LICENSE AGREEMENT
AGREEMENT dated this 21st day of March, 2000 by and between Xxx
Xxxxxxx, a resident of Orange, California ("XXXXXXX"), and Nutricology, Inc., a
California Corporation ("NUTRICOLOGY").
WHEREAS, XXXXXXX owns the U.S. trademark registration of the trademark
ProGreens(R) for food supplements; and
WHEREAS, NUTRICOLOGY is using the said ProGreens(R) trademark under
the terms of an agreement, between XXXXXXX and NUTRICOLOGY, the terms of which
are in some respects uncertain and potentially subject to dispute; and
WHEREAS NUTRICOLOGY is also using certain know-how provided by XXXXXXX,
in connection with the making of "green drink" food supplements, under the terms
of an agreement, between XXXXXXX and NUTRICOLOGY, the terms of which are in some
respects uncertain and potentially subject to dispute; and
WHEREAS the parties have agreed upon, and wish to set forth in writing,
the terms and conditions under which NUTRICOLOGY shall henceforth be licensed to
use the ProGreens(R) trademark and the know-how provided by XXXXXXX; and
WHEREAS the parties intend that this Agreement shall supercede all
previous agreements, oral or written, between the parties pertaining to the
subject matter of this Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. TRADEMARK LICENSE
XXXXXXX hereby grants to NUTRICOLOGY, subject to the terms and
conditions of this Agreement, the exclusive, worldwide license to use the
ProGreens(R) trademark, as the same has been registered with the United States
Patent and Trademark Office which has assigned it Registration No. 1965.670
(hereinafter, the "XXXX") for food supplements. A true copy of said registration
for the XXXX is attached hereto and identified as "ATTACHMENT 1."
2. QUALITY CONTROL
A. NUTRICOLOGY shall use its best efforts to preserve the high
standards and goodwill of all products which are sold under the XXXX (the
"PRODUCTS").
B. NUTRICOLOGY shall not, absent the written consent of XXXXXXX which
written consent shall not unreasonably be withheld, make or cause to be made
changes in any of the following characteristics of the manufacturing process for
PRODUCTS:
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o the formula used in making PRODUCTS;
o the sources used for the respective different raw materials
used in making PRODUCTS;
o the contractor who blends the ingredients and packages
PRODUCTS ("BLENDER");
o the approved process and materials by which the ingredients
are blended and packaged to produce PRODUCTS;
said characteristics will be referenced to hereinafter as "PRODUCT
CHARACTERISTICS". If NUTRICOLOGY wishes to make or cause a change in the PRODUCT
CHARACTERISTICS, it shall transmit a written request to Xxxxxxx. Xxxxxxx shall
respond in writing, either approving or disapproving such change, within five
(5) days of receiving such written request. If Xxxxxxx fails to respond in
writing within five (5) days of his receipt of NUTRICOLOGY's request, such
failure shall be deemed as constituting approval of the change.
C. The initial PRODUCT CHARACTERISTICS, for the purposes of this
Agreement, shall be the same as those which were used in producing the most
recent batch of PRODUCTS which were blended and shipped to NUTRICOLOGY by its
present BLENDER, Horizon Laboratories, in or about January of 2000.
D. NUTRICOLOGY shall, during normal business hours and upon advance
written request of not less than ten (10) business days, provide XXXXXXX with
reasonable access to all pertinent information with regard to the manufacture
and sale of PRODUCTS, including all information pertaining to the PRODUCT
CHARACTERISTICS.
F. NUTRICOLOGY shall at all times maintain quality control procedures
which shall at a minimum include the testing and approval of a sample, from each
batch of PRODUCTS received from the BLENDER, by a Quality Control
Representative. The Quality Control Representative shall be a person selected by
NUTRICOLOGY and trained by XXXXXXX to evaluate the quality of the PRODUCTS,
including for taste, solubility, appearance, and odor. NUTRICOLOGY shall advise
its Quality Control Representative to communicate openly with XXXXXXX with
regard to all matters related to the manufacture of PRODUCTS, and to provide
XXXXXXX at his request with a sample of PRODUCTS. In the event that XXXXXXX
advises that a batch should be rejected by NUTRICOLOGY, or that a change should
be made with regard to the PRODUCT CHARACTERISTICS, or that any other action
should be taken to preserve or enhance the quality or marketability of the
PRODUCTS, NUTRICOLOGY agrees to consider and respond such advice, and to
communicate in good faith with XXXXXXX regarding such advice; however,
NUTRICOLOGY's decision with regard to such advice shall be at its sole
discretion, consistent with the provisions of this Agreement.
