SHAREHOLDERS' AGREEMENT
1. PARTIES
This agreement is entered into by
1.1 Swedish Match AB, 111885 Stockholm, Sweden, reg. No. 556015-0756
("SM") and
1.2 Gum Tech International, Inc., a Utah corporation, 246 East Watkins
Street, Phoenix, AZ 85004, USA ("GT")
2. PURPOSE
The parties have agreed to cooperate for the purpose of developing,
manufacturing, marketing and distributing non-tobacco nicotine products
(the "Joint Venture Purpose").
3. NEW COMPANY
3.1 SM has caused to be incorporated a private limited company named Speed
8323 Limited with corporate registration number 4006562, to be named
by the parties (the "Venture Company"). The Venture Company is
incorporated under the laws of England with its Memorandum of
Association and Articles of Association substantially in the form
attached hereto as EXHIBIT 1.
3.2 The purpose of the Venture Company shall be to engage directly or
indirectly in business covered by the Joint Venture Purpose.
4. MANAGEMENT
4.1 BOARD OF DIRECTORS
4.1.1 The board of directors of the Venture Company (the "Board of
Directors") shall be responsible for resolving significant
corporate matters. It shall meet at lest quarterly.
4.1.2 The Board of Directors will have four members. Two members shall
be designated by SM, of which one will act as chairman. Two
members shall be designated by GT. Costs attributable to the
work of the Board of Directors shall be borne by the parties,
save as otherwise provided. each party shall bear the costs of
the Directors appointed by such party.
4.1.3 A quorum of the Board of Directors shall be constituted when at
least half of the members and at least one member designated by
each of SM and GT are present.
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4.1.4 The Board shall be responsible for the overall management of the
Venture Company and the determination of all matters of policy.
4.1.5 Except as provided in CLAUSE 4.1.6 below, the Board of Directors
shall adopt resolutions by simple majority. In case of a
deadlock, the chairman shall have the deciding vote.
4.1.6 Resolutions of the Board of Directors regarding the following
events ("Supermajority Events") must be supported by a majority
vote, which must include at least one member designated by each
of SM and GT.
(a) Issuance of new equity by the Venture Company;
(b) Sale of all or substantially all of the assets of the
Venture Company;
(c) Dissolution or liquidation of the Venture Company;
(d) Engaging in activities not covered by the Joint Venture
Purpose;
(e) Admission of a third party to the Venture Company;
(f) Merger of the Venture Company with or into another company;
(g) Sale of a controlling interest in the Venture Company; or
(h) Any event that would change the powers of the Board of
Directors as provided in this CLAUSE 4.1.
4.2 EXECUTIVE MANAGEMENT
4.2.1 The parties undertake to ensure that the Venture Company will
have dedicated executive management. The registered office of the
Venture Company will be located at the premises of SM at High
Wycombe, England until the Board of Directors decides otherwise.
4.2.2 The chief executive officer reports to the Board of Directors.
The parties have agreed that Johan Wallin will initially serve as
CEO. The duty of the CEO shall include day to day management and
decisions specifically delegated to him by the Board of
Directors.
4.2.3 Without authorization of the Board of Directors, the executive
management may not:
(a) Sell, transfer or assign all or substantially all of the
property or assets of the Venture Company;
(b) Make any loans or advances;
(c) Borrow any sums of money;
(d) Assume or guarantee the payment of any debt or other
obligation of any person, firm or business entity;
(e) Make any unbudgeted capital expenditure;
(f) Make any unbudgeted commitment for funds;
(g) Make any recommendation to the shareholders with respect to
distributions of capital or profits;
(h) Consolidate with or merge into any other corporation or
business entity;
(i) Issue any new equity in the Venture Company;
(j) Acquire shares or other securities or real property from any
third party;
(k) Take any action on behalf of the Venture Company outside the
Joint Venture Purpose;
(l) Adopt annual budgets or similar plans; and
(m) Make any other decision or take any other action similar to
the above.
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4.3 KEY PERSONNEL
4.3.1 GT undertakes to make the services of Gary Kehoe available to
the Venture Company on a part time basis throughout the existence
of the joint venture if possible and in no event less than five
years. Gary Kehoe shall devote sufficient working hours on an as
needed basis to the Venture Company, for which GT shall receive a
monthly compensation from the Venture Company of $6000 as long as
Gary Kehoe is employed by GT and $8000 if he is no longer
employed by GT. This compensation shall cover all work to be
carried out by Gary Kehoe, including without limitation work with
R&D and governmental approvals and in the Board of Directors.
4.3.2 Except in the case of Gary Kehoe's death or disability, if GT
fails to fulfil its undertakings under CLAUSE 4.3.1 it shall
constitute a material breach of this agreement.
5. CAPITAL AND OWNERSHIP
5.1 SHARE CAPITAL
5.1.1 The share capital of the Venture Company shall be GBP 2 thousand
and shall consist of 2,000 shares, each having a par value of GBP
1 and one vote. All shares shall rank equally in respect of
dividends, liquidation distributions and in every other respect.
5.1.2 If the parties decide to increase the share capital of the
Venture Company they shall subscribe in proportion to their
respective share-holdings. If a party fails to subscribe to any
new shares within 30 banking days of the issuance decision, the
other party may elect to subscribe to such shares in addition to
its own portion of the new shares. Such subscription by the other
party shall be made within 60 days of the issuance decision.
5.2 SM'S CONTRIBUTION
5.2.1 SM shall arrange for the contribution of the equivalent of GBP
1,020 in cash in exchange for 1,020 shares. This amount shall be
funded at the closing of the formation of the Venture Company
(the "Closing").
5.2.2 SM commits to arrange for additional cash contributions of up to
a total of USD 10 million. This contribution shall be made as
needed at the direction of the Board of Directors and is subject
to this Agreement remaining in full force and effect between the
original parties on the agreed payment date. If, in the Board of
Directors, the issue of requesting additional contribution as
provided for in this Section is raised, a resolution by the Board
of Directors not to request additional contribution must be
supported by Directors representing both parties.
5.2.3 SM shall receive a debenture with a liquidation preference in
the amount of its additional contribution committed under CLAUSE
5.2.2. This debenture shall not carry interest and shall be
payable only on liquidation of the Venture Company. The debenture
shall rank senior to any other similar instrument and the share
capital on any liquidation.
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5.3 GT'S CONTRIBUTION
GT shall in exchange for 980 shares, contribute research and
development services (as set forth in Section 6.4.2 below); expertise
and services regarding the manufacturing of nicotine gum (as set forth
in Section 6.4.1); consulting services of Gary Kehoe (as set forth in
Section 4.3.1 above); an agreement not to compete in the area of
non-tobacco nicotine products (as set forth in Section 7 below); all
Intellectual Property (as defined below) owned or controlled by Gary
Kehoe, GT or any of its affiliates; be responsible for securing U.S.
governmental approvals for the manufacture of the nicotine gum and
assist the Venture Company to the best of its ability in getting
approvals in the U.S. and in the rest of the world.
5.4 REINVESTMENT OF PROFITS
During the Restricted Period (as defined in Section 9.1 below) and for
two years thereafter, all profits of the Venture Company shall be
reinvested in the business of the Venture Company. After the
expiration of this period, 50 percent of the realized profits shall be
distributed to the shareholders unless the parties otherwise agree.
6. CONDUCT OF THE BUSINESS
6.1 INTELLECTUAL PROPERTY
6.1.1 All intellectual property owned or controlled by Gary Kehoe, GT,
SM or any of their affiliates on the date hereof, relating to all
non-tobacco nicotine products (except chewing gum products
containing leaf tobacco) and the development, manufacture and/or
governmental approval thereof, shall be transferred to and shall
vest in the Venture Company (the "Intellectual Property"),
subject to restrictions valid under applicable law or assumed by
contract before 1 January 2000.
