Certain
portions of the below Distribution Agreement have been redacted
based on a request for confidential treatment and those portions
have been filed separately with the Securities and Exchange
Commission.
DISTRIBUTION
AGREEMENT
THIS AGREEMENT
made as of the 4th day of May, 2005. ("Effective Date")
BETWEEN:
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SKINVISIBLE PHARMACEUTICALS,
INC. , a company
incorporated under the laws of the State of Nevada having its
principal place of business located at Unit #10 - 6320 South
Sandhill Road, Las Vegas, Nevada, 89120 (“
Skinvisible ”);
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AND:
SAFE4HOURS, INC. , a company incorporated under the laws of the
State of Nevada having its principal place of business located at
---202 N. Carson Street, Carson City, Nevada 89701 (the
“Distributor”).
WHEREAS:
A.
Skinvisible is in the business of
developing polymer-based delivery systems and related technologies
for combining hydrophilic and hydrophobic polymer emulsions and
licensing its technologies and/or selling its polymer delivery
systems to established brand manufacturers and providers of topical
prescription and over-the-counter cosmetic and skin-care
Product.
B.
The Distributor is engaging in the
business of marketing and distributing skin-care
Product.
C.
Skinvisible and the Distributor have
agreed to enter into this Agreement, whereby the Distributor will
have the exclusive right to distribute, market, sell and promote
the Product throughout the Territory.
NOW, THEREFORE, in consideration of the
foregoing premises and the mutual covenants herein set forth and
other good and valuable consideration, the parties agree as
follows:
I.
DEFINITIONS
In this Agreement, the following terms have the
following meanings:
1.1
“ Customers
” means, at any time and from time to time, the customers of
the Distributor in respect of the Product.
1.2
“Confidential
Information” means any and all technical or business
information, data, designs, concepts, ideas, Product, processes,
methods, techniques, specifications, formulas,
compositions,
samples, know-how, trade secrets, and improvements of a
confidential or proprietary nature, whether in tangible form or
not, which relate to the Product, or the development, manufacture,
end-use, or commercialization thereof, and were disclosed by one
party to the other party under this Agreement. As used herein,
“Confidential Information” shall not include
information a party can demonstrate through its records:
(a)
is, at the time of disclosure,
available to the general public;
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(b)
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becomes at a
later date available to the general public through no fault of the
receiving party, and then only after said later date;
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(c)
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was already in
the possession of the receiving party without restriction prior to
the date of disclosure;
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(d)
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is disclosed to
the party without secrecy obligations by a third party who had a
lawful right to disclose it; or
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(e)
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is
independently developed by personnel of the receiving party who had
no direct or indirect access to the Confidential Information of the
disclosing party.
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1.3
" Formula " shall
mean the specific ingredients, composition, and process for
preparing the Product (as defined below).
1.4
"Patents"
shall mean U.S. Patent No. 6,582,683
issued on June 24, 2003 for "Dermal Barrier Composition"; U.S.S.N.
09/933,275 filed on August 20, 2001 and U.S.S.N. 10/154,723 filed
on May 23, 2002, both for "Topical Composition, Topical Composition
Precursor, and Methods for Manufacturing and Using the Same"; PCT
Application No. US02/26301 filed on August 16, 2002 for purposes of
the countries designated therein that are within the Territory
namely Asia, Australia, Europe, India, Japan and S. Korea; and all
divisions, continuations, continuation-in-parts, reissues,
reexamination applications, extensions, foreign equivalents within
the Territory, and patents issuing there-from which are owned or
controlled by Skinvisible pertaining to the Product, Confidential
Information, and Improvement Inventions.
1.5
" Product" means
Skinvisible's proprietary antimicrobial hand sanitizer product
incorporating 1% Triclosan as an active ingredient, and further
identified in Appendix A.
1.6
" Product
Specifications " shall mean the specifications for the
Product that will likely be needed to meet customer and regulatory
requirements. These Product Specifications shall not be modified
without the express, written agreement of the parties.
1.7
"Territory" means all the countries of the world
except Canada, USA and Mexico.
II.
APPOINTMENT, TERRITORY
AND PRODUCT
2.1
Subject to the terms hereof,
Skinvisible hereby appoints the Distributor and grants to the
Distributor the exclusive right to distribute, sell, market and
promote the Product within the Territory. For greater certainty,
while this Agreement shall remain in effect, except for
sub-distributors appointed by the Distributor and consented to in
writing by Skinvisible, no person, firm or corporation will be
granted the right to distribute, sell, market or promote the
Product within the Territory other than the Distributor.
2.2
The Distributor shall not be
entitled to appoint sub-distributors to distribute, market, sell,
or promote the Product within the Territory without the prior
express written consent of Skinvisible, pursuant to Article VIII,
which shall not be unreasonably withheld.
2.3 The Distributor shall be restricted from
integrating the Product into the manufacture and production of
finished Product to be distributed, sold, marketed and promoted by
or on behalf of the Distributor or its permitted agents,
associates, affiliates, or sub-distributors. However, the Product
may be sold under a "private" label by the Distributors or its
permitted agents, associates, affiliates, or sub-distributors,
provided that all packaging costs are paid in advance to
Skinvisible.
