Exhibit 10.9
JOINT SYSTEMS DEVELOPMENT AND MARKETING AGREEMENT
THIS AGREEMENT is entered into as of October 1, 1997, between INTERNATIONAL
DISPENSING CORPORATION, a Delaware corporation with principal offices at 000
Xxxxxxx Xxx., Xxxxx 0000, Xxx Xxxx, XX 00000 ("IDC"), and PACKAGING SYSTEMS,
LLC, an Illinois limited liability company with principal offices at 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 ("PSL").
BACKGROUND
A. IDC develops and markets and has rights in certain technologies with
respect to one-way valve/pump applications in the food and beverage product
industry;
B. PSL develops, owns, markets and has rights in certain technologies with
respect to container applications in the food and beverage product industry;
C. IDC and PSL desire to develop, promote and market potential applications
combining their technologies in the Territory.
IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS CONTAINED HEREIN, AND
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY OF WHICH IS
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Amortization Amount" shall mean with respect to each Component of a
Developed Packaging System, the amount attributed by each of IDC and PSL for:
(i) all development costs incurred by each of IDC and PSL and (ii) the
amortization of the cost of machinery and equipment used in the production of
such component. The Amortization Amount for each Component of each Developed
Packaging System shall be set forth on a schedule for each Developed Packaging
System which schedule shall be signed by an authorized representative of each
party and be attached to this Agreement.
1.2 "Component Profit Margin" shall mean, with respect to each Component of
a Developed Packaging System sold to a particular Customer, the amount
attributed to such Component in excess of the Direct Manufacturing Expenses and
Amortization Amount and as set forth on a schedule which schedule shall be
signed by an authorized representative of each party and be attached to this
Agreement. Component Profit Margins may vary depending on the Customer.
1.3 "Component" shall mean the valve, pump, bag or container component of a
Developed Packaging System.
1.4 "Customers" shall mean existing or new customers of IDC or PSL that are
makers, users, lessors, sellers or distributors of (a) any food or beverage
product intended to be sold to or by food or beverage wholesale price
discounters, retailers and similar establishments that sell food or beverage to
consumers, including, but not limited to, those who solicit by mail order, door
to door or multi-level marketing; (b) any food or beverage product intended for
use in an industrial or commercial place of business in the preparation of food
or beverage at such place of business; or (c) any food or beverage product
intended for use in an industrial or commercial place of business by a customer
purchasing food or beverage at such place of business for consumption on or off
the premises of such place of business. Customers may include such "Bag-in-Box"
manufacturers as are jointly agreed upon by IDC and PSL. Customers explicitly do
not include any medical or pharmaceutical companies or any other companies or
industries as are mutually agreed to in writing by the parties.
1.5 "Developed Packaging Systems" shall have the meaning ascribed thereto
in Section 2.1 hereof.
1.6 "Development Project" shall mean the development of any Developed
Packaging System.
1.7 "Direct Manufacturing Expenses" shall mean the itemized direct expenses
for each of IDC and PSL associated solely with the manufacturing, including,
without limitation, costs of materials, of any Developed Packaging System to be
set forth on a schedule which schedule shall be signed by an authorized
representative of each party and be attached to this Agreement.
1.8 "Gravity Feed Valve" shall mean a dispensing valve configured to allow
for a continuous flow of product when actuated, due to the force of gravity
acting upon the product/container, and automatically stop flow when actuation
ceases.
1.9 "Gross Sales Revenues" shall mean the price received by either IDC or
PSL directly from the end user or distributor, as the case may be, on the sale
of any Developed Packaging System.
1.10 "IDC Patents" shall mean the patents listed on Exhibit A annexed
hereto.
1.11 "IDC Valve" shall mean any one-way valve including a Gravity Feed
Valve or Vacuum Actuated Feed Valve owned by, patented by, whose patent has been
applied for by, assigned to, or under development by IDC or which has been
licensed or sublicensed to IDC.
