EXHIBIT 10.5
Distribution Agreement
Eugene Science Inc.
and
Toong Yeuan Enterprise Co., Ltd.
<PAGE>
CONTENTS
CLAUSE
1.
INTERPRETATION
......................................................1
2.
APPOINTMENT
.........................................................3
3.
PURCHASE ORDERS AND DELIVERY
........................................3
4.
PAYMENT AND PRICES
..................................................4
5.
DUTIES OF THE DISTRIBUTOR
...........................................5
6.
DUTIES OF THE COMPANY
...............................................8
7.
TRADEMARKS
..........................................................9
8.
WARRANTIES AND INDEMNITIES
..........................................10
9.
DURATION
............................................................11
10.
TERMINATION
.........................................................11
11. EFFECT OF
TERMINATION ...............................................12
12. NO
PARTNERSHIP
......................................................13
13.
ANNOUNCEMENT
........................................................13
14.
CONFIDENTIAL INFORMATION
............................................13
15. ENTIRE
AGREEMENT
....................................................14
16. WAIVER
..............................................................14
17. COSTS
...............................................................15
18. INVALIDITY
..........................................................15
19. NOTICES
.............................................................15
20.
COUNTERPARTS
........................................................16
21. GOVERNING
LAW AND JURISDICTION ......................................17
22. EXCLUSION
OF THIRD PARTY RIGHTS .....................................17
23. ASSIGNMENT
..........................................................17
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THIS AGREEMENT (THE "AGREEMENT") is made on
February 18, 2003.
BETWEEN the following parties (collectively
the "PARTIES" and each a "PARTY"):
(1) EUGENE
SCIENCE INC., a corporation duly organized and validly
existing
under the laws of the
Republic of Korea
and having its registered
address at 8th Fl. LG Palace Bldg., 165-8 Donggyo-Dong, Mapo-Gu,
Seoul,
Korea (the "COMPANY"); and
(2) TOONG
YEUAN ENTERPRISE
CO., LTD., a corporation duly organized and
validly existing
under the laws of
Taiwan and having its
registered
address at 8F-1 No. 361, Ta Nan Road, Shih-Lin Dist., Taipei,
Taiwan (the "DISTRIBUTOR")
RECITALS
(A) WHEREAS
the Company has developed and has the exclusive right to
manufacture and sell
the Product in a number of countries, including
Taiwan.
(B) WHEREAS
the Distributor desires to have the exclusive right of the
Product to discuss with brand owners for the development, marketing
and
sale in Taiwan of foods and beverages containing the Product.
(C) WHEREAS
the Company
and the Distributor now desire to enter into an
agreement.
THE PARTIES AGREE AS FOLLOWS:
1.
INTERPRETATION
1.1 In this
agreement the following words, expressions, and abbreviations
shall have
the following respective meanings unless the context
otherwise requires:
"BUSINESS DAY"
means a day (excluding Saturdays) on which banks
generally are open in
Taiwan and Seoul for the transaction of normal
banking business;
"COMPANY FORECAST"
shall mean a six (6)
month forecast of anticipated
monthly volume of the
Product to be
supplied by the Company to the
Distributor in the Territory during the relevant Forecast Period,
which
forecast
the Company shall
provide the
Distributor
with pursuant to
Clause 3.1, based on the immediately preceding Distributor's Forecast
and the Company's available production volume.
"COMPANY FORECAST DATE" shall mean each of the following:
1 July and 1
January;
"CONFIDENTIAL
INFORMATION" means all
information
in relation to the
business of
the Company, the Distributor or any of their Group
Corporate Persons
which is not publicity
known and/or all information
from time to time designated by the Company or the Distributor as
being
confidential;
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"DISTRIBUTOR
FORECAST" shall
mean a six (6) month forecast of
anticipated
monthly volume
of orders for the Product that the
Distributor shall
place during the
relevant Forecast
Period, which
forecast the
Distributor provide
the Company with
pursuant to Clause
3.1.
"DISTRIBUTOR FORECAST
DATE" shall mean each of the following: 1 June
and 1 December;
"END PRODUCTS"
means any food or beverage product containing the
Product;
"END-USER" means an
entity or entities that develops or produces foods
and beverages using the Product.
