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Exhibit 10.01
SETTLEMENT
AGREEMENT
This Settlement Agreement (the "Agreement"),
which is effective as of the date it is fully executed (the
"Effective Date"), is made and entered into by and between, on the
one hand, General Nutrition Corporation, a Pennsylvania corporation
with its principal place of business in Pittsburgh, Pennsylvania
(hereinafter referred to as "GNC" as further defined herein), and,
on the other hand, Nutrition 21, LLC, a New York limited liability
company having its principal place of business in Purchase, New
York (hereinafter referred to individually as "Nutrition 21, LLC"),
and Nutrition 21, Inc., a New York corporation having its principal
place of business in Purchase, New York (hereinafter referred to
individually as "Nutrition 21, Inc."). GNC, Nutrition 21, LLC and
Nutrition 21, Inc. are referred to hereinafter collectively as the
"Parties."
Background of Agreement
Nutrition 21, LLC and General Nutrition
Corporation are parties to a civil action captioned Nutrition 21,
LLC v. General Nutrition Corporation, Civil Action No. 6:05-cv-228,
which is pending in the United States District Court for the
Eastern District of Texas, Tyler Division (the
"Litigation").
The Parties wish to compromise and settle the
Litigation and other possible claims on the terms and conditions
stated herein.
The Parties enter into the Agreement in
consideration of the mutual covenants and promises set forth
herein.
Definitions
In addition to the terms defined elsewhere
herein, each of the following terms shall have the meaning set
forth below:
"Accused Products" means the products listed on
Attachment B hereto and GNC’s Diabetic Support product, a
copy of the label for which is attached as Attachment C
(hereinafter referred to as "Diabetic Support").
"Affiliate" means, with respect to each party,
any corporation or other legal entity that directly or indirectly
controls, is controlled by, or is under common control with, the
party, but only for so long as the control continues. For purposes
of this definition, "control" means the power, whether or not
normally exercised, to direct the management and affairs of another
corporation or other legal entity, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise. In the case of a corporation, the direct or indirect
ownership of fifty percent (50%) or more of its outstanding voting
shares shall in any case be deemed to confer control, provided that
the direct or indirect ownership of a lower percentage of such
securities shall not necessarily preclude the existence of
control.
"Chromium Picolinate" means chromium picolinate,
chromium tripicolinate and chromic picolinate.
"Franchisees" means the GNC franchised retail
stores of GNC.
"GNC" means General Nutrition Corporation and its
Affiliates.
"Licensed Entities" means any corporation,
company, partnership or other form of business entity that is
licensed by GNC to use the GNC trademark in connection with the
sale of nutritional supplements in a designated outlet or area of a
store or website, such as, for example, Rite Aid and
drugstore.com.
"Multi-ingredient Chromium Picolinate Products"
means a product containing chromium as Chromium Picolinate and at
least one other active ingredient.
"Nutrition 21" means Nutrition 21, LLC and
Nutrition 21, Inc., both individually and collectively.
"Nutrition 21’s Other Patents" means,
individually and collectively, (a) all United States patents other
than the Patents-in-Suit that are now assigned to or otherwise
owned, in whole or in part, by (or subject to a duty of assignment
or transfer of ownership in whole or in part to) Nutrition 21,
including, but not limited to, those patents listed on Attachment A
hereto, and all continuations, continuations-in-part, divisions,
reissues and reexamination certificates thereof, and (b) all United
States patents hereafter issued or assigned to or otherwise owned,
in whole or in part, by Nutrition 21 based on (i) currently pending
applications, including, but not limited to, those listed on
Attachment A or (ii) future applications claiming priority to any
of the patents described in subparagraph (a) hereof, and all
continuations, continuations-in-part, divisions, reissues and
reexamination certificates thereof.
"Patents-in-Suit" means, individually and
collectively, (a) United States Patent No. 5,087,623, United States
Patent No. 5,087,624 and United States Patent No. 5,175,156, and
all continuations, continuations-in-part, divisions, reissues and
reexamination certificates thereof, and (b) all United States
patents hereafter issued or assigned to or otherwise owned, in
whole or in part, by Nutrition 21 based on currently pending
applications or future applications claiming priority to any of
such patents, and all continuations, continuations-in-part,
divisions, reissues and reexamination certificates
thereof.
"Standalone" means a product in which chromium as
Chromium Picolinate is the only active ingredient.
Payment by GNC
Within three (3) business days of the delivery to
Gardere Wynne Sewell, LLP of a fully executed copy of the
Agreement, GNC will pay Nutrition 21, LLC the sum of Two Million
Six Hundred Thousand Dollars ($2,600,000.00) by wire
transfer.
Purchase of Chromax by GNC
In each of calendar years 2007 and 2008, GNC will
purchase from Nutrition 21 a minimum of Thirty Thousand (30,000)
bottles of Nutrition 21 brand Chromax® Standalone Chromium
Picolinate products at a price of $9.75 per bottle. Unless
otherwise agreed by the Parties, the bottles of these products will
contain capsules having any or all of the following amounts of
chromium as Chromium Picolinate and capsule counts: 200 mcg/90 ct;
400 mcg/75 ct; and, 500 mcg/60 ct. At a minimum, GNC will place
orders by January 31, 2007 for delivery of 15,000 bottles. GNC will
pay for at least one-half of its 2007 commitment by March 31, 2007
and pay the balance by September 30, 2007. GNC will pay for at
least one-half of its 2008 commitment by March 31, 2008 and pay the
balance by September 30, 2008.
The Parties will promptly discuss and agree on
GNC’s promotional activities to be undertaken in connection
with the sale or offer to sell of the Chromax® Standalone-alone
Chromium Picolinate products referred to in paragraph 4.1 Patent
Licenses, Covenant Not to Sue and Assignment
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A.
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Licenses for Products Not Made with
Nutrition 21 Chromium Picolinate
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Nutrition 21 grants to:
GNC, Franchisees and Licensed Entities, and their
respective retail customers, with respect to all GNC branded
Standalone and GNC branded Multi-ingredient Chromium Picolinate
Products in the possession of GNC, Franchisees, Licensed Entities
and their respective customers as of the Effective Date, a
perpetual, paid up, non-exclusive license, without the right to
grant sublicenses, under the Patents-in-Suit, and U. S. Patents No.
5,789,401 and No. 5,929,066 with respect to Diabetic Support, to
use the methods and processes covered, in whole or in part, by any
claim of the Patents-in-Suit with respect to all GNC branded
Standalone and GNC branded Multi-ingredient Chromium Picolinate
Products and U. S. Patents No. 5,789,401 and No. 5,929,066 with
respect to Diabetic Support; and,
GNC, Franchisees and Licensed Entities a
perpetual, paid up, non-exclusive license, without the right to
grant sublicenses, with respect to all GNC branded Standalone and
GNC branded Multi-ingredient Chromium Picolinate Products in the
possession of GNC, Franchisees and Licensed Entities as of the
Effective Date, under the Patents-in-Suit, and U. S. Patents No.
5,789,401 and No. 5,929,066 with respect to Diabetic Support, to
sell, offer for sale, advertise and promote in any manner,
including, but not limited to, books, brochures, advertisements,
websites, HealthNotes, signs, labels and shelf-toppers, and for any
uses or benefits claimed in the Patents-in-Suit with respect to all
GNC branded Standalone and GNC branded Multi-ingredient Chromium
Picolinate Products and U. S. Patents No. 5,789,401 and No.
5,929,066 with respect to Diabetic Support.
5.2 Anything
contained in paragraph 5.3 hereof notwithstanding, GNC shall have
the right to manufacture and sell through its existing inventory as
of the Effective Date of Chromium Picolinate and other raw
materials, packaging, labeling and other components associated with
GNC’s branded Chromium Picolinate containing products. The
licenses provided for in subparagraph 5.1 hereof shall apply with
respect to all products made pursuant to the foregoing sentence of
this subparagraph.
B.
5.3 Patent Licenses
for Products Made with Nutrition 21 Chromium Picolinate
GNC agrees to purchase from Nutrition 21, and
Nutrition 21 agrees to sell to GNC, at a price of [**confidential
material is omitted and is filed separately with the Securities and
Exchange Commission**] per kilogram, all of GNC’s
requirements for GNC branded Chromium Picolinate products
(including without limitation Standalone and Multi-ingredient
Chromium Picolinate Products) to be sold or offered for sale in the
United States through December 29, 2009.
With respect to Chromium Picolinate purchased by
GNC from Nutrition 21 pursuant to Section 5.3, Nutrition 21 grants
to:
GNC a perpetual, paid up, non-exclusive license,
without the right to grant sublicenses, under the Patents-in-Suit
to make and have made GNC branded Standalone or GNC branded
Multi-ingredient Chromium Picolinate Products and under U. S.
Patents No. 5,789,401 and No. 5,929,066 to make and have made
Diabetic Support;
GNC, Franchisees, Licensed Entities and their
respective customers a perpetual, paid up, non-exclusive license,
without the right to grant sublicenses, to use the methods and
processes covered, in whole or in part, by any claim of the
Patents-in-Suit with respect to GNC branded Standalone or GNC
branded Multi-ingredient Chromium Picolinate Products or by any
claim of U. S. Patents No. 5,789,401 and No. 5,929,066 with respect
to Diabetic Support; and,
GNC, Franchisees and Licensed Entities a
perpetual, paid up, non-exclusive license, without the right to
grant sublicenses, under the Patents-in-Suit with respect to GNC
branded Standalone or GNC branded Multi-ingredient Chromium
Picolinate Products, and under U. S. Patents No. 5,789,401 and No.
5,929,066 with respect to Diabetic Support, to sell, offer for
sale, advertise and promote such products in any manner, including,
but not limited to, books, brochures, advertisements, websites,
HealthNotes, signs, labels and shelf-toppers, and for any uses or
benefits claimed in the Patents-in-Suit with respect to GNC branded
Standalone or GNC branded Multi-ingredient Chromium Picolinate
Products and under U.S. Patents No. 5,789,401 and No. 5,929,066
with respect to Diabetic Support.
For the avoidance of doubt, the
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