EXCLUSIVE DISTRIBUTION AGREEMENT
This EXCLUSIVE DISTRIBUTION AGREEMENT ("Agreement") made as of
this 25th day of August, 1998, by and between Vitahealth Scientific, Inc., a New
York corporation to be formed (the "Company"), and Virilitec Industries, Inc., a
Delaware corporation ("Distributor").
W I T N E S S E T H :
WHEREAS, the Company and Distributor desire to enter into a
relationship whereby Distributor will act as an exclusive distributor for the
Company for its nutritional supplement designed to enhance human male sperm
count and potency (the "Product"), upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises, covenants and conditions hereinafter contained, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby mutually agree as follows:
1. Engagement of Distributor.
Subject to the terms and provisions hereof, including without
limitation payment of the license fee contained on Schedule A hereto, the
Company hereby grants to Distributor the exclusive worldwide right to distribute
and sell the Product and Distributer hereby accepts such engagement.
2. Term.
The term of this Agreement shall be for fifty years from the
date hereof, subject to earlier termination as hereinafter provided.
3. Terms of Purchase and Sale of Product.
3.1 Distributor's agents shall place their orders with respect to the
Product directly with the Company's manufacturing facility which is currently
located in Jerusalem, Israel. Payment for all orders shall be due and payable by
the agents at the time of order placement.
3.2 If The Company notifies Distributor that an increase in price
resulting from any increase in the ex-factory price of the Products affects any
order theretofore accepted by the Company, Distributor may cancel said order or
accept Product covered thereby at the new price. If The Company does not receive
notice of such election within a reasonable time, but no less than 10 business
days, the Company may ship such Product at the new price and Distributor shall
be deemed to have placed its order at such new price. Each shipment hereunder
shall constitute a separate and independent sale. If the terms of sale and
payment for any order are not fulfilled, The Company may decline to make further
deliveries. No goods shall be returned without the Company's prior written
consent.
3.3 The Company shall sell Product to Distributor in accordance with
the price schedule set forth in Schedule B hereto. The Company agrees hereby not
to raise the price of the Product more than once every 12 months and that no
price increase may exceed 10%. All prices are F.O.B. the purchaser's location
unless otherwise specified by Distributor. All amounts payable pursuant to this
Agreement shall be paid in United States dollars.
3.4 The Company shall act as collections agent for Distributor and
shall promptly forward to Distributor its portion of the sales proceeds as
determined in accordance with Schedule B hereto. Upon reasonable notice and
during regular business hours, Distributor shall have the right to periodically
review the Company's books and records to ensure that Distributor is receiving
its appropriate fees hereunder.
3.5 The Company shall not be liable for delay or failure to perform by
reason of contingencies beyond its control, including without limitation, acts
of God, delays of carriers, vessel or car shortages, accidents, failure of
sources of supply of raw materials, power or supplies, or excessive cost
thereof, contingencies interfering with the transportation of Product, or by
reason of voluntary or involuntary compliance with any law, regulation or any
other act of governmental authority. Quantities so affected may be eliminated by
the Company from accepted orders without liability.
3.6 Distributor agrees to meet the following sales quotas:
* During the 2nd month of production and sales -- at least 22,500
capsules
* During months 3-5 -- at least 55,000 capsules per month
* During the 6th month -- at least 150,000 capsules
* Thereafter, at least 200,000 capsules per month
Beginning January 1, 2000, the monthly sales quota shall increase by
10% and the then existing sales quota shall increase by 10% on January 1 of each
year thereafter through the term of this Agreement. In the event the Company is
unable to provide Distributor in a timely manner with the amount of capsules
necessary for distributor to meet the monthly sales quotas, distributor's sole
remedy shall be to terminate the Agreement pursuant to Section 9. In the event
Distributor does not meet the monthly sales quotas, either party may terminate
the Agreement pursuant to Section 9 with 30 days notice without penalty or
financial consequence. The previous sentence notwithstanding, upon Distributor's
receipt of the Company's Notice of Termination for not meeting the sales quota,
Distributor shall have the right, during the 30 day period, to continue this
Agreement on a non-exclusive basis in which case the Company must continue to
supply Distributor, as per the terms of this Agreement.
3.7 Since the Product is in the final stages of reformulation and the
Company has not completed construction of its manufacturing facility, the
parties agree that the sales quotas stated above shall not begin until the month
next beginning following the 95th day after execution of this Agreement. In the
event the Product is still not ready after such period, Distributor may
terminate this Agreement at any time during the following thirty (30) days
unless it agrees to an extension period with the Company, in which event its
right to terminate this Agreement pursuant to this provision shall be held in
abeyance until the conclusion of such extension period.