1.12 "Quick Discharge Pump" shall mean a mechanical pump configured to push
a dose of product through a valve and then directly or indirectly draw a
replenishment of product out of an attached container in preparation for the
next dispensing cycle.
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1.13 "PSL Patents" shall mean the patents listed on Exhibit B annexed
hereto.
1.14 "Vacuum Actuated Vacuum Feed Valve" shall mean patented structures
that define the ability to use a pressure reduction to open a basic valve
structure to allow flow and integrally or separately use a pressure reduction to
draw product through and out of a valve structure. These structures can be
configured to function in a new and discrete type of valve (i.e. post-mix
system) or integral with a Gravity Feed Valve or Quick Discharge Pump.
1.15 "Territory" shall mean the United States of America or any other
territory that is mutually agreed to in writing by the parties.
2. DEVELOPMENT
2.1 Subject to the terms and conditions herein, IDC and PSL shall work with
one another to jointly develop food packaging systems (the "Developed Packaging
Systems"). IDC agrees to provide the information, materials and technology,
owned or controlled by or under license to IDC necessary to design and develop
the Developed Packaging Systems including, without limitation, the following
technologies (the "IDC Contributed Technologies"): Gravity Feed Valve, Quick
Discharge Pump and Vacuum Actuated Vacuum Feed Valve. PSL agrees to provide the
information, materials and technology, owned or controlled by or under license
to PSL necessary to design and develop the Developed Packaging Systems
including, without limitation, the following technologies (the "PSL Contributed
Technologies"): Filler technology, bag manufacturing technology, and Bag-in-Box
system integration technology. Each party grants to the other a limited,
royalty-free, non-exclusive, non-transferable license or sublicense to use the
contributed technologies solely in order for the parties to prepare the Develop
Packaging Systems during the term of this Agreement. Each party shall be
responsible for all expenses, materials, equipment, amortization and costs of
sales incurred by it in connection with each Development Project.
Notwithstanding the foregoing, this Agreement does not imply nor does it grant
to PSL or any other person any right, license or sublicense to manufacture the
IDC Valve.
2.2 Subject to Section 2.3, IDC and PSL shall jointly own the rights to the
Developed Packaging Systems (provided, however, that no joint ownership shall be
implied in the IDC Patents or the PSL Patents). The rights to the Developed
Packaging Systems may not be transferred, encumbered or pledged as collateral by
either party, except as is permitted under the provisions of this Agreement
relating to assignments.
2.3 Notwithstanding the foregoing Section 2.2, PSL shall be the sole owner
of all rights to any and all patents and patent applications worldwide covering
any Developed Packaging System (the "DPS Patents"). PSL and IDC shall share
equally the responsibility for (including the obligation to pay all costs and
expenses related to) the application, prosecution and maintenance of the DPS
Patents.
2.4 Prior to beginning work on a proposed Developed Packaging System, IDC
and PSL shall agree that such system (a) is cost effective, (b) has a viable
commercial application
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and (c) has an end use designed for a targeted Customer. Each Development
Project shall have a schedule agreed to in writing by IDC and PSL in advance (a
"Project Time Schedule"). Periodically, but not less than once each quarter, the
representatives of the parties shall review the performance of the development
work compared to the Project Time Schedule.
2.5 IDC and PSL will engage in joint development, manufacturing, marketing
and sales activities with respect to the Developed Packaging Systems. No third
party shall have or be granted any right or permission to make, manufacture,
use, sell, reproduce, modify, distribute, display, import or export or otherwise
commercially exploit any Developed Packaging System. In the event that IDC and
PSL mutually agree to license any Developed Packaging System, the terms of such
license shall be determined by the parties hereto and licensing fees or
royalties generated thereby would be equally shared by IDC and PSL.
2.6 This Agreement contemplates a collaborative effort and each party shall
provide the personnel and technical expertise and to make its employees
reasonably available to consult with the other party.
2.7 This Agreement does not cover the sales of (i) any IDC Valve, pump
(including the Quick Discharge Pump) or any other IDC product or any IDC
Contributed Technology which is not integrated into a Developed Packaging System
or (ii) any PSL bags, Bag-in-Box or any other PSL products or any PSL
Contributed Technology which is not integrated into a Developed Packaging
System.
3. MARKETING
3.1 IDC and PSL shall each have the right to market and sell the Developed
Packaging Systems jointly developed pursuant to this Agreement in the Territory
to Customers. Such right shall be exclusive to IDC and PSL. IDC and PSL shall
jointly develop a marketing and promotional protocol and strategy for any
Developed Packaging System, including pricing, billing, order fulfillment and
standard warranties.
3.2 In the event that either party proposes to enter into an agreement or
other arrangement regarding a Developed Packaging System with a proposed
Customer with respect to a country or countries outside the Territory, then such
party may enter into such agreement or other arrangement with the proposed
Customer with respect to such country or countries only if it has offered to the
other party the right to participate in such agreement or arrangement. If the
right to participate is declined, then the party declining to participate shall
not be entitled to any revenue sharing with respect to sales of Developed
Packaging Systems to the proposed Customer in the location outside of the
Territory with respect to which the party has declined to participate.
4. REVENUE SHARING
4.1 PSL and IDC agree to be compensated on the sales of any Developed
Packaging System as follows:
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(a) from the Gross Sales Revenue of each unit of any Developed
Packaging System, each party shall first be entitled to reimbursement of
its (i) Direct Manufacturing Expenses and (ii) Amortization Amount with
respect to each such unit; and
(b) on the balance remaining after deduction of Direct Manufacturing
Expenses and Amortization Amount, the parties shall share revenues as
follows:
(i) on any Component Profit Margin relating to a IDC Contributed
Technology, 55% of such Component Profit Margin to IDC and 45% of such
Component Profit Margin to PSL; and
(ii) on any Component Profit Margin relating to a PSL Contributed
Technology, 55% of such Component Profit Margin to PSL and 45% of such
Component Profit Margin to IDC.
4.2 Each of IDC and PSL shall be responsible for keeping and maintaining
the books and records related to the sales to its Customers of the Developed
Packaging Systems developed pursuant to this Agreement according to generally
accepted accounting principles. In the event of a dispute over the payments due
one party which cannot be resolved by the parties, both parties will mutually
agree upon an accounting firm to monitor compliance with this Agreement. Such
accounting firm will have access to the books and records of both parties, but
only to the extent necessary, and only for the purpose of determining,
compliance with the revenue sharing provisions of this Agreement. Either party
may request such a determination at any time. The cost of making the
determination will be borne by the party making the request.
4.3 The party receiving payment from a Customer from the sale of Developed
Packaging Systems shall remit, by check, to the other party the amount required
by Section 4.1 within thirty days of receipt of such Customer's payment.
4.4 No Component Profit Margin payments shall be made pursuant to this
Agreement with respect to revenue from a Customer until any and all warranty
claims made by such Customer are satisfied.
5. TERM AND TERMINATION
5.1 The obligations of each party with respect to any Developed Packaging
System developed and marketed hereunder shall continue in full force and effect
until the later of (a) the expiration date of any IDC Patent with respect to any
Component; (b) the expiration date of any PSL Patent with respect to any
Component; or (c) the expiration date of any DPS Patent with respect to any
Developed Packaging System.
5.2 Any Developed Packaging System in the market and being sold to
Customers at the time of termination of this Agreement shall continue to be sold
pursuant to appropriate purchase orders. In such case, the obligations of the
parties under Section 4 shall continue until all purchase orders are fulfilled
with respect to such Customer.
