DISTRIBUTION AGREEMENT

 

DISTRIBUTION AGREEMENT

 

THIS AGREEMENT made as of the 4th day of May, 2005. ("Effective Date")

 

BETWEEN:

 

 

AND:

 

 

WHEREAS:

 

 

 

 

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:

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.

 

 

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.

 

4.3 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: *

 

 

 

* 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:

 

 

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 45⁰ Celsius and at a minimum of 4⁰ 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: