Document:

Distributorship Agreement w/ Verus S.A. de C.V.

 

Exhibit 10.6

DISTRIBUTORSHIP AGREEMENT

This Agreement is made as of the 12th day of November, 2003, between:

LAM PHARMACEUTICAL CORPORATION, a corporation subsisting under the laws of
Delaware, and having a business address at 800 Sheppard Avenue West, Commercial
Unit 1, Toronto, Ontario, Canada M3H 6B4.

(hereinafter “LAM”)

- and -

Verus S.A. de C.V., a corporation subsisting under the laws of Mexico, having a
business address of Genova 20-PH Col. Juarez, Deleg. Cuauhtemoc, C.P. 06600,
Mexico.

(hereinafter “Distributor”)

WHEREAS LAM is engaged in the development and manufacture of pharmaceutical
preparations including a proprietary wound healing product (“Products”) as
hereinafter defined;

AND WHEREAS Distributor wishes to become, and LAM wishes to engage Distributor
as, an exclusive distributor of the Products for territories listed in the
Schedule B to this Agreement (“Territory”) to, among others, Hospitals,
Clinics, and Doctors treating diabetic and other non-healing ulcers, subject to
the terms and conditions of this Agreement;

AND WHEREAS the parties would like to enter into a five year agreement to
distribute LAM’s Products in Territory;

NOW THEREFORE in consideration of the mutual promises and covenants contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:

1. DEFINITIONS

The following terms will have the following meanings in this Agreement:

	•	 	“Intellectual Property” means all patents, copyrights, trade-marks,
designs, product formulation data, test results, trade secrets and all
other intellectual property owned, used or claimed by LAM from time to
time;

	•	 	“Person” means any individual, company, corporation, partnership, joint
venture, firm, trust, association, sole proprietorship, government or
government agency, or other entity howsoever designated or constituted;

	•	 	“Products” means LAM’s wound healing product as more fully described in
Schedule A attached hereto;

	•	 	“Territory” means the countries listed in Schedule B attached hereto;

 

 

	•	 	“Term” has the meaning given thereto in Section 4.

2. SCHEDULES

The following Schedules are attached hereto and form part hereof:

Schedule A  — Definition of Product

Schedule B  — List of Countries

3. GRANT AND INITIAL PAYMENT

3.1 Grant

Subject to the provisions of this Agreement, LAM hereby appoints the
Distributor, for the Term, as its exclusive distributor of the Products in the
Territory. LAM will sell to Distributor, and Distributor will buy from LAM,
the Products for resale in the Territory. LAM reserves the right to revise the
list of Products in Schedule A at any time during the Term on no less than 180
days’ notice to Distributor.

3.2 Right to Authorize Others / Direct Marketing

The appointment made hereunder is exclusive to the Distributor in the
Territory. Provided the Distributor has not breached any of the terms and
conditions hereof, LAM will not authorize any other Person to market or sell
the Products in the Territory, nor appoint other distributors, representatives
or agents to do so, nor market any of the Products in the Territory itself to
or with other parties.

3.3 No Agents

The Distributor may not appoint or permit any agents or sub-agents or
sub-contractors to carry out any of its obligations or to benefit from any of
its rights hereunder, without LAM’s prior written consent. However, for
greater clarity, nothing herein shall prevent or limit Distributor from selling
Products to its customers (“Distributor’s Customers”) for subsequent resale to
end users in Territory, whether or not such sales shall be governed by separate
supply or distribution agreements.

3.4 Relationship

This Agreement does not nor will it be deemed to constitute the Distributor as
a partner, joint venturer, servant or employee of LAM. The Distributor will
have no authority to bind LAM in any respect and will not hold itself out as
owned by or associated with LAM other than as an independent LAM Distributor
authorized to market and sell Products on the terms and conditions of this
Agreement, or as otherwise specified herein.

3.5 Representative of Record

LAM appoints the Distributor, for the Term, as its Representative of Record in
the Territory, and the Distributor may indicate this status to the extent
necessary to comply with the laws of

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Territory. The Distributor is hereby appointed as LAM’s legal representative,
solely for the purpose of the Marketing Authorization, and otherwise has no
ability to bind or act on LAM’s behalf.

4. TERM

4.1 Initial Term

The entire term of this Agreement (the “Term”) will, subject to earlier
termination according to Section 16, consist of the Initial Term. The Initial
Term will start as of the date on which the Distributor receives Marketing
Authorization for at least one country listed in the Schedule B, and will
continue for one year from such date.

4.2 Failure to obtain Marketing Authorization

If Marketing Authorization for Products in at last one country listed in
Schedule B is not obtained within six (6) months of the date upon which the
Agreement was executed, then LAM will have the option, but not the obligation,
to terminate this Agreement.

4.3 Marketing Success

If, at the end of the Initial Term, the parties agree that the Products are a
marketing success, then they may agree to enter into a further term with such
minimum purchase requirements as LAM and Distributor shall negotiate in good
faith. In the alternative, if the parties have neither renewed this Agreement
nor entered into a new agreement with respect to the subject matter hereof, and
LAM has not exercised any rights of termination but rather continues to accept
orders from the Distributor, the parties will continue to be bound by the terms
of this Agreement, until terminated by either party on thirty (30) days’
written notice to the other. In this latter case, the Distributor’s rights
hereunder shall be non-exclusive only.

5. DUTIES AND OBLIGATIONS OF LAM

During the Term LAM will:

	 	(a)	 	provide to the Distributor such
marketing and Product information as in LAM’s opinion
will assist the Distributor in the performance of the
Distributor’s obligations hereunder;
	 
	 	(b)	 	refer all inquiries with respect to
Products intended for use within the Territory to the
Distributor;
	 
	 	(c)	 	manufacture Products in conformance
to current Good Manufacturing Practices; and
	 
	 	(d)	 	inform the Distributor of changes to
Products, Product specifications, conditions and other
material aspects of the Products at least 180 days prior
to any such change, however, LAM agrees to use best
commercial efforts to supply adequate

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	 	 	 	quantities of unaltered Products to permit Distributor
to fulfill supply agreements awarded as a result of
tenders;

6. DUTIES AND OBLIGATIONS OF THE DISTRIBUTOR

6.1 Affirmative Covenants

The Distributor will:

	 	(a)	 	actively and diligently market and
sell the Products in the Territory, and devote all
necessary commercially reasonable resources, time and
attention to doing so;
	 
	 	(b)	 	purchase Products from LAM on its own
account for resale to customers, according to this
Agreement, and be solely responsible for invoicing and
collecting all receivables from customers;
	 
	 	(c)	 	purchase and maintain readily
available a sufficient inventory of Products to
reasonably promptly satisfy all customer orders;
	 
	 	(d)	 	take all reasonable care in storing
and handling the Products as required to preserve the
Products in an optimal condition for sale and use;
	 
	 	(e)	 	have and maintain insurance at all
times with respect to its inventory of Products against
risks of fire (including so-called extended coverage),
theft, and other risks as LAM may reasonably require.
Such insurance must be sufficient to completely satisfy
the Distributor’s indebtedness to LAM at all times. In
the event of failure by the Distributor to obtain such
insurance, LAM may do so on the Distributor’s behalf, at
the Distributor’s cost;
	 
	 	(f)	 	maintain competent and aggressive
sales, technical and support personnel to provide
appropriate demonstration, distribution and support of
the Products, including effective responses to inquiries
from customers and potential customers regarding Product
use, care, application, and the like and make its best
reasonable efforts to maximize sales of Products;
	 
	 	(g)	 	maintain an accurate record and
account of all transactions, negotiations, sales
strategies and sales activities, for no less than seven
(7) years, and make such information available to LAM on
request.
	 
	 	(h)	 	permit LAM or its representatives to
enter on the Distributor’s premises, on reasonable
notice, to inspect the Distributor’s inventory, and
books and records for the purpose of determining the
payment obligations of Distributor to LAM, The
Distributor

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	 	 	 	will cooperate fully with LAM and its representatives
in making such books and records available for
inspection;
	 
	 	(i)	 	submit when due, or if no due date is
specified, forthwith upon reasonable request, all
reports and other documents to be provided to LAM in
accordance herewith;
	 
	 	(j)	 	ensure that at all times prompt,
courteous and efficient service is accorded to every
customer and prospective customer, and adhere to the
highest standards of honesty, integrity, fair dealing
and ethical conduct in all dealings with its customers,
suppliers, LAM and the public, in accordance with
standard operating policies and procedures of
Distributor;
	 
	 	(k)	 	maintain and promote the goodwill of
LAM and its Products;
	 
	 	(l)	 	strictly comply with all applicable
municipal, state, federal and other laws of the
Territory countries, and regulations and the terms and
conditions of all applicable orders, permits,
certificates and licences, and obtain and at all times
maintain all permits, certificates and licences
necessary or desirable for the proper marketing and sale
of the Products according to this Agreement;
	 
	 	(m)	 	participate in all market research
activities that LAM determines from time to time to be
required for or beneficial to the marketing and sale of
Products, acting reasonably;
	 
	 	(n)	 	at all times cooperate with LAM’s
representatives and report promptly to LAM any
information which may come to the Distributor’s
attention regarding complaints or claims with respect to
the Products, customer needs and interests and local
market conditions;
	 
	 	(o)	 	refer all inquiries from outside the
Territory with respect to Products, or for Products
which are reasonably believed to be intended for use
outside the Territory, to LAM;
	 
	 	(p)	 	to provide, within 90 days of the
date upon which LAM executes this Agreement, a written
market analysis, marketing plan and minimum purchase
requirements for the Products in the Territory for the
duration of this Agreement. The Distributor agrees that
it will be at LAM’s sole discretion to accept or reject
the minimum purchase quantities. In the event that LAM
rejects the Distributor’s minimum purchase proposal, LAM
may, at its sole discretion, terminate this agreement.
	 
	 	(q)	 	upon the expiry or termination of
this Agreement, for whatever reason, assign the
Marketing Authorization to such entity as is

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	 	 	 	specified by LAM, forthwith upon receiving instructions
from LAM to do so. Distributor hereby appoints LAM as
its attorney with the limited power to effect such
assignment upon any such expiry or termination.

All of the foregoing will be at the Distributor’s sole cost and expense, unless
otherwise specified.

6.2 Negative Covenants

The Distributor will not:

	 	(a)	 	directly, indirectly or by inference,
orally or in writing, make or give any guarantees,
representations or warranties, express or implied, with
respect to any of the Products to customers or
prospective customers, other than to refer them to
information on the Products as LAM from time to time
provides in writing;
	 
	 	(b)	 	alter or remove, nor permit to be
altered or removed from the Products any patent numbers,
serial numbers, lot and batch numbers, instructions,
warnings, LAM-provided trade-marks or other commercial
symbols, or other identifying marks without LAM’s prior
written consent, or
	 
	 	(c)	 	knowingly transfer, sell, ship, or
allow to be sent, any of the Product to a destination or
person outside the Territory or to a person who is
likely to transfer, sell, ship or allow to be sent, any
of the Product to a destination or person outside the
Territory unless first granted permission to do so by
LAM.

7. PRICES

7.1 Prices

The initial prices charged by LAM to the Distributor for the Products will be
those set out in Schedule A. The prices charged by the Distributor to any and
all purchasers for Products must be approved by LAM, but LAM shall not refuse
to approve any proposed prices except on reasonable grounds.

7.2 Taxes

	 	(a)	 	The prices in this Agreement are for
the Products only. The Distributor will be responsible
for all Territory countries’ federal, provincial, state
and other taxes, duties, levies and assessments
pertaining to the sale and import of the Products
(except taxes based on LAM’s net income) except to the
extent the Distributor provides LAM with a valid
exemption certificate.

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8. ORDERS

8.1 Purchase Orders

The Distributor will place individual written purchase orders for Products from
time to time during the Term. Each purchase order must contain the following
minimum information:

	 	(a)	 	a reference to this Agreement;
	 
	 	(b)	 	identification of each Product
ordered by type, quantity and price;
	 
	 	(c)	 	shipping instructions and
destination; and
	 
	 	(d)	 	requested delivery date.

