EXHIBIT 10.4
STRATEGIC ALLIANCE AGREEMENT
THIS AGREEMENT is made as of the 8th day of April, 2004 (the
"Effective
Date"), by and between ARCHER-DANIELS-MIDLAND
COMPANY, a Delaware
corporation
("ADM"), and EUGENE SCIENCE INC., a Korean
corporation ("EUGENE").
WITNESSETH
WHEREAS, ADM is
engaged in the
business of procuring
and processing
fatty acid distillate ("Distillate") into, among other things, products
containing sterols and steryl esters using
multiple technologies,
and marketing
those products worldwide; and
WHEREAS, EUGENE is
engaged in the business of producing and marketing
products containing sterols and steryl esters utilizing EUGENE proprietary
technology (the "EUGENE Products"); and
WHEREAS, the
parties desire to enter into a strategic alliance
involving the procurement of Distillate,
the procurement and sale of sterols and
the sale and distribution of EUGENE Products, all pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE,
in consideration of the premises and the mutual
covenants contained herein, it is agreed as
follows:
1.
Term
(a) The term
of this Agreement commence on the Effective Date, and
shall continue for an initial term of five
(5) years from the date ADM commences
offering one or more EUGENE Products for commercial sale unless earlier
terminated as hereinafter provided. After
the initial term, this Agreement shall
be automatically renewed for successive one (1) year periods
unless and until
terminated as hereinafter provided.
The initial term and
each of the successive
renewal terms, if any, are hereinafter
referred to as the "Term".
(b)
Notwithstanding
anything to the
contrary, either
party may
terminate this Agreement, without liability, at the end of the initial term
or
any renewal term by providing the other party with at least
ninety (90) days
advance written notice prior to the end of
such term.
(c) Upon the
happening of any one or more of the following events,
in addition to all other rights and
remedies available to it, either party shall
have the right to cancel and terminate
this Agreement immediately by written
notice to the other party:
(i) The
failure of the other
party to perform or
comply
with any one or more of any of the terms or
conditions of this
Agreement and the failure to cure
such failure within
thirty (30) days from
receiving
written notice of such failure;
(ii)
The insolvency of the other party; or the assignment
by the other parry for the benefit of creditors; or
the filing of a voluntary or involuntary bankruptcy,
judicial liquidation,
or reorganization
petition by
or against the other party; or the appointment of a
receiver, liquidator or judicial administrator, or a
trustee for either party, of any part or interest of
its business;
or the failure of either party to
vacate, set
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aside or have
dismissed any
insolvency
proceeding
under any law governing, or in effect for, the
Territory, within
sixty (60) days from the date of
the
commencement
of any such proceeding; or the
dissolution of the
entity of the other party for any
cause whatsoever;
or the suspension of check/note
clearance privilege;
(iii) The
failure to commence the sales of EUGENE Products
to any customers
in the Territory within one year
after obtaining final
regulatory approval to
market
the EUGENE Products.
2.
RIGHTS AND OBLIGATIONS UPON TERMINATION
(a) Neither
party
shall
be liable for compensation or
consequential damages of any kind, whether on
account of the loss of present or
prospective profits, or anticipated sales, expenditures, investments, or
commitments made in connection with-this
Agreement.
(b) The
parties
shall
abide by and uphold any rights or
obligations accrued or existing on the date
of such termination.
(c) For a
period of six (6) months after the expiration or earlier
termination of this Agreement, ADM shall have the right to sell
its inventories
of EUGENE Products through its regular channels of distribution and upon
terms
consistent with those offered before
expiration or termination.
3.
