Manufacturing Services Agreement

EXHIBIT 10.69


MANUFACTURING SERVICES AGREEMENT


This Manufacturing Services Agreement ("Agreement") is made as of the 5th day of November, 2002, by and between DESERT WHALE JOJOBA COMPANY, INC., a Arizona Corporation, having its principal place of business at 2101 E. Beverly Drive, Tucson, Arizona 85719, hereinafter called "DWJ", and IGI, INC., a Delaware Corporation, with its principal place of business at 105 Lincoln Avenue, Buena, New Jersey 08310, hereinafter called "Manufacturer".


WHEREAS, DWJ wishes to develop and market the product or products ("Subject Products") described on Exhibit A attached hereto, from the raw materials ("Raw Materials") and with the specifications ("Product Specifications") described on said Exhibit A; and


WHEREAS, Manufacturer possesses the facilities and the technical know-how to produce the Subject Products from the Raw Materials; and


WHEREAS, DWJ wishes to produce the Subject Products meeting the Product Specifications at Manufacturer's facility from the Raw Materials supplied by DWJ, and Manufacturer desires to produce the Subject Products for DWJ; and


WHEREAS, the Subject Products and the Raw Materials set forth on Exhibit A hereto may be modified in accordance with the terms of this Agreement.


AGREEMENT


NOW, THEREFORE, the parties mutually agree as follows:


1. RECITALS. The recitals set forth above are hereby incorporated by reference and made a part of this Agreement as if set forth herein at length.


2. PRODUCTION OF THE SUBJECT PRODUCTS.
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Manufacturer agrees to produce the Subject Products from the Raw Materials upon the following terms:


2.1 Shipment of Raw Materials. DWJ shall at its sole cost and expense supply Manufacturer with the Raw Materials to be encapsulated from which Manufacturer shall produce any and all Subject Products under this Agreement. DWJ shall be solely responsible for the method of and all costs related to shipment of the Raw Materials from which Manufacturer is to produce the Subject Products. The Raw Materials shipped by DWJ to Manufacturer under this Agreement shall be accompanied by and delivered with a Certificate of Analysis and Expiration Date. Risk of Loss and Title to any and all Raw Materials shall not pass to Manufacturer, and shall remain with DWJ, until such time as Manufacturer accepts such shipment of Raw Materials. In addition to any other rights


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and remedies available to the Manufacturer under this Agreement and/or as otherwise provided by law, Manufacturer shall be free to reject and/or refuse to accept shipment of any Raw Materials hereunder that (i) are defective, damaged, inferior and/or otherwise non-conforming; (ii) are dated to expire within 120 days after the date such shipment was received at the Manufacturer's Production Facility (as defined below); (iii) do not conform to or otherwise meet the applicable Product Specifications for the Subject Products to which the shipment relates; and/or (iv) exceed the amount necessary for production of the Subject Products to which the shipment relates. In addition, DWJ shall not ship to Manufacturer any Raw Materials in amounts exceeding that which is necessary for production of the Subject Products to which the shipment relates (hereinafter "Excess Raw Materials"). In the event DWJ ships any Excess Raw Materials to Manufacturer, the Risk of Loss and Title to any such Excess Raw Materials shall at all times remain with DWJ until and unless such time as the Excess Raw Materials are actually encapsulated by Manufacturer into a Subject Product for delivery to DWJ under this Agreement. DWJ shall be responsible for any and all costs and expenses of return shipment for any and all Excess Raw Materials, as well as any and all other Raw Materials rejected and/or otherwise not accepted by Manufacturer hereunder. All shipments of Raw Materials shall be sent to Manufacturer at Manufacturer's facility located at 105 Lincoln Avenue, Buena, New Jersey 08310, or such other address as Manufacturer may provide to DWJ in a written notice (hereinafter "Manufacturer's Production Facility"). At least fifteen (15) calendar days prior to any shipment of Raw Materials hereunder, DWJ shall provide the Manufacturer with written notice of the shipment (hereinafter "Shipment Notice"), which Shipment Notice shall specify the quantity and type of Raw Materials, the Subject Products to be manufactured from the Raw Materials, the shipment date and the date that the shipment is expected to arrive at Manufacturer's Production Facility. The Shipment Notice shall also constitute the purchase order for the Subject Products set forth therein.