6.1.2 The Intellectual Property includes without limitation patents,
trademarks, copyrights, designs, trade secrets and other
know-how, such as formulations and technology, relating to all
non-tobacco nicotine products which have been or are being
developed at the time of the Closing. The Intellectual Property
includes but is not limited to the property listed in EXHIBIT 2.
6.1.3 Upon dissolution of the Venture Company, all Intellectual
Property shall be transferred back to the company or person who
owned it prior to the Closing.
6.1.4 All intellectual property relating to products developed under
the R&D Agreement (as defined below), including without
limitation patents, trademarks, copyrights, designs, trade
secrets and other know-how, such as formulations and technology,
as well as other intellectual property developed by or for the
Venture Company, shall be the property of the Venture Company.
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6.2 MARKETING
6.2.1 The Venture Company shall have its own organization for
marketing and distribution of its products. SM undertakes to
supply or assist in the supply of marketing and distribution
personnel.
6.2.2 The Venture Company shall directly or indirectly market and
distribute its products wherever commercially and legally
feasible in the entire world.
6.2.3 Notwithstanding any provisions on restrictions of competition
herein, the Venture Company shall be entitled to enter into
distribution or agency agreements with SM and/or GT, provided the
terms and conditions of such agreements are no more favorable to
SM or GT than the terms and conditions of similar agreements with
third parties.
6.3 AGREEMENTS BETWEEN SM AND THE VENTURE COMPANY
6.3.1 The Venture Company shall have the option to enter into services
agreements with SM and/or its other subsidiaries regarding the
provision of the ancillary services below, provided the terms and
conditions of such agreements are no more favorable to SM than
the terms and conditions of similar agreements with third
parties. The conditions of such services agreement shall be
agreed separately. The Venture Company shall have the right to
terminate any such service agreement by giving six months notice
in writing.
6.3.2 The services to be provided may include:
(a) Finance administration, such as invoicing, payment of
invoices and payroll administration;
(b) Postal services;
(c) IT services, such as telephones, faxes, copiers, computers,
computer networks and Internet site;
(d) Rent of premises; and
(e) Other services agreed between the parties.
6.3.3 The Venture Company shall be entitled to purchase services from
other providers.
6.4 AGREEMENTS BETWEEN GT AND THE VENTURE COMPANY
6.4.1 GT or the relevant of its subsidiaries shall manufacture the
relevant nicotine products pursuant to a contract manufacturing
agreement, the "Manufacturing Agreement", substantially in the
form attached as EXHIBIT 3 TO THIS AGREEMENT.
6.4.2 GT or the relevant of its subsidiaries or other affiliates shall
continue to develop new nicotine containing products pursuant to
a research and development agreement, the "R&D Agreement",
substantially in the form attached as EXHIBIT 4 TO THIS
AGREEMENT.
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7. COMPETITION
Except as provided in this Agreement, the parties and their affiliates will
be prohibited from directly or indirectly engaging in any business covered
by the Joint Venture Purpose unless the parties agree otherwise.
8. TERMS AND CONDITIONS
8.1 This Agreement shall become effective immediately after having been
duly executed by the parties and shall remain in force for as long as
at least two parties still hold shares in the Venture Company. If all
shares in the Venture Company are acquired by one party, this
Agreement shall terminate. This Agreement shall also terminate upon
the completion of liquidation of the Venture Company, including the
distribution of all its assets.
8.2 SM and GT agree to remain in the joint venture for a period of ten
years from the effective date hereof, subject to the provisions of
this Agreement.
8.3 Each party shall have the right to terminate this Agreement with
immediate effect and cause the Venture Company to enter into
liquidation as provided for in CLAUSE 9.5 by written notice to the
other party within 90 days of the occurrence of one of the following
events:
(a) the Venture Company shall have failed to obtain required product
licenses for the launch of its first product in at least one
industrialized market having an aggregate population of ten (10)
million or more within eighteen (18) months of the effective date
of this Agreement; or
(b) in respect of its first product, the Venture Company shall have
failed to achieve a share of three (3) percent of at least one
geographical market for the calendar quarter ending as near as
possible to 18 months after the date of launch. For the purposes
hereof "market" shall mean the market for chewing gum containing
purified nicotine irrespective of the positioning, price,
packaging and sales channels of such products.
9. TRANSFER OF SHARES; LIQUIDATION
9.1 RESTRICTED PERIOD
During the first three years following the effective date of this
Agreement (the "Restricted Period") the parties undertake not to sell,
assign, transfer or otherwise dispose, whether directly or indirectly,
of any of their shares in the Venture Company.
9.2 TRANSFERS DURING RESTRICTED PERIOD
9.2.1 Notwithstanding CLAUSE 9.1, SM may immediately elect in writing
to purchase GT's shares in the Venture Company if an Acceleration
Event (as defined below) occurs. At the occurrence of an
Acceleration Event, GT shall notify SM thereof. SM's right to
purchase GT's shares shall be exercised within 30 days of the
receipt of notice of an Acceleration Event or within 60 days of
the occurrence of the Acceleration Event, which ever occurs
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later. The price to be paid for GT's shares shall be their fair
market value at the time of the relevant Acceleration Event.
9.2.2 An Acceleration Event shall be deemed to have occurred
(a) if Gary Kehoe's services cease to be available to the
Venture Company during the Restricted Period on the
conditions set out in CLAUSE 4.3.1 above;
(b) upon a change of control of GT without the prior written
consent of SM (such consent not to be unreasonably
withheld). The control of GT shall be deemed to have changed
if an entity or person or a group of related entities or
persons, whether directly or indirectly, acquires de facto
control so as to secure that material decisions of GT are
not taken without the consent of the acquirer(s). without
limitation of the foregoing, the holding of shares in GT,
which in the aggregate carries with it more than 50 percent
of the total voting rights in the share capital of GT, shall
be deemed conclusively to give the holder control of GT for
purposes of this Clause.
9.2.3 The right of SM pursuant to Clauses 9.2.1 and 9.2.2 above shall
be in addition to such other remedies as may be available to SM.
9.2.4 Notwithstanding the restrictions in CLAUSE 9.1, either party
(the "Terminating Party") may immediately elect to purchase the
other party's shares (the "Defaulting Party") in the Venture
Company if any of the events below ("Terminating Events") occurs.
The Terminating Party's right to purchase the Defaulting Party's
shares shall be exercised within 30 days of the receipt of notice
of a Terminating Event or within 60 days of the occurrence of the
Terminating Event, whichever occurs later. The price to be paid
for the Defaulting Party's shares shall be their fair market
value at the date of the relevant Terminating Event.
(a) The Defaulting Party becomes insolvent, enters into
liquidation, makes arrangements with its creditors or if
preparations are being made for its winding up.
(b) The Defaulting Party fails to remedy a material breach
within 30 days after written notice is given to the
Defaulting Party by the Terminating Party, provided that the
notice specifies the particulars of the breach.
9.2.5 At the occurrence of a material breach, the Terminating Party
may, in addition to all other available remedies, be entitled to
damages.
9.3 TRANSFER TO THIRD PARTIES
9.3.1 After the Restricted Period, if a shareholder is prepared to
sell any of its shares in the Venture Company and receives a bona
fide purchase offer from a third party, the seller shall offer to
sell such shares to the other shareholder (the "Offer") on the
terms and conditions of the bona fide offer or, if not a cash
offer, its nearest equivalent in cash. If an offer from a third
party does not contain all necessary terms and conditions of the
proposed purchase, in particular price and payment conditions, it
shall not be considered as a bona fide offer for the purposes of
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this Clause and no transfer of such shares shall be permitted to
a third party based on such offer.
