DISTRIBUTION
AGREEMENT
THIS AGREEMENT
made as of the 1st day of February, 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:
DERMAL
DEFENSE, INC. , a
company incorporated under the laws of the State of Michigan having
its principal place of business located at 2447 Cumberland Drive,
Whitelake, MI 48383 (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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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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was already in
the possession of the receiving party without restriction prior to
the date of disclosure;
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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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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";
Canadian Application No. 2,457,124 filed on August 16, 2002 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; and all
divisions, continuations, continuation-in-parts, reissues,
reexamination applications, extensions, foreign equivalents within
the Territory, and patents issuing therefrom 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 those countries identified in
Schedule C.
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 $250,000 nonrefundable
deposit applicable toward this up-front license fee. The remaining
$750,000 USD is payable under the following schedule until
Skinvisible has received the $750,000:
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Date of Payment
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Amount of Payment
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June 30,
2004
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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September 30, 2004
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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December
31, 2004
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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March
31, 2005
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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June 30,
2005
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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September 30, 2005
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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December
31, 2005
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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March
31, 2006
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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June 30,
2006
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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September 30, 2006
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$75,000
or 5% of gross revenues generated by Distributor from sales of the
Product in the Territory in the prior quarter, whichever is
greater
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Under no
circumstances shall the installments towards such up-front license
fee exceed in the aggregate $750,000.
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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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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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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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June 30,
2004
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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, 2004
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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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December
31, 2004
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$15,000
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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March
31, 2005 and subsequent
Year
Quarters
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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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In the event
that payments are not made as set forth in section 4.2, 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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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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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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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 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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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 Certifica
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