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5.3 (a) Unless earlier terminated pursuant to Section 5.1 above, no later
than eighteen months from the Effective Date (the "Outside Review Date"), the
parties hereto shall conduct a business review and evaluation to determine in
good faith whether to terminate this Agreement. Either IDC or PSL may, within 60
days after the Outside Review Date, cancel this Agreement by giving written
notice to other party.
(b) Unless earlier terminated pursuant to Section 5.1 or 5.3(a) above,
this Agreement shall continue in effect for an additional term of two years from
the Outside Review Date (the "Original Renewal Term") and this Agreement shall
automatically renew itself for additional two year periods (the "Renewal Terms")
thereafter unless either IDC or PSL cancels this Agreement by giving written
notice to the other within 60 days prior to the expiration of the Original
Renewal Term and each Renewal Term thereafter.
5.4 Either party may terminate this Agreement at any time for cause upon
giving sixty (60) days notice of a material breach by the other hereunder,
provided that such breach will not have been remedied during such period.
5.5 This Agreement will terminate, without notice, (i) upon the institution
by either party of insolvency, receivership or bankruptcy proceedings or any
other proceedings for the settlement of either party's debts, (ii) upon the
institution by a third party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of debts (which is not
dismissed within 60 days after commencement), (iii) upon either party's making
an assignment of substantially all of its assets for the benefit of creditors,
or (iv) upon either party's dissolution or cessation of business.
5.6 Each party's Confidential Information (as defined below), customer
lists, customer contact information, trademarks, trade names, patents,
copyrights, designs, drawings, or other data, photographs, literature,
demonstration units and sales aids of every kind will remain the property of
that party. In the event of termination of this Agreement for any reason
whatsoever, each party agrees promptly to destroy or to surrender and deliver to
the other party all records, materials, equipment, drawings, and documents
provided to it by the other party containing any Confidential Information, and
all other materials belonging to the other party, including demonstration units
and sales materials provided by the other party. Neither party will make or
retain any copies of any items containing Confidential Information of the other
party that may have been entrusted to it.
5.7 The provisions of Sections 5.6, 5.7, 6, 7 and 9 will survive the
expiration or termination of this Agreement for any reason. Except as provided
in Section 5.1, all other rights and obligations of the parties will cease upon
expiration or termination of this Agreement.
6. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY LOST PROFITS, OR
FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT, UNDER ANY CAUSE OF ACTION INCLUDING,
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WITHOUT LIMITATION, THOSE RESULTING FROM THE USE OF THE DEVELOPED PACKAGING
SYSTEMS, OR THE FAILURE OF THE PRODUCTS TO PERFORM, OR FOR ANY OTHER REASON. THE
PARTIES ACKNOWLEDGE THAT THIS SECTION 6 REPRESENTS A REASONABLE ALLOCATION OF
RISK.
7. CONFIDENTIALITY
7.1 "Confidential Information" shall mean any trade secrets, confidential
data (including, but not limited to, customer lists and customer contact
information) or other confidential information relating to or used in the
business of either party or any of its affiliates or customers, that a party may
produce, obtain or otherwise acquire during the term of this Agreement (the
"Confidential Information"), except as herein provided, and, except for customer
lists and customer contact information) that is marked "Confidential",
"Proprietary" or in some other manner to indicate its confidential nature.
Confidential Information may also include oral information disclosed pursuant to
this Agreement, provided that such information is designated as confidential at
the time of disclosure and confirmed in writing as confidential within thirty
(30) days after its oral disclosure and delivered to the receiving party.
7.2 Each party agrees to treat the other party's Confidential Information
with the same degree of care as it maintains its own information of a similar
nature. Without limiting the foregoing, each party shall use at least the same
procedures and degree of care which it uses to protect the confidentiality of
its own confidential information of like importance, and in no event less than
reasonable care.