PROCUREMENT OF DISTILLATE Subject to the terms and
conditions
set forth in this Agreement, ADM shall and hereby does
appoint EUGENE as its
exclusive agent to purchase Distillate from
vegetable oil refining in. Korea. As
needed in ADM's discretion. ADM shall inform EUGENE of the price,
specifications, terms and conditions upon which ADM is willing to purchase
Distillate. EUGENE shall use commercially
reasonable
efforts and diligence
to
purchase Distillate at or below the price
requested by ADM, conforming with the
specifications, terms and conditions requested by ADM. To the extent
EUGENE is
able to source such Distillate, EUGENE shall procure such Distillate for
EUGENE's account. EUGENE shall then sell such
Distillate
to ADM at the
price
requested by ADM, conforming with the specifications, terms and conditions
requested by ADM. To the extent
EUGENE is able to
procure the Distillate
at a
price lower than requested by ADM, EUGENE shall retain such margin for its
account. In addition, the parties may mutually agree
upon a commission payable
from ADM. to EUGENE for procuring
Distillate
pursuant to this
section ADM will
remit payment to EUGENE by wire
transfer of
irrevocable
funds within one
(1)
business day of receiving the faxed
documents outlined in
ADM's request,
which
will include, but is not necessarily
limited to, bill of lading, invoice, kosher
certificate and wash certificates. ADM shall reserve for EUGENE the
equivalent-quantity of sterols (finished product basis) in the
Distillate that
EUGENE procured for ADM for sale to EUGENE
pursuant to Section 4 below.
4.
STEROL SUPPLY For
EUGENE Products
sold in North America
and
Europe, EUGENE shall purchase all of its
requirements for sterols from ADM, The
contract with respect to any such sale
shall consist of this
Agreement,
plus
EUGENE'S purchase order, and ADM'S sales
confirmation and/or
invoice; however,
any provisions in EUGENE'S
purchase order or
ADM'S sales
confirmation
and/or
invoice that are inconsistent with the provisions of this
Agreement shall be of
no force or effect. The terms and conditions shall include those set forth
below:
(a) PRICE The
price for sterols sold hereunder shall be ADM's
weighted average resale price of sterols and sterol
steryl esters (on a pure
sterol basis deducting processing costs of intersterification) for food
applications and pharmaceutical
applications (the "ADM's Weighted Average Sterol
Price"). The price shall be set at the commencement of the Term using ADM's
Weighted Average
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Sterol Price for the immediately preceding six-month period, and shall be
adjusted each six months based upon ADM's
Weighted Average
Sterol Price for the
immediately preceding six month period.
(b)
LIMITATIONS The
sterols sold hereunder are for EUGENE's
internal use for the production of EUGENE
Products, and are not
for resale. To
the extent EUGENE requires sterols for
resale to third parties in Korea, Eugene
would purchase all of its requirements from ADM upon the terms and
conditions
set forth herein, except for the price,
which is to be mutually agreed.
(c) RELEASE To
the extent EUGENE
requires quantities of sterols
hereunder in excess of the amounts
reserved for EUGENE pursuant to Section 3
above, and ADM is unable to supply such
quantities,
EUGENE may purchase
such
sterols from a third party.
(d) DELIVERY
The product shall be sold CIF Busan. All
interpretation of the delivery terms shall be in
accordance with the Incoterms,
latest edition.
(e) PAYMENT
ADM shall invoice
EUGENE for sterols
purchased, and
EUGENE shall make payment within 45 days of
shipment.
(f) ORDERS
EUGENE shall place all orders in writing for sterols at
least 30 days prior to the date of
shipment. Orders shall set out the
quantity
of product desired, any special instructions and the requested date product
should be available. EUGENE shall order sterols in
approximately equal
amounts
each month during the Term.
(g) WEIGHTS
ADM's weights shall govern settlement; provided,
however, if any substantial discrepancy with EUGENE's weights exists, the
parties shall attempt in good faith to
resolve the same.
(h) WARRANTIES;
INDEMNIFICATION
ADM warrants that the sterols
shall conform to the specifications set forth in Schedule A, attached
hereto.
EXCEPT AS SET FORTH IN THIS PARAGRAPH, SELLER MAKES NO WARRANTIES, WHETHER
EXPRESS OR IMPLIED. THE IMPLIED WARRANTIES
OF MERCHANTABILITY,
IMPLIED WARRANTY
OF FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT ARE
HEREBY DISCLAIMED.
IN NO EVENT WHATSOEVER SHALL EITHER PARTY
SHALL BE LIABLE FOR ANY CONSEQUENTIAL,
SPECIAL OR INCIDENTAL DAMAGES UNDER ANY TORT, CONTRACT, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY, EVEN IF SAID PARTY HAS BEEN
ADVISED OF THE
POSSIBILITY OF OR COULD HAVE FORESEEN SUCH
DAMAGES.