2.4
Distributor recognizes that
Skinvisible is in the business of developing, marketing, selling,
and distributing its polymer-based delivery systems and related
technologies (including Product), and developing end-use
applications therefore, on worldwide bases. For so long as
Distributor retains its exclusive distribution rights for the
Product granted under Section 2.1 of this Agreement, Skinvisible
shall refrain from selling the Product to customers within the
Territory, or engaging any third party as a distributor of the
Product within the Territory.
III.
DISTRIBUTOR NOT MADE
AGENT OR LEGAL REPRESENTATIVE
This Agreement
does not render Distributor an agent or legal representative of
Skinvisible for any purpose whatsoever. The Distributor is not
granted any right or authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or
in the name of Skinvisible or to bind Skinvisible in any manner or
thing whatsoever.
IV.
PRICING AND
PAYMENT
4.1
Product shall be sold to the
Distributor by Skinvisible at the pre-determined prices set forth
in Schedule B hereto. Any change in the price of Product shall not
affect orders by the Distributor that were accepted by Skinvisible
prior to such change. As business conditions warrant, Skinvisible
shall have the unrestricted right to change the price of the
Product, provided that the increase is directly attributable to
higher costs of raw materials, other manufacturing costs, or an
increase in the Cost of Living Index, and that Skinvisible provides
Distributor sixty (60) days prior written notice of any such price
increase before it becomes effective.
4.2
The Distributor shall pay for all
orders for Product by electronic bank transfer, certified check or
bank draft in favor of Skinvisible
4.3
Except as provided in Section
5.5(b), the purchase price for each order of Product must be paid
by the Distributor prior to shipment of the Product and the
Distributor shall incur all shipping and packaging
costs.
4.4
The Distributor shall pay
Skinvisible an up-front license fee in the amount of $1,000,000 USD
for the exclusive right to distribute, sell, market and promote the
Product within the Territory. Skinvisible acknowledges receipt of a
$25,000 nonrefundable deposit applicable toward this up-front
license fee. The remaining $975,000 USD is payable under the
following schedule until Skinvisible has received the $975,000:
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(a)
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Under no
circumstances shall the remaining installments towards such
up-front license fee required under this Section 4.4 exceed an
aggregate of $975,000.
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(b)
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In the event
that the Distributor appoints a sub-distributor under Article VIII
of this Agreement, the Distributor will then be required to make a
one-time payment in addition to those in the payment schedule set
forth above in this Section 4.4 equal to 50% of all up-front
proceeds that the Distributor receives, directly or indirectly,
upon the execution of any agreement in which a sub-distributor is
appointed.
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(c)
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Payments made
under this Section 4.4 are separate and in addition to payments to
be made under Section 4.1 for the Product and the running royalties
due under Section 4.5.
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(d)
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In the event
that payments are not made as set forth in this Section 4.4 and the
parties are unable to agree to a revised schedule of payments
within thirty (30) days of the date for payment, then Skinvisible
may in its sole discretion terminate the Agreement or any provision
therein and retain, without any claim or demand from the
Distributor, all monies previously paid.
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* The confidential portion has been omitted and
filed separately with the Commission.
4.5
The Distributor shall pay quarterly
to Skinvisible a running royalty fee in order to maintain the
exclusivity granted herein no later than thirty (30) days after the
end of each quarter. The amount of the royalty shall be calculated
as follows:
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Quarter
Ended
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Amount
of Payment
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September 30,
2005 and subsequent first Year Quarters
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$5,000 or 5% of
gross revenues generated by Distributor from sales of the Product
in the Territory in the quarter, whichever is greater
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September 30,
2006 and subsequent second Year Quarters
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$10,000 or 5%
of gross revenues generated by Distributor from sales of the
Product in the Territory in the quarter, whichever is
greater
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September 30,
2007 and subsequent Quarters Thereafter
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$20,000 or 5%
of gross revenues generated by Distributor from sales of the
Product in the Territory in the quarter, whichever is
greater
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(a)
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In the event
that payments are not made as set forth in section 4.4, then
Skinvisible shall give the Distributor a written notice of default.
If payment is not received within thirty (30) days following
receipt of the notice of default, then Skinvisible may in its sole
discretion terminate the Agreement or any provision therein and
retain, without claim or demand from the Distributor, all monies
previously paid.
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(b)
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The Distributor
shall provide to Skinvisible documentation including, but not
limited to, receipts, invoices, or other documentation that shall
reasonably allow Skinvisible to confirm the accuracy of the royalty
payment made.
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(c)
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Skinvisible
shall be entitled to audit the accuracy of the royalty payments
made by the Distributor. Skinvisible shall incur the expense of the
audit only if it is determined that Skinvisible received ninety
percent (90%) or more of the audited amount and in all other
circumstances the Distributor shall incur the expense of the audit.
