulations harmless from and against any and all costs,
losses, liabilities and expenses of any type whatsoever
(including reasonable attorneys' fees to enforce this
indemnification) arising out of the Company's grossly negligent
or intentionally wrongful activities or omissions.
9.3. Procedure. The party wishing to be indemnified shall give the
other party prompt written notice of any claim or action for
which it believes it is entitled to be indemnified. The
indemnified party shall give the indemnifying party sole control
over the defense of the claim and shall cooperate and assist the
indemnifying party as reasonably requested in the defense of the
claim, at the indemnifying party's expense. The indemnified party
may, at its option and expense, choose to be represented by
separate counsel in any such legal action.
10. Independent Contractor. In creating, preparing and furnishing the Services
to the Company, Pharmulations is acting as an independent contractor and
not as an agent or employee of the Company or as the Company's partner or
joint venturer. Neither party may bind the other to any agreement with
anyone else. Any access to the Company premises granted to Pharmulations
will not be construed as indicating that Pharmulations is an employee of
the Company or that Pharmulations has the rights or restrictions of an the
Company employee. Pharmulations shall be solely responsible for and will
file, on a timely basis, all tax returns and payments required to be filed
with or made to any federal, state or local tax authority with respect to
Pharmulations' performance of services and receipt of fees under this
agreement.
11. Miscellaneous.
11.1. 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.
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11.2. Entire Agreement; Amendment; Waiver. This Agreement constitutes
the entire agreement of the parties regarding the subject
matter hereof and supersedes all prior representations,
proposals, discussions, and communications, whether oral or in
writing, including the prior form of this Consulting Agreement
between the parties, except to the extent otherwise expressly
provided herein. 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.
11.3. Incorporation of Addendum. The terms of the Addendum dated
effective October 1, 1998, attached to the original version
of this Agreement, are hereby reaffirmed and incorporated herein
by reference.
11.4. 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.
11.5. Injunctive Relief. Pharmulations acknowledges and agrees that the
services to be rendered by it are of a special, unique and
extraordinary character and 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.
11.6. Assignment; Binding Effect. 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. 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
Form of Employee Services and Confidentiality Agreement
See attached agreement form.
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EXHIBIT B
List of Pharmulations' Works Previously Developed for First Scientific
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