DISTRIBUTION AND PURCHASE AGREEMENT
THIS DISTRIBUTION AND PURCHASE AGREEMENT (the "Agreement") is made and
effective as of December 6, 2002 by and between BIOACCESS, INC., a Delaware
corporation with its principal place of business at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000 (the "Company") and VALESC INC., a Delaware corporation with
its principal offices at 0000 Xxxx Xxxx, Xxxxx 000X, Xxxxx, XX 00000 (the
"Distributor").
In consideration of the mutual agreements and understandings set forth
herein, the parties hereby agree as follows:
1. PURPOSE
The purpose of this Agreement is to facilitate the promotion,
distribution and sale of the Company's products (the "Products"), which
are specifically identified on the list attached hereto as Appendix A.
2. APPOINTMENT OF DISTRIBUTOR
The Company hereby appoints Distributor as its exclusive distributor
within the geographic area described on Appendix B attached hereto (the
"Territory"). At any time during the term of this Agreement and upon
written notice to the Company, Distributor may designate one of its
subsidiaries as the Distributor for all purposes under this Agreement
and may assign and transfer all of its rights and obligations hereunder
to such subsidiary.
3. PRODUCTS
The Company may from time to time in its sole discretion, upon 30 days'
written notice to Distributor, add items to the list of Products
specified on Appendix A and/or remove items from the list. When the
Company develops a next generation product for one or more of the
Products, the next generation product shall be added promptly to
Appendix A and become a Product hereunder.
4. RESPONSIBILITIES OF DISTRIBUTOR
Distributor shall have the following responsibilities:
A. Provide coverage of existing and potential customers within
the Territory on a regular basis consistent with good business
practice and use commercially reasonable efforts to promote
and distribute the Products in the Territory.
B. Employ sales personnel in connection with the promotion of the
Products who are qualified and suitably trained with respect
to the Products, to the reasonable satisfaction of Company;
provided that, nothing in this provision shall require
Distributor to employ additional or new sales representatives.
C. Cooperate with and assist the Company in promotional
campaigns; provided that
the Company shall be responsible for the costs of such
campaigns, except for the costs of Distributor's personnel.
D. Distributor shall not promote, sell, or offer for sale within
the Territory during the term of this Agreement, either
directly or through its wholly owned subsidiaries, any goods
or articles that, in the Company's reasonable judgment,
compete with the Products. The Company represents that it has
reviewed the products currently being sold by the Distributor
and its subsidiaries as of the date of this Agreement and has
determined that such products are noncompetitive.
E. Upon request, submit periodic sales reports containing such
information as the Company may reasonably require for the
purpose of enabling the Company to be advised of sales
progress in the Territory. This information shall be provided
within 30 business days after the close of each quarterly
accounting period. The Company has reviewed and approved the
current reporting package generated by the Distributor, and
finds it to be sufficient.
F. Maintain lot tracing information and provide information to
the Company upon request.
G. Maintain adequate and balanced levels of Product inventory.
5. RESPONSIBILITIES OF THE COMPANY
The Company shall have the following responsibilities:
A. Maintain the quality level of the Products sold hereunder, so
that the Distributor can assure its customers that it will
deliver products of high quality.
B. Advertise and promote the Products within the Territory and
keep Distributor advised of these promotions.
C. Communicate with Distributor with respect to possible
availability of new products and price changes and policies.
All notices of price changes must be in writing to the
Distributor with a minimum of 90 days advance notice.
D. Support Distributor with (i) training with respect to the
Products, (ii) the provision of sales support materials and
(iii) field support by the Company's Sales Representatives.
Such support will be provided by the Sales Representatives and
other personnel from the Company promptly upon request by the
Distributor. If the Distributor feels that this support is not
satisfactory, Distributor will contact the Vice President of
Sales, or equivalent officer if there is no Vice President of
Sales, of the Company immediately. The Company shall provide,
prior to Distributor's first sale of the Products, initial
training concerning the Products for
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the sales representatives of Distributor at a location in
the Territory selected by Distributor.
E. Allow credit to Distributor on merchandise returned by
customers of Distributor in accordance with the Company's
Returned Goods Policy, as in effect from time to time;
provided, that returns must be approved by the Company in
advance and such approval will not be unreasonably withheld.
There will be no restocking charge for Products (in unopened
cartons) returned to the Company by the Distributor.
F. Respect all matters of a confidential nature and agree not to
divulge these matters to any other distributor.