9.3.2 The Offer shall be in writing and shall contain a copy of the
bona fide offer, together with all of its terms and conditions
and reasonable proof that the third party is able to complete the
purchase on the said terms and conditions. If the other
shareholder has not accepted the Offer in writing within 60 days
of receipt it shall be deemed to have rejected it.
9.3.3 If the other shareholder rejects the Offer the seller shall be
entitled to sell its shares to the third party, provided that the
transfer is in accordance with the terms and conditions of the
bona fide offer. If the transfer is not completed within a period
of 90 days of the date the seller first received the bona fide
offer, the bona fide offer shall be deemed to have lapsed. Any
transfer or attempted transfer by the seller of any of its shares
in the Venture Company thereafter shall be regarded as arising
from a new offer, subject to all of the provisions of this CLAUSE
9.3 as if no previous bona fide offer had occurred.
9.4 BUY OUT
9.4.1 After the Restricted Period, either party shall be entitled to
invoke this CLAUSE 9.4 upon the occurrence of any of the
following events ("Buy Out Events"):
(a) The Venture Company shall have incurred losses on an FBT
basis in respect of all accounting periods including the
first quarter after the expiration of the Restricted Period;
or
(b) The other party is prevented due to force majeure from
fulfilling its obligations under this Agreement for a
continuous period of more than three months.
9.4.2 If the parties have not within 90 days of the occurrence of a
Buy Out Event reached an agreement to continue the joint venture,
a buy out period of 30 days will occur. During the buy out
period, either party (the "Offeror") may offer the other party
(the "Offeree") in writing to purchase all of the Offeror's
shares in the Venture Company. Such offer shall contain all
necessary terms and conditions of the proposed purchase, in
particular the price per share and terms of payment. An offer to
purchase less than all of the said interest of a party shall not
be valid.
9.4.3 If the Offeree has not rejected the offer in writing within 15
days of receipt it shall be deemed to have accepted it. If the
Offeree rejects the offer, it shall be deemed conclusively to
have offered to sell its shares in the Venture Company to the
Offeror upon the same terms and conditions as set forth in the
first offer. The Offeror shall be required to purchase the
Offeree's interest in the Venture Company from the Offeree in
accordance with the terms and conditions of the first offer.
9.4.4 When ten years have passed from the effective date hereof,
CLAUSES 9.4.2 AND 9.4.3 shall apply correspondingly each year
even if a Buy Out Event has not occurred, provided however that
the buy our period shall be the month of November of each year.
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9.4.5 Completion of a transfer under this CLAUSE 9.4 shall occur
within 30 days of the Offeror's offer.
9.5 LIQUIDATION
9.5.1 If, after the expiration of the Restricted Period, a Buy Out
Event occurs and no buy out as provided for in CLAUSE 9.4 is
completed, either party may by written notice to the other party
cause the Venture Company to be wound up and dissolved.
9.5.2 The procedure of the winding up and dissolution shall follow
applicable provisions of law, except that all Intellectual
Property shall be transferred back to the company or person who
owned it prior to the Closing.
9.6 ACCESSION OF THIRD PARTY TO THIS AGREEMENT
No transfer of shares in the Venture Company to a third party may be
completed unless and until the seller has procured written evidence
that the new shareholder in the Venture Company has agreed in writing
to be bound by the terms of this Agreement in lieu of the seller.
9.7 INVALIDITY OF TRANSFER
Any purported transfer or disposition of the shares of the Venture
Company by the parties hereto in violation of the terms of this CLAUSE
9 shall be void and without effect.
9.8 FAIR MARKET VALUE
The fair market value under this CLAUSE 9 shall be the average of the
fair market value determined by three fully qualified independent
auditors. The parties shall appoint one each. The auditors thus
appointed shall jointly appoint the third auditor. If one party fails
to appoint an auditor within 10 days of being requested to do so by
the other party, such fully qualified independent auditor shall be
nominated by the Stockholm Chamber of Commerce. The determination of
the auditors shall be made within 30 days of the last appointment and
shall be final and binding on the parties.
10. LIMITATION OF LIABILITY
Notwithstanding anything to the contrary in this Agreement or otherwise, in
no event shall either of the parties be liable in damages to the other
party for breach or otherwise under this Agreement for more than USD 10
million.
11. CONFIDENTIALITY
The parties acknowledge that they and their officers, employees and agents
will have access to information regarding the Venture Company and the
parties which is confidential. Neither of the parties will at any time use
or disclose any such information or any information regarding this
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Agreement without the prior consent of the other party. This does not apply
to information which is previously known to the public.
12. MISCELLANEOUS
12.1 FORCE MAJEURE
Neither party shall be considered in breach of this Agreement if its
performance is prevented, delayed or made unreasonably onerous because
of labour disputes or because of non-foreseeable and insurmountable
circumstances beyond its reasonable control and without its fault or
negligence.
12.2 NOTICES
12.2.1 All notices and other communications which are required or may
be given under this Agreement shall be in writing and shall be
deemed to have been received by the other party if delivered
personally or upon the 5th day following its mailing by
registered or certified mail. All notices hereunder shall be
addressed as follows or to such other address as either party
shall have specified by notice in writing to the other.
12.2.2 Swedish Match AB, attention General Counsel, 11885 Stockholm,
Sweden
12.2.3 Gum Tech International, Inc., attention General Counsel, 246 E.
Watkins Street, Phoenix, AZ 85004, USA
12.3 DISCLAIMER OF AGENCY
Neither party shall be deemed to represent the Venture Company or to
have the authority to represent the Venture Company in any way
whatsoever, except as specifically agreed in accordance with CLAUSE
6.2 above or otherwise in writing by the Board of Directors.
12.4 ENTIRE AGREEMENT AND AMENDMENTS
This Agreement (with Exhibits hereto) constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes any other previous agreement, oral or written. The parties
acknowledge that there are no implied terms, requirements,
representations or warranties applicable to the parties except as
expressly provided in this Agreement and its Exhibits. The provisions
hereof may not be waived, modified or supplemented except by any
instrument in writing signed by the parties.
12.5 GOVERNING LAW AND DISPUTE RESOLUTION
12.5.1 This Agreement and the rights and liabilities of the parties
shall be governed by and be construed in accordance with the
laws of Sweden.
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12.5.2 Any dispute arising out of or in relation to this Agreement
shall, failing agreement between the parties, be finally
settled by arbitration in Stockholm in accordance with the
Rules of the Arbitration Institute of the Stockholm Chamber of
Commerce. The arbitral tribunal shall be composed of a sole
arbitrator. The arbitration language shall be English.
12.6 WAIVER AND SEVERABILITY
12.6.1 Except as waived in writing by a party, no action taken
pursuant to this Agreement or failure to pursue the enforcement
of any right pursuant to this Agreement shall be deemed to
constitute a waiver by the party in question of compliance with
any covenants or promises contained herein. The waiver by
either party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any continuing
or subsequent breach.
12.6.2 If for any reason any of the provisions of this Agreement is
invalid or unenforceable under any rule of law or executive
order, such provision shall be deemed reformed or deleted, as
the case may be, but only to the extent necessary to comply
with such rule or order, and the remaining parts of this
Agreement shall remain in full force, provided however that
this does not create an unreasonable lack of balance in the
rights and obligations of the parties.
12.7 RESTRICTIONS ON THE SHARES
12.7.1 The parties agree not to encumber, charge or permit any liens
to attach to their interest, whether legal or beneficial, in
any of their shares in the Venture Company.
12.7.2 Whenever a provision of this Agreement refers to shares in the
Venture Company, this shall include all other financial
instruments constituting interest in the Venture Company, such
as call options and convertible securities, except where it is
obvious that this was not the intent of the parties at the
signing of the Agreement.