4. Advertising.
Distributor shall not use any Advertising Materials (as hereinafter
defined) without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. The proposed uses and the proposed
duration of use of the Advertising Materials shall be stated by Distributor when
submitting the same for approval, and the approval of the Company for any such
Advertising Materials shall extend only to the said proposed uses and only for
the duration stated. For purposes of this Agreement, the term "Advertising
Materials" shall mean all advertising, promotional, packaging, labeling and
display materials used with respect to the Product and all other textual or
pictorial material embodying, bearing, depicting or otherwise pertaining to, the
name and/or character of the Product.
5. Certain Agreements and Covenants.
5.1 Distributor shall devote its best efforts actively to promote,
market and distribute the Product at its own expense.
5.2 Distributor shall not order any item similar to the Product from
any other person or entity and shall not itself manufacture, or arrange for the
manufacture, directly or indirectly, of any such similar item.
5.3 Distributor shall not, during the term of this Agreement or
thereafter, make or permit any of its sales representatives to make, any sales
of Product except in accordance with the provisions of this Agreement.
5.4 The Company shall maintain warehouse stocks of the Product in
quantities sufficient for the proper promotion and sale of the Product and to
enable it to fulfill all orders promptly.
5.5 Distributor shall employ an adequate staff of properly trained
sales personnel.
5.6 Distributor shall notify the Company immediately upon the
occurrence of any event described in Section 9.1 hereof.
5.7 The Company is the sole owner of the Product and all rights
pertaining thereto, having been assigned said rights by the inventor of the
Product and that the Company has the full and complete ability and authority to
enter into this Agreement.
6. Rights in Name; Trademark and Copyright Protection.
6.1 Distributor recognizes that there is great value to the Name of the
Product and the goodwill associated therewith; and that nothing contained in
this Agreement gives Distributor any interest or property rights therein.
6.2 Distributor agrees with and covenants to the Company that it will
not, during the term of this Agreement or thereafter, directly or indirectly
through its subsidiaries or through any other person or entity controlling,
controlled by or under common control with Distributor (hereinafter referred to
as an "affiliate") or otherwise, (i) assert any interest in or property rights
in the name of the Product (the "Name") ; or (ii) adopt or use or register, or
attempt to register, as a trademark, service xxxx, trade name or corporate name
or as part of a trademark, service xxxx, trade name or corporate name, the Name,
any term or translation meaning the same thing as the Name, or any word, symbol
or picture, or combination thereof, which is confusingly or colorably similar to
the Name; or (iii) permit or acquiesce in any of the foregoing activities by any
of its subsidiaries, other affiliates, manufacturers, distributors, or customers
or any of the employees, officers, shareholders, partners or agents of any of
the foregoing.
6.3 Distributor agrees to place on all Product and all Advertising
Materials such copyright notices as shall be specified by the Company, such
notices to be sufficient in size, legibility, form, location, number and
permanency to comply with all applicable trademark and copyright laws as are in
effect at the time of public distribution of the Advertising Materials. When
requested by the Company, Distributor also agrees to add to any copyright notice
any language or legend requested by the Company to obtain or maintain copyright
protection in a particular country. Distributor also agrees that it will not,
without the Company's prior written consent, affix to any of the Product or to
any Advertising Materials a copyright notice in its own name or in the name of
any other person or entity. Distributor's authorization to make public
distribution of the Product and all approvals by the Company of Advertising
Materials pursuant to Article 4 hereof are expressly conditioned upon
Distributor's compliance with this Section 6.3.
6.4 The Company agrees that at the request of Distributor to cause the
appropriate statutory notice of trademark and/or copyright registration to be
imprinted wherever the Name is used.
7. Infringements.
7.1 When Distributor learns that any person or entity is or may be
making unauthorized uses of the Name or any trademarks or copyrights associated
therewith, Distributor agrees promptly to give the Company written notice giving
full information with respect to the actions by such person or entity.
7.2 Distributor shall have no right to, and agrees that it will not,
make any demands or claims, bring suit, effect any compromises or settlements,
permit any infringer to dispose of inventory or continue to use the Name or any
trademarks and copyrights associated therewith or take any other action with
respect to the infringement or possible infringement of any trademarks or
copyrights associated with the Name, in each case without the prior written
consent of the Company.
7.3 Upon such notification pursuant hereto by Distributor of an
infringement, the Company at its sole expense, shall promptly take all necessary
and reasonable action to prevent such infringement.
8. Indemnification.
8.1 Distributor agrees to defend, indemnify, and hold the Company
harmless from any and all claims, liabilities, judgments, penalties, losses,
costs, damages, and expenses, including but not limited to, reasonable
attorneys' fees and court costs, arising by reason of or in connection with any
act under or in violation of this Agreement by Distributor, its subsidiaries or
other affiliates, or the employees or agents of any of the foregoing, including
but not limited to, the distribution, exploitation, advertising or sale of the
Product, but excluding any claims relating to the quality or efficacy of the
Product.
