AGREEMENT
This Agreement ("Agreement") is executed as of November 1,1999, by and
between The RiceX Company, a Delaware corporation ("RiceX"), and NutraStar, a
Nevada corporation ("NutraStar").
A. RiceX is a producer of nutritionally dense ingredients and related
products (the "Products").
B. NutraStar 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
nutraceutical and human market on the terms set forth below.
C. RiceX is willing to grant NutraStar a right of first refusal to
acquire its nutritionally dense ingredients and to grant NutraStar an exclusive
arrangement with RiceX in the entire nutraceutical and 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 NutraStar on the terms and subject
to the conditions of this Agreement. NutraStar shall be entitled to a "most
favored customer" status, exclusive of samples (which shall be free). The price
to be charged to NutraStar 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 NutraStar 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 NutraStar shall be FOB 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 NutraStar. RiceX shall deliver Products
to the common carrier specified by NutraStar within ten (10) days after the date
for which delivery of Products is requested in a mutually executed
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purchase order from NutraStar, and shall assist NutraStar in arranging any
desired insurance (in amounts that NutraStar shall determine) and
transportation to any destinations specified in writing from time to time by
NutraStar. All insurance premiums and other expenses relating to such
transportation and delivery shall be at NutraStar's expense.
2. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. RiceX hereby grants to
NutraStar 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
NutraStar with production surplus for the first half of 2000, and will notify
NutraStar on or before April 1 and October 1 of each year commencing in 2000 of
the amount of estimated production of Products during the following six (6)
calendar months. Thereafter, on or before May 1 and November 1 of each year
commencing in 2000, NutraStar shall inform RiceX in writing of the amount of
each Product that NutraStar is willing to purchase during the following six (6)
calendar months To the extent that NutraStar commits to purchase RiceX Products,
RiceX shall be obligated to manufacture and supply such Products, and NutraStar
then shall be obligated to purchase the Products on a take or pay basis. In
addition, should NutraStar 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 NutraStar during the ensuing twelve (12) month
period. Should NutraStar fail to direct delivery of said production during the
ensuing twelve (12) month period, NutraStar shall forfeit prepaid funds and the
right to receive the Product.
(c) SALES TO OTHER CUSTOMERS. In the event that
NutraStar 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 NutraStar declines to sell to any customer in the human market,
NutraStar will notify RiceX and, if NutraStar 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 October 31, 2009. In addition, provided that
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NutraStar is not then in material default under this Agreement, NutraStar 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 NutraStar
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(b) below, RiceX hereby
grants to NutraStar the exclusive right to sell Products which include RiceX
ingredients to the entire nutraceutical and human market, including current
customers of RiceX. During the term of this Agreement, no one other than
NutraStar shall sell Products for the nutraceutical and human market, except as
provided in paragraph 2(c) above. In addition, in the event anyone contacts
RiceX with a business opportunity for the nutraceutical or human market, RiceX
shall forward that inquiry to NutraStar.
(b) MINIMUM PURCHASE REQUIREMENTS. The exclusive
rights granted to NutraStar under paragraph 3(a) of this Agreement (but no other
rights granted hereunder) shall terminate in the event that NutraStar purchases
less than $2,000,000 (not including sales to customers indicated on Exhibit "B"
attached hereto) of Products through April 30, 2001, and $5,000,000 of Products
in 2002. Thereafter, the exclusive rights granted to NutraStar hereunder shall
be subject to minimum purchases of $6,000,000 in 2003, $7,200,000 in 2004,
$8,640,000 in 2005, and increasing thereafter at the rate of five percent (5%)
per annum from 2006 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 NutraStar's obligation to meet such minimum purchase
requirements is subject to RiceX manufacturing sufficient Product to allow
NutraStar to meet such minimum purchases.
(c) LICENSE FOR TRADEMARKS. In addition to the
exclusive right to sell described in this paragraph, and in consideration of
NutraStar's payment of all filing fees for future trademarks and patents, so
long as NutraStar is not in default hereunder, RiceX hereby grants to
NutraStar an exclusive license to use the trademarks "MiraChol-Registered
Trademark-" and "MaxE-Registered Trademark-," and the non-exclusive right to
use the RiceX trademark. NutraStar also shall be required to imprint the
RiceX trademark brand on all products incorporating RiceX Products sold by
NutraStar 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 rights. RiceX shall indemnify and defend NutraStar against any and
all such infringement claims, demands,
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actions, losses, damages, fines, penalties, costs and expenses (including
reasonable attorneys' fees). NutraStar 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 NutraStar
hereunder shall be for the term of this Agreement (including extensions) as
provided in paragraph 2(d) above.