2.2 Production of Subject Products.
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(a) Unless otherwise agreed by the parties in writing, within twenty (20) business days of the date of Manufacturer's acceptance of Raw Materials shipped by DWJ pursuant to Section 2.1 above (hereinafter "the Production Period"), the Subject Products specified in the Shipment Notice shall be produced by Manufacturer as per the applicable Product Specifications, packaged in bulk and ready for shipment to DWJ pursuant to Section 2.3 below. Upon Manufacturer's acceptance of a shipment of Raw Materials from DWJ, Manufacturer shall notify DWJ in writing of the estimated date upon which the Subject Products ordered under the Shipment Notice relating to such Raw Materials shall be completed, packaged in bulk and ready for shipment to DWJ pursuant to Section 2.3 below. Notwithstanding the foregoing, DWJ shall not unreasonably withhold its consent to any reasonable request by Manufacturer to extend the duration of the Production Period relating to any order of Subject Products under this Agreement, but in no event shall the Production Period exceed forty-five (45) business days.


(b) Manufacturer shall not be deemed to be in breach of any of its obligations under this Agreement, nor shall it be liable to DWJ and/or any other third party in any


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way whatsoever for damages or otherwise, for the inability and/or failure to complete production of any Subject Products hereunder within the Production Period as a result of and/or due to DWJ's failure to timely supply Manufacturer with Raw Materials in sufficient amounts and quality as are necessary in order for Manufacturer to produce such Subject Products.


2.3 Shipment of Subject Products. Upon completion of the production of Subject Products from a shipment of Raw Materials, Manufacturer shall (a) notify DWJ in writing of such completion, and (b) ship the Subject Products to DWJ in a manner directed in writing by DWJ. The Risk of Loss and Title to any and all of such Subject Products shall pass to DWJ immediately upon Manufacturer's delivery of such Subject Products to the shipment carrier as arranged and designated by DWJ for transport to DWJ's facility located at 2101 East Beverly, Tucson, Arizona 85719, or such other address DWJ may provide to Manufacturer in a written notice (hereinafter "DWJ's Facility"). DWJ shall be responsible for any and all costs and expenses for shipping and/or otherwise transporting all Subject Products ordered by DWJ hereunder from Manufacturer's Production Facility to DWJ's Facility for delivery thereof.


2.4 Amendment of Exhibit A. From time to time DWJ may request that the Manufacturer produce a new product that would be added as a Subject Product on Exhibit A hereto, which product may or may not be made from raw materials not previously listed on said Exhibit A (hereinafter "Proposed Product"). Manufacturer agrees to review the request for the Proposed Product and determine (a) whether or not Manufacturer is capable of producing the Proposed Product, (b) whether or not Manufacturer is desirous of producing the Proposed Product, and (c) whether or not Manufacturer's production of the Proposed Product for DWJ's behalf would violate the terms of any agreement with a third party to which Manufacturer is subject. If Manufacturer is desirous and capable of producing the Proposed Product, and the Manufacturer's production of the Proposed Product does not violate the terms of any agreement with a third party to which Manufacturer is subject, Manufacturer shall so notify DWJ in writing ("Acceptance Notice"). Within twenty (20) business days of DWJ's receipt of an Acceptance Notice, and provided the parties are able to mutually agree upon pricing and other terms, the parties shall execute a written amendment to Exhibit A to add the Proposed Product as a Subject Product and the Raw Material(s) for the Proposed Product to be supplied by DWJ pursuant to the terms of this Agreement. If the parties are unable to so agree on the price and other terms for the Proposed Product, Exhibit A shall not be otherwise amended to add the Proposed Product thereto. At any time prior to DWJ's receipt of an Acceptance Notice, DWJ may withdraw its request for such Proposed Product be added as a Subject Product on Exhibit A, and such Proposed Product shall not be subject to the terms of this Agreement.


3. MARKETING AND MANUFACTURING RIGHTS.
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3. l Grant of Exclusive Manufacturing Rights. Subject to the terms of this Agreement, Manufacturer shall have the exclusive right to manufacture the Subject Products during the term of this Agreement. In that regard, DWJ shall not enter into any


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agreement with any person or entity other than Manufacturer for the manufacture of the Subject Products, without the express prior written consent of Manufacturer, which consent may be granted or withheld in Manufacturer's sole discretion.