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3. GOOD FAITH EFFORTS
NUTRICOLOGY agrees at all times to use its best efforts, in good faith,
to manufacture, market, promote, and sell PRODUCTS to the mutual benefit of the
parties.
4. KNOW-HOW LICENSE; NON-COMPETITION
A. The parties acknowledge that Dr. Xxxxxxx Xxxxxx of NUTRICOLOGY and
XXXXXXX have each provided NUTRICOLOGY with certain know-how relating to the
manufacture, of "green drinks", including know-how related to formulation,
sources for ingredients, and blending processes and procedures. During the term
of this Agreement, XXXXXXX hereby grants to NUTRICOLOGY a worldwide license to
use the know-how he has provided to NUTRICOLOGY with respect to its manufacture
of the PRODUCTS (the "Know-How"), subject to the royalty obligations set form in
this Agreement.
B. So long as this Agreement is in effect, XXXXXXX shall not compete
with NUTRICOLOGY in the "green drinks" market, by using the know-how licensed
hereunder to manufacture any "green drink" product, or by assisting any third
person or entity in the manufacture or marketing of any "green drink" product.
5. ROYALTIES
A. Throughout the term of this Agreement, and for any renewals or
extensions of this Agreement, NUTRICOLOGY shall pay XXXXXXX a royalty, on a
monthly basis, payable on or before the fifteenth day of each month, on all
"green drink" products sold by NUTRICOLOGY during the previous calendar month.
Such royalties shall be calculated on the basis of "Net Sales"; the term "Net
Sales" is hereby defined to mean gross sales at the applicable distributor,
wholesale, retail or discount price at which the PRODUCTS were sold, less any
returns, shipping charges, and any sales, use or value added taxes.
B. With regard to sales of PRODUCTS, the royalty shall be four and
one-half percent (4.5%) of the first one hundred seventy thousand dollars
($170,000) in Net Sales of PRODUCTS during the calendar month, six and
three-fourths percent (6.75%) of the next one hundred seventy thousand dollars
($170,000) in Net Sales of PRODUCTS during the calendar month, and eight percent
(8%) of all Net Sales in excess of three hundred forty thousand dollars
($340,000) during the calendar month.
C. With regard to "green drink" products sold by NUTRICOLOGY but not
sold under the XXXX, the royalty rate shall be four and one-half percent (4.5%)
of Net Sales of such products, unless a different rate is agreed to in writing
from time to time by the parties.
D. On or before the fifteenth day of each month, NUTRICOLOGY shall
furnish to XXXXXXX a statement, certified by a responsible officer of
NUTRICOLOGY, showing the Net Sales of products subject to this Agreement during
the previous month, and the
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amounts of royalty payable thereon. Such statement, together with the payment
for the fees shown therein, shall be sent to XXXXXXX at the address set forth
below under "NOTICES", or at such other place as XXXXXXX may designate from time
to time in writing.
E. If NUTRICOLOGY does not receive payment from its customer within
ninety (90) days of any sale for which it has paid XXXXXXX a royalty pursuant to
this Agreement, and if NUTRICOLOGY thereafter writes off such receivable as
"bad debt", then NUTRICOLOGY may set forth such information on its statement to
XXXXXXX, claim a credit for the royalty previously paid on such sale and deduct
the same from the next payment due to XXXXXXX.
F. Upon XXXXXXX'x reasonable written request, NUTRICOLOGY will provide
XXXXXXX with accurate information pertaining to products manufactured and sold
pursuant to this Agreement, including any information reasonably necessary or
convenient for XXXXXXX to verify the amounts of royalties which are due to him
under this Agreement.
6. APPEARANCE OF XXXX; PRODUCT LABELS
NUTRICOLOGY shall use and display the XXXX only in substantially the
same style, appearance and manner of use which is currently in effect, or in
such other form and manner as may be approved by XXXXXXX, which approval shall
not be reasonably withheld. NUTRICOLOGY shall not cause or permit any changes to
be made in the appearance and design of the XXXX in the labels for PRODUCTS,
without XXXXXXX'x prior written consent, which consent shall not be unreasonably
withheld.