13. EXPENSES
13.1 The Venture Company agrees to assume liability for all costs and
expenses incurred since December 18, 1999, in developing any
non-tobacco based nicotine products on behalf of the Venture Company,
including but not limited to any legal fees and other related costs
incurred by SM or GT in connection with the formation of the Venture
Company (but not attorneys' fees or other costs in relation to the
negotiating and/or drafting of this Agreement). The Venture Company
agrees to reimburse any costs and expenses incurred by GT and SM
within a reasonable period after submission to the Venture Company of
a written itemization of such costs and expenses.
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14. AGREEMENT PARAMOUNT
14.1 This Agreement shall take precedence as between the parties hereto
over the Articles of Association of the Venture Company and any other
document, agreement or understanding to the extent permitted by law.
14.2 The parties ensure that all their acts, whether as shareholders or
otherwise, harmonize with the provisions of this Agreement.
This Agreement has been signed in two copies of which the parties have taken one
each.
Place: ______________ Date: ________ Place: _____________ Date: ___________
SWEDISH MATCH AB GUM TECH INTERNATIONAL, INC.
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EXHIBIT 1
ARTICLES OF INCORPORATION
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EXHIBIT 2
INTELLECTUAL PROPERTY
LIST OF CONTENTS
1. Installation/Operational Qualification Protocols (WLS Gabler Mixer, WLS
Gabler Rolling Line, Pellegrini Coating Equipment, Euromec Sorting Machine
and Uhlmann Packaging Machine)
2. Installation/Operational Qualification Summary Reports (WLS Gabler Mixer,
WLS Gabler Rolling Line, Pellegrini Coating Equipment, Euromec Sorting
Machine and Uhlmann Packaging Machine)
3. Equipment Standard Operating Procedures (WLS Gabler Mixer, WLS Gabler
Rolling Line, Pellegrini Coating Equipment, Euromec Sorting Machine and
Uhlmann Packaging Machine)
4. Quality Control Standard Operating Procedures (Packaging Line
Pre-production Release, Manufacturing Process Quality Control Audits,
Packaging Batch Folder Review & Release of Product and Analysis of Blister
Pack Seal Integrity)
5. Draft Preventive Maintenance Procedures (WLS Gabler Mixer, WLS Gabler
Rolling Line, Pellegrini Coating Equipment, Euromec Sorting Equipment and
Uhlmann Packaging Machine)
6. Process Qualification Protocol (2 mg Nicotine Gum)
7. Experimental Manufacturing Orders (all critical processes)
8. Manufacturing Records (all critical processes)
9. Test Data (Cleaning Studies, Uniformity of Mixture, Stability, Bio
equivalency Study)
10. Development Date (experimental information)
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EXHIBIT 3
INTERNATIONAL MANUFACTURING AGREEMENT
PARTIES: J.V. Co., an English company ("CUSTOMER")
Address: Sword House
Totteridge Road, High Wycombe
England
GUM TECH INTERNATIONAL, INC., a Utah corporation ("GUM TECH")
Address: 246 East Watkins Street
Phoenix, Arizona 85004
RECITALS:
A. Gum Tech manufactures and packages specialty gums and other products for
others for their sale and distribution.
B. Customer desires to have Gum Tech manufacture and may assign Gum Tech to
package certain specialty gum products upon the terms and conditions of this
Manufacturing Agreement (this "AGREEMENT") for sale by Customer.
AGREEMENTS:
In consideration of the mutual promises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1) DEFINITIONS. For purposes of this Agreement the following terms shall
have the following meanings:
a) "PRODUCT" or "PRODUCTS" means nicotine delivery gums.
b) "SPECIFICATIONS" means the specifications for the Products'
formulas, packaging and labeling as set forth on the attached EXHIBIT A. In the
event that complete specifications are not attached to this Agreement at the
time it is executed, Customer shall, with the prior written consent of Gum Tech,
which consent shall not be unreasonably withhold or delayed, decide upon the
Specifications. Gum Tech shall thereby give Customer the expert advice it may
reasonably require.
2) MANUFACTURING AND PACKAGING.
a) Gum Tech shall manufacture the Products of commercially acceptable
quality and in accordance with [Good Manufacturing Practices and] the
Specifications. Gum Tech may, with the prior written consent of Customer and
without limiting Gum Tech's obligations under this Agreement, subcontract the
manufacturing process to an affiliate or a third party. Gum Tech shall supply
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raw materials for the Product in accordance with the standards prescribed by
Customer.
b) Should Gum Tech have to acquire any tools and/or machinery to be
able to manufacture the Products then Gum Tech shall present to Customer a list
of the required equipment with a specification of the cost thereof. Customer
shall, after approval of the equipment and cost, pay for the equipment within 30
days after receipt of invoice. Such equipment shall become and remain the
property of Customer.
c) Customer shall have the right to inspect the production of the
Products at Gum Tech's facilities during normal business hours together with
representatives of Gum Tech.
d) Upon the request of Customer, Gum Tech shall package the Products in
compliance with the packaging and labeling instructions in the Specifications.
Gum Tech may, with the prior written consent of Customer and without limiting
Gum Tech's obligations under this Agreement, subcontract the packaging process
to an affiliate or a third party. Gum Tech shall supply packaging materials for
the Product printed with artwork provided by Customer. Gum Tech and Customer
shall jointly agree on the volumes of packaging material to be purchased and
stored by Gum Tech at any given time. Should Gum Tech become unable to use its
stock of packaging material due to Customer's changes of the packaging design or
discontinuance of any Products then Customer shall have the obligation to
repurchase Gum Tech's stock of packaging material at cost. Gum Tech shall be
responsible for checking the wet-proof to ensure that the packaging material is
within the parameters proscribed by Customer and that it matches the artwork
provided by Customer.
3) EXCLUSIVITY. During the term of this Agreement, Customer shall not
itself manufacture, or engage any other person or entity to manufacture, the
Product, without Gum Tech's prior written consent, provided however that Gum
Tech can deliver the volumes which Customer shall order from time to time. Gum
Tech shall not at any time, whether during the term of this Agreement or after
it has been terminated, manufacture the Product for any other entity than
Customer.
4) CHANGE IN SPECIFICATIONS. Customer may change the Specifications for a
Product with at least 90 days prior notice to Gum Tech, provided that Customer
may not change the Specifications so substantially that the Product no longer
falls within its general description. Gum Tech shall be entitled to compensation
for additional costs which are necessary in order for Gum Tech to be able to
meet the changes of the Specifications. Before the end of the 90 day period Gum
Tech shall inform Customer of such necessary additional costs incurred by Gum
Tech and substantiate such costs in writing, which costs shall then be included
in the Price.
5) TERM AND TERMINATION.
a) This Agreement shall enter into force when signed by both parties
and shall apply until 31 December 2003. Unless terminated at the end of the
initial period, it shall be renewed and remain effective until terminated
pursuant to the terms hereof.
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b) A party wishing to terminate this Agreement shall give the other
party at least 16 months written notice.
c) Notwithstanding anything to the contrary herein, either party may
terminate this Agreement immediately: (i) If the other party becomes or may
under Swedish law be presumed to have become insolvent, or enters into
liquidation, makes arrangements with its creditors or makes preparations for
liquidation or arrangements with its creditors; or (ii) If the other party
commits a material breach hereof and does not remedy such breach within 15 days
of receipt of a notice from the terminating party, giving the details of the
breach.
d) Notwithstanding anything to the contrary herein, Customer may
immediately terminate this Agreement:
(i) At the change of control of Gum Tech; and
(ii) In accordance with SECTION 6(D).
e) At the termination of this Agreement, Gum Tech shall return to
Customer all printed materials of confidential nature concerning the Products
and shall cease (i) to manufacture the Products, save for the fulfillment of
Customer's pending orders, and (ii) to use any trademark related to the
Products.
