EXHIBIT 10.6
DISTRIBUTION AGREEMENT
Eugene Science Inc.
and
Hokuyo Koeki Co., Ltd.
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CONTENTS
Clause:
1.
INTERPRETATION........................................................1
2.
APPOINTMENT...........................................................3
3.
PURCHASE ORDERS AND
DELIVERY..........................................4
4.
PAYMENT AND
PRICES....................................................5
5.
DUTIES OF THE
DISTRIBUTION............................................5
6.
DUTIES OF THE
COMPANY.................................................8
7.
TRADE
MARKS...........................................................9
8.
WARRANTIES AND
INDEMNITIES...........................................10
9.
DURATION.............................................................11
10.
TERMINATION..........................................................12
11. EFFECT OF
TERMINATION................................................12
12. NO
PARTNERSHIP.......................................................13
13.
ANNOUNCEMENT.........................................................13
14.
CONFIDENTIAL
INFORMATION.............................................13
15. ENTIRE
AGREEMENT.....................................................14
16.
WAIVER...............................................................15
17.
COSTS................................................................15
18.
INVALIDITY...........................................................15
19.
NOTICES..............................................................16
20.
COUNTERPARTS.........................................................17
21. GOVERNING
LAW AND JURISDICTION.......................................17
22. EXCLUSION
OF THIRD PARTY RIGHTS......................................17
23.
ASSIGNMENT...........................................................17
SCHEDULE
1....................................................................20
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THIS AGREEMENT (THE "AGREEMENT") is made on
May 21st, 2002.
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) HOKUYO
KOEKI CO.,
LTD., a corporation duly organized and validly
existing under the laws of Japan and having its registered address at
29th Fl., Yebisu Garden Place Tower. 4-20-3 Ebisu, Shibuya-Ku,
Tokyo 510-6029, Japan (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
Japan.
(B) WHEREAS
the Company and the
Distributor
entered into the Marketing
Agreement under which the Company granted the Distributor the
exclusive
rights to (i) develop
cholesterol reducing
beverages containing the
Product in Japan; (ii) find a suitable Japanese beverages
manufacturing
company or brand owner
capable of
successfully marketing
and selling
the beverages
containing
the Product in Japan; and (iii) be the
exclusive distributor of the Product in Japan for the purpose of
making
beverages only.
(C) WHEREAS
the Company
subsequently granted
the Distributor the right to
discuss with Meiji Seika Kaisha, Ltd., ("MEIJI SEIKA") a brand owner,
the development,
marketing and sale in Japan of foods and
beverages
containing the Product.
(D) WHEREAS
the Company, the
Distributor
and Meiji Seika
entered into a
Memorandum of
Understanding
on 30 October 2001
(the "MEMORANDUM
OF
UNDERSTANDING") concerning the development, marketing and sale of food
and beverages containing the Product in Japan.
(E) WHEREAS
the Company
and the Distributor now desire to enter into an
agreement consistent with the terms of the Memorandum of
Understanding.
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:
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"BUSINESS DAY"
means a day (excluding Saturdays) on which banks
generally are open in
Tokyo 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" means each of the following: 1 May and 1
November;
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 publicly
known and/or all
information
from time to time designated by the Company or the Distributor as
being
confidential.
"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 April
and 1 October;
"END PRODUCTS"
means any food or beverage product containing the
Product;
"END-USER" means an
entity or entities that develops or produces foods
or beverages
using the Product, including but not limited to the
Sub-Distributor.
"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.
"FOSHU" means
Foods for Specified Health Use as designated by the
Japanese Ministry of Health Labour and Welfare;
"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.
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"MARKETING AGREEMENT"
means the agreement dated 8th March 2001 between
the Company
and the Distributor; "PRODUCT" means EuCho-S series,
cholesterol reducing substances derived mainly from natural
plant
sterol;
"SUB-DISTRIBUTOR"
means the entity or
entities listed in
Schedule 1
hereto as amended from time to time by the mutual written
agreement of
the Parties;
"TERRITORY" means Japan;
"TRADE MARK" means EUCHOL-S, the trade mark 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:
(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
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making foods and beverages and the Distributor accepts such
appointment
on the subject to such terms.
2.2 The
Distributor shall
import the Product for
incorporation into
food
and beverage products either by itself or with or by
Sub-Distributors.
2.3 The
Distributor
shall only
distribute
the Product to
End-Users and
Sub-Distributors both
of whom have been
mutually agreed in writing
between the Parties. Only those Sub-Distributors listed in Schedule 1
hereto shall be regarded as "mutually agreed." Sub-Distributors may
only be added or removed from the list in Schedule 1 upon the written
agreement of the Parties.
3.
PURCHASE ORDERS & DELIVERY
3.1 On or
before each
Distributor Forecast
Day, the Distributor shall
provide
the Company with a Distributor Forecast for the relevant
Forecast Period.
On or before each
Company Forecast Date, the Company
shall provide the Distributor with a Company Forecast for the
relevant
Forecast Period.
Forecasts are intended to allow 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.
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 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
(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 make
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 obligations under this
Agreement. The
exercise of such right by the company shall not
constitute a breach of this Agreement by the Company.
3.4 If the
company accepts the Distributor's purchase order, it shall send
a written acceptance
within ten (100 days
from the date of receipt of
the 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 inform
the results to the Company within either fourteen (140 days from the
date when the Distributor receives
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the product ordered at its facilities in Japan, or twenty one (210
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 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.
4.
PAYMENT AND PRICES
4.1 The
Distributor
shall make payments
for the Product to the Company in
Japanese Yen by means of an irrevocable and revolving letter of credit
in Japanese Yen.
Within seven (7) 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 a prime bank as is
satisfactory to the Company. 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,
and shall be opened such
letter of credit on a yearly basis 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 than 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 imposts.
5.
DUTIES OF THE DISTRIBUTOR
5.1 The
Distributor shall order at 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 for 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
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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
Sub-Distributors and
End-Users,
and new or continuing
relationships
with its customers
and/or
Sub-Distributors
(including the details of
all contracts entered
into with its customers and/or Sub-Distributors
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.
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 claims
in connection with complaints regarding the Product sold in a
way that
is inconsistent with the terms of this Agreement.
5.8 The
Distributor shall not
make any settlement
offers or accept claims
in connection with complaints regarding the Product sold in a
way that
is inconsistent with the terms of this Agreement.
5.9 The
Distributor
shall not directly or
indirectly
(i) establish any
branch, warehouse or
distribution center outside the Territory for the
promotions,
distribution, or
sale of the Products, (ii) promote,
distribute, or sell the Products outside the Territory, (iii)
advertise
or solicit customers
outside the Territory,
or (iv) sell or otherwise
dispose of the Products within the Territory if the Distributor
knows,
suspects, or has a
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 inquiries 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
Sub-Distributors
and/or customers (both
actual and anticipated) for the Products in the
Territory. The
Distributor
shall store such stock in its proper
warehouse and all
deliveries shall be
dealt with through such storage
facility.
5.12 The Distributor shall be responsible for complying with any and all
necessary or
proper laws, rules, regulations, decrees and other
applicable government or administrative procedures for the
distribution
and sale of the
