ex_10-17.htm


    
 

    INVENTORY CONSIGNMENT
AGREEMENT

     

         This
INVENTORY CONSIGNMENT AGREEMENT
(this “Agreement”) is made
as of December 1, 2008 by and between Gamma Pharmaceuticals,
Inc. (“Consignor”) and Bridgeland Trading Ltd. (the
“Consignee”).

     

    Background
Statement

     

         Consignor
is in the business of developing and distributing various pharmaceutical
products including but not limited to Multi-Flavored Gumdrops, Swirl Gummy
Bears, Multi-Flavored gummy Bears, Orange Gumdrops, as further described in
Schedule A, attached hereto, including the Ordered Inventory, as defined herein,
the “Consigned
Merchandise”). Pursuant to this Agreement Consignor and Consignee desire
that Consignee sell the Consigned Merchandise pursuant to a consignment
arrangement, the terms of which are set forth below. The use of the words
“hereof,” “hereto” and “herein” shall refer to this
Agreement, as supplemented by such Schedules as the parties agree
upon.

     

    Statement of
Agreement

     

         The
parties hereto agree as follows:

     

         1. Definitions.

     

         (a) “Consignee Locations”
has the meaning set forth in Section 3.

     

         (c) “Consigned
Merchandise” has the meaning set forth in the Background
Statement.

     

         (d) “Consignment Payment”
has the meaning set forth in Section 8.

     

         (e) “Consignment Sale” has
the meaning set forth in Section 2(a)(i).

     

         (f) “Minimum Consignment
Payment” has the meaning set forth in Section 8(c).

     

         (g) “Net Sales” shall
mean, with respect to a Consignment Sale, the gross amount invoiced by or on
behalf of Consignee for that Consignment Sale sold to third parties in bona fide, arm’s length
transactions, less customary deductions, determined in accordance with
Consignee’s standard accounting methods as generally and consistently applied by
Consignee, to the extent included in the gross invoiced sales price of any
Consignment Sale and otherwise directly paid or incurred by Consignee or
distributors with respect to the sale of such a Consignment Sale, including:
(i) applicable sales credits (as described below), (ii) payments or
rebates incurred pursuant to federal, state and local government (or agency
thereof) programs, including Medicare and Medicaid rebates, (iii) costs for
transit insurance, freight, handling or other transportation billed to customers
to the extent included in the invoiced price, (iv) sales, use or excise
taxes included in the invoiced price, and (v) any applicable importation tax or
comparable tax. Applicable sales credits include credits or discounts deducted
from the sales price for: (A) customer returns, returned goods allowances,
rejected goods and damaged goods not covered by insurance, (B) cash or
terms discounts, (C) direct to customer discount or customer rebate
programs, including coupons, (D) third party rebates and chargebacks,
(E) trade show discounts and stocking allowances, (F) price
adjustments on customer inventories following price changes, (G) product
recalls, (H) deductions due for discount card programs, (I) amounts
credited for uncollectible amounts on previously sold products and (J) as
agreed by Consignor and Consignee in writing, other specifically identifiable
amounts included in gross sales of Consigned


    
      
         


      

      
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    Merchandise
that were or ultimately will be credited and that are substantially similar to
those listed above.

     

         (k) “Ordered Inventory”
has the meaning set forth in Section 4.

     

         (l) “License” means
the   rights in and to the Regulatory Approvals for the Product
and under its Intellectual Property rights associated with the Product as
received and otherwise set forth to import, market, use, manufacture, have
manufactured, promote, distribute and sell the Product in the
Territory.

     

         (m) “Term” means the
period beginning on the date hereof and continuing until the expiration or
termination of this Agreement pursuant to the terms and conditions
herein.

     

         2. Delivery; Title to Consigned
Merchandise.

     

         (a) The
following provisions of this Section 2(a) are subject
in their entirety to the provisions of Section 2(b)
hereof:

     

         (i) 
Consignor shall, pursuant to the terms of this Agreement deliver to Consignee
the Consigned Merchandise constituting finished product inventory in bulk, for
packaging and distribution for sale to any third party (a “Consignment
Sale”).

     

         (ii) 
Consignor shall at all times retain title to all Consigned Merchandise, and
Consignee agrees to hold the Consigned Merchandise as Consignor’s property for
the sole purpose of making Consignment Sales in the ordinary course of
Consignee’s business.