G. Except for Excluded Sales (as hereinafter defined), the
Company shall not sell any Products directly to any customer
in the Territory without the approval of the Distributor,
which approval shall not unreasonably be withheld. The
Company shall not request such approval from Distributor
unless Distributor is unable or unwilling to sell the
Products to the customer in question. With respect to any
sale of Products by the Company in the Territory where
approval has been obtained from Distributor and except for
Excluded Sales, the Company will pay Distributor a
commission of 20% of the gross sale price (excluding taxes
and shipping costs) for such sale on the tenth day of the
month following such sale. "Excluded Sales" shall mean sales
of Products by the Company to any customer in the Territory
where the Products will not be used within the Territory
(e.g. national accounts with a billing address located
within the Territory; JITs - just in time warehousers
located within the Territory).
6. TERMS OF AGREEMENT
A. This Agreement shall remain in effect for one year from the
date of delivery of the first products ordered by the
Distributor, and will be automatically renewed for terms of
one year unless terminated by either party upon 90 days
advance written notice before the end of any term.
B. The prices for the Products sold hereunder shall be
established in the Company's Distributor Price List, the
current form of which is attached hereto as Appendix D, and
are subject to change from time to time at the Company's
sole discretion upon 90 days' written notice, provided there
is a commensurate increase in the list price to the
customer. In the event of a price increase, the Company will
rebate to the Distributor the original price for all pricing
commitments to customers that were agreed to prior to the
increase; provided that, in order to obtain such a rebate,
the Distributor must provide the Company with written proof
that such pricing commitments were obtained prior to the
announced price increase. Sales shall be F.O.B. Company's
facility. Orders calling for delivery prior to the effective
date of a price change shall be subject to the previous
price; provided, that (i) any delays in shipment are not
caused by the Distributor being on "credit hold" status,
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and (ii) such orders shall not be substantially in excess of
Distributor's usual ordering pattern. All payments are due
within 30 days of the date of invoice.
C. Prior to the shipment of any Product by the Distributor
wherein the price charged to the customer would result in a
gross margin earned by the Distributor of less than 25%, the
Company must specifically approve the pricing to the
customer and guarantee Distributor a minimum of 25% gross
margin prior to the sale being accepted. In the unlikely
event that the gross margin earned by Distributor on sales
of the Company's Products should fall below 25%, it is
mutually agreed, in consideration of the time and expenses
that will be incurred by the Distributor in obtaining these
sales, that the Company will award the Distributor a credit
towards future Product purchases by Distributor in an amount
equal to the amount needed for Distributor to receive the
agreed-upon minimum 25% gross margin for the sale(s) in
which its gross margin was less than 25%. For purposes of
this computation, "gross margin" is defined as the net
selling price to the customer (invoice price), less the cost
of the Products purchased based on the Company's distributor
price list, divided by the net selling price and multiplied
by 100.
D. All sales hereunder shall be subject to the Company's standard
terms and conditions of sale (including provisions thereof
with respect to disclaimer or warranties) except for such
terms and conditions of sale that conflict with any provision
hereof.
E. All sales are to be made by Distributor only to customers
located in the Territory.
F. The Company will charge Distributor interest on all past due
invoices for Product orders at an interest rate equal to the
lesser of (i) 1.5% per month (18.00% APR) or (ii) the maximum
legal interest rate then established by the laws of the State
of Maryland. The Distributor shall be liable for all costs and
reasonable attorney fees incurred by the Company in order to
collect on any past due account.
7. LIMITATION OF DISTRIBUTOR'S AUTHORITY
A. Distributor shall be an independent contractor of the Company.
Under no circumstances shall Distributor or its
representatives, agents or employees be deemed the agent of
the Company for any purpose, nor shall Distributor enter into
any contract or make any representation or commitment in the
name of or on behalf of the Company, except as provided for in
this Agreement.
B. Distributor shall under no circumstances make any warranties
or representations with respect to the Company's products
beyond those warranties and representations expressly issued
or approved by the Company in writing, or which are included
in the Company's promotional or informational materials.
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8. PRODUCT DEFECTS AND REPAIRS
Distributor shall promptly inform the Company of any information it may
obtain that relates to any claimed or actual defect or deficiency in
any Product. In no event shall Distributor attempt to repair or correct
a defect or deficiency in any Product, or advise any other person to so
act, without the express authorization of the Company. In all cases
involving such defects or deficiencies, Distributor shall proceed as
instructed by the Company. However, Distributor must comply with all
applicable laws and regulations including, but not limited to, the
regulations of the FDA as they apply to Medical Devices.