"FORECAST" shall mean a Company Forecast or Distributor
Forecast.
"FORECAST PERIOD"
shall mean the period of six (6)
calendar months
commencing on the date
falling two calendar
months after the relevant
Distributor Forecast Date.
"GROUP CORPORATE
PERSON" means in relation to any Party its
holding
companies,
subsidiaries and subsidiary undertakings, and subsidiaries
and subsidiary undertakings of its parent companies;
"GUARANTEED QUANTITY"
shall mean fifty (50) percent of the volume of a
Company Forecast for a given Forecast Period, provided that the
Company
Forecast
does not exceed the immediately preceding Distributor
Forecast.
"PRODUCT" means
EuChol-S series, cholesterol reducing substances
deriving mainly from natural plant sterol;
"TERRITORY" means Taiwan;
"TRADE MARK" means EuChol-S, the trademark which is under
application
for registration in the Territory;
"WORKING HOURS"
means between [9:00 a.m.] and [5:30 p.m.] on any
Business Day; and
"YEAR" means
successive periods of
12 calendar months,
the first of
which shall
commence on and from the date upon which
this Agreement
shall be deemed to have commenced in accordance with the provisions of
Clause 9 and the second and subsequent of which shall
commence on the
first and subsequent anniversaries thereof respectively.
1.2 The text
of this Agreement
written in the English language is the
authentic text
and all disputes, differences, difficulties or
uncertainties in interpretation and/or construction shall be resolved
exclusively by reference to such English text.
1.3 In this
Agreement unless otherwise specified, reference to:
2
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(a) recitals,
clauses, paragraphs or schedules are to recitals,
clauses and paragraphs of and schedules to this Agreement. The
schedules form
part of the operative provisions of this
Agreement and references to this Agreement shall, unless the
context otherwise requires, include references to the recitals
and the schedules;
(b) "WRITING"
shall include
typewriting, printing,
lithography,
photography and other modes of representing words in a legible
form (other than writing on an electronic or visual display
screen) or other writing in non-transitory form; and
(c) words
denoting the singular
shall include the plural and vice
versa and words denoting any gender shall include all genders.
1.4 The index
to and the headings in
this Agreement
are for information
only and are to be ignored in construing the same.
2.
APPOINTMENT
2.1 Subject
to the terms of this Agreement the Company appoints the
Distributor to be its sole and exclusive distributor of the
Products in
the Territory
for the purpose of
making foods and
beverages and the
Distributor accepts such appointment on and subject to such
terms.
2.2 The
Distributor shall
import the Product for
incorporation into
food
and beverage products either by itself.
2.3 The
Distributor
shall only
distribute
the Product to
End-Users whom
have been mutually agreed in writing between the Parties.
3.
PURCHASE ORDERS & DELIVERY
3.1 On or
before each
Distributor Forecast
Date, the Distributor shall
provide the
Company with a Distributor Forecast for the relevant
Forecast Period,
provided
that the obligation to provide such
Distributor Forecast
begins from the second year following the date of
this Agreement.
On or before each
Company Forecast Date,
the Company
shall provide the Distributor with a Company Forecast for the
relevant
Forecast Period,
provided that the
obligation to provide such Company
Forecast begins
from the second year following the date of this
Agreement. Forecasts
are intended to follow the Company to plan
production and to determine the Distributor's entitlement.
3.2 The Distributor shall place orders on a monthly basis based on the
Distributor Forecasts.
When the Distributor doesn't have any order for
a certain month,
the Distributor shall inform the Company of such
notice in writing and the Company shall send written acceptance to the
Distributor upon receipt of such notice. All purchase orders placed by
the Distributor
shall be in writing
and shall specify the quantity of
the Product ordered
and the requested date for shipment and such other
information the Company may reasonably request for in order to
fulfill
the order. The first
purchase order shall be placed
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at least three (3) months prior to the requested date of shipment,
and
purchase orders
thereafter
shall be placed
at least two (2)
months
prior to the requested date of shipment. In case, until the end of the
first three (3) months of a Forecast Period, the Distributor fails to
order half of the relevant Guaranteed Quantity for the
Forecast Period
(i.e., twenty five
(25) percent of the volume of the Company Forecast
for the Forecast
Period), the Company may demand,
via, inter alia,
sending a demand letter to the Distributor, that the Distributor makes
best efforts,
such
as intensive and efficient promotions and
advertisements, to
meet the requirement
of ordering at least the
Guaranteed Quantity for the Forecast Period.