     

         (iii) 
Consignee covenants not to assign, sell, mortgage, lease, transfer, pledge,
grant a security interest in or lien upon, encumber or otherwise dispose of or
abandon, or suffer or permit any of the same to occur with respect to any part
or all of the Consigned Merchandise, without prior written consent of Consignor,
except for Consignment Sales in the ordinary course of Consignee’s
business.

     

         (b) Consignee
will continue to engage in Consignment Sales in the ordinary course of
Consignee’s business. Upon removal of any Consigned Merchandise by or on behalf
of Consignee from a Consignee Location (as hereinafter defined) in anticipation
of a Consignment Sale, title to the Consigned Merchandise will pass from
Consignor to Consignee subject to the occurrence of a Consignment Sale in the
ordinary course of Consignee’s business. All proceeds of Consignment Sales shall
be the sole property of Consignor subject to payments as provided in paragraph 8
below.

     

         (c) Consignor
may execute and file all such instruments, including Uniform Commercial Code
financing statements, as may be necessary to confirm and to disclose Consignor’s
title to the Consigned Merchandise. Consignee will cause each lender, if any,
that has a security interest in any of Consignee’s inventory or equipment to
provide to Consignor written confirmation that such lender has been informed of
Consignor’s ownership of the Consigned Merchandise.

     

         3. Location of Consigned
Merchandise. All Consigned Merchandise will be held by Consignee at the
locations set forth on Schedule B hereto (the
“Consignee
Locations”). Until such time as an article of Consigned Merchandise is
sold in a Consignment Sale, Consignee will have no right to remove Consigned
Merchandise from any Consignee Location without Consignor’s written consent
unless reasonably in the ordinary course of Consignee’s business. Consignee will
provide prompt written notice to Consignor if Consignee intends to add or
discontinue the use of any Consignee Location. Consignee will store, maintain,
inspect and otherwise manage the Consigned Merchandise consistent with the
ordinary course of Consignee’s business as heretofore
conducted.


    
      
         


      

      
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         4. Acquisition and Maintenance
of Inventory. As of the date hereof, Consignee has placed an order with
Consignor, to manufacture and deliver in December, 2008 the quantities of
Consigned Product as set forth in Schedule C hereto (the
“Ordered
Inventory”). Consignee shall not cancel or modify its purchase order for
the Ordered Inventory without the written consent of Consignor. Consignee shall
use commercially reasonable efforts at all times during the Repurchase Period to
maintain, in Consignee’s reasonable business judgment, a sufficient supply of
each dose and package size of the finished products included in the Consigned
Merchandise; provided, that with
respect to the Ordered Inventory, Consignee’s obligation to use commercially
reasonable efforts to maintain such finished products shall begin upon receipt
of the Ordered Inventory. Consignee shall pay all costs incurred to replenish
the Consigned Merchandise pursuant to this Section 4.

     

         5. Risk of Loss and
Insurance. Consignee will bear all risk of loss or damage to Consigned
Merchandise and will maintain (i) all-risk property insurance for the full
replacement value on all Consigned Merchandise and (ii) general liability
insurance under customary pharmaceutical industry forms and endorsements,
providing product liability and contractual liability coverage, with per
occurrence limits of not less than $1,000,000, which limits may be achieved
through a combination of underlying and excess policies. The insurance policies
described in the preceding sentence shall be endorsed to (A) name Consignor
as an additional insured and loss payee, as applicable and (B) be primary
and non-contributory to any insurance otherwise available to Consignor.
Consignee will cause the insurer to provide Consignor with a certificate of
insurance evidencing the existence of such insurance, including its primary and
non-contributory nature, upon the execution of this Agreement and at such times
as Consignor may request thereafter. Such certificate of insurance shall provide
that the insurer will notify Consignor not less than thirty (30) days prior
to any expiration, non-renewal, cancellation, reduction in limits or exhaustion
of limits of such insurance. Consignee will be responsible for any deductible or
self-insured amounts under any such insurance.

     

         6. Terms of Consignment
Sales. Subject to the terms hereof, all Consignment Sales shall be made
in the ordinary course of Consignee’s business.

     

         7. Product
Warranties. CONSIGNEE HEREBY ACCEPTS ALL CONSIGNED MERCHANDISE ON
AN “AS IS” BASIS
WITHOUT WARRANTIES OF ANY SORT, INCLUDING EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Consignee shall be
responsible for all products warranties made in connection with Consignment
Sales and shall indemnify and hold harmless Consignor from and against all
warranty claims of any sort arising out of Consignment Sales, other than claims
arising out of Consignor’s gross negligence or willful misconduct.