9. SAMPLES
The Company shall provide the Distributor with a reasonable amount of
Products (relative to anticipated sales by the Distributor) to be used
as samples and literature at no charge to the Distributor.
10. CONFIDENTIALITY
Distributor recognizes the importance of confidentiality with respect
to the matters covered by this Agreement or relating to the Products,
and agrees to keep confidential such matters and such information and
knowledge as the Company may from time to time provide regarding the
Company's business affairs, products, trade secrets, customers,
manufacturing, marketing, or the like. Distributor agrees not to
disclose at any time, before or after the termination or expiration of
this Agreement, any part of such matters, information or knowledge,
including without limitation, the names and other material information
pertaining to customers of the Company, whether or not such customers
were developed by Distributor, except as such disclosure is authorized
by the Company, or as necessary in the course of the Distributor's
duties under this Agreement. This provision shall not apply to
confidential information (i) that becomes public through no act or
fault of Distributor or its subsidiaries, (ii) that is independently
developed by Distributor or its subsidiaries by persons who have not
had access to the confidential information, (iii) that is received by
Distributor or its subsidiaries from a third party not known to be
under restriction on disclosure or use, (iv) that is in the lawful
possession of Distributor of its subsidiaries without any limitations
on disclosure prior to its disclosure by the Company, or (v) that is
required by law or by judicial or regulatory process to be disclosed.
The Company understands that the Distributor will be required to
publicly file this Agreement with the Securities and Exchange
Commission in connection with its status as a reporting company under
the Securities Exchange Act of 1934, as amended.
11. TERMINATION OF DISTRIBUTORSHIP
A. Either party may terminate this Agreement without cause upon
written notice delivered at least three months prior to the
effective date. If Distributor terminates this Agreement
without cause and provides the required notice to Company,
Company may accelerate the effective date of termination to a
date not less than 30 days after the notice of termination is
delivered.
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B. No later than three months after the Distributor first orders
Products from the Company, the Company shall identify the
minimum volume of Product sales in the Territory that the
Distributor shall be required to order in each quarter for
the duration of the initial term hereof, in the form
attached hereto as Appendix C. After such time, if the
Distributor fails to obtain orders for delivery within the
Territory of at least the volume of Products in units
indicated on Appendix C, the Company may notify the
Distributor in writing that this Agreement may be
terminated. The Distributor will have 60 days to correct the
deficient performance. If terminated for deficient
performance, the Distributor can purchase Products on a
non-exclusive basis for 120 days following the date of
termination at the same pricing and discounts as provided in
Appendix A, as modified from time to time. The minimum sales
volume of Products in units per quarter as stated on
Appendix C may be amended by written agreement of the
Company and the Distributor prior to the expiration of the
initial term and any succeeding one-year term hereof.
C. Not less than 30 days before the expiration of the initial
term and any succeeding one-year term hereof, the Company may
notify Distributor of revised sales targets, which will have
been mutually agreed upon, to be included as Appendix C for
the renewal term of this Agreement. In the unlikely event that
a new quota amount cannot be mutually agreed upon, then the
quota will become 105% of the prior period's quota. During the
first six months of this Agreement, the Distributor will be
required only to use its best efforts to meet the targeted
quota.
D. Except as provided in Paragraph B of this section, in the
event of a material default by either the Company or the
Distributor in the performance of its duties, obligations, or
undertakings under this Agreement, the other party shall have
the right to give written notice to the defaulting party
advising such party of the specific default involved and if,
within 60 days after such notice, the defaulting party has not
remedied such default, the other party shall have the right,
in addition to any other rights and remedies they may have, to
terminate this Agreement immediately upon given written notice
to the defaulting party.
E. The Company or the Distributor may immediately terminate this
Agreement at any time by giving written notice of such
termination in the event the other party becomes insolvent,
institutes or permits to be instituted against it any
proceedings seeking receivership, trusteeship, bankruptcy,
reorganization, arrangement, readjustment of debt, assignment
for the benefit of creditors, or other similar proceedings
under any applicable law.