5.
DISTRIBUTION OF
EUGENE PRODUCTS Subject to the terms and
conditions set forth in this Agreement,
EUGENE shall and hereby does appoint ADM
as the exclusive distributor of the EUGENE Products for shipment and sale
to
customers in North America and Europe (the
"Territory").
ADM shall and
hereby
does accept such appointment. The terms of
such appointment are as follows:
(a)
PRE-COMMERCIALIZATION
ADM shall use
commercially
reasonable
efforts and diligence to proceed with the regulatory approval, promotion,
marketing and sale of the EUGENE
Products in the Territory. As part of such
efforts, ADM shall pursue regulatory approval and conduct a review of
intellectual property rights in the Territory. These expenses ADM incurs and
other expenses ADM incurs related to preparing for the
commercial
sale of the
EUGENE Products in the Territory,
and that are
pre-approved
by EUGENE,
such
approval not to be unreasonably withheld, shall be defined as
"Pre-Commercialization Expenses." As further set forth below, EUGENE shall
reimburse ADM for one-half of the
Pre-Commercialization
Expenses. In the event,
ADM has not been reimbursed for one-half of
the Pre-
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Commercialization Expense pursuant to the method set forth
below, then EUGENE
shall promptly remit such unpaid amounts,
including accrued interest, to ADM
unless the parties mutually agree to extend
the period of repayment.
(b) PURCHASE
OF PRODUCTS
From time to time
during the Term,
ADM
may place purchase orders with EUGENE for the
purchase of the EUGENE
Products,
and to the extent EUGENE has EUGENE
Products available or capacity to
produce.
EUGENE Products available, EUGENE shall accept such purchase
orders. EUGENE
shall produce the EUGENE Products at its production facility in Korea. The
contract with respect to any such sale
shall consist of this
Agreement,
plus
ADM'S purchase order, and EUGENE'S sales
confirmation and/or
invoice; however,
any provisions in ADM'S purchase
order or EUGENE'S
sales confirmation and/or
invoice that are inconsistent with the provisions of this
Agreement shall be of
no force or effect. The terms and conditions of such purchase and sale shall
include those set forth below:
(i) Price The
price for EUGENE
Products sold
hereunder
shall be (y) 115% of
EUGENE's cost of manufacture
calculated in
accordance
with Generally Accepted
Accounting Principles,
as have been consistently
applied by EUGENE (the
'Transfer Price"),
plus (z)
50% of ADM's net
margin from the resale of EUGENE
Products less an amount described below for EUGENE's
one-half share of the Pre-Commercialization Expenses
(the "Bonus Price").
For purposes of this paragraph,
EUGENE's cost
of manufacture shall only include
actual costs
incurred by EUGENE for
raw materials,
labor, depreciation of production facility, utilities
and overhead
necessary for the production. For
purposes of this paragraph, ADM's net margin shall be
calculated by subtracting from ADM's gross margin any
expenses, including rebates, returns, commissions and
license fees payable
to any third parties,
but not
including any
Pre-Commercialization
Expenses. For
purposes of this paragraph, ADM's gross margin shall
equal the sales
received from
ADM's sale of
EUGENE
Products less the Transfer Price, less freight, taxes
and duties. The amount
to be deducted for
EUGENE'S
one-half share of the Pre-Commercialization Expenses
shall be calculated
by amortizing-one-half of the
Pre-Commercialization Expenses over a period of three
(3) years, accruing interest per annum at an interest
rate equal to the Prime Rate, as published in THE
WALL STREET
JOURNAL, plus 3%, such rate to be
adjusted semi-annually.
(ii)
DELIVERY The
product shall be sold CIF US port or
European port
to be mutually agreed. All
interpretation of the
delivery terms shall be in
accordance with the Incoterms, latest edition.
(iii)
PAYMENT EUGENE
shall invoice ADM for the EUGENE
Products purchased, and ADM shall make payment within
45 days of shipment.