3.3 Such
purchase orders placed
by the Distributor
shall be subject to
a
written acceptance by the Company. The Company shall have the right
to
cancel any acceptance of orders or to refuse, suspend, or delay
shipment of any orders if the Distributor is in default of its
payment
obligations or
fails to comply with any obligation under this
Agreement. The
exercise of such right by the Company shall not
constitute a breach of this Agreement by the Company.
3.4 The
Company accepts the
Distributor's purchase
order; it shall send a
written acceptance
within ten (10) days from the date of
receipt of
this purchase
order. The Company shall use reasonable efforts to
promptly fill and
deliver all orders for the Product submitted by the
Distributor by the requested shipping date.
3.5 The
Distributor shall conduct any incoming acceptance test and uniform
the results to the Company within either twenty-eight (28) days from
the date when the
Distributor receives
the Product ordered at its
facilities in Taiwan,
or thirty-five (35)
days from the date when the
Products arrive in a port of the Territory, whichever is earlier. Any
product not
rejected by the Distributor in written format to the
Company within
such period of time of
incoming acceptance shall be
deemed accepted,
and the Company
shall not be liable
for any defects
whatsoever of the Products after such period elapses.
3.6 The
Company shall not be obliged to accept a request for delay once
the
Company has accepted a
purchase order.
If the Company allows for a
request for
delay, the Distributor shall pay for any storage,
insurance, or other
costs incurred due to
such delay. If the
Company
accepts a purchase order from the Distributor, the Distributor shall
make the payments in accordance with Clause 4.1 below.
If the Company
cannot comply with the Distributor's request for the promised
shipment
schedule, the Company
shall compensate the
Distributor for reasonable
losses directly and solely caused by such delay.
4.
PAYMENT AND PRICES
4.1 The
Distributor
shall make payments
for the Product to the Company in
US Dollar by means of an irrevocable and revolving letter of credit in
US Dollar.
Within
ten (10) days after receiving the Company's
acceptance of a
purchase order as
provided in Clause 3.3
above, the
Distributor shall open an irrevocable and revolving letter of
credit in
favor of the
Company in such form and with such prime bank as is
satisfactory to the Company.
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Such letter of credit shall contain terms covering, inter alia, the
total price and additional charges and/or expenses to be borne by the
Distributor.
4.2 The
Company shall ship the Product ordered by the Distributor
hereunder
F.O.B. Busan or Incheon by commercial surface transportation.
4.3 The prices
of the Products shall
be determined in accordance with the
price lists to be issued from time to time by the Company.
The Company
shall grant most favored status to the Distributor in terms of
pricing
of the Products.
The Company may change
the price of the Product with
not less six (6) months notice to the Distributor.
4.4 The price
of the Product agreed
between the Parties shall be exclusive
of value added tax, excise duty and similar imposts. However, this
does
not mean that the
Distributor is exempt
from value added tax,
excise
duty and similar posts.
4.5 If an
End-User in the Territory wishes to purchase the Product
directly
from the Company,
the Company
may sell the Product
to such End-User
only if the Distributor has referred the End-User to the Company.
If an
End-User in the
Territory imports the Product directly from the
Company, the Company
shall remit payment
difference or
commission to
the Distributor
within seven (7) days from the date when Company
receives payment.
5.
DUTIES OF THE DISTRIBUTOR
5.1 The
Distributor
shall order at the least the relevant Guaranteed
Quantity for a
Forecast Period until the last day of the Forecast
Period.
5.2 The
Distributor
shall at all
times use all reasonable efforts to
advertise, promote, market and sell the Products in the
Territory.