F. If the Company terminates the Distributor without cause or
elects not to renew this Agreement even though the
Distributor has met its performance objectives as specified
on Appendix C, the Company shall pay Distributor an amount
equal to 12 times the Termination Amount. The "Termination
Amount" shall be equal to the monthly average of the
Distributor's net sales to customers for the three months
immediately preceding the effective date of such
termination, less the cost
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of goods sold (including shipping charges for shipment of
the Products from the Company to the Distributor and from
the Distributor to the customer). The payment due the
Distributor shall be paid in four equal quarterly
installments commencing on the first day of the first month
following the effective date of termination.
G. Rights upon Termination. Upon termination of this Agreement
for any reason, the Company and the Distributor shall be
bound by the following provisions:
1. No Effect on Rights to Payment or Receipt of Product.
Termination of this Agreement shall not affect the
right of the Company to receive payment for the
Products accepted by Distributor before or after such
termination nor shall termination affect the right of
Distributor to receive the Products ordered before
termination.
2. No Release from Obligations. Any termination of this
Agreement shall not release any party from
obligations that shall have accrued under this
Agreement prior to termination. No termination shall
release any party from liability to the other arising
out of or in connection with a party's breach of, or
failure to perform any covenant, agreement, duty or
obligation contained herein.
3. No Right to Damages or Indemnification Resulting from
Termination. In the event of proper termination of
this Agreement, neither Distributor nor Company shall
have any right to damages or indemnification of any
nature arising from such termination, whether for the
loss of future profits or on account of expenditures,
investment, leases or commitments made in connection
with business or goodwill, except as specifically
provided for herein.
4. Right to Sell Remaining Inventory. Except as
specifically provided elsewhere hereunder,
Distributor shall have the right, for a period not to
exceed 180 days from the date of termination, to sell
any Products remaining in inventory to the extent the
same are not repurchased by the Company pursuant to
Paragraph 5 below.
5. Repurchase of Remaining Inventory. In the event the
Company terminates this Agreement for any reason
other than a material breach by the Distributor, the
Company shall repurchase from Distributor all of the
Products in Distributor's inventory, F.O.B. the
Company, and shall repay to Distributor the actual
price paid for such returned Products; provided,
however, that during any phase-out period,
Distributor shall use its best efforts to minimize
any excess inventory that would otherwise accumulate.
6. No Agency Created. Except to the extent of selling
its remaining inventory as permitted by the foregoing
paragraphs, Distributor shall not
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thereafter represent or hold itself out as being an
authorized Distributor for the Company.
H. Any acceptance by the Company of orders for Products after
notice of termination is given hereunder shall be separate
transactions and shall not operate as a renewal or revival of
this Agreement or as a waiver of any provision hereof.
12. INDEMNIFICATION
The Company will indemnify, defend, and hold harmless Distributor and
its officers, directors, employees and agents (collectively, the
"Indemnified Parties") from and against any and all claims that may be
asserted against the Indemnified Parties arising out of or relating to
the use or sale of the Products and which claims do not result in whole
or in part from the Indemnified Parties' willful misconduct; provided,
that Distributor shall give the Company prompt notice of such claims
and the Company shall have the right to conduct the defense of such
claims and to settle such claims at its discretion.
Throughout the term of this Agreement, the Company agrees to maintain
products liability insurance coverage insuring the Products sold
hereunder with a minimum limit of $2,000,000 and a deductible per
incident of no more than $_____. In addition, the Company agrees to
list the Distributor and the Indemnified Parties as additional insureds
on such policy and provide Distributor with a certificate evidencing
such coverage.
13. TRADEMARKS AND TRADE NAMES
A. Distributor recognizes the validity of the Company trademarks
and trade name, acknowledges that the same are the property of
the Company, and agrees not to infringe upon, harm or contest
the rights of the Company in its trademarks and trade names.
B. Distributor shall not use any of the Companies' trademarks or
trade names, unless in conformity with this Agreement or
otherwise approved in writing by the Company.
C. Distributor agrees that upon termination of this Agreement for
any reason, it will destroy or return as directed by the
Company, any advertising, stationery, or other materials
bearing any of the Company's trade names or trademarks.
D. The Company agrees to defend, indemnify and hold harmless the
Indemnified Parties from and against any and all claims that
may be asserted against the Indemnified Parties arising out of
or relating to any trademark, trade name, proprietary interest
or patent related to the Products, provided the Distributor
promptly notifies the Company if any claim is made and
furnishes such information and assistance, at the Company's
expense, as the Company may require to defend against such
claim. The Company will bear all costs and expenses incurred
in connection with the defense of any such claims or as a
result
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of any settlement made or judgment rendered on the basis of
such claims.