8.2 The Company agrees to defend, indemnify, and hold Distributor
harmless from any and all claims, liabilities, judgments, penalties, losses,
costs, damages, and expenses, including but not limited to, reasonable
attorneys' fees and court costs, arising by reason of or in connection with the
Product, including specifically but without limitation, any claims relating to
the quality or efficacy of the Product.
8.3 With respect to any claims or suits coming within the scope of the
foregoing indemnifications:
(i) The indemnified party shall have the right (but not the obligation)
to require the indemnifying party to defend it and to approve any attorney
selected to defend it;
(ii) The indemnified party shall have the right to participate, with
such counsel as it shall select, in any suit or claim instituted against it and
being defended by the indemnifying party; and
(iii) The indemnifying party hereby agrees that, with respect to any
claim or suit being defended:
(a) it will keep the indemnified party fully and promptly
advised with respect thereto;
(b) it will not enter into any compromise or settlement of such
claim or suit without the prior written consent of the
indemnified party; and
(c) it will promptly pay any judgment or settlement and all
other amounts payable by it Distributor pursuant to this
Article 8.
9. Termination.
9.1 At the Company's option, this Agreement may be terminated, upon its
written notice thereof to Distributor (i) upon the breach of any of the terms or
provisions hereof by Distributor (provided, however, that, Distributor shall
have a period of thirty (30) days after such notification to remedy a breach of
any of the terms or provisions hereof if and only if such breach can reasonably
be cured within such thirty (30) day period), or (ii) upon the occurrence of any
of the following circumstances: (a) Distributor's business is discontinued; (b)
Distributor's liabilities exceed its assets; (c) Distributor is unable to pay
its debts as they come due or becomes insolvent; or (d) Distributor files a
petition for bankruptcy or for reorganization or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy,
reorganization or similar law or is adjudicated bankrupt or a petition in
bankruptcy is filed against Distributor and is not dismissed within 30 days from
the date of filing or a receiver is appointed for it or its business.
9.2 At Distributor's option, this Agreement may be terminated, upon its
written notice thereof to the Company (i) upon the breach of any of the terms or
provisions hereof by the Company (provided, however, that, the Company shall
have a period of thirty (30) days after such notification to remedy a breach of
any of the terms or provisions hereof if and only if such breach can reasonably
be cured within such thirty (30) day period), or (ii) upon the occurrence of any
of the following circumstances: (a) the Company's business is discontinued; (b)
the Company's liabilities exceed its assets; (c) the Company is unable to pay
its debts as they come due or becomes insolvent; (d) the Company files a
petition for bankruptcy or for reorganization or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any bankruptcy,
reorganization or similar law or is adjudicated bankrupt or a petition in
bankruptcy is filed against the Company and is not dismissed within 30 days from
the date of filing or a receiver is appointed for it or its business; or (e) a
change in control in the Company without Distributor's prior written consent.
9.3 Any termination pursuant to this Article 9 shall be without
prejudice to the rights of either party to monies due or to become due pursuant
to this Agreement.
9.4 Upon the termination of this Agreement by the Company pursuant to
the terms hereof, Distributor agrees (i) not to represent to the public or to
any of its customers, directly or indirectly, that it is an authorized
distributor for the Product, (ii) to refrain from further use of the Name and
from any further reference to it, (iii) to refrain from using any designation
confusingly or colorably similar to the Name, (iv) to immediately cease the
selling and distribution of the Product, except for Product already ordered and
paid for, and Distributor agrees to use its best efforts to sell such Product as
soon as possible, and (v) to promptly remove and otherwise discontinue the use
of all Advertising Materials.
10. Notices.
Any notice, demand, request or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed
effective when hand delivered, or, if mailed, upon having been properly
deposited in appropriate mail, postage prepaid, registered or certified mail,
return receipt requested (if available), and addressed as set forth in Schedule
C hereto. Any party may change its address for purposes of this Agreement by
written notice given in accordance herewith.
11. Miscellaneous.
11.1 All of the provisions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns; provided, however, that neither party hereto may assign
or transfer its interest in this Agreement, or delegate the performance of its
duties hereunder, without the prior written consent of the other party.
11.2 This Agreement (including the Schedules attached hereto) contains
the entire agreement between the Company and Distributor concerning the subject
matter hereof, and any oral statements or representations or prior written
matter with respect thereto not contained in this Agreement shall have no force
or effect. In the event of any conflict between the provisions of this Agreement
and the provisions contained in any contract or sales order or purchase order
form used by the Company or Distributor, the provisions of this Agreement shall
control.