5.3 Before
planning or commencing
any major advertising or promotional
activity or the
Products in the Territory, the Distributor shall
furnish to the Company
a copy of such
promotional materials
for the
Company's review.
The Distributor agrees to accept any changes
recommended by the
Company, provided that
such changes are reasonable
based on regulatory
requirements
and/or preservation of good will
associated with the Company's Trade Mark.
5.4 The
Distributor shall
inform the Company in writing every month of the
status of its
business related with this Agreement and any other
information it
acquires that is likely to be a significant interest,
use, or benefit to the
Company, including
but not limited to
monthly
shipped volumes,
sales prices at which the Products were sold to
End-Users, and new or
continuing
relationships
with its customers
(including the details of all contracts entered into with its
customers
in connection
with the Product or
foods or beverages
containing the
Product).
5.5 The Distributor
shall insure that the Product is sold or resold in
good condition.
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5.6 The
Distributor
shall not present the Product in a way that is
inconsistent with the reality, by spreading unjustified and
exaggerated
opinions about
the Product's quality, content, applications,
effectiveness, granted
attestations, country
of origin, availability,
etc.
5.7 The
Distributor shall not make any settlement offers or accept claim
in
connection with
complaints regarding
the Product sold in any way that
is inconsistent with the terms of this Agreement.
5.8 The
Distributor shall not
directly or indirectly
import,
distribute,
sell, advertise, market or promote the distribution in the
Territory of
any product
for use in food or beverages that would compete or
interfere with the sale of the Products.
5.9 The
Distributor
shall not directly or
indirectly
(i) establish any
branch, warehouse or
distribution center outside the Territory for the
promotion,
distribution, or
sale of the Products, (ii) promote,
distribute, or sell the Products outside the Territory, (iii)
advertise
or solicit customers
outside the Territory
if the Distributor
knows,
suspects, or has
reason to know or suspect that the Products will be
resold in or to any area outside the Territory.
5.10 In the
event that the Distributor receives inquires from sources
outside the Territory,
the Distributor shall redirect or transfer such
inquiries to the Company.
5.11 The Distributor shall at all times have
under its control or in its
possession such stocks
of the Products as shall be sufficient in all
respects to meet reasonably anticipated demands of the
customers (both
actual and
anticipated)
for the Products in the Territory. The
Distributor shall be
responsible
for all government approvals and
authorizations for the
distribution
and sale of the
products in the
Territory.
5.12 The Distributor shall be responsible for complying with any and all
necessary or
proper laws, rules, regulations, decrees and other
applicable
governmental or
administrative
procedures
for the
distribution and sale of the Products in the Territory. The
Distributor
shall be responsible
for all government
approvals and
authorizations
for the distribution and sale of the Products in the Territory.
5.13 The Distributor shall make all reasonable efforts to develop
cholesterol reducing
foods and beverages
containing the Product which
food and beverages
should be suitable for the Taiwanese food and
beverage market.
5.14 The Distributor
shall maintain close marketing relationships with the
customers so
that their relevant needs and future plans are
ascertained.
5.15 The Distributor
shall diligently
respond to routine
service inquiries
from the customers
either by telephone,
fax, e-mail or in the
field,
including:
(a)
maintaining liaison with the customers; and
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(b) assisting
the customers in the implementation of the Company's
warranty for the Product.
5.16 The Distributor
shall promptly draw to the attention of the Company any
new or revised
legislation,
regulation or orders
related to the food
and beverage sector in the Territory when such legislation,
regulation
or orders comes to its attention.
5.17 Immediately
after entering into any significant contract with the
customers in
connection
with the Product or foods or beverages
containing the Product
(including,
but not limited to,
all contracts
with a potential
volume of one (1)
Metric Ton or more of the Product
for one (1) year), the
Distributor
shall inform the Company of the
terms and conditions of such contract.
5.18 The Distributor shall maintain and coordinate, at it own cost, such
technically competent
sales, commercial and service staff to render
satisfactory service
to the customers of the Product and/or foods and
beverages containing the Product.
5.19 In order to
protect the Company's rig