6) FORECAST; PURCHASE ORDERS; SHIPMENT
a) FORECAST. Customer and Gum Tech shall jointly develop a written
forecast of the Products to be ordered by Customer and packaging material to be
acquired by Gum Tech, if any, during the up-coming 90 day period and whether and
to what extent such Products shall be packaged by Gum Tech. Customer and Gum
Tech shall jointly update the Forecast every thirty (30) days during the Term.
b) ORDERS. Customer shall order the Products from Gum Tech in writing,
each order specifying the relevant Product, whether it shall be packaged,
quantity and delivery date. Any term in any purchase order inconsistent with
this Agreement shall prevail, unless Gum Tech expressly objects to the term in
writing within a week of the receipt of the order. For the purposes of this
Agreement, Gum Tech shall be deemed to have received an order two working days
after it was faxed to Gum Tech. Gum Tech may only reject an order if delivery is
made impossible due to force majeure, if Customer is in material breach of this
Agreement or if the requested quantity materially exceeds what was projected in
the Forecast. In the latter case, Gum Tech shall only be required to use all
reasonable efforts to complete the order by the delivery date specified in the
order.
c) SHIPPING. Gum Tech shall deliver all ordered Products which are
based on previous forecasts, within 30 days of order, "FOB Phoenix, Arizona,
U.S.A." as defined in INCOTERMS 2000. However, Gum Tech shall administer that
the Products be delivered to the customs of Customer's choice. Customer shall
recognize the receipt of the delivery of the Products without undue delay after
Customer has inspected it.
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d) DELAYS. Gum Tech shall not be liable for delays in delivery and/or
shipment of the Product if such delay derives from causes beyond Gum Tech's
control to the extent that they were unforeseeable and insurmountable and
rendered Gum Tech unable to comply with its obligations hereunder. If, in such
an event, Gum Tech is unable to make delivery to Customer for three (3) months,
Customer shall have the option of canceling all orders, including the unshipped
portion of any such orders already received and accepted by Gum Tech, by giving
10 days notice in writing thereof.
7) PRICES; PAYMENT.
a) PRICE. Customer will pay Gum Tech for the Product at full cost, (the
"PRICE"). Customer shall be entitled to audit Gum Tech's books to establish such
costs ("OPEN BOOKS"). Gum Tech undertakes to use its best effort to minimize
costs and negotiate prices with suppliers. Customers tariffs, duties, taxes and
levies imposed on Customer or Gum Tech by any governmental body in the United
States shall be paid by Customer. Customer shall pay or give reimbursement for
any such tariffs, duties, taxes or levies imposed on gum Tech outside the United
States in connection with the Product to or by Customer, on condition that Gum
Tech gives Customer immediate written notice thereof.
b) PRICE REVISION. Prices shall be revised at the end of each calendar
quarter to reflect increases or decreases in the costs mentioned in Section
7.a). should however any raw material cost increase or decrease by 25 percent or
more before the end of any such period, then the prices shall immediately be
adjusted accordingly. Revised Prices shall be effective as soon as Customer has
been given a reasonable time to carry out such audit as is provided for in
Section 7.a). Such increase shall apply to orders manufactured after the
effective date of the change.
c) PAYMENT TERMS. Customer shall pay for Products ordered and received
under this Agreement within 30 days of receipt of invoice.
8) GUM TECH'S REPRESENTATION AND WARRANTIES
a) PERMITS AND REGULATORY APPROVALS. Gum Tech represents and warrants
that it has all the necessary permits and licenses for the manufacture of
Product. Customer represents and warrants that, at the launch of the Product, it
will have all the necessary regulatory approvals and registrations for the sale
and distribution of the Product.
b) PRODUCT WARRANTY.
(i) Gum Tech represents and warrants that it shall manufacture and
package the Product in compliance with the Specifications and all applicable
laws and that the Product will be free from defects in Materials utilized by Gum
Tech in manufacturing the Product.
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(ii) Customer shall give written notice to Gum Tech of a defect
claimed to be within the scope of this warranty without undue delay of
Customer's discovery of the defect. The Product involved must be returned to Gum
Tech at its manufacturing facility or other mutually agreeable location within
five (5) business days after Customer receives the Product from the customer or
other end-user, at Customer's expense. The Product must be properly preserved,
packaged and shipped to avoid damage or degradation in transit. Gum Tech shall
have the right to conduct tests and other investigation on the returned Product,
the results of which will be shared with Customer, in order to determine whether
it in fact suffers from a defect for which Gum Tech is responsible hereunder. In
the event that a defect is discovered that is covered by this warranty, Gum Tech
shall reimburse Customer for the cost of shipping the Product and shall replace
the Product with conforming Product. Gum Tech shall not be liable for any
consequential or incidental damages caused by any defect in the Product. In the
event that no defect is discovered for which Gum Tech is responsible hereunder,
Customer shall reimburse Gum Tech for the cost of testing the returned Product.
(iii) Notwithstanding anything to the contrary herein, Gum Tech
shall hold Customer harmless from all direct costs (including reasonable
attorney's fees) which Customer may be held liable to pay as a result of claims
or suits arising out of any injuries to person and/or damage to property due to
defects of the Products resulting from Gum Tech's or its subcontractors; failure
to follow the Specifications, provided however that Gum Tech receives notice of
such claim or suit against Gum tech without undue delay. Gum Tech shall give
Customer such support in the defense as Customer may reasonably request.
9. LIABILITY. Without prejudice to SECTION 9(C)(III),neither party shall be
liable to the other for any indirect or consequential loss or damage.
10. PRODUCT STANDARDS AND COMPLIANCE WITH LAWS.
a) REGISTRATION AND APPROVALS. Customer shall be responsible for
required registrations and/or approvals of the Product. In connection therewith,
Gum Tech shall give Customer any assistance which Customer may reasonably
request, including preparing relevant documents and execute approval
applications. All such registrations and/or approvals shall be issued in the
name of Customer. If any registrations and/or approvals must be issued in the
name of Gum Tech, Customer shall give Gum Tech notice thereof. Such
registrations and/or approvals shall, if possible, be assigned or transported to
Customer by Gum Tech as soon as possible. Customer shall pay for all
registration costs.
b) EXPORT LICENSE. Gum Tech shall be responsible for obtaining export
licenses and any other permits as may be required in order to be allowed to
export the Products.
c) REGULATORY REQUIREMENTS. Customer agrees to advise Gum Tech to the
extent necessary with respect to all health, safety, environmental and other
standards and other legal requirements applicable to the Product.
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11) INDEMNIFICATION. Customer shall indemnify and defend Gum Tech, and Gum
Tech shall indemnify Customer from costs (including reasonable attorneys' fees)
or losses suffered by the other party as a result of a claim or action by a
third party relating to a material breach of a warranty or agreement made by the
indemnifying party in this Agreement, provided that the party seeking
indemnification notifies the indemnifying party in writing promptly of such
claim or action.
12) INSURANCE. Each party shall maintain, during the term of this
Agreement, on occurrence basis, sufficient general liability insurance
(including products liability and contractual liability).
13) RECALLS. If any governmental authority having jurisdiction over the
subject matters of this Agreement requires Customer to recall any Product,
Customer shall immediately notify Gum Tech and review with Gum Tech the basis
for the recall.
14) INTELLECTUAL PROPERTY.
a) TRADEMARKS/TRADE NAMES. The trademarks used in marketing the Product
shall be Customer's property. To the extent necessary for the performance of
this Agreement, Customer hereby grants to Gum Tech the right to reproduce and
print on the Products those trademarks and/or trade names of Customer as are
designed by Customer. Neither party shall have any right, title, or interest in
or to an of the other party's trademarks or trade names.
b) SPECIFICATIONS. At all times, Customer shall retain ownership of and
be assigned all right, title and interest to the Specifications. Any inventions,
formulas, or other improvements to the Specifications developed by Gum Tech
shall be deemed owned by and assigned to Customer.