11.3 The parties hereto represent and warrant to each other that they
have not dealt with or through any other person or firm who may claim a
brokerage or finder's fee with respect to this Agreement.
11.4 None of the terms hereof may be waived, modified or discharged,
except by an instrument in writing specifically referring to this Agreement
signed by each of the parties hereto. No failure or delay on the part of either
party in exercising any power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. All rights and remedies provided for in this Agreement
shall be cumulative and in addition to any other rights or remedies such parties
may have at law or in equity.
11.5 In the event of a breach or threatened breach of the terms or
covenants of this Agreement by a party hereto, the other party shall, in
addition to all other remedies available to it, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof. In any
proceeding for an injunction, the responding party agrees that its ability to
answer in damages shall not be a bar or be interposed as a defense to the
granting of such temporary or permanent injunction against it, that the moving
party will not have an adequate remedy at law in the event of any breach
hereunder and that it will suffer irreparable damage and injury if the other
party breaches any of the provisions of this Agreement.
11.6 The provisions of this Agreement which place restrictions on
certain activities of Distributor after the termination of this Agreement and
the agreements in Article 8 shall survive the expiration or termination of this
Agreement and shall be enforceable after the termination of this Agreement.
11.7 In the event that any of the provisions of this Agreement would be
held to be invalid, prohibited or unenforceable for any reason unless narrowed
by construction, this Agreement shall be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to
be invalid, prohibited or unenforceable. If any court construes any of the
provisions of this Agreement to be unenforceable because of the duration of such
provision or the area covered thereby, such court shall have the power to reduce
the duration or area of such provision and, in its reduced form, such provision
shall then be enforceable and shall be enforced. In the event any of the
provisions contained in this Agreement should be held to be invalid, prohibited
or unenforceable, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
11.8 Distributor is not an employee or agent of, or joint venturer
with, or partner of, the Company, but is an independent contractor. Neither
party hereto has, nor shall it hold itself out as having, any right, power or
authority to create any contract or obligation, either express or implied, on
behalf of, in the name of, or binding upon, the other, or to pledge the other's
credit, or to extend credit in the other's name, unless the other shall have
specifically consented thereto in writing. Each party hereto shall be entitled
to receive from the other prompt reimbursement for any legal, accounting or
other fees, and such other expenses, as it may reasonably incur in the
enforcement of this Agreement or any provision herein contained.
11.9 The section headings set forth in this Agreement are for
convenience of reference only and shall not be considered part of this Agreement
in any respect, nor shall they in any way limit or otherwise affect the meaning
or interpretation of any of the provisions of this Agreement.
11.10 The parties hereto understand that the corporate entity defined
herein as the "Company" does not exist as of the date of this Agreement and that
it will be formed shortly hereafter and that Xx. Xxxxx Xxxxxxx, the inventor of
the Product and the principal of the New York corporation intended to be a party
hereto, is not accepting any personal liability hereto and that if the
identified name of the corporation is unavailable he shall select another name
and all references hereto to the "Company" shall mean the New York corporation
so formed on behalf of Xx. Xxxxxxx.
11.11 This Agreement shall be construed in accordance with and governed
by the internal laws of New York, without regard to principles of conflicts of
law.
11.12 This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed in its behalf by its duly authorized signatory or
signatories, as of the day and year first above written.
VITAHEALTH SCIENTIFIC, INC.
Attest: By:_________________________________
Authorized Signatory
VIRILITEC INDUSTRIES, INC.
Attest: By:_________________________________
Authorized Signatory
SCHEDULE A - License Fee
Distributor will pay an initial non-refundable one-time fee of
$8,500 and an annual fee of $10,000 beginning 90 days after the Product is
manufactured and ready for delivery to Distributor's agents upon order and then
annually thereafter, provided this Agreement has not been terminated, for any
reason, prior to the date such payment is due.
Distributor will grant the Company stock options to purchase
up to 300,000 additional restricted shares of Distributor's common stock for a
period of 5 years beginning October 30, 1999 according to the following
schedule:
Date Option to be Effective Amount of Options Exercise Price (per Share)
10/30/1999 100,000 $10.00
2/29/2000 100,000 $10.00
10/30/2000 100,000 $10.00
These options shall vest only in the event the Agreement is
still in effect on the date the options are due to be effective. The shares of
common stock underlying the options have no registration rights.
SCHEDULE B - Price of Product and Proceeds to Distributor
The Company will sell Product to each of the Distributor's Agents at
a price to be determined by Distributor, of which price the Company will retain
$1.45 and forward the balance to Distributor.
SCHEDULE C - Addresses for Distribution
Company:
PUT IN VITAHEALTH COMPANY ADDRESS
Distributor:
Viriliec Industries, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