8.2 Minimums

Minimum Product order quantities and delivery lead times are set out in Schedule A.

8.3 Order Acceptance

No purchase order will be effective until accepted and acknowledged in writing
by a duly authorized LAM official. Acceptance of all orders is subject to
approval by LAM’s credit department. Any terms and conditions set out in a
purchase order that contradict or are inconsistent with the terms and
conditions of this Agreement are void and of no force or effect, unless
otherwise agreed by the Parties.

8.4 Reschedule of Purchase Orders

The Distributor may reschedule any Product, which is to be delivered under any
purchase order with a minimum of thirty [30] days’ prior written notice to LAM.
Any requested delay in delivery may extend the delivery up to a maximum of
sixty [60] days beyond the originally scheduled delivery date. Any Product may
be rescheduled only once, and any rescheduled Product may not be cancelled.

8.5 Purchase Order Cancellations

The Distributor may cancel any Product which is to be delivered under any
purchase order on written notice no less than thirty [30] days’ prior to the
originally scheduled delivery date, provided that:

	 	(a)	 	the Distributor is not in default of
its obligations under this Agreement at the time of the
cancellation request; and
	 
	 	(b)	 	the Distributor remits, within thirty
[30] days following notice of cancellation, a
cancellation payment according to the following
schedule:

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	No. of Days Prior to Shipment
	 	Cancellation Charge (% of Purchase Price)

	[60 or more days]
	 	[no charge]
	[30-59 days]
	 	[15%]
	[0-29 days]
	 	[no cancellation permitted]

These cancellation charges are established by LAM and the Distributor in good
faith as a means of reimbursing LAM for its expenditures and losses in the
event of the Distributor’s exercise of the specified cancellation privileges.
As an exact calculation of such expenditures and losses would be impractical in
each circumstance, such charges are fixed as a percentage, and are not intended
as a penalty on the Distributor.

9. DELIVERY, RISK OF LOSS

9.1 Delivery

Delivery of all Products will be F.O.B. at LAM’s warehouse at a US location as
LAM will specify by written notice. Although LAM will use reasonable efforts
to notify the Distributor of anticipated delay in delivery or inability to
deliver Product, LAM will not be liable to the Distributor for any such failure
or delay, or for failure to give notice thereof.

9.2 Product Shortage

In the event of a shortage of Product, LAM will have the right to allocate its
supply of Products among its distributors in any way that LAM considers
reasonable. LAM will make reasonable efforts to supply Products to
Distributor to fulfill Distributor’s contractual obligations pursuant to
awarded tenders.

9.3 Withholding Shipment

LAM may withhold or suspend, in whole or in part, shipment of the Products to
the Distributor or may, at its option, sell the Products on a C.O.D. basis in
the event the Distributor fails to pay according to the terms of this Agreement
and invoices for Products previously shipped to the Distributor, or otherwise
fails to perform any of its obligations under this Agreement, provided that
Distributor fails to remedy such deficiency within thirty (30) days of written
notice from LAM.

9.4 Risk of Loss

Risk of loss will pass to the Distributor on delivery of the Products at the
F.O.B. point specified above. In the event of any loss of or damage to the
Products following delivery to the carrier, LAM will, on request, cooperate
with the Distributor in connection with the proof of loss claim presented by
Distributor to the carrier and/or insurer. Unless requested otherwise by the
Distributor, LAM will use its discretion in selecting the method of shipment
and the carrier.

9.5 Packaging

All packing materials and methods, the carrier and type of conveyance will
conform to LAM’s standard commercial practices for export shipment of its
Products. The cost of any special

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packing or packaging materials and methods requested by the Distributor which
do not conform to or are in addition to said standard commercial practices will
be borne by the Distributor. This excludes Spanish language packaging and
inserts, to be provided by LAM in accordance with Schedule A.

9.6 Inspection

The Distributor must inspect all Products delivered to it by LAM within fifteen
[15] days of delivery, for purposes of quality control. Unless the Distributor
notifies LAM of any defect within fifteen [15] days of delivery thereof or of
damage to the Products’ containers, the Products will be deemed to have been
free of any defects which would have been apparent on a proper inspection at
such time of delivery, and will be deemed to be accepted by the Distributor.

10. PAYMENT AND SECURITY INTEREST

10.1 Invoicing and Payment

Payment for all orders must be made by wire transfer, bank draft or letter of
credit prior to LAM having to ship Products pursuant to any order from the
Distributor, and if payment is not received by LAM, LAM shall have no
obligation to ship same. The Distributor is required to pay for all products
ordered, and nothing in this clause allows or permits the Distributor to avoid
the provisions of section 8.5 herein, to delay payment, or to cancel any order
by non-payment of the purchase price.

10.2 Security Interest

As general and continuing security for payment to LAM of all amounts owing by
the Distributor hereunder, the Distributor agrees that title to the Products
purchased by the Distributor under this Agreement will remain with LAM until
LAM receives payment in full therefor. LAM reserves, until full payment is
received, a purchase-money security interest in all Products sold to the
Distributor and in proceeds derived from the resale of such Products. If the
security interest provided here is insufficient to satisfy the Distributor’s
indebtedness to LAM, the Distributor will remain liable for all remaining
indebtedness. The Distributor will execute and deliver all such further
documents, agreements and instruments as LAM may request so that LAM can
perfect and maintain such security interest.

11. INTELLECTUAL PROPERTY

11.1 No Permanent Interest

The Distributor irrevocably acknowledges that all of the Intellectual Property
involving the Product, including but not limited to any and all patent rights
whether in Territory countries or any other country, is the exclusive property
of LAM or that LAM has the exclusive rights thereto except as provided herein.
Neither this Agreement nor the conduct of the parties hereunder will in any way
give or be deemed to give to the Distributor any interest in any of the
Intellectual Property except for the limited right to sell the Products bearing
trade-marks, trade names and other commercial symbols owned or used by LAM,
solely in accordance with the terms and conditions of this Agreement and only
within and for use within the Territory. Any and all

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goodwill and other value associated with the Intellectual Property will inure
exclusively to the benefit of LAM.

11.2 Distributor’s Obligations With Respect to Trade-marks and Trade Names

The Distributor covenants and agrees that:

	 	(a)	 	the Distributor will not use any of
the trade-marks, tradenames and commercial symbols owned
or used by LAM as any part of the Distributor’s
corporate, firm or business name(s);
	 
	 	(b)	 	the Distributor may only use the such
trade-marks, trade names and commercial symbols as
appear on the Products and on promotional materials
therefor when received by the Distributor under this
Agreement, and otherwise only use such trade-marks and
trade names and in such manner and for such purpose as
LAM may specify and approve from time to time, and no
other; and
	 
	 	(c)	 	neither during the Term nor at any
time thereafter will the Distributor, either directly or
indirectly, dispute or contest the validity or
enforceability of any of the Intellectual Property,
attempt any registration thereof, or attempt to dilute
the value of any goodwill attaching to the Intellectual
Property or inuring from any part thereof, anywhere in
the world unless explicitly granted the right to do so
in writing by LAM.

11.3 Infringement

LAM represents and warrants that to its knowledge at the effective date hereof,
sale or use of the Products does not infringe any intellectual property rights
of any third party in the Territory. The Distributor will immediately notify
LAM of any infringement of or challenge to LAM’s or the Distributor’s use of
any of the Intellectual Property. In such case, LAM will have the sole
discretion to take such action as it deems appropriate.

11.4 No Liability

LAM will have no liability or obligation to the Distributor with respect to any
claim whatsoever, including but not limited to any patent infringement claim,
such as:

	 	(a)	 	use of the Products in combination
with devices or products not purchased hereunder where
the Products themselves would not be infringing;
	 
	 	(b)	 	use of the Products in an application
or environment for which such Products were not designed
or contemplated;
	 
	 	(c)	 	modifications of or to the Products;
or

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	 	(d)	 	any claims of infringement of a
patent in which the Distributor or any affiliate or
customer of the Distributor has an interest or license.

11.5 Litigation of Liability

The provisions of this section 11 state LAM’s entire liability with respect to
infringement or alleged infringement of patents by the Products or any part
thereof. In no event will LAM’s liability exceed the purchase price paid by
the Distributor for Products alleged to be infringing, and LAM will in no event
be liable to the Distributor or any third party for any consequential, special
or incidental damages, except as otherwise provided herein.

11.6 Modification or Discontinuance

If it becomes advisable at any time in the sole discretion of LAM for the
Distributor to modify or discontinue the use of any of the Intellectual
Property or to use one or more additional or substitute trade names or
trade-marks or other items of intellectual property, the Distributor will do so
immediately on notice from LAM. The sole obligation of LAM in such event will
be to reimburse the Distributor for out pocket expenses reasonably incurred by
the Distributor in complying with this section.

12. ADVERTISING

12.1 Promotions and Advertising

LAM may from time to time and in its sole discretion make available promotional
programs, including national or international programs, to assist the
Distributor in generating business. LAM may also from time to time, and in its
sole discretion as to content, supply the creative ad production services for
one or more series of standard Distributor print or other ads. The Distributor
may, in accordance with LAM’s procedures in that regard, add its name, address,
phone number, and details regarding products, prices and/or other promotions.

12.2 Distributor’s Advertising

The Distributor may conduct such advertising and promotions and produce its own
advertising material in respect of the Products as the Distributor desires,
provided that the Distributor:

	 	(a)	 	advertises and promotes only in a
manner that will, in LAM’s opinion, reflect favorably on
the Products, LAM, the Distributor, other LAM
distributors, and the good name, goodwill and reputation
thereof; and
	 
	 	(b)	 	submits to LAM for its prior written
approval, all advertising and promotions to be used by
the Distributor; until such time as LAM gives such
approval, the Distributor will not use any such
advertising or promotions.

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12.3 Other Promotional Material

The Distributor may, in its sole discretion, use such brochures, sales aids and
other promotional materials provided by LAM from time to time, including
current literature and other material for the Products. LAM reserves the right
to limit the quantities of such materials provided to the Distributor and/or
charge the Distributor for such materials, at wholesale cost, acting
reasonably.

12.4 Copyright

The Distributor hereby acknowledges that LAM is and will remain the sole and
exclusive owner of all copyrights and trademark or other intellectual property
rights relating to any such advertising and promotional material and any and
all advertising and promotional material prepared by or on behalf of LAM.

13. WARRANTY

13.1 Warranty

LAM warrants the Products to be free from defects in design, workmanship and
materials under normal use for the warranty period specified in Schedule A.
Subject to the terms and conditions of this Agreement, LAM agrees to replace
any defective Products which are returned, at the Distributor’s expense, to LAM
within the applicable warranty period specified in Schedule A; provided that an
inspection thereof discloses that the defects are as defined above, and
provided further that the Products have not been altered or been subjected to
misuse, improper maintenance or storage, negligence or accident; that the
Products have not been damaged; and that the Products have not had their serial
number, lot and batch number, or any part thereof altered, defaced or removed.

13.2 Return

In the event of a warranty claim, the Distributor must obtain the appropriate
return authorization from LAM prior to the return of the allegedly defective
Product. Thereafter, the Distributor must, at LAM’s request, ship the Product
to LAM. The Distributor must reference the return authorization number on the
shipment and advise LAM in writing of the details concerning the alleged
defect. All shipments of returned Products must be packaged in their original
or equivalent containers and shipped prepaid to LAM. All Products determined
to be defective will become LAM’s property on replacement thereof. Shipping
charges for repaired or replaced Products forwarded by LAM to the Distributor
will be borne by LAM. Such shipping charge will be limited to the customarily
used carrier rate for the Products then in effect. Products replaced are
warranted throughout the remainder of the warranty period originally applicable
to the defective item or for ninety [90] days, whichever is longer.

13.3 Determination of Warranty Claim

Final determination of eligibility for warranty coverage for the Products will
be made by LAM. If a warranty claim is improperly made, LAM will so advise the
Distributor and the Distributor will be charged for service performed, and all
expenses incurred by LAM in handling and shipping the Products. All
replacements will be performed according to standard factory

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specifications, unless the Distributor has an executed agreement with LAM
establishing different specifications and the Distributor so advises LAM at the
time of requesting the replacement.