     

         8. Consignment Payment.
In consideration of the Consignment of Consigned Merchandise pursuant to this
Agreement, Consignee shall pay Consignor payments (each such payment a “Consignment Payment”)
as follows:  

    
       

          (a)
Payment Amount.
The Consignment Payment shall be equal to Ten percent (10%) of Consignee’s Net
Sales of Consigned Merchandise, plus such additional amount, if any, as may be
necessary for Consignee to pay the Minimum Consignment Payment.


      
        
           


        

        
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           (b)
Quarterly
Payment. Fifteen (15) days prior to the end of each calendar quarter any
part of which is during the Term, Consignee shall deliver to Consignor
(i) a written statement showing all Net Sales during such calendar quarter
and (ii) the Consignment Payment due upon such Net Sales. All payments
shall be made by wire transfer of immediately available funds to an account
designated by Consignor at least two (2) Business Days in
advance.

    

         

        
9. Access by
Consignor.

     

         (a) Inspection. Consignee
will permit Consignor, its officers, agents and accountants access to
Consignee’s facilities and Consignee Locations during customary business hours
for the purpose of inspecting and otherwise examining the Consigned Merchandise
and auditing the books and records of Consignee to the extent such books and
records reflect sales of Consigned Merchandise. Consignor will give Consignee
not less than three (3) Business Days’ prior notice, which notice may be
given orally, electronically, in writing or by any other reasonable and
verifiable means of communication, prior to inspection. Consignor will conduct
any such inspection or audit in a manner that does not unreasonably interfere
with the ordinary conduct of Consignee’s business and will permit Consignee to
observe any inspection of the Consigned Merchandise conducted by
Consignor.

     

         (b) Audit. Upon not less
than seven (7) days written notice, Consignor shall have the right to audit
the books and records of Consignee relating to sales of Consigned Merchandise
for the purpose of determining the correctness of Consignee’s computation and
payment of the Consignment Payment. Such audit may not be conducted more than
once in any six-month period and shall be conducted during normal business
hours. Consignor may engage an accounting firm at its cost to perform or assist
in such audit. Consignee shall provide Consignor, its officers, agents and
accountants with access to all pertinent books and records and shall reasonably
cooperate with Consignor’s efforts to conduct such audits.  

     

         10. Termination.

     

         (a)
Consignor may terminate this Agreement by written notice to Consignee upon any
breach by Consignee of any material provision of this Agreement that is not
cured within thirty (30) days after Consignor’s giving Consignee written
notice thereof.

     

         (b)
Consignee may terminate this Agreement by written notice to Consignor upon any
breach by Consignor of any material provision of this Agreement that is not
cured within thirty (30) days after Consignee’s giving Consignor written
notice thereof.

     

         (iii)
Upon termination of this Agreement pursuant to this Section 10(b), all
amounts due and payable by Consignee shall immediately become due and payable
without further notice or demand.

     

         (c) Termination for Non-Payment
of Consignment Payment: Without otherwise limiting Section 10, Consignor
shall have the right to terminate the Agreement if Consignee shall (i) fail
to pay any part of the Consignment Payment when due and shall fail to cure such
non-payment within fifteen (15) days after receiving written notice, unless
the amount required to be paid is the subject of a good faith dispute between
the Parties and undisputed amounts, as of the last due date prior to notice
being given, have been paid.

     

         (d) Return of Consigned
Merchandise. Upon the termination of this Agreement, Consignee shall (i)
(A) at Consignee’s expense immediately deliver all Consigned Merchandise to
a location reasonably designated by Consignor or (B) make all Consigned
Merchandise


    
      
         


      

      
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    immediately
available for pick-up by Consignor, and (ii) provide Consignor with all
information possessed by Consignee regarding (A) the quantity of each
dosage and package size of finished product in the Consigned Merchandise,
(B) the status of outstanding purchase orders for Consigned Merchandise
from customers of Consignee, (C) the status of the Ordered Inventory (if
not then delivered) and all outstanding purchase orders for the manufacture of
Consigned Merchandise, (D) the obligations of Consignee with regard to
accepting returns of Consigned Merchandise and (E) the obligations of
Consignee with regard to rebates and chargebacks from all sources with regard to
Consigned Merchandise previously sold by Consignee.  