(e) PAYMENT FOR EXCLUSIVE RIGHTS. In consideration
for granting the exclusive rights and license to NutraStar hereunder, NutraStar
shall pay to RiceX the following:
(i) A royalty of two percent (2%) of
NutraStar's gross receipts other than receipts constituting royalties received
from sublicensing the rights granted by RiceX hereunder, and payment of all
royalty fees received from sublicensing the rights granted by RiceX hereunder.
For purposes of this Agreement, the term "gross receipts" means the total
receipts received by NutraStar 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) NutraStar 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. NutraStar
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 NutraStar
submits its report of gross receipts based on such records. NutraStar also shall
prepare and deliver to RiceX within thirty (30) days after the end of each
calendar quarter a true written statement signed by NutraStar 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, NutraStar shall pay to RiceX the amount of royalty due for such
calendar quarter. If NutraStar 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 NutraStar's failure as
a
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breach of this Agreement. RiceX also may elect to conduct an audit of all
books and records of NutraStar 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 additional royalties are due, NutraStar shall pay such royalties,
plus interest thereon at the maximum rate 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 NutraStar's statement for the
same period, NutraStar 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 NutraStar
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 sales only. During the term of this Agreement, RiceX may sell Products
to customers in other countries, however RiceX will negotiate with NutraStar for
an extension of this Agreement to cover sales in other countries on a
country-by-country basis. In addition, during the term of this Agreement, RiceX
shall make every reasonable effort, including written notification to customers,
to make certain that RiceX Products purchased by customers outside of the United
States shall only be distributed in the country of purchase.
(h) INDEMNIFICATION.
(i) RiceX agrees to indemnify NutraStar 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 NutraStar 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 NutraStar ("Additions and Modifications").
(ii) NutraStar 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 NutraStar 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.
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4. DEFAULT. A party shall be in default under this
Agreement if any of the following shall occur:
(a) NutraStar shall fail to pay any royalty due
hereunder as and when due;
(b) RiceX shall fail to manufacture Products for sale
to NutraStar 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 NutraStar fails to meet the minimum purchase
requirements for December 31, 2000 as set forth in paragraph 3(b) above, all
results, reports, information and materials derived from the clinical trials,
testing and research to be undertaken by NutraStar (which materials and
information currently are owned by NutraStar) shall become the property of RiceX
and shall be delivered to RiceX by NutraStar, subject to a non-exclusive right
in favor of NutraStar to continue to use such materials and information free of
charge.
5. ADDITIONAL OBLIGATIONS OF NUTRASTAR. In
consideration of the rights granted to NutraStar hereunder, NutraStar agrees
to assume the following obligations from and after the date hereof:
(a) NutraStar shall sublease from RiceX a portion of
RiceX's premises pursuant to the sublease agreement attached hereto as Exhibit
"C" and incorporated herein by reference.
(b) NutraStar shall assume and pay all costs
associated with RiceX's current scientific staff, as well as all other personnel
working within the premises which will be subleased to NutraStar as provided in
paragraph 5(a) above. RiceX agrees to terminate such scientific staff and other
employees and NutraStar agrees to employ such scientific staff and personnel,
all as of March 1, 2000.
(c) NutraStar further agrees to perform all quality
control functions required for the Products produced by RiceX. Such quality
control functions will be as reasonably agreed by RiceX and will not exceed
thirty (30) hours per week of time commitment. All costs and expenses associated
with such quality control function will be paid by NutraStar.
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6. 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 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:
The RiceX Company: 0000 Xxxx'x Xxxxxx Xxxxx
Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000
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Attention: Xxxxxx X XxXxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
NutraStar: 0000 Xxxx'x Xxxxxx Xxxxx
Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx 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 6(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) 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.
(h) 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.
(i) 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.
(j) 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.
(k) GOVERNING LAW; DISPUTES. This Agreement shall be
governed by and construed
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under the law of the State of California, 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 California, (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 California 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 California 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.
(l) 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")
By: /s/ XXXXXX XXXXXX, XX
------------------------------------
Name: Xxxxxx XxXxxx, Xx
Its: Chief Executive Officer and
Chairman of the Board
NutraStar
A Nevada Corporation
("NutraStar")
By: /s/ XXXXXXXX XxXXXX
------------------------------------
Name: Xxxxxxxx XxXxxx
Its: President
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EXHIBIT "A"
PRODUCT LINE
Stabilized Rice Bran (SRB Fine)
SRB Fine
Dextrinized SRB
Rice Soluble
Rice Bran Fiber Concentrate
High Beta-Glucan
Stabilized Flaxseed and Flaxseed Meal
Rice Bran Oil
Enhanced Rice Bran Oil
And any and all other products developed by RiceX during the term of
this Agreement
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EXHIBIT "B"
Customer List*
* Confidential treatment granted as to certain portions.