15) CONFIDENTIALITY.
a) Either party undertakes not to disclose to any third party, without
the other party's written consent, any information relating to the other party's
business ("Confidential Information"), disclosed to it by the other party,
unless required by law. The term Confidential Information shall not cover
information which is generally available to the public, except by breach of this
Agreement, was known by the party to which it is disclosed prior to the
disclosure to it by the other party, or is lawfully disclosed by a third party
under no duty of confidentiality to the disclosing party. Neither party may
disclose that it has obtained information relating to the other party's business
under this Agreement, whether the information is Confidential or not.
b) Each party undertakes not to use any Confidential Information of the
other party for any other purpose than the purpose of this Agreement without the
prior written consent of the other party.
c) Each party shall use its best efforts to protect the Confidential
Information of the other party in such party's possession. Each party shall
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instruct its employees and any person acting on such party's behalf to treat the
other party's Confidential Information as confidential.
d) Customer owns all rights to the Product and shall at its sole
election be entitled to copy, replicate, imitate or reverse engineer the same.
e) The obligations under this Section shall survive the expiration or
termination of this Agreement.
16) MISCELLANEOUS.
a) INDEPENDENT CONTRACTORS. This Agreement does not and shall not be
construed to constitute a partnership or agency relationship, and neither party
shall have the right to obligate or bind the other party except as specifically
set forth herein.
b) COMPLETE AGREEMENT, AMENDMENTS, NON-WAIVER. This Agreement and the
Exhibit attached hereto contain the entire understanding of the parties and may
not be modified, altered or amended except in writing signed by both parties. In
particular, no failure or delay of either party to enforce an of its rights
under this Agreement shall be deemed a waiver by such party of any of its rights
hereunder.
c) SEVERABILITY OF PROVISIONS. If any provision of this Agreement, or
its application to any person or circumstances, is invalid or unenforceable,
then the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby.
d) ATTORNEYS' FEES. In the event either party hereto is required to
bring any action to enforce any provision hereof, or to secure specific
performance hereof, or to collect damages of any kind for any breach of this
Agreement, the prevailing party shall be entitled to all court costs, all
expenses arising out of or incurred by reasons of the litigation and any
reasonable attorneys' fees expended or incurred in any such proceedings, and all
costs and expenses shall be included in the judgment.
e) NOTICES. All notices provided for by this Agreement shall be given
in writing, postage or transmission costs prepaid, and shall be addressed to the
intended recipient at the address first set forth above, or such other address
as such party may from time to time designate in writing. All notices shall be
deemed received by the intended recipient on: (1) the fifth business day after
the date placed in the mail, as certified mail, return receipt requested and
postage paid thereon; and (ii) the day that such notice is sent by fax to the
intended recipient at such fax numbers as the parties shall notify each other.
f) GOVERNING LAW. This Agreement and each purchase order shall be
exclusively governed by the laws of Sweden, without giving effect to the choice
of law principals thereof. All disputes arising out of or in connection with
this Agreement shall be exclusively settled by arbitration in the English
language in accordance with the Rules of the International Chamber of Commerce.
The arbitral tribunal shall be composed of three arbitrators and the place of
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arbitration shall be (i) Stockholm. Sweden, if Gum Tech should initiate the
proceedings or (ii) New York, N.Y., USA, if Customer should initiate the
proceedings.
g) ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other party. Notwithstanding the foregoing, Customer shall have the right
to assign this Agreement, including all rights and obligations hereunder, to a
company directly or indirectly wholly owned by Customer.
This Agreement has been signed in two copies of which the parties have taken one
each.
GUM TECH INTERNATIONAL, INC. J.V. Co.
By: By:
------------------------------- --------------------------------
Name: Name:
------------------------------- --------------------------------
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EXHIBIT A
SPECIFICATIONS
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EXHIBIT 4
RESEARCH AND DEVELOPMENT AGREEMENT
This RESEARCH AND DEVELOPMENT AGREEMENT (hereinafter referred to as the
"Agreement") is made as of this ____ day of June, 2000 by and between GUMTECH
INTERNATIONAL, INC., a Utah corporation having a principal place of business at
246 E. Watkins Street, Phoenix, AZ 85004 (hereinafter "Gumtech") and "JOINT
VENTURE CO.", an English corporation having a principal place of business at
High Wycombe, England (hereinafter "Joint Venture Co.").
BACKGROUND
Gumtech is engaged in the business of research, design, formulation,
development, testing, marketing and sale of specialty gums, and has the
facilities, personnel, equipment and expertise for developing, manufacturing and
gaining regulatory approval for specialty gums.
Joint Venture Co. desires to develop and market various nicotine products and
Joint Venture Co. desires Gumtech to assist in the research and development of
such products.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS
1.1 "Confidential Information" means information that a party deems to be
valuable and proprietary including, but not limited to, information
encompassed in any and all designs, product descriptions, test data,
reports, recommendations, plans, proposals, financial information and
other documents of every description, including patent applications,
formulations, source code, chemical compounds, technical, commercial,
scientific and other proprietary data, trade secrets, processes,
documents or other information including, without limitation,
materials, specifications, schematics, marketing data, methods and
strategy, agreements between a party hereto and a third party,
licenses and license applications, customer lists, credit and
financial information, and business plans and projections of a party,
its affiliates or any o fits officers, directors, employees, agents
and subcontractors, whether the information is furnished in
electronic, oral or written form. Confidential Information also
includes information of the type described above which, though not
specifically disclosed to one party by the other party, is made
available to a party through that party's inspection of the other
party's facilities or products.
1.2 "Effective Date" means December 21, 1999, the date on which a Letter
of Intent was executed between the parties to this Agreement.
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1.3 "Intellectual Property Rights" means all rights of a person or entity
in, to, or arising out of (a) any U.S., international or foreign
patent or any application therefor and any and all reissues,
divisions, continuations, renewals, extensions and
continuations-in-part thereof; (b) formulations, inventions (whether
patentable or not in any country), invention disclosures,
improvements, trade names, trade secrets, proprietary information,
know-how, technology and technical data; (c) copyrights, copyright
registrations, mask works, mask work registrations, and applications
therefor in the U.S. or any foreign country, and all other rights
corresponding thereto throughout the world; and (d) any other
proprietary rights in technology anywhere in the world.
2. GUMTECH RESPONSIBILITIES
2.1 SERVICES. Gumtech agrees to provide services to Joint Venture Co.
within the framework of research and development projects covered by
the areas identified in EXHIBIT A (hereinafter "Project" or
"Projects"), subject to the terms and conditions of this Agreement.
Each Project will be defined by Joint Venture Co. as to objective,
scope and time frame after consultation with Gumtech. Joint Venture
Co. shall have the right to modify or discontinue a Project at any
time by giving 60 days prior notice in writing to Gumtech. The first
such project has been on-going since the effective date.
2.2 METHOD OF PERFORMING SERVICES. Gumtech agrees that any services
provided under this Agreement will conform to development, testing,
and quality assurance guidelines that reflect prudent industry
practices. Gumtech and not Joint Venture Co. will have the right to
determine the method, details, and means of performing the relevant
services, subject always, however, to instructions from Joint Venture
Co. as to the objective and scope of such services.
2.3 TOOLS AND INSTRUMENTALITIES. Joint Venture Co. agrees to supply any
additional tools and instrumentalities, at Joint Ventura Co.'s sole
expense, reasonably requested by Gumtech required to perform the
services under this Agreement.
2.4 WARRANTY. Gumtech warrants that all services provided to Joint Venture
Co. under this Agreement will be provided in a good and workmanlike
manner.