7.3 The foregoing restrictions will not apply to information that (i) is
known to the receiving party at the time of disclosure by the disclosing party;
(ii) is or becomes publicly known through no wrongful act of the receiving
party; (iii) is rightfully received from a third party without restriction; (iv)
is independently developed by the receiving party; (v) has been approved for
release by written authorization of the disclosing party; (vi) is not marked or
similarly designated as confidential, and is provided for a purpose or in a
manner that reasonably contemplate, or would naturally be understood to
contemplate, disclosure or use by others; and (vii) is disclosed pursuant to a
valid order of any governmental authority provided that the party intending to
make disclosure in such circumstances has given the other party prompt notice
prior to making such disclosure so that such party may seek a protective order
or other appropriate remedy prior to such disclosure.
8. REPRESENTATIONS AND WARRANTIES
Each party warrants and represents to the other that it has the legal
rights and power to enter into this Agreement, and to fully perform its
obligations hereunder, and that neither has made nor will make any commitments
to others in conflict with or in derogation of such rights or this Agreement.
Each party further represents to the other that it is not aware of any legal
obstacles, including patent rights of others, which could prevent either party
from carrying out the provisions of this Agreement. IDC represents that it is
the sole sublicensee of all right, title and interest in the IDC Contributed
Technology and the IDC Patents in the food and beverage
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product industry and said right, title and interest is free and clear of any
material liens, claims, mortgages and other encumbrances. Except for security
interests granted in favor of its senior lender, PSL represents that it has full
right, title and interest in the PSL Contributed Technology and the PSL Patents
and said right, title and interest is free and clear of any material liens,
claims, mortgages and other encumbrances. Each party also represents that to the
best of its knowledge, its patents and technologies do not infringe, and neither
party has received any notice that such patents infringe, on the proprietary
rights of any third party.
9. INDEMNIFICATION
Subject to Section 6 hereof, each party, upon receipt of prompt notice and
opportunity to defend, shall indemnify and hold the other party harmless, and
hereby forever releases and discharges the other party from and against all
claims, demands, liabilities, damages and expenses (including attorneys' fees)
arising out of the negligence of the indemnifying party or its affiliates in
connection with the work performed in connection with this Agreement.
10. GENERAL PROVISIONS
10.1 The relationship of IDC and PSL established by this Agreement is that
of independent contractors, and nothing contained in this Agreement will be
construed to (i) give either party the power to direct and control the day-today
activities of the other, (ii) constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint undertaking, or
(iii) allow either party to create or assume any obligation on behalf of the
other for any purpose whatsoever. All financial and other obligations associated
with a party's business are the sole responsibility of that party.
10.2 This Agreement will be governed by and construed under the laws of the
State of New York without reference to conflict of laws principles.
10.3 Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof shall be settled by arbitration to be held in New York,
New York, in accordance with the commercial arbitration rules (including, where
applicable, the expedited procedure rules) then in effect of the American
Arbitration Association or any successor thereto. The decision of the
arbitrators shall be final, conclusive and binding on the parties. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator must also award to the party who received a
favorable determination upon the arbitration of any dispute submitted, the
expenses incurred by such party, including reasonable counsel fees and
accountants' fees and disbursements.
10.4 This Agreement sets forth the entire agreement and understanding of
the parties relating to the subject matter herein and merges all prior
discussions between them. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing signed by the party to be charged. This Agreement shall constitute the
legal, valid, binding and enforceable agreement of the parties.
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10.5 Any notice required or permitted by this Agreement will be deemed
given if sent by registered mail, postage prepaid, addressed to the other party
at the address set forth below or at such other address for which such party
gives notice hereunder. Delivery will be deemed effective three (3) days after
deposit with postal authorities.
If to IDC: International Dispensing Corp.
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx
Att: Xxx Xxxxxxxxx
with a copy to: Lowenthal, Landau, Xxxxxxx & Bring, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Att: Xxxxxx X. Bring, Esq.
If to PSL: Packaging Systems, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Att: Xxxx X. Xxxxxx, President
with a copy to: Xxxxx X. Xxxxxxxxxx, Esq.