The existence of an audit for any quarterly payment does not
suspend or relieve the Distributor from their obligation to make a
royalty payment within thirty (30) days after the end of each
quarter.
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4.6
All payments by the Distributor to
Skinvisible to be made hereunder shall be in United States
dollars.
V.
TERMS AND CONDITIONS OF
PRODUCT ORDERS
5.1
The Distributor shall submit a
written purchase order to Skinvisible specifying the amount of
Product required. Skinvisible agrees to provide an acceptance of an
order within three (3) business days after
receiving a written purchase order from the Distributor.
5.2
All of the Product ordered by the
Distributor shall be shipped within three (3) weeks from the date
the acceptance of an order has been delivered to the Distributor
and shall carry an expiration date of three (3) years from the date
of shipment. Delivery of all Product sold by Skinvisible to the
Distributor shall be F.O.B. the place of Product manufacture.
The method and route of shipment shall be
at the sole discretion of the Distributor subject to
Skinvisible’s guidelines for the method and conditions of
shipment which would provide for arrival of the Product at the
Distributor’s point of delivery in substantially the same
condition as such Product were at the point of shipment. These
guidelines include conditions regarding temperature (which shall
not exceed at a maximum of 45 0 Celsius and at a minimum
of 4 0 Celsius) to preserve the quality and integrity of
the Product during shipment. Failure of Distributor to abide by
Skinvisible’s guidelines in the shipment of the Product shall
bar the Distributor from making any claim whatsoever against
Skinvisible arising from any defect in the Product, which occurred
or arose during shipment. Nothing in this section shall mean or be
implied to mean that there is any shifting of the risk of loss of
goods to Skinvisible once such goods are placed in the control of
Distributor’s carrier. All such risk of loss is borne by
Distributor once the Product to be shipped have been delivered to
or placed in the control of the carrier.
5.3
Title to the Product shall pass
from Skinvisible to the Distributor upon the delivery to a
recognized commercial carrier of the Product for shipment to the
Distributor.
5.4
Skinvisible shall deliver the
Product to the Distributor free and clear of all liens,
encumbrances and security interests and shall not, without the
prior written consent of the Distributor: (a) transfer, deliver or
otherwise provide the Product as listed in the written purchase
order submitted by the Distributor to any other person or entity;
or (b) assign any rights to the Product as listed in the written
order submitted by the Distributor to any other person or
entity.
5.5
Prior to receiving an acceptance of
the written order from Skinvisible, the Distributor may cancel any
order at any time, with or without cause, and the
Distributor’s liability for such cancellation shall be
limited to Skinvisible’s out-of-pocket costs and expenses
incurred for such cancelled order.
5.6
The Distributor shall give notice
to Skinvisible of any claims relating to the non-conformity of
Product. The Distributor shall make all claims with respect to the
Product as follows:
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(a)
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Any claim that
a shipment contains a shortage of Product or other error in
delivery must be made by the Distributor to Skinvisible in writing
within seven (7) days from the date of receipt by
the Distributor of
such shipment of Product together with a reasonable description of
the delivery error. The Distributor’s failure to make a claim
in accordance with the foregoing sentence shall constitute
agreement by the Distributor that there was no error in delivery.
Provided that the
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Distributor
makes a claim in accordance with this Section 5.6(a) and proves
that the shipment contained a shortage of Product or other error in
delivery, Skinvisible, at the Distributor’s option, shall
deliver to the Customer to such location(s) designated by the
Distributor, at Skinvisible’s risk and cost and expense, the
number of Product in shortage in such shipment, or credit the
Distributor the amount of such shortage.
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(b)
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In the event
that the Distributor claims that upon delivery any of the Product
are non-conforming because the product is not consistent with the
Certificate of Analysis, the Distributor may reject the same,
provided that (i) within thirty (30) days after receipt by
the Distributor of such shipment of
Product, the Distributor notifies Skinvisible in writing of the
nonconformity, (ii) the Distributor sends the product out for
further review and inspection and it is determined that the Product
are not consistent with the Certificate of Analysis, (iii) the
Distributor returns to Skinvisible, at Skinvisible’s expense,
the rejected Product or shipment, subject to the terms and
conditions hereinafter provided, within seven (7) days after the
Distributor receives notice that the further review and inspection
of the Product found the Product to be inconsistent with the
Certificate of Analysis, and (iv) none of the Product has been
changed from its original condition. The Distributor’s
failure to make a claim in accordance with the foregoing sentence
shall constitute unqualified acceptance of all shipments and
Product. Following receipt of the rejected Product under this
Section 5.6(b), Skinvisible shall deliver Product consistent with
the Certificate of Analysis within fourteen (14) days. Provided
that the rejected Product have been rejected by the Distributor in
accordance with the terms of this Section 5.6(b) and are proved to
have been non-conforming, then Skinvisible shall credit the
Distributor for the cost of the Product and all costs and expenses
incurred by the Distributor in shipping the rejected Product back
to Skinvisible, if such Product return requested is made by
Skinvisible to the distributor. The Distri
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