13.4 No Other Warranty

EXCEPT AS EXPRESSLY AND SPECIFICALLY PROVIDED, THERE ARE NO REPRESENTATIONS,
WARRANTIES OR CONDITIONS WITH RESPECT TO ANY PRODUCTS OR SERVICES, WHETHER
EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES AND CONDITIONS OF
MERCHANTABILITY AND FITNESS FOR INTENDED OR PARTICULAR PURPOSE.

14. SALE, ASSIGNMENT, TRANSFER

14.1 Assignment or Transfer by the Distributor

The Distributor may not assign this Agreement or any of the Distributor’s
rights or obligations hereunder or thereunder; without the prior written
consent of LAM.

14.2 Assignment by LAM

LAM may sell, transfer or assign all or any part of its interest in this
Agreement or the Intellectual Property without the Distributor’s consent, upon
providing the Distributor with written notice thereof.

15. CONFIDENTIALITY AND NON-COMPETITION

15.1 Non-Disclosure and Non-Use

“Confidential Information” means any data or information of either LAM on the
one hand, or the Distributor on the other, whether oral, written or otherwise
recorded, that is non-public, confidential or proprietary in nature, and all
such information that is developed by either of the parties in the course of
their relationship, including, without limitation: any scientific, computer or
other technical information, technology, research, design, idea, process,
procedure, formula or improvement, or any portion or phase thereof; information
relating to any current or proposed products, services, methods, businesses or
business plans, marketing, pricing, distribution and other business strategies;
lists of, or any other information relating to, any customers, suppliers,
dealers, agents or employees and the relationships therewith; and any financial
information relating to any of the foregoing. Neither party will be obliged to
reveal any of its Confidential Information to the other party.

All disclosures of Confidential Information made by either party to the other
are and will be made solely on a confidential basis and as trade secrets.
Accordingly, each party will maintain the confidentiality of all Confidential
Information during the Term and at all times thereafter. Neither party will
disclose any Confidential Information to any Person except those with a “need
to know” to enable the party to fulfill its obligations under this Agreement,
except with the disclosing party’s prior written authorization, or as may be
required by the applicable laws of Canada, the United States of America or
Territory countries.

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Each party agrees that it will not use the other’s Confidential Information for
any purpose other than as provided herein. The parties agree that any
unauthorized disclosure or use by or for the benefit of any party could cause
irreparable harm and damage to a disclosing party. Accordingly, in addition to
any monetary damages, a party who suffers from a breach of this provision of
non-disclosure and non-use shall be entitled to an injunction to prevent any
threatened or continuing violation of this Agreement, and the breaching party
hereby consents to such relief.

The parties obligations of non-disclosure and non-use shall survive the
expiration or any early termination of this Agreement for whatever reason, and
shall expire seven (7) years from the effective date hereof, or five (5) years
from termination of any business relationship of the parties, whichever occurs
later.

15.2 Non-Competition

(i) The Distributor will not, without the prior written consent of LAM, either
individually, in partnership, jointly or in conjunction with any Person, as
principal, agent, shareholder, employee, director, officer, or in any other
manner whatsoever:

	 	(a)	 	at any time during the Term, carry
on; be engaged in; be concerned with or interested in;
advise; lend money to; guarantee the debts or
obligations of; or permit its name or any part thereof
to be used or employed by any Person engaged in,
concerned with or interested in, any business selling,
operating, offering or providing products or services
competitive with the Products; nor
	 
	 	(b)	 	during the period of two (2) years
from the termination or expiry of this Agreement,
anywhere within the Territory, do any of the things
listed in paragraph (a), or solicit the business of any
customers of LAM or of any other LAM distributor or
agent.

(ii) LAM will not, without the prior written consent of Distributor, either
individually, in partnership, jointly or in conjunction with any Person, as
principal, agent, shareholder, employee, director, officer, or in any other
manner whatsoever:

	 	(a)	 	at any time during the Term and
during the effective period of the obligations of
non-disclosure and non-use, sell a Product directly to
any of Distributor’s Customers in the Territory (“Direct
Selling”).
	 
	 	(b)	 	If Direct Selling should occur, the
Distributor will be entitled to seek immediate
injunctive relief.

15.3 Personal Acknowledgments

The Distributor will deliver to LAM, at any time LAM may request, either: (i)
the written acknowledgment of such directors, officers, shareholders or
employees of the Distributor as LAM will in its discretion determine,
acknowledging that they have reviewed the confidentiality

14

 

and no-competition provisions of this Section 15 and that they agree to abide
and be bound thereby; or (ii) LAM’s form of non-disclosure / non-competition
agreement signed by such of them as LAM may specify.

16. TERMINATION

16.1 LAM’s Termination in the Event of Default

LAM will have the right to terminate this Agreement and the rights granted
hereunder without prejudice to the enforcement of any other right or remedy,
immediately upon giving written notice to the Distributor of such termination,
upon the happening of any of the following events of default:

	 	(a)	 	if the Distributor breaches or fails
to observe any term or condition of Section 11
(Intellectual Property) or Section 15 (Confidentiality
and Non Competition);
	 
	 	(b)	 	if the Distributor does not pay any
amount payable under this Agreement when due, together
with any interest accrued thereon, or if the Distributor
breaches or fails to observe or perform any other term
or condition of this Agreement or any other agreement or
undertaking entered into with or required by, LAM, and
such breach or failure continues for a period of thirty
[30] consecutive days after written notice thereof has
been given to the Distributor by LAM;
	 
	 	(c)	 	if the Distributor ceases or
threatens to cease to carry on business, takes or
threatens to take any action to liquidate its assets;
stops making payments to any creditors, trade or
otherwise, in the normal course of business; makes or
purports to make a general assignment for the benefit of
creditors; makes or purports to make a bulk sale of its
assets; or institutes or has instituted against it any
proceeding under any statute or otherwise relating to
insolvency, bankruptcy, winding up, liquidation or
dissolution, including the appointment of a custodian or
receiver, or if any proceeding under any such statute or
otherwise is instituted against it;
	 
	 	(d)	 	if any lessor or creditor or any
other Person or any government entity lawfully takes
possession of any of the Distributor’s undertaking,
business, property or assets or if the Distributor
commits or suffers any default under any contract or
conditional sale, mortgage or other security instrument;
	 
	 	(e)	 	if the Distributor, its directors,
officers or shareholders engage in any activity contrary
to any material law, including by way of example and not
of limitation, applicable Federal, Provincial, State,
Municipal or other laws or regulations of Canada, the
United States of America or Territory countries which in
the opinion of

15

 

	 	 	 	LAM acting reasonably, would reflect negatively upon
the Products or LAM; or
	 
	 	(f)	 	if the Distributor commits, permits,
or allows to continue any other default under this
Agreement which is not cured to the satisfaction of LAM
within thirty (30) days after written notice is provided
to the Distributor;

16.2 Distributor’s Termination in the Event of Default

The Distributor will have the right to terminate this Agreement without
prejudice to the enforcement of any other right or remedy, immediately upon
giving written notice to LAM of such termination, upon the happening of any of
the following events of default:

	 	(a)	 	if LAM breaches or fails to observe
any term or condition of Section 15 (Confidentiality and
Non Competition) and such default, breach or failure
continues for a period of thirty (30) consecutive days
after written notice has been given by the Distributor
to LAM;
	 
	 	(b)	 	if LAM breaches or fails to observe
or perform any other term or condition of this Agreement
and such breach or failure continues for a period of
thirty [30] consecutive days after written notice
thereof has been given by the Distributor to LAM; or
	 
	 	(c)	 	if LAM ceases to cease to carry on
business, takes any action to liquidate its assets;
stops making payments to any creditors, trade or
otherwise, in the normal course of business; makes or
purports to make a general assignment for the benefit of
creditors; makes or purports to make a bulk sale of its
assets; or institutes or has instituted against it any
proceeding under any statute or otherwise relating to
insolvency, bankruptcy, winding up, liquidation or
dissolution, including the appointment of a custodian or
receiver, or if any proceeding under any such statute or
otherwise is instituted against it.

16.3 Distributor’s obligations on Expiry or Termination

Upon the expiry or termination of this Agreement for any reason whatsoever, the
Distributor will:

	 	(a)	 	immediately pay to LAM all accounts
then due and unpaid by the Distributor;
	 
	 	(b)	 	immediately discontinue displaying
and/or using any and all signs, stationery, letterheads,
packaging, forms, manuals, bulletins, instruction
sheets, printed matter, advertising and other physical
objects containing or bearing any of LAM’s trade-marks,
trade

16

 

	 	 	 	names or commercial symbols, promptly execute such
documents or take such actions as may be necessary to
abandon the Distributor’s use of any thereof, and will
not thereafter operate or do business under any name or
in any manner that might lead to the inference that it
is or was associated with LAM or the Products:
	 
	 	(c)	 	promptly remove or co-operate in the
removal of, at LAM’s request, the Distributor’s listing
as an LAM Distributor from all telephone directories and
all other trade or business directories (in respect of
the next publication thereof), and to assign (if the
business of the Distributor is being continued by LAM or
its nominee) to LAM or any other party designated by LAM
all of the Distributors’ telephone numbers and listings
in connection with the marketing and sale of Products;
	 
	 	(d)	 	immediately return to LAM, or destroy
if requested by LAM, all Confidential Information and
all copies thereof, all other material provided to the
Distributor by LAM and all information, data and
materials pertaining to the Products;
	 
	 	(e)	 	promptly assign Marketing
Authorization as requested by LAM in accordance with
section 6.1(q) herein.

Notwithstanding the foregoing, the Distributor will have the right to sell,
according to this Agreement, those Products which it still has in inventory on
the date of termination and which LAM does not re-purchase according to this
Agreement.

16.4 LAM’s obligations on Expiry or Termination

On expiration or termination of this Agreement, LAM will have the right, but
not the obligation, to purchase or cause a nominee of LAM to purchase from the
Distributor the inventory of Products held by the Distributor on the effective
date of termination, providing that the Products have not expired and are in
salable condition; at the then prevailing price or the price paid by the
Distributor, whichever is less (the “Repurchase Price”); failing which the
Products must be returned to LAM for destruction or other disposition by LAM,
at LAM’s sole option. LAM may exercise this right by notice in writing
delivered to the Distributor within thirty [30] days of the date of such
expiration or termination. Any such repurchase by LAM will be subject to the
following conditions:

	 	(a)	 	Within five [5] days of the effective
date of termination, the Distributor will give to LAM a
written schedule listing all Products then owned by or
in the possession of the Distributor, identifying each
Product by model or unit number and showing the quantity
on hand.
	 
	 	(b)	 	The Distributor will, within ten [10]
days’ following LAM’s request, ship the Products
specified in the schedule to LAM,

17

 

	 	 	 	freight prepaid. LAM will only accept Products in
their original unbroken packaging. On receipt of the
Products, LAM will Inspect and test the Products to
determine if they are in good marketable condition, and
whether they have been properly handled and returned to
LAM. LAM will repurchase those Products which it
determines have satisfied the foregoing conditions, and
will return to the Distributor, freight collect, those
which it determines have not.
	 
	 	(c)	 	To the extent such Products are
delivered to LAM, freight prepaid and in good condition,
LAM will pay to the Distributor the Repurchase Price
therefor, either by issuing a credit to apply to
indebtedness of the Distributor to LAM and, to the
extent there is any excess of Repurchase Price payable
over and above such indebtedness, by payment of the
excess to the Distributor within thirty [30] days of
delivery of the Products to LAM.
	 
	 	(d)	 	To the extent such Products are, upon
inspection, found to have expired or otherwise not be in
salable conditions, LAM will not be obliged to pay to
the Distributor the Repurchase Price in respect of such
expired or non-salable Products, but LAM shall retain
possession and ownership of all such Products.