3.2 Agreement Not to Manufacture or Sell Subject Products. Subject to the terms of this Agreement, Manufacturer shall not during the term of this Agreement manufacture any of the Subject Products for its own behalf or for any third party or entity other than DWJ, without the express prior written consent of DWJ, which consent may be granted or withheld in DWJ's sole discretion.


3.3 No Limitation on Use of Subject Products. Except as otherwise provided by law and/or by any other binding contractual obligations of either DWJ or the Manufacturer, DWJ shall not be limited in any way in marketing the Subject Products or ways in which the Subject Products are utilized, including, without limitation, marketing products under the name of DWJ or some other trade name to which DWJ has rights and title thereto, or supplying the Subject Products to third party users, who will also not be subject to any limitations in the way in which the Subject Products are utilized except as provided herein, including, without limitation, marketing the Subject Products under their own name or the trade name of any third party to which they have rights and title thereto.


3.4 Discontinuance of Sale of Subject Products. Upon forty-five (45) calendar days prior written notice to Manufacturer, DWJ in its sole discretion shall have the right to discontinue the sale of any Subject Product at any time during the term of this Agreement (hereinafter "Discontinued Product"). DWJ shall continue to be obligated to purchase from Manufacturer in accordance with the terms contained herein (a) any and all Discontinued Products that were completed and ready for shipment to DWJ as of the date of Manufacturer's receipt of DWJ's written notice for such Discontinued Products, and (b) any and all Discontinued Products for which production had already been commenced by Manufacturer, but not yet completed, as of the date of Manufacturer's receipt of DWJ's written notice for such Discontinued Products. Notwithstanding the foregoing, the parties expressly acknowledge and agree that upon DWJ's delivery of a notice of discontinuation hereunder, Section 3.2 shall as of such date automatically, and without any further action required by either party, cease to apply to or have any force or effect as to any such Discontinued Products identified therein.


3.5 Ownership Rights.
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(a) DWJ shall own any and all patents and/or other intellectual property rights in and to the Product Formulations (as defined below) and Product Specifications of any Subject Product hereunder ("DWJ's IP"), and except as is necessary for the purpose of manufacturing any and all Subject Products under this Agreement, Manufacturer agrees to hold in confidence all such DWJ IP Rights. For purposes of this Agreement, Product Formulations shall mean the Product Formulations for the Subject Products as set forth on Exhibit A attached hereto, as it may be amended from time to time. Manufacturer is hereby granted a license to use any and all DWJ's IP in connection with the performance of Manufacturer's obligations and exercise of Manufacturer's rights hereunder.


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Notwithstanding the foregoing, nothing contained in this Agreement shall transfer, confer, convey and/or otherwise grant to DWJ any rights, interest, title or claim of any kind whatsoever in or to any of Manufacturer's production technology and/or processes, including, without limitation, the patented Novasome(R) encapsulation technology and processes, all of which rights, title, interests and claims shall remain the sole property of Manufacturer.


(b) Manufacturer shall own any and all patents, know-how, trade secrets, designs and other intellectual property rights in and to the processes, systems and methods to make, produce and/or manufacture any and all of the Subject Products hereunder ("Manufacturer's Processes"), including, without limitation, Manufacturer's patented Novasome(R) encapsulation technology and processes, all of which rights, title and interests shall remain the sole property of Manufacturer.


(c) DWJ agrees to defend, indemnify and hold Manufacturer, and its directors, officers, shareholders, employees, agents, representatives, attorneys, successors and assigns, harmless from and against any and all third-party liabilities, claims, demands, damages, costs and expenses (including, without limitation, reasonable attorneys' fees and costs), penalties, fines, interest, assessments, judgments, suits, allegations, and injuries of any kind whatsoever, actual, threatened and/or alleged at any time after the Effective Date of this Agreement, arising from, relating to, and/or resulting from: (i) breach, infringement, violation and/or other interference with the rights of a third-party, including, without limitation, ownership, title, license, contract, trademark, copyright, patent, intellectual property and/or any other property rights of any kind whatsoever, as it may relate to any or all of DWJ's IP; and/or (ii) any and all personal injury and/or property damage due to and/or caused by use and/or ingestion of any and/or all Subject Products supplied by Man ...