(iv)
ORDERS ADM shall
place all orders in writing for
sterols at
least 60 days prior to the date of
shipment. Orders
shall set out the quantity of
product desired,
any special
instructions
and the
requested date product should be available.
(v) WEIGHTS
EUGENE'S weights shall govern settlement;
provided, however,
if any substantial discrepancy
with ADM's weights exists, the parties shall attempt
in good faith to resolve the same.
(vi)
WARRANTIES;
INDEMNIFICATION EUGENE warrants that the
EUGENE Products shall
conform to the
specifications
set forth in Schedule B, attached hereto. EXCEPT AS
SET FORTH IN THIS PARAGRAPH, SELLER MAKES NO
WARRANTIES, WHETHER
EXPRESS OR IMPLIED.
THE IMPLIED
WARRANTIES OF
MERCHANTABILITY
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IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
AND NON-INFRINGEMENT
ARE HEREBY
DISCLAIMED.
IN NO
EVENT WHATSOEVER
SHALL EITHER PARTY
SHALL BE LIABLE
FOR ANY CONSEQUENTIAL,
SPECIAL OR
INCIDENTALDAMAGES
UNDER ANY TORT,
CONTRACT, STRICT
LIABILITY OR OTHER
LEGAL OR EQUITABLE
THEORY, EVEN IF SAID PARTY HAS
BEEN ADVISED
OF THE POSSIBILITY OF OR COULD HAVE
FORESEEN SUCH DAMAGES.
(c) TRADEMARKS
ADM may, but shall have no obligation, to, use the
tradenames, trademarks or get-up of EUGENE in
connection
with the sale of
the
EUGENE Products.
6.
LICENSE TO EUGENE
TECHNOLOGY In the event EUGENE is unable to
supply the volume of EUGENE Products required by ADM for distribution in the
Territory from its facility in Korea, upon request by ADM. EUGENE shall be
deemed to have granted to ADM a license on the
terms and conditions
set forth
below:
(a) LICENSE
GRANT For the Term, and subject to the terms and
conditions hereof, EUGENE hereby grants to ADM (i) a
sole and exclusive
right
and license, with the right to assign and
sublicense, to the
EUGENE Technology
and Licensed Patents to manufacture,
have manufactured on its behalf,
import,
use, sell and offer to sell EUGENE
Products in the
Territory. EUGENE
shall not
grant other licenses under the EUGENE
Technology or the
Licensed Patents in the
Territory. Further, EUGENE does not retain any rights under the EUGENE
Technology and the Licensed Patents to manufacture, have manufactured, use,
sell, offer for sale or import Eugene
Products in the Territory.
(b) TECHNOLOgY
TRANSFER EUGENE shall furnish to ADM copies of
EUGENE'S plans, drawings, schematics, manuals and other
drawings related to the
manufacture of EUGENE Products utilizing the EUGENE Technology and Licensed
Patents. EUGENE shall further provide support and assistance to ADM as
may be
reasonably requested to transfer the EUGENE
Technology
to ADM for purposes
of
the license granted above.
(c) RUNNING
ROYALTIES In
consideration of the rights and licenses
granted to ADM by EUGENE under the License, ADM shall pay EUGENE a running
royalty ("Running Royalty") in United States dollars
for each calendar quarter
equal to a percentage of Net Sales
between 8% and 12%,
the exact percentage
to
be based upon the net sales price in a manner to be mutually agreed by the
parties. Running Royalties shall be paid by
ADM to EUGENE within forty-five (45)
days after the close of the calendar
quarter.
(d)
ENFORCEMENT ADM if it
so desires,
shall have the right to
institute and prosecute any infringement action for the infringement of the
EUGENE Technology and/or Licensed Patents against
any third party at ADM's own
expense. In such event, and, in the event
that such suit results in a favorable
determination for ADM, ADM shall be
entitled to keep any and all monies received
from such third party infringer for
infringement of the EUGENE Technology and/or
Licensed Patents regardless of whether such monies are obtained by way of
judgment or by way of settlement. In any such infringement action brought by
ADM, EUGENE shall at ADM's request and subject to reimbursement by ADM for
EUGENE's reasonable out-of-pocket expense and
management costs,
cooperate with
ADM in all respec