3. COMPENSATION
3.1 COMPENSATION. Joint Venture Co. agrees to pay Gumtech the amounts set
forth in EXHIBIT B. Gumtech shall submit itemized invoices to Joint
Venture Co. on a monthly basis. Joint Venture Co. must pay the amounts
reflected in such invoices within 30 days of receipt of such invoices.
3.2 EXPENSES. Joint Venture Co. must reimburse Gumtech for all reasonable,
direct out-of-pocket expenses incurred in connection with the services
to be performed under this Agreement. Out of pocket expenses include,
but are not limited to, laboratory prototyping, scale-up and
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production validation/qualifications, labor, equipment, raw materials
and travel. All such out-of-pocket expenses must be reflected in the
invoices submitted to Joint Venture Co. to be reimbursable.
3.3 STATE AND FEDERAL TAXES. Gumtech is responsible for paying all
required state and federal taxes and other charges of whatever kind
and making contributions to all benefit programs for any of Gumtech's
personnel used in providing services under this Agreement.
Specifically, without limitation, Joint Venture Co. will not be
required to:
3.3.1 withhold FICA (Social Security) or federal or state income tax
from compensation payments made to Gumtech personnel;
3.3.2 make state or federal unemployment insurance contributions or
disability insurance contributions on Gumtech's behalf; nor
3.3.3 obtain worker's compensation insurance on behalf of Gumtech
personnel.
4. CONFIDENTIALITY
4.1 During the term of this Agreement, and in furtherance of the purpose
of this Agreement, each party is likely to disclose Confidential
Information to the other.
4.2 Each party agrees that all Confidential Information received from the
other during this period will cease to be deemed Confidential
Information if:
4.2.1 a party's Confidential Information is generally available to the
public through no fault of the receiving party and without breach
of this Agreement;
4.2.2 a party's Confidential Information is already in the possession
of the other party, without restriction and prior to any
disclosure under this Agreement;
4.2.3 a party's Confidential Information is or has been lawfully
disclosed to the other party by a third party without breaching
an obligation of confidentiality upon that party; or
4.2.4 the confidentiality of that information has been terminated or
released in a written agreement, which is signed by an officer of
the party being requested to release the Confidential
Information, and which specifically refers to this Agreement.
4.3 Each party agrees:
4.3.1 not to make public or authorize any disclosure or publication of
Confidential Information disclosed by one party to the other
under this Agreement, except as expressly permitted in writing by
the disclosing party;
4.3.2 to take all reasonable and necessary steps to assure that any
principal, officer, agent, employee, representative, consultant,
or any other person affiliated in any manner with the receiving
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party, does not disclose, or make public, or authorize any
disclosure or publication, of any Confidential Information
disclosed by one party to the other under this Agreement;
4.3.3 not to use the Confidential Information disclosed by one party
to the other under this Agreement in the development or operation
of any business outside of this Agreement; and
4.3.4 to advise the other party in writing of any and all
misappropriations or misuse by any person of Confidential
Information disclosed by one party to the other under this
Agreement as soon as it becomes aware of such misappropriation or
misuse.
4.4 Subject to Section 6 of this Agreement, all documents or other media
containing Confidential Information and all reproductions thereof
(whether delivered by one party to the other or reproduced by a party
itself) will at all times be and remain the sole and exclusive
property of the party that discloses the documents or other media, and
will be returned by the receiving party to an authorized
representative of the other party immediately upon the latter party's
written request for such return. Furthermore, no documents or other
media containing any Confidential Information may be reproduced by a
party without the other party's prior written authorization.
4.5 The parties to this Agreement admit for all purposes that any
violation or threatened violation of this Section 4 by one party will
constitute an irreparable injury to the other party for which monetary
damages provide no adequate remedy, and agree that, in addition to all
other rights provided by law to which a party is entitled, that party
will have the right to have an injunction or equivalent remedy issued
against the other party to prevent the other party form violations or
further violations of this Agreement.
4.6 Each of the parties to this Agreement agrees, on behalf of itself and
its principals, officers, agents, employees, representatives,
consultants, or any other affiliated persons, to maintain the
confidentiality of and not to disclose any Confidential Information
disclosed by the other in connection with this Agreement, any other
agreement, or any license or sublicense.
4.7 Notwithstanding anything to the contrary in this Agreement, if
required by law or order of any government authority, any party may
disclose Confidential Information to the appropriate authorities to
the extent required by such order, provided that such party shall have
first notified the other party of such order and such other party
shall have had a reasonable opportunity to oppose such disclosure or
obtain a protective order (including but not limited to
"confidentiality treatment" pursuant to U.S. securities laws)
reasonably satisfactory to such other party to maintain the
confidentiality of such Confidential Information.
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5. TERM AND TERMINATION OF AGREEMENT
5.1 TERM. This Agreement is effective as of the Effective Date and will
continue in effect until termination of the Joint Venture Agreement
unless (a) terminated earlier as set forth below, (b) extended upon
the mutual agreement of the parties, or (c) Gumtech's services as
described in Exhibit A are completed.
5.2 TERMINATION FOR DEFAULT. If any party breaches this Agreement, the
non-breaching party may then, or at any time thereafter during which
the breach continues, submit its intention to terminate this Agreement
by giving the breaching party at least 30 days written notice of
termination. Termination will be effective 30 days after delivery of
the notice unless the breach is corrected prior to the expiration of
the 30 day period. For purposes of this paragraph, a material breach
of this Agreement includes, but is not limited to, negligence, fraud,
misrepresentation, or willful misconduct by a party in connection with
this Agreement.
5.3 TERMINATION FOR FAILURE TO MAKE AGREED-UPON PAYMENTS. If Joint Venture
Co. fails to pay Gumtech the compensation set forth in Section 3 of
this Agreement on a timely basis, Gumtech will provide notice of that
default to Joint Venture Co. Gumtech may terminate this Agreement if
the failure to pay is not remedied by Joint Venture Co. prior to
expiration of the 14 business day period following the date of receipt
of the notice.
6. INTELLECTUAL PROPERTY RIGHTS AND OWNERSHIP
6.1 WORK PRODUCT. Joint Venture Co. acknowledges that Gumtech may be
expected to participate in conceiving or reducing to practice
formulations, ideas, inventions, discoveries, improvements or
processes, whether or not patentable, and which may be directly or
indirectly useful and/or relate to the use of any and all components,
services, or products related to Joint Venture Co.'s business
(hereinafter collectively referred to as the "Inventions"). Gumtech
agrees to transfer exclusively to Joint Venture Co. all rights of
ownership to any and all Inventions created in connection with this
Agreement.
6.2 Except as provided in Section 6.1, any and all work product,
inventions, and Confidential Information produced solely by either
party will be and remain the sole property of the conceiving party,
and any technology that is jointly developed by Joint Venture Co. and
Gumtech outside the scope of the services described in Exhibit A will
be jointly owned by the parties unless the parties otherwise agree.
6.3 Each party will promptly notify the other of any formulations,
Inventions, materials, and Intellectual Property that arises out of
the services performed under this Agreement. Upon request of the other
party, each party agrees to use its best efforts to cause any of its
personnel who performed services under this Agreement to assist in the
filing and prosecution of patents and copyright registration and mask
works registration applications in any and all countries of the world,
including but not limited to, the review and execution of documents
required or desired the performance of any other reasonable acts that,
in the opinion of the parties, are necessary or desirable to perfect,
protect or enforce the parties' rights.
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6.4 Joint Venture Co. and Gumtech represent and warrant to each other that
neither will knowingly use any patented technology or proprietary
rights owned by a third party in conjunction with this Agreement
without appropriate authorization.