     

         (e) No Release of
Obligations. Termination of this Agreement shall not release either party
hereto from any obligation incurred prior to the date of termination or arising
out of termination. The remedies expressly set forth herein are in addition to
any other remedies that may otherwise be available to Consignor under this
Agreement, the Uniform Commercial Code or other applicable law and do not serve
to waive or modify Consignor’s rights with respect thereto.

     

         11.
Grant of
License.

    
         


         
(a) Grant.
Gamma hereby grants to Bridgeland, upon and subject to the terms and conditions
of this Agreement, an exclusive license under the Rights to develop,
manufacture, market, distribute and sell, and have manufactured, marketed,
distributed and sold, the Licensed Products in the Territory (the “License”).

       

           (b)
Exclusivity.
The License is exclusive as to all Persons, including Gamma.

      


           (c)
No Transfer.
Neither Bridgeland nor any consigned parties, distributors, manufacturers, etc.,
shall assign the License or grant any sublicense under the License, other than
(i) a sublicense to manufacture the Licensed Products solely for sale by or
on behalf of Gamma or (ii) such sublicenses as may be necessary to continue
the development of, and to obtain marketing approval for, Licensed
Products.

       

           (d)
Obligation to Develop
and Market. Bridgeland shall at all times during the Term use its
commercially reasonable efforts, consistent with usual pharmaceutical industry
practice, to develop and commercialize the Licensed Products during the term of
this Agreement.

    

         

       
12. Amendment;
Waiver. This Agreement, including the Schedules hereto, may be amended,
modified or supplemented only by an agreement in writing signed by the Parties.
No course of dealing between the Parties or failure by a Party to exercise any
right or remedy hereunder shall constitute an amendment to this Agreement or a
waiver of any other right or remedy or the later exercise of any right or
remedy.

     

         13. Force Majeure. No
Party shall be responsible to any other Party for any failure or delay in
performing any of its obligations under this Agreement or for other
nonperformance hereof if such delay or nonperformance is caused by fire, flood,
accident, act of God or of the government or any country or of any state or
local government, or of the public enemy of either, or by cause unavoidable or
beyond the control of such Party. In such event, the Party affected will use
reasonable commercial efforts to resume performance of its
obligations.


    
      
         


      

      
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         14. Headings. The
headings of Articles and Sections of this Agreement are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement in any way. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and
assigns.

     

         15. Notices. All notices,
consents, waivers and other communications hereunder shall be in writing and
shall be (i) delivered by hand, (ii) sent by facsimile transmission or
(iii) sent by a nationally recognized overnight delivery service, charges
prepaid, to the address set forth below (or such other address for a Party as
shall be specified by like notice):

     

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              If
      to the Consignor:

            	 
      	
              Gamma
      Pharmaceuticals Inc.

            
	 
      	 
      	 
      	 
      	
              800
      N. Rainbow Blvd

            
	 
      	 
      	 
      	 
      	
              Suite
      110

              Las
      Vegas, Nevada 89107

            
	 
      	 
      	 
      	 
      	
              Attention:
      Joe Cunningham

            
	 
      	 
      	 
      	 
      	
              Facsimile:

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Copy
      to:

            	 
      	
              Stoecklein
      Law Group

            
	 
      	 
      	 
      	 
      	
              402
      West Broadway, Suite 690

            
	 
      	 
      	 
      	 
      	
              San
      Diego, California 92101

            
	 
      	 
      	 
      	 
      	
              Attention:
      Donald J. Stoecklein

            
	 
      	 
      	 
      	 
      	
              Facsimile:
      (619) 704-1325

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              If
      to the Consignee:

            	 
      	
              Bridgeland
      Trading Ltd.

            
	 
      	 
      	 
      	 
      	
              Suites
      1601-1603

              Kinwick
      Center

              32
      Hollywood Road

              Central,
      Hong Kong

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
              Attention:

            
	 
      	 
      	 
      	 
      	
              Facsimile:
      852-2545-0550

            


    

     

         Each
such notice or other communication shall be deemed to have been duly given and
to be effective if (A) delivered by hand, immediately upon delivery if
delivered on a Business Day during normal business hours and, if otherwise, on
the next Business Day, (B) sent by facsimile transmission, immediately upon
confirmation that such transmission has been successfully transmitted on a
Business Day before or during normal business hours and, if otherwise, on the
Business Day following such confirmation or (C) sent by a nationally
recognized overnight delivery service, on the day of delivery by such service
or, if not a Business Day, on the first Business Day after delivery. Notices and
other communications sent via facsimile must be followed by notice delivered by
hand or by overnight delivery service as set forth herein within five
(5) Business Days.