16.5 Survival of Certain Provisions after Termination

Notwithstanding the expiry or termination of this Agreement for any reason
whatsoever, all covenants and agreements to be performed and/or observed by
either party under this Agreement which by their nature survive the expiration
or termination of this Agreement, including without limitation those set out in
Sections 11 (Intellectual Property), 15 (Confidentiality and Non-Competition)
and 16 (Termination), will survive any such expiration or termination.

16.6 Failure to Terminate Does Not Constitute Waiver

If LAM should choose not to terminate this Agreement when the conditions for
such termination are met, such behaviour does not constitute waiver and LAM
will retain the option to terminate this Agreement upon written notice, unless
LAM and the Distributor have explicitly agreed in writing to waive the grounds
of termination.

17. INDEMNIFICATION, LIMITATION AND EXCLUSION OF LIABILITY

17.1 Indemnification by LAM

The LAM hereby agrees, during and after the Term of this Agreement, to
indemnify and save harmless the Distributor and all of its directors,
shareholders, officers, employees, agents and representatives from any and all
liabilities, damages, losses, suits, claims, demands, costs, expenses, fines
and actions of any kind or nature whatsoever which any of them may incur or
suffer by reason of any breach, violation or non-performance on the part of the
indemnifying

18

 

party or any of its shareholders, officers, directors, employees, agents and
representatives of any term or condition of this Agreement.

17.2 Indemnification by Distributor

The Distributor hereby agrees, during and after the Term of this Agreement, to
indemnify and save harmless LAM and all of its directors, shareholders,
officers, employees, agents and representatives from any and all liabilities,
damages, losses, suits, claims, demands, costs, expenses, fines and actions of
any kind or nature whatsoever which any of them may incur or suffer by reason
of any breach, violation or non-performance on the part of the indemnifying
party or any of its shareholders, officers, directors, employees, agents and
representatives of any term or condition of this Agreement.

IN NO EVENT AND UNDER NO CIRCUMSTANCES WILL LAM BE LIABLE TO THE DISTRIBUTOR OR
TO ANY OTHER PERSON FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL
LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION FINANCIAL LOSS, LOSS OF REVENUE
OR LOSS OF PROFITS, FOR ANY REASON WHATSOEVER.

17.3 Equitable Remedies/ Injunctive Relief

The parties agree that, without prejudice to any other remedies which may be
available to a party, injunctive relief may be the only effective relief for a
breach of certain covenants herein, including without limitation the provisions
of Sections 11 (Intellectual Property) and 15 (Non-Competition and
Confidentiality), the breach of any which may cause a party irreparable harm,
non-compensable by damages alone. The parties agree that a so-harmed party
will be entitled to injunctive relief, including an interim injunction in any
court of competent jurisdiction or specific performance or other equitable
remedies, in addition to any other remedies available to it, to enforce any of
the covenants herein in the event of a breach or threatened breach thereof, and
the parties hereby consent to the grant of such relief to the other, as the
case may be.

18. ACKNOWLEDGMENTS

18.1 Independent Investigation

The Distributor acknowledges that it has conducted an independent investigation
of the Products and the business opportunity involved in the marketing and sale
thereof, and recognizes that the business venture contemplated by this
Agreement involves business risks and that its success will be dependent upon
the ability of the Distributor as an independent business entity. LAM
expressly disclaims the making of, and the Distributor acknowledges that it has
not received any representation, warranty or guarantee, expressed or implied,
as to the potential volume of business, profits or success from the marketing
and sale of the Products.

18.2 Review of Agreement

The Distributor acknowledges that it has received this Agreement, has had ample
time to read, and has read, this Agreement, and fully understands its
provisions. The Distributor further acknowledges that it has had adequate
opportunity to be advised by legal counsel and accounting

19

 

professionals of its own choosing regarding all pertinent aspects of this
Agreement, the relationship contemplated hereby and the operation of the
contemplated business or marketing and selling the Products.

19. GENERAL PROVISIONS

19.1 Severability

If for any reason whatsoever, any term or condition of this Agreement or the
application thereof to any party or circumstance is to any extent invalid or
unenforceable, all other terms and conditions of this Agreement and/or the
application of such terms and conditions to parties or circumstances will not
be affected thereby and will be separately valid and enforceable to the fullest
extent permitted by law. The unenforceable provision(s) will be deemed to be
amended to the extent needed to render them enforceable, so as best to reflect
the intentions of the parties.

19.2 Notices

All notices, consents, approvals, statements, authorizations, documents, or
other communications (collectively “notices”) required or permitted to be given
hereunder will be in writing, and will be delivered personally, sent by fax, or
mailed by registered mail, postage prepaid, at the addresses set forth
hereunder, namely:

	 	 	 	 	 
	

	 	If to LAM at:
	 	L.A.M. Pharmaceutical Corp., 800 Sheppard Avenue West,

Toronto, Ontario, M3H 6B4

Canada

Fax: 416-633-2363

Attention: Joseph Slechta, President and Chief Executive
Officer
	 
	 	 	 	 
	

	 	If to the Distributor, at:
	 	Verus S.A. de C.V.

Genova 20PH Col. Juarez, Deleg. Cuauhtemoc

C. P. 06600 Mexico

Attention: P. Daniel Bagi, CEO

Fax No.: 52-55-55-14-40-26

or at any such other address or addresses as may be given by any of them to the
other in writing in accordance with this subsection from time to time. If sent
by registered mail, such notice will be deemed to have been given on the fifth
business day following such mailing; provided that if such notice will have
been mailed and if regular mail service will be interrupted by strike or other
irregularity before the deemed receipt of such notice as aforesaid, then such
notice will not be effective unless delivered personally or sent by fax. If
delivered personally or sent by fax during regular business hours, such notice
will be deemed to have been given on the day of delivery or transmission, if
during regular business hours on a business day, or if not, on the business day
next following the day of delivery or transmission.

19.3 Waiver of Obligations / Rights Cumulative

No waiver by LAM of any obligation, restriction or remedy under this Agreement
will be valid unless by specific written instrument. No acceptance by LAM of
any payment by the Distributor

20

 

and no failure, refusal or neglect of LAM to exercise any right under this
Agreement or to insist upon full compliance by the Distributor with its
obligations hereunder, will constitute a waiver of any other provision of this
Agreement or any further or subsequent non-compliance with the same or any
other provision. No exercise or enforcement by LAM of any right or remedy
hereunder will preclude the exercise or enforcement by LAM of any other right
or remedy to which LAM is entitled by law to enforce.

19.4 Interpretation

The words “hereof”, “herein”, “hereunder” and similar expressions used in any
section, subsection or paragraph of this Agreement relate to the whole of this
Agreement (including the Schedules attached hereto) and not to that section,
subsection or paragraph only, unless otherwise expressly provided for or the
context clearly indicates the contrary. For the purposes of this Agreement a
“business day” means any day other than a Saturday, Sunday, holiday (in the
United States of America, New York state, or Territory countries) or other day
on which LAM’s primary bank is not open for business during its regular
business hours at its head office.

19.5 Default Under Another Agreement

In the event that the Distributor acquires the right and/or licence to operate
any other LAM-related business(es), any default by the Distributor in the
performance or observation of any of the terms and conditions under any one
agreement governing the aforesaid right and licence will be deemed to be an
event of default under this Agreement and all other agreements pursuant to
which the Distributor operates such other LAM-related business(es).

19.6 LAM’s Right of Set-Off

Notwithstanding anything contained in this Agreement, upon the Distributor’s
failure to pay to LAM any amounts owing by the Distributor to LAM, and without
affecting in any way LAM’s other rights and remedies hereunder, LAM will have
the right, at its option, to deduct any and all of such amounts remaining
unpaid from any moneys or credits payable by LAM to the Distributor or held by
LAM for the account of the Distributor.

19.7 Further Assurances

Each of the parties hereto hereby covenants and agrees to execute and deliver
such further and other agreements, assurances, undertakings, acknowledgments or
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence and do and perform and cause to be
done and performed any further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part hereof.

19.8 Binding Agreement

Subject to the restrictions on assignment and transfer herein contained, this
Agreement will inure to the benefit of and be binding upon all of the parties
hereto and their respective (as applicable) heirs, executors, administrators,
successors and permitted assigns.

21

 

19.9 Force Majeure

If any party hereto is delayed or hindered in the performance of any act
required by this Agreement by reason of act of nature, strike, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrection, war or other reasons of a like nature not the
fault of such party, then performance of such act will be excused for the
period of the delay and the period of performance of any such act will be
extended for a period equivalent to the period of such delay, up to a maximum
of three [3] months. The provisions of this Force Majeure clause will not
operate to excuse the Distributor from the payment of any price or other
payment when due.

19.10 Headings

The headings, section numbers and table of contents appearing in this Agreement
or any Schedule hereto are inserted for convenience of reference only and will
not in any way affect the construction or interpretation of this Agreement.

19.11 Applicable Law

This Agreement will be construed in accordance with and governed by the laws of
the state of New York, and the laws of the United States of America applicable
therein except that the parties expressly exclude the application of the United
Nations Convention on Contracts for the International Sale of Goods to this
Agreement or any sale or purchase made pursuant hereto.

19.12 Entire Agreement

This Agreement together with the Schedules hereto constitutes the entire
agreement and understanding between the parties relating to the subject matter
hereof, and supersedes all other agreements, oral or written, made between the
parties with respect to such subject matter. Except as provided herein, this
Agreement may not be amended or modified in any way except by a written
instrument signed by both parties.

19.13 Non-applicability of the UN Convention

The parties expressly exclude the application of the United Nations Convention
on Contracts for the International Sale of Goods to this Agreement or any sale
or purchase made pursuant hereto.

19.14 Time of the Essence

Time will be of the essence of this Agreement and of each and every part hereof.

19.15 Counterparts

This Agreement may be signed in counterparts, each of which when signed and
delivered will be deemed to be an original, but all such counterparts will
together constitute one and the same instrument.

22

 

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
as follows:

	 	 	 	 	 
	 	L.A.M. Pharmaceutical Corporation

 	 
	 	By:  	/s/
Joseph T. Slechta
 	 
	 	 	Authorized Signing Officer 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	VERUS S.A. de C.V.

 	 
	 	By:  	/s/
P. Daniel Bagi
 	 
	 	 	Authorized Signing Officer 	 
	 	 	Name: P. Daniel Bagi	 

23

 

	 	 	 	 	 

SCHEDULE A

PRODUCTS

For purposes of this Agreement, “Products” shall mean the product referred to
in English as “L.A.M. I.P.M.TMWound Gel”.

The minimum order quantity of Products shall be one [1] case of 50 tubes of the
Products, and all orders must be for a whole-number multiple of cases of the
Products. LAM has the right to unilaterally change its type, size or quantity
of packaging and the resulting minimum order quantity, so long as the minimum
order quantity does not exceed 600 grams of Products (excluding package
weight).

The lead time prescribed in section 8.2 shall be 3 months, meaning that LAM
shall endeavour to fill orders within 3 months of receipt.

The price charged by LAM to the Distributor for Products during the first
fifteen months of this Agreement shall be not more than ten dollars U.S. funds
($10.00 U.S. funds) per ten gram (10 g) tube, or in the event of a change of
packaging, shall not exceed ten dollars fifty cents U.S. funds ($10.50 U.S.
Funds) per ten grams (10 g).

Unless LAM advises the Distributor otherwise in writing, the expiry date of all
Products is eighteen [18] months from the date of initial manufacture.

The warranty period for the Products is twelve [12] months from the shipping
date, unless otherwise specified in this Agreement or unless otherwise agreed
to.