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Att: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
10.6 Nonperformance of either party will be excused to the extent that
performance is rendered impossible by strike, fire, flood, governmental acts,
orders or restrictions, or any other reason where failure to perform is beyond
the control and not caused by the negligence of the non-performing party.
10.7 This Agreement may not be assigned or transferred, nor, except as
expressly provided herein, may any right or obligation hereunder be assigned or
transferred, to a third party by either party without the prior written consent
of the other party hereto. Notwithstanding the foregoing, either party may
transfer or assign its rights and obligations under this Agreement to a
successor to all or substantially all of its business or assets relating to this
Agreement whether by sale, merger, operation of law or otherwise. Subject to the
foregoing, this Agreement will be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
10.8 No modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, will be effective unless in writing signed by
the party to be charged, and the waiver of any breach or default will not
constitute a waiver of any other right hereunder or any subsequent breach or
default.
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10.9 In the event that it is determined by a court of competent
jurisdiction as part of a final nonappealable ruling, government action or
binding arbitration, that any provision of this Agreement (or part thereof) is
invalid, illegal, or otherwise unenforceable, such provision will be enforced as
nearly as possible in accordance with the stated intention of the parties, while
the remainder of this Agreement will remain in full force and effect and bind
the parties according to its terms. To the extent any provision (or part
thereof) cannot be enforced in accordance with the stated intentions of the
parties, such provision (or part thereof) will be deemed not to be a part of
this Agreement.
10.10 This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
PACKAGING SYSTEMS, LLC
By:/s/ Xxxx X. Xxxxxx
------------------------
Xxxx X. Xxxxxx, President
INTERNATIONAL DISPENSING CORPORATION
By:/s/ Xxx Xxxxxxxxx
------------------------
Xxx Xxxxxxxxx, President
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Exhibit A
International Dispensing Corp.
Patents
U. S. Patent No. Expiration Date
34,243 July 11, 2006
5,092,855 March 3, 2009
5,305,783 April 26, 2011
5,279,447 January 18, 2011
5,279,330 January 18, 2011
5,305,786 April 26, 2011
5,353,961 October 11, 2011
5,613,517 March 24, 2014
5,673,251 August 4, 2014
Exhibit B
Packaging Systems LLC
Patents
Patent Number Title Date Issued
------------- ----- -----------
1) 4,981,374 Plastic Bags Carried in a 01/01/91
Continuous Web
2) 5,115,626 Plastic Bags Carried in a 05/26/92
Continuous Web
3) 4,948,014 Two Piece Valved Fluid 08/14/90
Dispenser
4) 4,322,018 Fluid Dispenser 03/30/82
5) 4,360,996 Method and Apparatus for 11/30/82
Filling and Sealing Plastic
Bag Fluid Containers
6) 4,475,670 Fluid Dispenser 10/09/84
7) D286,005 Combined Fluid Dispensing 10/07/86
Tap and Clip-On Tubing
Connector
8) 4,574,559 Flexible Bag Automatic 03/11/86
Filling and Capping
Apparatus
9) 4,598,529 Method and Apparatus for 07/08/86
Forming, Filling and
Sealing Flexible Plastic Bags
Exhibit B continued
Packaging Systems LLC
Patents
Patent Number Title Date Issued
------------- ----- -----------
10) 4,700,744 Flexible Shut-Off Fluid 10/20/87
Dispenser Element
11) 5,111,970 Fluid Dispenser Having a 05/12/92
Removable Sealing
Diaphragm
12) 5,143,278 Reinforced Bulk Material 09/01/92
Box
13) 5,427,306 Reinforced Bulk Material 06/27/95
Box
14) 5,419,485 End Opening Reinforced 05/30/95
Bulk Material Box
15) 5,417,341 Box and Packaging System 11/29/94
for Containing elongated fragile objects