7. WARRANTY, INDEMNITY PROVISIONS
X. XXXXXXX warrants that he is the owner of the XXXX, and that be has
the unrestricted authority to enter into this Agreement, provided however that
XXXXXXX makes no warranty regarding the extent of any rights granted hereunder
to use the XXXX outside of the United States of America. If a lawsuit is filed
and served against NUTRICOLOGY claiming that NUTRICOLOGY's use of the XXXX in
the United States infringes upon the trademark rights of any third party,
XXXXXXX shall defend NUTRICOLOGY at XXXXXXX'x expense and shall pay the damages
and costs finally awarded against NUTRICOLOGY in the action, but only if (a)
NUTRICOLOGY notifies XXXXXXX promptly upon learning that the claim might be
asserted, (b) XXXXXXX has sole control over the defense of the claim and any
negotiation for its settlement or compromise, and (c) NUTRICOLOGY takes no
action that in XXXXXXX'x reasonable judgment, impairs XXXXXXX'x defense of the
claim.
X. XXXXXXX warrants that this Agreement, and NUTRICOLOGY's exercise of
its rights hereunder, does not and will not infringe on any rights of Xxxxx
Xxxxxx, including but not limited to any rights related to the know-how licensed
under this Agreement. If a lawsuit is filed and served by Xxxxx Xxxxxx or her
assignee or successor, against NUTRICOLOGY, claiming that NUTRICOLOGY's use of
the know-how licensed under this Agreement or other exercise of its rights under
this Agreement infringes upon the rights of Xxxxx Xxxxxx or her successor,
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XXXXXXX shall defend NUTRICOLOGY at XXXXXXX'x expense and shall pay the damages
and costs finally awarded against NUTRICOLOGY in the action, but only if (a)
NUTRICOLOGY notifies XXXXXXX promptly upon learning that the claim might be
asserted, (b) XXXXXXX has sole control over the defense of the claim and any
negotiation for its settlement or compromise, and (c) NUTRICOLOGY takes no
action that in XXXXXXX'x reasonable judgment, impairs XXXXXXX'x defense of the
claim.
C. During the pendency of any litigation which is the subject of
XXXXXXX'x indemnification obligations as set forth above in paragraphs 7A and
7B, NUTRICOLOGY shall deposit all royalty payments due to XXXXXXX with a
mutually agreeable third party escrow company which shall be instructed in
accordance with the terms of this Agreement. Upon the resolution of such
litigation, either by judgment or by dismissal, the funds so held and any
interest accrued thereon shall be distributed as follows: first, to NUTRICOLOGY
in satisfaction or partial satisfaction of any liability of XXXXXXX to
NUTRICOLOGY under XXXXXXX'x indemnification obligations as provided in this
paragraph 7, and then the balance to XXXXXXX.
D. NUTRICOLOGY agrees not to challenge the XXXX. NUTRICOLOGY warrants
that it has the unrestricted right to enter into this Agreement, and that it
shall comply with all applicable laws and regulations with respect to its
manufacture and sale of products pursuant to this Agreement. NUTRICOLOGY agrees
to maintain a policy for products liability during the term of this Agreement
covering the PRODUCTS for an amount and as provided for in Paragraph 11 hereof
NUTRICOLOGY agrees to indemnify XXXXXXX and hold him harmless against all
product liability claims brought against XXXXXXX based in any respect upon the
manufacture, sale or distribution of the PRODUCTS by NUTRICOLOGY in an amount
not to exceed that which is covered by the insurance policy referred to above in
this Paragraph 7.B., but only if (a) XXXXXXX notifies NUTRICOLOGY promptly upon
learning that the claim might be asserted, (b) NUTRICOLOGY has sole control over
the defense of the claim and any negotiation for its settlement or compromise,
and (c) XXXXXXX takes no action that, in NUTRICOLOGY's reasonable judgment,
impairs NUTRICOLOGY's defense of the claim,
8. DEFENSE OF XXXX
Licensee and Licensor agree to cooperate with one another in
maintaining and enforcing all common law and statutory rights under the XXXX. In
the event either party becomes aware of any infringement of such rights. Such
party shall notify the other party of same. Other than as specifically provided
in this Agreement, neither party shall be obligated to institute any legal
action or otherwise take any affirmative steps to stop any infringement of the
XXXX by any third party.
9. ASSIGNMENT
NUTRICOLOGY may not assign, sublicense or transfer this Agreement
except to another company which controls, is controlled by, or is under common
control with NUTRICOLOGY, without the prior written consent of XXXXXXX, which
consent shall not be unreasonable withheld.
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10. TERM AND TERMINATION
A. The term of this Agreement shall commence on the date of its
execution by the parties hereto and shall continue until terminated pursuant to
the provisions herein.