 

SCHEDULE A

TERRITORY COUNTRIES

	 	 	 
	1)
	 	GUATEMALA
	2)
	 	EL SALVADOR
	3)
	 	HONDURAS
	4)
	 	NICARAGUA
	5)
	 	COSTA RICA
	6)
	 	PANAMA
	7)
	 	BELIZE
	8)
	 	ECUADOR
	9)
	 	VENEZUELA
	10)
	 	COLOMBIA
	11)
	 	CHILE
	12)
	 	BOLIVIA
	13)
	 	PARAGUAY
	14)
	 	URUGUAY
	15)
	 	PERU
	16)
	 	CUBA

25Distributorship Agreement w/ China National

 

Exhibit 10.7

DISTRIBUTORSHIP AGREEMENT

     This Agreement is made as of the 30th day of January, 2004, between LAM
PHARMACEUTICAL CORPORATION, a corporation subsisting under the laws of
Delaware, United States of America and having a business address at 800
Sheppard Avenue West, Commercial Unit 1, Toronto, Ontario, Canada M3H 6B4
(hereinafter “LAM”) and China National Pharmaceutical Foreign Trade Corporation
(SINOPHARM), a corporation subsisting under the laws of the Peoples’ Republic
of China, having a business address of Unit A No. 48 Xihai Nanyan, Xicheng
District, Beijing, China 100035 (hereinafter “Distributor")

     WHEREAS LAM is engaged in the development and manufacture of
pharmaceutical preparations including a proprietary wound healing product
(“Products”) as hereinafter defined;

     AND WHEREAS the Distributor wishes to become, and LAM wishes to engage
Distributor as, an exclusive distributor of the Products in China to, among
others, Hospitals, Clinics, and Doctors treating diabetic and other non-healing
ulcers, subject to the terms and condition of this Agreement;

     AND WHEREAS the parties would like to enter into a three year agreement to
distribute LAM’s Products in Territory;

     NOW THEREFORE in consideration of the mutual promises and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:

1. DEFINITIONS

     The following terms will have the following meanings in this Agreement:

     “Intellectual Property” means all patents, copyrights, trademarks,
designs, product formulation data, test results, trade secrets and all other
intellectual property owned, used or claimed by LAM from time to time;

     “Person” means any individual, company, corporation, partnership, joint
venture, firm, trust, association, sole proprietorship, government or
government agency, or other entity howsoever designated or constituted;

     “Products” means LAM’s wound healing product as more fully described in
Schedule A attached hereto;

     “Territory” means the country of the Peoples’ Republic of China;

     “Term” has the meaning given thereto in Section 4.

 

 

2. SCHEDULES

     The following Schedules are attached hereto and form part hereof:

Schedule A — Definition of Product

3. GRANT 

     3.1 Grant

Subject to the provisions of this Agreement, LAM hereby appoints the
Distributor, for the Term, as its exclusive distributor of the Products in the
Territory. LAM will sell to Distributor, and Distributor will buy from LAM, the
Products for resale in the Territory. LAM reserves the right to revise the list
of Products in Schedule A at any time during the Term on no less than 180 days’
notice to Distributor.

     3.2 Right to Authorize Others / Direct Marketing

The appointment made hereunder is exclusive to the Distributor in the
Territory. Provided the Distributor has not breached any of the terms and
conditions hereof, LAM will not authorize any other Person to market or sell
the Products in the Territory, nor appoint other distributors, representatives
or agents to do so, nor market any of the Products in the Territory itself to
or with other parties.

     3.3 No Agents

The Distributor may not appoint or permit any agents or sub-agents or
sub-contractors to carry out any of its obligations or to benefit from any of
its rights hereunder, without LAM’s prior written consent. However, for greater
clarity, nothing herein shall prevent or limit Distributor from selling
Products to its customers (“Distributor’s Customers”) for subsequent resale to
end users in Territory, whether or not such sales shall be governed by separate
supply or distribution agreements.

     3.4 Relationship

This Agreement does not nor will it be deemed to constitute the Distributor as
a partner, joint venturer, servant or employee of LAM. The Distributor will
have no authority to bind LAM in any respect and will not hold itself out as
owned by or associated with LAM other than as an independent LAM Distributor
authorized to market and sell Products on the terms and conditions of this
Agreement, or as otherwise specified herein.

     3.5 Representative of Record

LAM appoints the Distributor, for the Term, as its Representative of Record in
the Territory, and the Distributor may indicate this status to the extent
necessary to comply with the law of Territory. The Distributor is hereby
appointed as LAM’s legal representative, solely for the purpose of the
Marketing Authorization, and otherwise has no ability to bind or act on LAM’s
behalf.

2

 

4. TERM 

     4.1 Initial Term

The entire term of this Agreement (the “Term”) will, subject to earlier
termination according to Section 16, consist of the Initial Term. The Initial
Term will start as of the date on which the LAM receives regulatory approval
and for China from the government of China, and will continue for three years
from such date.

     4.2 Failure to obtain Marketing Authorization

If the regulatory approval for Products in China is not obtained within three
(3) months of the date upon which the Agreement was executed, then LAM will
have the option, but not the obligation, to terminate this Agreement

     4.3 Marketing Success

If, at the end of the Initial Term, the parties agree that the Products are a
marketing success, then they may agree to enter into a further term with such
minimum purchase requirements as LAM and Distributor shall negotiate in good
faith. In the alternative, if the parties have neither renewed this Agreement
nor entered into a new agreement with respect to the subject matter hereof, and
LAM has not exercised any rights of termination but rather continues to accept
orders from the Distributor, the parties will continue to be bound by the terms
of this Agreement, until terminated by either party on thirty (30) days’
written notice to the other. In this latter case, the Distributor’s rights
hereunder shall be non-exclusive only.

5. DUTIES AND OBLIGATIONS OF LAM 

     During the Term LAM will;

	 	(a)	 	provide to the Distributor such marketing and
Product information as in LAM’s opinion will assist the
Distributor in the performance of the Distributor’s
obligations hereunder;
	 
	 	(b)	 	refer all inquiries with respect to Products
intended for use within the Territory to the Distributor;
	 
	 	(c)	 	manufacture Products in conformance to current
Good Manufacturing Practices.
	 
	 	(d)	 	inform the Distributor of changes to Products,
Product specifications, conditions and other material aspects
of the Products at least 180 days prior to any such change,
however, LAM agrees to use best commercial efforts to supply
adequate quantities of unaltered Products to permit
Distributor to fulfill supply agreements awarded as a result
of tenders;

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6. DUTIES AND OBLIGATIONS OF THE DISTRIBUTOR 

     6.1 Affirmative Covenants

     The Distributor will:

	 	(a)	 	actively and diligently market and sell the
Products in the Territory, and devote all necessary
commercially reasonable resources, time and attention to doing
so;
	 
	 	(b)	 	purchase Products from LAM on its own account for
resale to customers, according to this Agreement, and be
solely responsible for invoicing and collecting all
receivables from customers;
	 
	 	(c)	 	purchase and maintain readily available a
sufficient inventory of Products to reasonably promptly
satisfy all customer orders;
	 
	 	(d)	 	take all reasonable care in storing and handling
the Products as required to preserve the Products in an
optimal condition for sale and use;
	 
	 	(e)	 	have and maintain insurance at all times with
respect to its inventory of Products against risks of fire
(including so-called extended coverage), theft, and other
risks as LAM may reasonably require. Such insurance must be
sufficient to completely satisfy the Distributor’s
indebtedness to LAM at all times. In the event of failure by
the Distributor to obtain such insurance, LAM may do so on the
Distributor’s behalf, at the Distributor’s cost;
	 
	 	(f)	 	maintain competent and aggressive sales,
technical and support personnel to provide appropriate
demonstration, distribution and support of the Products,
including effective responses to inquiries from customers and
potential customers regarding Product use, care, application,
and the like and make its best reasonable efforts to maximize
sales of Products;
	 
	 	(g)	 	maintain an accurate record and account of all
transactions, negotiations, sales strategies and sales
activities, for no less than seven (7) years, and make such
information available to LAM on request;
	 
	 	(h)	 	permit LAM or its representatives to enter on the
Distributor’s premises, on reasonable notice, to inspect the
Distributor’s inventory, and books and records for the purpose
of determining the payment obligations of Distributor to LAM;
The Distributor will cooperate fully with LAM and its
representatives in making such books and records available for
inspection;
	 
	 	(i)	 	submit when due, or if no due date is specified,
forthwith upon reasonable request, all reports and other
documents to be provided to LAM in accordance herewith;

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	 	(j)	 	ensure that at all times prompt, courteous and
efficient service is accorded to every customer and
prospective customer, and adhere to the highest standards of
honesty, integrity, fair dealing and ethical conduct in all
dealings with its customers, suppliers, LAM and the public, in
accordance with standard operating policies and procedures of
Distributor;
	 
	 	(k)	 	maintain and promote the goodwill of LAM and its
Products;
	 
	 	(l)	 	strictly comply with all applicable municipal,
state, federal and other laws of the Territory, and
regulations and the terms and conditions of all applicable
orders, permits, certificates and licenses, and obtain and at
all times maintain all permits, certificates and licenses
necessary or desirable for the proper marketing and sale of
the Products according to this Agreement;
	 
	 	(m)	 	participate in all market research activities
that LAM determines from time to time to be required for or
beneficial to the marketing and sale of Products, acting
reasonably;
	 
	 	(n)	 	at all times cooperate with LAM’s representatives
and report promptly to LAM any information which may come to
the Distributors attention regarding complaints or claims with
respect to the Products, customer needs and interests and
local market conditions;
	 
	 	(o)	 	refer all inquiries from outside the Territory
with respect to Products, or for Products which are reasonably
believed to be intended for use outside the Territory, to LAM;
	 
	 	(p)	 	to provide, within 90 days of the date upon which
LAM executes this Agreement, a written market analysis,
marketing plan and minimum purchase requirements for the
Products in the Territory for the duration this Agreement. The
Distributor agrees that it will be at LAM’s sole discretion to
acceptor reject the minimum purchase quantities. In the event
that LAM rejects the Distributor’s minimum purchase proposal,
LAM may, at its sole discretion, terminate this agreement;
	 
	 	(q)	 	upon the expiry or termination of this Agreement,
for whatever reason, assign the Marketing Authorization to
such entity as is specified by LAM, forthwith upon receiving
instructions from LAM to do so. Distributor hereby appoints
LAM as its attorney with the limited power to effect such
assignment upon any such expiry or termination.

     All of the foregoing will be at the Distributor’s sole cost and expense,
unless otherwise specified.

     6.2 Negative Covenants

     The Distributor will not:

5

 

	 	(a)	 	directly, Indirectly or by inference, orally or
in writing, make or give any guarantees, representations or
warranties, express or implied, with respect to any of the
Products to customers or prospective customers, other than to
refer them to information on the Products as LAM from time to
time provides in writing;
	 
	 	(b)	 	alter or remove, nor permit to be altered or
removed from the Products any patent numbers, serial numbers,
lot and batch numbers, instructions, warnings, LAM provided
trademarks or other commercial symbols, or other identifying
marks without LAM’s prior written consent; or
	 
	 	(c)	 	knowingly transfer, sell, ship, or allow to be
sent, any of the Product to a destination or person outside
the Territory or to a person who is likely to transfer, sell,
ship or allow to be sent, any of the Product to a destination
or person outside the Territory unless first granted
permission to do so by LAM

7. PRICES 

     7.1 Prices

The initial prices charged by LAM to the Distributor for the Products will be
those set out in Schedule A. The prices charged by the Distributor to any and
all purchasers for Products must be approved by LAM, but LAM shall not refuse
to approve any proposed prices except on reasonable grounds.

     7.2 Taxes

	 	(a)	 	The prices in this Agreement are for the Products
only. The Distributor will be responsible for all Territory’s
federal, provincial, state and other taxes, duties, levies and
assessments pertaining to the sale and import of the Product
(except taxes based on LAM’s net income) except to the extent
the Distributor provides LAM with a valid exemption
certificate.

8. ORDERS

     8.1 Purchase Orders

The Distributor will place individual written purchase orders for Products from
time to time during the Term. Each purchase order must contain the following
minimum information:

	 	(a)	 	a reference to this Agreement;
	 
	 	(b)	 	identification of each Product ordered by type,
quantity and price;
	 
	 	(c)	 	shipping instructions and destination; and
	 
	 	(d)	 	requested delivery date.

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     8.2 Minimums

Minimum Product order quantities and delivery lead times are set out in Schedule A.