7. RELATIONSHIP OF THE PARTIES
7.1 For purposes of this Agreement, the relationship of Gumtech to Joint
Venture Co. is that of an independent contractor. Neither Joint
Venture Co. nor Gumtech will have any right or authority to bind the
other party or to assume or create any obligation or responsibility,
express or implied, on behalf of the other party, or in the other
party's name, except as may be expressly permitted under this
Agreement or subsequently agreed to in writing by the parties. Nothing
in this Agreement is intended to create the relationship of employer
and employee, master and servant, respondent superior, principal and
agent between Joint Venture Co. and Gumtech, or any other legal or
equitable relationship rendering Joint Venture Co. or Gumtech liable
for the other party's acts or omissions.
8. INDEMNITIES
8.1 Each party warrants that, to the best of its knowledge, no formula,
technique or data provided pursuant to this Agreement infringes any
patent, copyright, trade secret, mask work, trademarks or other legal
or equitable rights of any third party.
8.2 Each party agrees to indemnify, defend and hold harmless the other
party from and against any and all claims, demands, damages, expenses
(including reasonable attorneys' fees and costs) or assertions, of any
kind or nature whatsoever, of liability by any and all third parties,
arising out of or in any way connected with (a) any alleged act,
failure to act, omission, or misrepresentation by the indemnifying
party, its officers, directors, employees or agents; or (b) any breach
by the indemnifying party of any of the terms, conditions, warranties
or representations contained in this Agreement or in any other
instrument executed by the indemnifying party in connection with this
Agreement.
9. ASSIGNMENT
9.1 Neither party may assign or transfer any rights, duties or obligations
under this Agreement without the prior written consent of the other
party, which may not be unreasonably withheld. Any purported attempt
to assign or transfer any rights, duties or obligations without
consent will be null and void.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Joint Venture Co. and Gumtech respectively represent that they have
taken all necessary corporate action to authorize the execution and
consummation of this Agreement and to render the Agreement a legal,
valid and binding obligation enforceable in accordance with its terms
and conditions, and that the execution, delivery and performance of
this Agreement will not result in any breach of its charter documents
or of any instrument or license, or any violation of any law,
regulation, order or decree, to which it is a party or by which it or
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its property is bound. Upon request, Joint Venture Co. and Gumtech
will furnish each other with satisfactory evidence to establish the
accuracy of the representations set forth above. Each party agrees to
execute any other documents or agreements that might be reasonably
necessary or desirable for the effective implementation and
administration of this Agreement.
10.2 Joint Venture Co. and Gumtech respectively represent that there are no
actions, suits or proceedings existing, pending or, to the best
knowledge of either party, threatened against, or affecting either
party before any court, arbitrator, or governmental or administrative
body or agency that affect the validity or enforceability of this
Agreement or that affect the implementation or administration of this
Agreement, which might result in any material adverse effect on the
ability of either to perform its obligations hereunder.
11. GENERAL PROVISIONS
11.1 COMPLIANCE WITH LAWS. Both parties and their representatives agree to
comply with all applicable federal, state, and local laws, rules and
regulations.
11.2 NO WAIVER; REMEDIES. Any waiver of any provision of this Agreement
will be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of either party to
exercise, and no delay in exercising, any right, power, or privilege
under this Agreement will operate as a waiver thereof; nor will any
single or partial exercise of any right under this Agreement preclude
any other or further exercise of that right or the exercise of any
other right. The remedies provided in this Agreement are cumulative
and not exclusive of any remedies provided by law.
11.3 SEVERABILITY. If at any time subsequent to the Effective Date, any
provision of this Agreement or any amendment to this Agreement is held
by any court of competent jurisdiction to be illegal, void or
unenforceable, that provision will be of no force and effect, but the
illegality or unenforceability of that provision will have no effect
upon and will not impair the validity or enforceability of any other
provision of this Agreement or any amendment to this Agreement.
11.4 NOTICES. Any required notices must be given in writing and must be
delivered by personal service, by telecopier, telex, cable or by
certified mail to the appropriate party at the address of that party
set forth in this Agreement, or to such other address as either party
may substitute by written notice to the other. A notice that is
delivered in person will be effective upon the date of delivery. A
notice that is dispatched by telecopier, telex, or cable will be
effective 48 hours after confirmed dispatch. A notice that is mailed,
postage prepaid, will be effective 5 days from the date it is
deposited in the U.S. mail.
11.5 DISPUTE RESOLUTION. Disputes arising out of or in connection with this
Agreement shall be finally settled by arbitration in accordance with
the rules of the Arbitration Institute of the Stockholm Chamber of
Commerce. The proceedings shall be held in Stockholm and shall be
conducted in English.
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11.6 GOVERNING LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of Sweden without reference to
its conflict of laws provisions.
11.7 MODIFICATION. This Agreement may be modified only by a written
instrument signed by the parties.
11.8 TRANSFER. This Agreement may not be assigned or transferred by either
party, without prior approval of the other party, which may not be
unreasonably withheld.
11.9. INAPPLICABILITY. The parties agree that the United Nations Convention
on Contracts for the International Sale of Goods shall not apply to
this Agreement.
11.10 PARAGRAPH HEADINGS. Paragraph headings are for reference only and
will not be construed as substantive parts of this Agreement.
11.11 INURE, COMPLETELY INTEGRATED AGREEMENT, CONSTRUCTION. This Agreement,
together will all exhibits, represents a completely integrated and
exclusive agreement and understanding between the parties and, as of
its Effective Date, supersedes all prior and contemporaneous
agreements, negotiations, representations and proposals, written or
oral. Neither party will be bound by or liable to the other party for
any representation, promise or inducement embodied in this Agreement
made by any agent or person in the other's employ. In the event of any
discrepancy, ambiguity or inconsistency between this Agreement and any
form, correspondence or communication used by either party in
connection herewith, the terms of this Agreement will govern. This
Agreement may not be varied, altered, amended or supplemented, nor may
any of its provisions be waived, except by a writing duly executed by
authorized representatives of both Joint Venture Co. and Gumtech. This
Agreement will be binding upon and inure to the benefit of the
parties' respective successors, permitted assigns, and legal
representatives, as applicable.
11.12 FORCE MAJEURE. Neither party will be responsible or liable to the
other party in any manner for failure or delay in performing its
obligations under this Agreement provided for under this Agreement,
when such failure or delay is due to any cause beyond the reasonable
control of the party concerned, including acts of God, governmental
orders or restrictions, war, threat of war, war-like conditions,
hostilities, sanctions, mobilization, blockade, embargo, detention,
revolution, riot, strike or other labor dispute, accident, fire,
flood, or an inability to obtain fuel, power, raw materials, labor, or
transport, provided that upon cessation of such events such party
shall thereupon promptly perform or complete the performance of its
obligations hereunder.
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This Agreement has been signed in two copies of which the parties have taken one
each.
GUMTECH INTERNATIONAL, INC. JOINT VENTURE CO.
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- -------------------------------
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EXHIBIT A
DESCRIPTION OF THE SERVICES AND SCHEDULE
Services will include support research and development of products that deliver
nicotine from the laboratory stage through formula prototyping and plant scale
up, and necessary documentation, preparations and governing of the government
approval application process.
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EXHIBIT B
COMPENSATION TERMS
Joint Venture Co. will pay Gumtech an amount each month equal to $55 per hour
for any laboratory professionals providing services under this Agreement and $35
per hour for each laboratory technician providing services under this Agreement.
Gumtech will provide a written estimate of the cost to provide the services
contemplated by this Agreement prior to commencing those services and will
provide to Joint Venture Co. on a monthly basis a statement of the costs
incurred for the prior month in providing services under this Agreement. Joint
Venture Co. agrees to pay the amounts due as provided by the monthly statements
within 30 days of the date of the statement.
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