     

         16. Assignment. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by Consignee without the prior
written consent of Consignor, which consent Consignor may withhold or grant in
its sole discretion. This Agreement and its provisions are for the sole benefit
of the parties to this Agreement and their successors and permitted assigns and
shall not give any other Person any legal or equitable right, remedy or
claim.

     

         17. Governing Law; Venue.
The execution, interpretation and performance of this Agreement, and any
disputes with respect to the transactions contemplated by this Agreement,
including any fraud claims, shall be governed by the internal laws and judicial
decisions of the State of Nevada, without regard to principles of conflicts of
laws.

     

         18. Severability. If any
provision contained in this Agreement shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein, unless the invalidity of any such
provision substantially deprives either Party of the practical benefits intended
to be conferred by this Agreement. Notwithstanding the foregoing, any provision
of this Agreement held invalid, illegal or unenforceable only in part or degree
shall remain in full force and effect to the extent not held invalid or
unenforceable, and the determination that any provision of this Agreement is
invalid, illegal or unenforceable as applied to particular circumstances shall
not affect the application of such provision to circumstances other than those
as to which it is held invalid, illegal or unenforceable.

     

         19. Construction. Each
Party acknowledges that it and its attorneys have been given an equal
opportunity to negotiate the terms and conditions of this Agreement and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting Party or any similar rule operating against the drafter of an
agreement shall not be applicable to the construction or interpretation of this
Agreement.

     

         20. Related Agreement.
This Agreement, including the Related Agreements, appendices, schedules and
exhibits thereto, are intended to be construed as parts of a group of related
transactions and shall be construed accordingly.

     

         21. Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may be executed on signature pages exchanged by
facsimile, in which event each Party shall promptly deliver to the others such
number of original executed copies as the other Party may reasonably
request.

     

         22. No Joint Venture. The
relationship between the Parties hereto is that of independent contractors. Such
Parties are not joint venturers, partners, principal and agent, master and
servant, employer or employee, and have no relationship other than as
independent contracting parties. Neither Party shall have the power to bind or
to obligate the other in any manner.

     

    

      
        
           


        

        
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         IN WITNESS WHEREOF, the
parties hereto have caused this Inventory Consignment Agreement to be executed
by their duly authorized representatives as of the date first set forth
above.

    
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              CONSIGNOR:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              GAMMA
      PHARMACEUTICALS INC.

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              By:

            	 
      	 /s/
      Joseph
      Cunningham                       
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Name:

            	 
      	
              Joe
      Cunningham

            	 
      	 
      
	 
      	 
      	
              Title:

            	 
      	
              President

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              CONSIGNEE:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              BRIDGELAND
      TRADING LTD.

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              By:

            	 
      	 /s/
      Geraldine
      Duo                                 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 	 
      	 
      
	 
      	 
      	
              Name:

            	 
      	Geraldine
      Duo for and on behalf of 	 
      	 
      
	 	 	 	 	Grampian
      Managers Limited	 	 
	 
      	 
      	
              Title:

            	 
      	
              President and Chief Executive Officer

            	 
      	 
      


    

     

    



    
      
         


      

      
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    SCHUDULE
A

     

    MERCHANDISE

     

    Products:

     

    Products
included to be agreed between the parties from time to time.

     

    Initial
orders world consists of the following:

     

    Various
pharmaceutical products including but not limited to Multi-Flavored Gumdrops,
Swirl Gummy Bears, Multi-Flavored gummy Bears, Orange Gumdrops,

     

    

      
        
           


        

        
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    SCHEDULE
B

     

    LOCATION

     

     

    Unless
otherwise agreed to in writing, the location shall mean Greater China which
shall include Hong Kong, Taiwan and South Korea. Consigned goods shall be held
at a secure or otherwise bonded facility when in transit.

     

    

      
        
           


        

        
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    SCHEDULE
C

     

    INVENTORY

     

     

    Inventory
quantities to be agreed between the parties from time to time. Initially, no
orders will be shipped that contains quantities of less than a full 20-foot
standard shipping container.  Inventory held at Location shall be held
in a secure storage facility and under environmental conditions consistent with
recommendations.

     

    


     

    

      
        
           


        

        
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