     8.3 Order Acceptance

No purchase order will be effective until accepted and acknowledged in writing
by a duly authorized LAM official. Acceptance of all orders is subject to
approval by LAM’s credit department. Any terms and conditions set out in a
purchase order that contradict or are inconsistent with the terms and
conditions of this Agreement are void and of no force or effect, unless
otherwise agreed by the Parties.

     8.4 Reschedule of Purchase Orders

The Distributor may reschedule any Product, which is to be delivered under any
purchase order with a minimum of thirty [30] days’ prior written notice to LAM.
Any requested delay in delivery may extend the delivery up to a maximum of
sixty [60] days beyond the originally scheduled delivery date. Any Product may
be rescheduled only once, and any rescheduled Product may not be cancelled.

     8.5 Purchase Order Cancellations

The Distributor may cancel any Product which is to be delivered under any
purchase order on written notice no less than thirty [30] days’ prior to the
originally scheduled delivery date, provided that

	 	(a)	 	the Distributor is not in default of its
obligations under this Agreement at the time of the
cancellation request; and
	 
	 	(b)	 	the Distributor remits, within thirty [30] days
following notice of cancellation, a cancellation payment
according to the following schedule:

	 	 	 	 	 
	 	 	Cancellation Charge
	No. of Days Prior-to-Shipment
	 	(% of Purchase Price)

	[60 or more days]
	 	[no charge]
	[30-59 days]
	 	 	15	%
	[0-29 days]
	 	[no cancellation permitted]

These cancellation charges are established by LAM and the Distributor in good
faith as a means of reimbursing LAM for its expenditures and losses in the
event of the Distributor’s exercise of the specified cancellation privileges.
As an exact calculation of such expenditures and losses would be impractical in
each circumstance, such charges are fixed as a percentage, and are not intended
as a penalty on the Distributor.

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9. DELIVERY, RISK OF LOSS

     9.1 Delivery

Delivery of all Products will be F.O.B. at LAM’s warehouse at a US location as
LAM will specify by written notice. Although LAM will use reasonable efforts to
notify the Distributor of anticipated delay in delivery or inability to deliver
Product, LAM will not be liable to the Distributor for any such failure or
delay, or for failure to give notice thereof.

     9.2 Product Shortage

In the event of a shortage of Product, LAM will have the right to allocate its
supply of Products among its distributors in any way that LAM considers
reasonable. LAM will make reasonable efforts to supply Products to Distributor
to fulfill Distributor’s contractual obligations pursuant to awarded tenders.

     9.3 Withholding Shipment

LAM may withhold or suspend, in whole or in part, shipment of the Products to
the Distributor or may, at its option, sell the Products on a C.O.D. basis in
the event the Distributor fails to pay according to the terms of this Agreement
and invoices for Products previously shipped to the Distributor, or otherwise
fails to perform any of its obligations under this Agreement, provided that
Distributor fails to remedy such deficiency within thirty (30) days of written
notice from LAM.

     9.4 Risk of Loss

Risk of loss will pass to the Distributor on delivery of the Products at the
F.O.B. point specified above. In the event of any loss of or damage to the
Products following delivery to the carrier, LAM will, on request, cooperate
with the Distributor in connection with the proof of loss claim presented by
Distributor to the carrier and/or insurer. Unless requested otherwise by the
Distributor, LAM will use its discretion in selecting the method of shipment
and the carrier.

     9.5 Packaging

All packing materials and methods, the carrier and type of conveyance will
conform to LAM’s standard commercial practices for export shipment of its
Products. The cost of any special packing or packaging materials and methods
requested by the Distributor which do not conform to or are in addition to said
standard commercial practices will be borne by the Distributor. This excludes
Spanish language packaging and inserts, to be provided by LAM in accordance
with Schedule A.

     9.6 Inspection

The Distributor must inspect all Products delivered to it by LAM within fifteen
[15] days of delivery, for purposes of quality control. Unless the Distributor
notifies LAM of any defect within fifteen [15] days of delivery thereof or of
damage to the Products’ containers, the Products will be deemed to have been
free of any defects which would have been apparent on a proper Inspection at
such time of delivery, and will be deemed to be accepted by the Distributor.

8

 

10. PAYMENT AND SECURITY INTEREST 

     10.1 Invoicing and Payment

Payment for all orders must be made by wire transfer, bank draft or letter of
credit prior to LAM having to ship Products pursuant to any order from the
Distributor, and if payment is not received by LAM, LAM shall have no
obligation to ship same. The Distributor is required to pay for all products
ordered, and nothing in this clause allows or permits the Distributor to avoid
the provisions of section 8.5 herein, to delay payment, or to cancel any order
by non payment of the purchase price.

     10.2 Security Interest

As general and continuing security for payment to LAM of all amounts owing by
the Distributor hereunder, the Distributor agrees that title to the Products
purchased by the Distributor under this Agreement will remain with LAM until
LAM receives payment in full therefor. LAM reserves, until full payment is
received, a purchase-money security Interest in all Products sold to the
Distributor and in proceeds derived from the resale of such Products. If the
security interest provided here is insufficient to satisfy the Distributor’s
indebtedness to LAM, the Distributor will remain liable for all remaining
indebtedness. The Distributor will execute and deliver all such further
documents, agreements and instruments as LAM may request so that LAM can
perfect and maintain such security interest.

11. INTELLECTUAL PROPERTY 

     11.1 No Permanent Interest

The Distributor irrevocably acknowledges that all of the Intellectual Property
involving the Product, including but not limited to any and all patent rights
whether in Territory countries or any other country, is the exclusive property
of LAM or that LAM has the exclusive rights thereto except as provided herein.
Neither this Agreement nor the conduct of the parties hereunder will in any way
give or be deemed to give to the Distributor any interest in any the
Intellectual Property except for the limited right to sell the Products bearing
trade-marks, trade names and other commercial symbols owned or used by LAM,
solely in accordance with the terms and conditions of this Agreement and only
within and for use within the Territory. Any and all goodwill and other value
associated with the Intellectual Property will inure exclusively to the benefit
of LAM.

     11.2 Distributor’s Obligations With Respect to Trademarks and Trade Names

     The Distributor covenants and agrees that:

	 	(a)	 	the Distributor will not use any of the
trademarks, tradenames and commercial symbols owned or used by
LAM as any part of the Distributor’s corporate, firm or
business name(s);
	 
	 	(b)	 	the Distributor may only use the such trademarks,
trade names and commercial symbols as appear on the Products
and on promotional

9

 

	 	 	 	materials therefor when received by the Distributor under
this Agreement, and otherwise only use such trademarks and
trade names and in such manner and for such purpose as LAM
may specify and approve from time to time, and no other; and
	 
	 	(c)	 	neither during the Term nor at any time
thereafter will the Distributor, either directly or
indirectly, dispute or contest the validity or enforceability
of any the Intellectual Property, attempt any registration
thereof, or attempt to dilute the value of any goodwill
attaching to the Intellectual Property or inuring from any
part thereof, anywhere in the world unless explicitly granted
the right to do so in writing by LAM.

     11.3 Infringement

LAM represents and warrants that to its knowledge at the effective date hereof,
sale or use of the Products does not infringe any intellectual property rights
of any third party in the Territory. The Distributor will immediately notify
LAM of any infringement of or challenge to LAM’s or the Distributor’s use of
any of the Intellectual Property. In such case, LAM will have the Sole
discretion to take such action as it deems appropriate.

     11.4 No Liability

LAM will have no liability or obligation to the Distributor with respect to any
claim whatsoever, including but not limited to any patent infringement claim,
such as:

	 	(a)	 	use of the Products in combination with devices
or products not purchased hereunder where the Products
themselves would not be infringing;
	 
	 	(b)	 	use of the Products in an application or
environment for which such Products were not designed or
contemplated;
	 
	 	(c)	 	modifications of or to the Products; or
	 
	 	(d)	 	any claims of infringement of a patent in which
the Distributor or any affiliate or customer of the
Distributor has an interest or license.

     11.5 Limitation of Liability

The provisions of this Section 11 state LAM’s entire liability with respect to
infringement or alleged infringement of patents by the Products or any part
thereof. In no event will LAM’s liability exceed the purchase price paid by the
Distributor for Products alleged to be infringing, and LAM will in no event be
liable to the Distributor or any third party for any consequential, special or
incidental damages, except as otherwise provided herein.

     11.6 Modification or Discontinuance

If it becomes advisable at any time in the sole discretion of LAM for the
Distributor to modify or discontinue the use of any of the Intellectual
Property or to use one or more additional or

10

 

substitute trade names or trademarks or other items of intellectual property,
the Distributor will do so immediately on notice from LAM. The sole obligation
of LAM in such event will be to reimburse the Distributor for out pocket
expenses reasonably incurred by the Distributor in complying with this section.

12. ADVERTISING

     12.1 Promotions and Advertising

LAM may from time to time and in its sole discretion make available promotional
programs, including national or international programs, to assist the
Distributor in generating business. LAM may also from time to time, and in its
sole discretion as to content, supply the creative ad production services for
one or more series of standard Distributor print or other ads. The Distributor
may, in accordance with LAM’s procedures in that regard, add its name, address,
phone number, and details regarding products, prices and/or other promotions.

     12.2 Distributors Advertising

The Distributor may conduct such advertising and promotions and produce its own
advertising material in respect of the Products as the Distributor desires,
provided that the Distributor:

	 	(a)	 	advertises and promotes only in a manner that
will, in LAM’s opinion, reflect favorably on the Products,
LAM, the Distributor, other LAM distributors, and the good
name, goodwill and reputation thereof; and
	 
	 	(b)	 	submits to LAM for its prior written approval,
all advertising and promotion to be used by the Distributor;
until such time as LAM gives such approval, the Distributor
will not use any such advertising or promotions.

     12.3 Other Promotional Material

The Distributor may, in its sole discretion, use such brochures, sales aids and
other promotional materials provided by LAM from time to time, including
current literature and other material for the Products. LAM reserves the right
to limit the quantities of such materials provided to the Distributor and/or
charge the Distributor for such materials, at wholesale cost, acting
reasonably.

     12.4 Copyright

The Distributor hereby acknowledges that LAM is and will remain the sole and
exclusive owner of all copyrights and trademark or other intellectual property
rights relating to any such advertising and promotional material and any and
all advertising and promotional material prepared by or on behalf of LAM.

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13. WARRANTY 

     13.1 Warranty

LAM warrants the Products to be free from defects in design, workmanship and
material under normal use for the warranty period specified in Schedule A.
Subject to the terms and conditions of this Agreement, LAM agrees to replace
any defective Products which are returned, at the Distributor’s expense, to LAM
within the applicable warranty period specified in Schedule A; provided that an
inspection thereof discloses that the defects are as defined above, and
provided further that the Products have not been altered or been subjected to
misuse, improper maintenance or storage, negligence or accident; that the
Products have not been damaged; and that the Products have not had their serial
number, lot and batch number, or any part thereof altered, defaced or removed.

     13.2 Return

In the event of a warranty claim, the Distributor must obtain the appropriate
return authorization from LAM prior to the return of the allegedly defective
Product. Thereafter, the Distributor must, at LAM’s request, ship the Product
to LAM. The Distributor must reference the return authorization number on the
shipment and advise LAM in writing of the details concerning the alleged
defect. All shipments of returned Products must be packaged in their original
or equivalent containers and shipped prepaid to LAM. All Products determined to
be defective will become LAM’s property on replacement thereof. Shipping
charges for repaired or replaced Products forwarded by LAM to the Distributor
will be borne by LAM. Such shipping charge will be limited to the customarily
used carrier rate for the Products then in effect. Products replaced are
warranted throughout the remainder of the warranty period originally applicable
to the defective item or for ninety [90] days, whichever is longer.

     13.3 Determination of Warranty Claim

Final determination of eligibility for warranty coverage for the Products will
be made by LAM. If a warranty claim is improperly made, LAM will so advise the
Distributor and the Distributor will be charged for service performed, and all
expenses incurred by LAM in handling and shipping the Products. All
replacements will be performed according to standard factory specifications,
unless the Distributor has an executed agreement with LAM establishing
different specifications and the Distributor so advises LAM at the time of
requesting the replacement.