B. In the event of a significant breach of this Agreement by either
party, the other party may on sixty days' written notice terminate the license
and rights granted to the breaching party under this Agreement by giving written
notice to such breaching party of termination and the basis for such
termination. The license and rights granted under this Agreement shall terminate
sixty (60) days after mailing of such written notice unless such breach is cured
within such sixty (60) day period.
C. The failure of NUTRICOLOGY to achieve a minimum of two hundred fifty
thousand dollars ($250,000) in Net Sales of the PRODUCTS in any calendar quarter
shall, at XXXXXXX'x option, be considered a significant breach of this Agreement
and cause for termination of this Agreement as provided herein. In the event
that XXXXXXX gives written notice of NUTRICOLOGY's breach for failure to meet
such minimum Net Sales, NUTRICOLOGY may cure such breach by paying to XXXXXXX,
within sixty (60) days following the mailing of such notice, an amount equal to
the difference between the royalties amount paid to XXXXXXX for sales of
PRODUCTS during the deficient quarter and the amount which would have been
payable had NUTRICOLOGY achieved the minimum Net Sales as set forth in this
paragraph.
D. In the event of any termination of this Agreement, all rights in and
to the XXXX shall revert to XXXXXXX, and NUTRICOLOGY shall discontinue all use
of the XXXX and will not at any time thereafter use the XXXX, or any other
trademark, services xxxx or trade name similar thereto or likely to be confused
therewith. Notwithstanding any termination of this Agreement, however,
NUTRICOLOGY shall retain the right to use the Know-How provided to it by
XXXXXXX, and the right to make "green drink" products.
11. INSURANCE
NUTRICOLOGY shall maintained at its own expense in full force and
effect at all times during which PRODUCTS are being sold, with a responsible
insurance carrier, at least a Two Million Dollar products liability insurance
policy with respect to all products sold under this Agreement. This insurance
shall be for the benefit of NUTRICOLOGY, shall name XXXXXXX as an insured, and
shall provide for at least thirty (30) days prior written notice to XXXXXXX of
the cancellation or any substantial modification of the policy. NUTRICOLOGY
shall, from time to time upon reasonable request by XXXXXXX, promptly furnish or
cause to be furnished to XXXXXXX evidence of the maintenance of the insurance
herein required, including, but not limited to, certificates or insurance (with
applicable riders and endorsements) and proof of premium payments.
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12. NOTICES
Any notice or communication required or permitted to be sent under this
Agreement shall be duly made and shall be valid and effective only if in writing
and sent by facsimile, with a confirmation copy by mail, or by registered or
certified mail, return receipt requested, postage prepaid, by one party to the
other to its respective address and facsimile number as follows:
XXXXXXX:
Xxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxx., Xxxx 00
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
NUTRICOLOGY:
Nutricology, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
Either party may change its address and/or facsimile number to which notices or
requests shall be directed by written notice to the other party.
13. DISPUTE RESOLUTION
In the event of any dispute between the parties arising out of this
Agreement, the parties agree to participate in mediation, in a good-faith effort
to resolve such dispute, with all expenses of such mediation to be shared
equally between the parties. If the parties are unable to resolve any dispute by
mediation, the parties shall submit such dispute to binding arbitration under
the then prevailing Commercial Rules of the American Arbitration Association for
resolution by a single arbitrator. The arbitrator shall award reasonable
attorneys fees to the prevailing party in any such arbitration.
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14. ENTIRE AGREEMENT; MISCELLANEOUS PROVISIONS
A. The provisions of this Agreement supersede all previous
discussions and agreements of the parties with regard to the licensing of the
XXXX and Know-How related to the manufacture of "green drink" products.
B. Agreement may not be released, discharged, abandoned, changed or
modified in any manner except by an instrument in writing signed by the parties.
C. The construction and performance of this Agreement will be governed
by the laws of the State of California.
D. This Agreement shall inure to the benefit of the parties and their
heirs, executors, administrators and permitted assigns.
B. The paragraph headings are inserted for convenience of reference
only and are not intended to affect the meaning or interpretation of this
Agreement.
F. This Agreement may be signed in counterparts, and faxed signatures
shall be deemed equally valid and binding as originals.
Dated: April 2, 2000 NUTRICOLOGY, INC.
By: /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx, President
Dated: March 15, 2000 XXX XXXXXXX
/s/ Xxx Xxxxxxx
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