14. TRANSFER AND ASSIGNMENT
Except as set forth in Section 2 hereof, neither Distributor nor the
Company may sell, assign, or otherwise transfer this Agreement or any
of its rights or obligations hereunder to any non-party without the
express written consent of the non-transferring parties.
15. BINDING AGREEMENT
This Agreement shall be binding on the parties and their permitted
assigns, representatives and successors.
16. CHANGES AND ALTERATIONS
No modification or addition of or to this Agreement shall be effective
unless in writing and properly executed by the parties.
17. OBSERVANCE OF LAWS
The Company and Distributor each agree to comply with all laws,
statutes, regulations, and ordinances relating to this Agreement and
duly enacted by public authorities that are applicable in the
Territory.
18. NOTICES
All notices required hereunder from any of the parties shall be in
writing and shall be considered to have been duly given or served if
delivered personally or sent by certified or registered mail, return
receipt requested, postage prepaid, to the other parties at their
address given above or such other address of which notice has been
given. Notices shall be deemed effective on the date of delivery, if
delivered personally, or three business days after mailing, if mailed.
19. WAIVER OF BREACH
One or more waivers of any breach of any covenant, term, or condition
of this Agreement by any party shall not be construed as a waiver of a
subsequent breach of the same covenant, term, or condition.
20. GOVERNING LAW
This Agreement shall be interpreted in accordance with and governed by
the laws of the State of Maryland.
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21. CONTRACT TERMS EXCLUSIVE
This Agreement constitutes the entire Agreement among the parties with
respect to the subject matter hereof. The parties acknowledge and agree
that they have not made any representations with respect to the subject
matter of this Agreement or any representations inducing the execution
and delivery hereof except as specifically set forth in this Agreement.
The parties acknowledge that they have relied on their own judgment in
entering into this Agreement, or have obtained advice of counsel to the
extent deemed necessary.
22. SEVERABILITY
Any provision hereof held to contravene the law of any jurisdiction
held applicable hereto shall be deemed deleted herefrom, and all other
provisions hereof shall remain in full force and effect.
23. FORCE MAJEURE
The obligations of any party to perform under this Agreement shall be
excused if such failure to perform or any delay is caused by matters
such as acts of God, strikes, civil commotion, riots, war, revolution,
acts of governments, world shortage of qualified materials, shortage of
fuel, or other causes whether similar or dissimilar to those enumerated
which are reasonably beyond the control of the party obligated to
perform. Upon the occurrence of such an event, the duties and
obligations of the parties shall be suspended for the duration of the
event preventing property performance under this Agreement; provided,
however, that if such suspension shall continue in excess of 60 days,
the parties shall meet and attempt to arrive at a mutually acceptable
compromise within the spirit and intent of this Agreement. If no such
compromise is agreed to by the parties, either party may terminate this
Agreement by providing 10 days prior written notice to the other party.
24. EXECUTION
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
25. ARBITRATION
Any dispute arising under or in connection with the interpretation,
application, implementation or enforcement of this Agreement or the
transactions contemplated herein shall be subject to arbitration before
the American Arbitration Association in Maryland. Such tribunal shall
have the right to award reasonable legal fees and disbursements
incurred to the prevailing party. The tribunal will be requested to
determine who is the prevailing party. If the tribunal does not make
such a determination, then each party will be responsible for its own
legal fees and disbursements. Any arbitration award rendered between
the parties hereto shall be binding, unless modified or vacated by a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BIOACCESS, INC.
By: ______________________
Name:
Title:
VALESC INC.
By: ______________________
Name:
Title:
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APPENDIX A
1. Bone Biopsy Drive
2. Bone Marrow Harvest Device
3. Bone Marrow Collection System
4. Percutaneous Pinning Procedure Kit
5. Small Bone Drill and Accessories
6. O.R. Drill and Accessories
7. Hand Piece and Accessories
00
XXXXXXXX X
Distributor's Territory
1. North Texas (defined as all areas north of Austin)
2. Oregon
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APPENDIX C
MINIMUM SALES REQUIREMENT FOR EACH PRODUCT (BY QUARTER)
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Product Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 04
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Bone Biopsy Drive
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Bone Marrow Harvest
Device
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Bone Marrow Collection
System
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Percutaneous Pinning
Procedure Kit
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Small Bone Drill and
Accessories
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Hand Piece and
Accessories
------------------------- ---------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
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APPENDIX D
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