     13.4 No Other Warranty

     EXCEPT AS EXPRESSLY AND SPECIFICALLY PROVIDED, THERE ARE NO
REPRESENTATIONS, WARRANTIES OR CONDITIONS WITH RESPECT TO ANY PRODUCTS OR
SERVICES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES AND
CONDITIONS OF MERCHANTABILITY AND FITNESS FOR INTENDED OR PARTICULAR PURPOSE.

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14. SALE, ASSIGNMENT, TRANSFER

     14.1 Assignment or Transfer by the Distributor

The Distributor may not assign this Agreement or any of the Distributor’s
rights or obligations hereunder or thereunder; without the prior written
consent of LAM.

     14.2 Assignment by LAM

LAM may sell, transfer or assign all or any part of its interest in this
Agreement or the Intellectual Property without the Distributor’s consent, upon
providing the Distributor with written notice thereof.

15. CONFIDENTIALITY AND NON-COMPETITION 

     15.1 Non-Disclosure and Non-Use

“Confidential Information” means any data or information of either LAM on the
one hand, or the Distributor on the other, whether oral, written or otherwise
recorded, that is non-public confidential or proprietary in nature, and all
such information that is developed by either of the parties in the course of
their relationship, including, without limitation: any scientific, computer or
other technical information, technology, research, design, idea, process,
procedure, formula or improvement, or any portion or phase thereof; information
relating to any current or proposed products, services, methods, businesses or
business plans, marketing, pricing, distribution and other business strategies;
lists of, or any other information relating to, any customers, suppliers,
dealers, agents or employees and the relationships therewith; and any financial
information relating to any of the foregoing. Neither party will be obliged to
reveal any of its Confidential Information to the other party.

All disclosures of Confidential Information made by either party to the other
are and will be made solely on a confidential basis and as trade secrets.
Accordingly, each party will maintain the confidentiality of all Confidential
Information during the Term and at all times thereafter. Neither party will
disclose any Confidential Information to any Person except those with a “need
to know” to enable the party to fulfill its obligations under this Agreement,
except with the disclosing party’s prior written authorization, or as may be
required by the applicable laws of Canada, the United States of America or
China.

Each party agrees that it will not use the other’s Confidential Information for
any purpose other than as provided herein. The parties agree that any
unauthorized disclosure or use by or for the benefit of any party could cause
irreparable harm and damage to a disclosing party. Accordingly, in addition to
any monetary damages, a party who suffers from a breach of this provision of
non-disclosure and non-use shall be entitled to an injunction to prevent any
threatened or continuing violation of this Agreement, and the breaching party
hereby consents to such relief. The parties obligations of non-disclosure and
non-use shall survive the expiration or any early termination of this Agreement
for whatever reason, and shall expire seven (7) years from the effective date
hereof, or five(5) years from termination of any business relationship of the
parties, whichever occurs later.

13

 

     15.2 Non-Competition

(i) The Distributor will not, without the prior written consent of LAM, either
individually, in partnership, jointly or in conjunction with any Person, as
principal; agent, shareholder, employee, director, officer, or in any other
manner whatsoever:

	 	(a)	 	at anytime during the Term, carry on; be engaged
in; be concerned with or interested in; advise; lend money to;
guarantee the debts or obligations of; or permit its name or
any part thereof to be used or employed by any Person engaged
in, concerned with or interested in, any business selling,
operating, offering or providing products or services
competitive with the Products; nor
	 
	 	(b)	 	during the period of two (2) years from the
termination or expiry of this Agreement, anywhere within the
Territory, do any of the things listed in paragraph (a), or
solicit the business of any customers of LAM or of any other
LAM distributor or agent.

(ii) LAM will not, without the prior written consent of Distributor, either
individually, in partnership, jointly or in conjunction with any Person, as
principal, agent, shareholder, employee, director, officer, or in any other
manner whatsoever:

	 	(a)	 	at any time during the Term and during the
effective period of the obligations of non-disclosure and
non-use, sell a Product directly to any of Distributor’s
Customers in the Territory (“Direct Selling”).
	 
	 	(b)	 	If Direct Selling should occur, the Distributor
will be entitled to seek immediate injunctive relief.

     15.3 Personal Acknowledgments

The Distributor will deliver to LAM, at any time LAM may request, either: (i)
the written acknowledgment of such directors, officers, shareholders or
employees of the Distributor as LAM will in its discretion determine,
acknowledging that they have reviewed the confidentiality and non-competition
provisions of this Section 15 and that they agree to abide and be bond thereby;
or (ii) LAM’s form of non-disclosure/non-competition agreement signed by such
of them as LAM may specify.

16. TERMINATION

     16.1 LAM’s Termination in the Event of Default

LAM will have the right to terminate this Agreement and the rights granted
hereunder without prejudice to the enforcement of any other right or remedy,
immediately upon giving written notice to the Distributor of such termination,
upon the happening of any of the following events of default:

14

 

	 	(a)	 	if the Distributor breaches or fails to observe
any term or condition of Section 11 (Intellectual Property) or
Section 15 (Confidentiality and Non Competition);
	 
	 	(b)	 	If the Distributor does not pay any amount
payable under this Agreement when due, together with any
interest accrued thereon, or if the Distributor breaches or
fails to observe or perform any other term or condition of
this Agreement or any other agreement or undertaking entered
into with or required by, LAM, and such breach or failure
continues for a period of thirty [30] consecutive days after
written notice thereof has been given to the Distributor by
LAM;
	 
	 	(c)	 	if the Distributor ceases or threatens to cease
to carry on business, takes or threatens to take any action to
liquidate its assets; stops making payments to any creditors,
trade or otherwise, in the normal course of business; makes or
purports to make a general assignment for the benefit of
creditors; makes or purports to make a bulk sale of its
assets; or institutes or has instituted against it any
proceeding under any statute or otherwise relating to
insolvency, bankruptcy, winding up, liquidation or
dissolution, including the appointment of a custodian or
receiver, or if any proceeding under any such statute or
otherwise is instituted against it;
	 
	 	(d)	 	if any lessor or creditor or any other Person or
any government entity lawfully takes possession of any of the
Distributor’s undertaking, business, property or assets or if
the Distributor commits or suffers any default under any
contract or conditional sale, mortgage or other security
instrument;
	 
	 	(e)	 	if the Distributor, its directors, officers or
shareholders engage in any activity contrary to any material
law, including by way of example and not of limitation,
applicable Federal, Provincial, State, Municipal or other laws
or regulations of Canada, the United States of America or
China which in the opinion of LAM acting reasonably, would
reflect negatively upon the Products or LAM; or
	 
	 	(f)	 	if the Distributor commits, permits, or allows to
continue any other default under this Agreement which is not
cured to the satisfaction of LAM within thirty (30) days after
written notice is provided to the Distributor;

     16.2 Distributor’s Termination in the Event of Default

The Distributor will have the right to terminate this Agreement without
prejudice to the enforcement of any other right or remedy, immediately upon
giving written notice to LAM of such termination, upon the happening of any of
the following events of default:

	 	(a)	 	if LAM breaches or fails to observe any term or
condition of Section 15 (Confidentiality and Non Competition)
and such default, breach or failure

15

 

	 	 	 	continues for a period of thirty (30) consecutive days after
written notice has been given by the Distributor to LAM;
	 
	 	(b)	 	If LAM breaches or fails to observe or perform
any other term or condition of this Agreement and such breach
or failure continues for a period of thirty [30] consecutive
days after written notice thereof has been given by the
Distributor to LAM; or
	 
	 	(c)	 	if LAM ceases to cease to carry on business,
takes any action to liquidate its assets; stops making
payments to any creditors, trade or otherwise, in the normal
course of business; makes or purports to make a general
assignment for the benefit of creditors; makes or purports to
make a bulk sale of its assets; or institutes or has
instituted against it any proceeding under any statute or
otherwise relating to insolvency, bankruptcy, winding up,
liquidation or dissolution, including the appointment of a
custodian or receiver, or if any proceeding under any such
statute or otherwise is instituted against it.

16.3 Distributor’s Obligations on Expiry or Termination

Upon the expiry or termination of this Agreement for any reason whatsoever, the
Distributor will:

	 	(a)	 	immediately pay to LAM all accounts then due and
unpaid by the Distributor;
	 
	 	(b)	 	immediately discontinue displaying and/or using
any and all signs, stationary, letterheads, packaging, forms,
manuals, bulletins, instruction sheets, printed matter,
advertising and other physical objects containing or bearing
any of LAM’s trademarks, trade names or commercial symbols,
promptly execute such documents or take such actions as may be
necessary to abandon the Distributor’s use of any thereof, and
will not thereafter operate or do business under any name or
in any manner that might lead to the inference that it is or
was associated with LAM or the Products;
	 
	 	(c)	 	promptly remove or co-operate in the removal of,
at LAM’s request, the Distributor’s listing as an LAM
Distributor from all telephone directories and all other trade
or business directories (in respect of the next publication
thereof), and to assign (if the business of the Distributor is
being continued by LAM or its nominee) to LAM or any other,
party designated by LAM all of the Distributors’ telephone
numbers and listings in connection with the marketing and sale
of Products;
	 
	 	(d)	 	immediately return to LAM, or destroy if
requested by LAM, all Confidential Information and all copies
thereof, all other material provided to the Distributor by LAM
and all information, data and materials pertaining to the
Products;

16

 

	 	(e)	 	promptly assign Marketing Authorization as
requested by LAM in accordance with section 6.1 (q) herein.

Notwithstanding the foregoing, the Distributor will have the right to sell,
according to this Agreement, those Products which it still has in inventory on
the date of termination and which LAM does not re-purchase according to this
Agreement.

     16.4 LAM’s Obligations on Expiry or Termination

On expiration or termination of this Agreement, LAM will have the right, but
not the obligation, to purchase or cause a nominee of LAM to purchase from the
Distributor the inventory of Products held by the Distributor on the effective
date of termination, providing that the Products have not expired and are in
salable condition, at the then prevailing price or the price paid by the
Distributor, whichever Is less (the “Repurchase Price”); failing which the
Products must be returned to LAM for destruction or other disposition by LAM,
at LAM’s sole option, LAM may exercise this right by notice in writing
delivered to the Distributor within thirty [30] days of the date of such
expiration or termination. Any such repurchase by LAM will be subject to the
following conditions:

	 	(a)	 	Within five [5] days of the effective date of
termination, the Distributor will give to LAM a written
schedule listing all Products then owned by or in the
possession of the Distributor, identifying each Product by
model or unit number and showing the quantity on hand.
	 
	 	(b)	 	The Distributor will, within ten [10] days’
following LAM’s request, ship the Products specified in the
schedule to LAM, freight prepaid. LAM will only accept
Products in their original unbroken packaging. On receipt of
the Products, LAM will inspect and test the Products to
determine if they are in good marketable condition, and
whether they have been properly handled and returned to LAM.
LAM will repurchase those Products which it determines have
satisfied the foregoing conditions, and will return to the
Distributor, freight collect, those which it determines have
not.
	 
	 	(c)	 	To the extent such Products are delivered to LAM,
freight prepaid and in good condition, LAM will pay to the
Distributor the Repurchase Price therefor, either by issuing a
credit to apply to indebtedness of the Distributor to LAM and,
to the extent there is any excess of Repurchase Price payable
over and above such indebtedness, by payment of the excess to
the Distributor within thirty [30] days of delivery of the
Products to LAM.
	 
	 	(d)	 	To the extent such Products are, upon inspection,
found to have expired or otherwise not be in salable
conditions, LAM will not be obliged to pay to the Distributor
the Repurchase Price in respect of such expired or non-salable
Products, but LAM shall retain possession and ownership of all
such Products.

17

 

     16.5 Survival of Certain Provisions after Termination

Notwithstanding the expiry or termination of this Agreement for any reason
whatsoever, all covenants and agreements to be performed and/or observed by
either party under this Agreement which by their nature survive the expiration
or termination of this Agreement, including without limitation those set out in
Sections 11 (Intellectual Property), 15 (Confidentiality and Non-Competition)
and 16 (Termination), will survive any such expiration or termination.

     16.6 Failure to Terminate Does Not Constitute Waiver

If LAM should choose not to terminate this Agreement when the conditions for
such termination are met, such behavior does not constitute waiver and LAM will
retain the option to terminate this Agreement upon written notice, unless LAM
and the Distributor have explicitly agreed in writing to waive the grounds of
termination.

17. INDEMNIFICATION, LIMITATION AND EXCLUSION OF LIABILITY 

     17.1 Indemnification by LAM

The LAM hereby agrees, during and after the Term of this Agreement, to
indemnify and save harmless the Distributor and all of its directors,
shareholders, officers, employees, agent and representatives from any and all
liabilities, damages, losses, suits, claims, demands, costs, expenses, fines
and actions of any kind or nature whatsoever which any of them may incur or
suffer by reason of any breach, violation or non-performance on the part of the
indemnifying party or any of its shareholders, officers, directors, employees,
agents and representatives of any term or condition of this Agreement.

     17.2 Indemnification by Distributor

The Distributor hereby agrees, during and after the Term of this Agreement, to
indemnify and save harmless LAM and all of its directors, shareholders,
officers, employees, agents and representatives from any and all liabilities,
damages, losses, suits, claims, demands, cost, expenses, fines and actions of
any kind or nature whatsoever which any of them may incur or suffer by reason
of any breach, violation or non-performance on the part of the indemnifying
party or any of its shareholders, officers, directors, employees, agents and
representative of any term or condition of this Agreement.

IN NO EVENT AND UNDER NO CIRCUMSTANCES WILL LAM BE LIABLE TO THE DISTRIBUTOR OR
TO ANY OTHER PERSON FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL
LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION FINANCIAL LOSS, LOSS OF REVENUE
OR LOSS OF PROFITS, FOR A REASON WHATSOEVER.

     17.3 Equitable Remedies / Injunctive Relief

The parties agree that, without prejudice to any other remedies which may be
available to a party, injunctive relief may be the only effective relief for a
breach of certain covenants herein, including without limitation the provisions
of Sections 11 (Intellectual Property and 15 (Non-Competition and
Confidentiality), the breach of any which may cause a party irreparable harm,
non-compensable by damages alone. The parties agree that a so-harmed party will
be entitled to

18

 

injunctive relief, including an interim injunction in any court of competent
jurisdiction or specific performance or other equitable remedies, in addition
to any other remedies available to it, to enforce any of the covenants herein
in the event of a breach or threatened breach thereof, and the parties hereby
consent to the grant of such relief to the other, as the case may be.

18. ACKNOWLEDGMENTS 

     18.1 Independent Investigation

The Distributor acknowledges that it has conducted an independent Investigation
of the Products and the business opportunity involved in the marketing and sale
thereof, and recognizes that the business venture contemplated by this
Agreement involves business risks and that its success will be dependent upon
the ability of the Distributor as an independent business entity. LAM expressly
disclaims the making of, and the Distributor acknowledges that it has not
received any representation, warranty or guarantee, expressed or implied, as to
the potential volume of business, profits or success from the marketing and
sale of the Products.

     18.2 Review of Agreement

The Distributor acknowledges that it has received this Agreement, has had ample
time to read, and has read, this Agreement, and fully understands its
provisions. The Distributor further acknowledges that it has had adequate
opportunity to be advised by legal counsel and accounting professionals of its
own choosing regarding all pertinent aspects of this Agreement, the
relationship contemplated hereby and the operation of the contemplated business
or marketing and selling the Products.

19. GENERAL PROVISIONS

     19.1 Severability

If for any reason whatsoever, any term or condition of this Agreement or the
application thereof to any party or circumstance is to any extent invalid or
unenforceable, all other term and conditions of this Agreement and/or the
application of such terms and conditions to parties or circumstances will not
be affected thereby and will be separately valid and enforceable to the fullest
extent permitted by law. The unenforceable provision(s) will be deemed to be
amended to the extent needed to render them enforceable, so as best to reflect
the intentions of the parties.

     19.2 Notices

All notices, consents, approvals, statements, authorizations, documents, or
other communications (collectively “notices”) required or permitted to be given
hereunder will be in writing, and will be delivered personally, sent by fax, or
mailed by registered mail, postage prepaid, at the addresses set forth
hereunder, namely:

19

 

	 	 	 
	If to LAM at:

	 	L.A.M. Pharmaceutical Corp.,

800 Sheppard Avenue West,

Toronto, Ontario, M3H 6B4

Canada

Fax: 416-633-2363

Attention: Joseph Slechta,

President & Chief Executive Officer
	 
	If to the Distributor, at:

	 	China National Pharmaceutical

Foreign Trade Corporation

Unit A No. 48 Xihai Nanyan

Xicheng District

Beijing, China 100035

Fax: 86-(0)10-6617-8885

Attention: Yong Kuang, General Manager

or at any such other address or addresses as may be given by any of them to the
other in writing in accordance with this subsection from time to time. If sent
by registered mail, such notice will be deemed to have been given on the fifth
business day following such mailing; provided that if such notice will have
been mailed and if regular mail service will be interrupted by strike or other
irregularity before the deemed receipt of such notice as aforesaid, then such
notice will not be effective unless delivered personally or sent by fax. If
delivered personally or sent by fax during regular business hours, such notice
will be deemed to have been given on the day of delivery or transmission, if
during regular business hour on a business day, or if not, on the business day
next following the day of delivery or transmission.

     19.3 Waiver of Obligations/ Rights Cumulative

No waiver by LAM of any obligation, restriction or remedy under this Agreement
will be valid unless by specific written instrument. No acceptance by LAM of
any payment by the Distributor and no failure, refusal or neglect of LAM to
exercise any other right under this Agreement or to insist upon full compliance
by the Distributor with its obligations hereunder, will constitute a waiver of
any other provision of this Agreement or any further or subsequent
non-compliance with the same or any other provision. No exercise or enforcement
by LAM of any right or remedy hereunder will preclude the exercise or
enforcement by LAM of any other right or remedy to which LAM is entitled by law
to enforce.

     19.4 Interpretation

The words “hereof, “herein”, “hereunder” and similar expressions used in any
section, subsection or paragraph of this Agreement relate to the whole of this
Agreement (including the Schedules attached hereto) and not to that section,
subsection or paragraph only, unless otherwise expressly provided for or the
context clearly indicates the contrary. For the purposes of this Agreement a
“business day” means any day other than a Saturday, Sunday, holiday (in the
United States of America, New York state, or Territory countries) or other day
on which LAM’s primary bank is not open for business during its regular
business hours at its head office.

20

 

     19.5 Default Under Another Agreement

In the event that the Distributor acquires the right and/or license to operate
any other LAM related business(es), any default by the Distributor in the
performance or observation of any of the terms and conditions under any one
agreement governing the aforesaid right and license will be deemed to be an
event of default under this Agreement and all other agreements pursuant to
which the Distributor operates such other LAM-related business (es).

     19.6 LAM’s Right of Set-Off

Notwithstanding anything contained in this Agreement, upon the Distributor’s
failure to pay to LAM any amounts owing by the Distributor to LAM, and without
affecting in any way LAM’s other rights and remedies hereunder, LAM will have
the right, at its option, to deduct any and all of such amounts remaining
unpaid from any moneys or credits payable by LAM to the Distributor or held by
LAM for the account of the Distributor.

     19.7 Further Assurances

Each of the parties hereto hereby covenants and agrees to execute and deliver
such further and other agreements, assurances, undertakings, acknowledgments or
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence and do and perform and cause to be
done and performed any further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part hereof.

     19.8 Binding Agreement

Subject to the restrictions on assignment and transfer herein contained, this
Agreement will inure to the benefit of and be binding upon all of the parties
hereto and their respective (as applicable) heirs, executors, administrators,
successors and permitted assigns.

     19.9 Force Majeure

If any party hereto is delayed or hindered in the performance of any act
required by this Agreement by reason of act of nature, strike, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrection, war or other reasons of a like nature not the
fault of such party, then performance of such act will be excused for the
period of the delay and the period of performance of any such act will be
extended for a period equivalent to the period of such delay, up to a maximum
of three [3] months. The provisions of this Force Majeure clause will not
operate to excuse the Distributor from the payment of any price or other
payment when due.

     19.10 Headings

The headings, section numbers and table of contents appearing in this Agreement
or any Schedule hereto are inserted for convenience of reference only and will
not in any way affect the construction or interpretation of this Agreement.

21

 

     19.11 Applicable Law

This Agreement will be construed in accordance with and governed by the laws of
the state of New York, and ,the laws of the United States of America applicable
therein except that the parties expressly exclude the application of the United
Nations Convention on Contracts for the International Sale of Goods to this
Agreement or any sale or purchase made pursuant hereto.

     19.12 Entire Agreement

This Agreement together with the Schedules hereto constitutes the entire
agreement and understanding between the parties relating to the subject matter
hereof, and supersedes all other agreements, oral or written, made between the
parties with respect to such subject matter. Except as provided herein, this
Agreement may not be amended or modified in any way except by a written
instrument signed by both parties.

     19.13 Non-applicability of the UN Convention

The parties expressly exclude the application of the United Nations Convention
on Contracts for the International Sale of Goods to this Agreement or any sale
or purchase made pursuant hereto.

     19.14 Time of the Essence

Time will be of the essence of this Agreement and of each and every part hereof.

     19.15 Counterparts

This Agreement may be signed in counterparts, each of which when signed and
delivered will be deemed to be an original, but all such counterparts will
together constitute one and the same instrument.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as follows:

	 	 	 	 	 
	 	L.A.M. Pharmaceutical Corporation

 	 
	 	By:  	/s/ Joseph T. Slechta
 	 
	 	 	Authorized Signing Officer 	 
	 	 	Name: Joseph T. Slechta 	 
	 

	 	 	 	 	 
	 	China National Pharmaceutical Foreign Trade Corporation (Sinophorm)

 	 

	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Li
Zhixin
 	 
	 	 	Authorized Signing Officer 

Director, President	 
	 	 	Name: Li
Zhixin	 

22

 

	 	 	 	 	 

SCHEDULE A

PRODUCTS

For purposes of this Agreement, “Products” shall mean the product referred to
in English as “L.A.M. I.P.M.TM Wound Gel”.

The minimum order quantity of Products shall be one [1] case of 50 tubes of the
Products, and all orders must be for a whole-number multiple of cases of the
Products. LAM has the right to unilaterally change its type, size or quantity
of packaging and the resulting minimum order quantity, so long as the minimum
order quantity does not exceed 600 grams of Products (excluding package
weight).

The lead time prescribed in section 8.2 shall be 3 months, meaning that LAM
shall endeavor to fill orders within 3 months of receipt.

The price charged by LAM to the Distributor for Products during the first
twelve months of this Agreement shall be not more than eight dollars U.S. funds
($8.00 U.S. funds) per ten gram (10 g) tube.

Unless LAM advises the Distributor otherwise in writing, the expiry date of all
Products is thirty six [36] months from the date of initial manufacture.

The warranty period for the Products is twelve [12] months from the shipping
date, un less otherwise specified in this Agreement or unless otherwise agreed
to.

23

 

SCHEDULE A

TERRITORY COUNTRIES

	1)	 	GUATEMALA
	 
	2)	 	EL SALVADOR
	 
	3)	 	HONDURAS
	 
	4)	 	NICARAGUA
	 
	5)	 	COSTA RICA
	 
	6)	 	PANAMA
	 
	7)	 	BELIZE
	 
	8)	 	ECUADOR
	 
	9)	 	VENEZUELA
	 
	10)	 	COLOMBIA
	 
	11)	 	CHILE
	 
	12)	 	BOLIVIA
	 
	13)	 	PARAGUAY
	 
	14)	 	URUGUAY
	 
	15)	 	PERU
	 
	16)	 	CUBA

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