Product Development, Production And Marketing Agreement

PRODUCT DEVELOPMENT, PRODUCTION AND MARKETING AGREEMENT


THIS PRODUCT DEVELOPMENT, PRODUCTION AND MARKETING AGREEMENT (this "Agreement") made as of this 4th day of April, 2006 (the "Effective Date"), by and between (a) Modec, Inc., a Colorado Corporation with its principal business address at 4725 Oakland Street, Denver, Colorado 80239 ("Modec"), and (b) Scott's Liquid Gold-Inc. a Colorado Corporation, and SLG Chemicals, Inc., a Colorado corporation, each with its principal business address at 4880 Havana Street, Denver, CO 80239 (collectively and separately these two corporations are referred to as "SLG").


RECITALS


WHEREAS, Modec has the rights to license, produce, sell and distribute certain products identified in Section 1.1 hereto for use in the mitigation, remediation and decontamination of mold and mycotoxin contamination; and


WHEREAS, Modec has used and tested the Products (as defined below) and found them be safe and effective in the mitigation, remediation and decontamination of mold and mycotoxin; and


WHEREAS, Modec desires to assist with and grant to SLG the right to develop, produce and market the Products and SLG desires to fill, package and market the Products, subject to the terms and conditions set forth in this Agreement; and


NOW THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:


ARTICLE 1 DEFINITIONS


1.1 Definitions: In addition to terms that may be defined throughout this Agreement, the following capitalized terms shall have meanings set forth below:


(a) "Affiliate" shall mean, with respect to a party, any Person directly controlling, controlled by or under common control with, such party.


(b) "Channels" shall mean sales of the Product referred to herein to or through the following:


(i) Hardware and Do It Yourself.


(ii) Grocery.


(iii) Mass Merchant, including, by way of example and without limitation, Wal-Mart, K-Mart, Target and other national and regional discount retail stores.


(iv) Drug Stores.


(v) Other Retail Stores.


(vi) Consumer Direct Web Site(s) developed and maintained by SLG.


(vii) Retail Web Merchants, excluding web sites of (x) distributors who are sold Product by Modec that are intended for resale to professional mold remediators, and (y) professional mold remediators who are sold Product by Modec or such distributors; provided however, that Modec hereby covenants and agrees that during the term of this Agreement, Modec shall not sell or otherwise provide any Product to any distributor, professional mold remediator or other third party that Modec knows or has reason to know intends to resell such Product for the purpose of retail sales.


(viii) Direct to Consumer Advertising including but not limited to direct response TV (DRTV) and direct mail.


(c) "Confidential Information" shall mean information, whether in written, verbal, magnetic, photographic, optical, or other form, disclosed to or obtained by one party from another party either prior to or during the term of this Agreement which is non-public and has been designated as being confidential, or which is otherwise disclosed in such a manner or is of such a character as would put a reasonable person on notice as to the confidential and proprietary nature of the information (including, without limitation, discoveries, technical and non-technical data and information, technology, formulae, know-how, trade secrets, methodologies, concepts, techniques, financial data, patent applications, manufacturing methods, processes, drawings, designs, specifications, market research data, marketing or business plans, research and development, identity of customers, identity of suppliers, manufacturers and other vendors, and product information, including the nature and source of raw materials, product formulation and methods of producing, testing and packaging) and which relates to the disclosing party's past, present or future research, development or business activities or consists of third party Confidential Information. Confidential Information shall not, however, include information that a party can demonstrate by tangible evidence:


(i) is or becomes generally known to the public other than as a result of a breach by a party hereto (or any of its Affiliates) of its obligations of confidentiality contained herein;


(ii) is known by the receiving party prior to disclosure by the other party; or


(iii) was developed by the receiving party independent of any disclosure by the other party;


(iv) is subsequently, lawfully and in good faith obtained by the receiving party on a non-confidential basis from a third party as shown by documentation sufficient to establish the third party as the source of the information, provided that such third party was not under an obligation to treat such information in a confidential manner and had a lawful right to make such disclosure.


(d) "Damages" shall mean all damages, liabilities, expenses (including reasonable attorney's fees and expenses), losses, judgments, settlement amounts, fines, penalties and other similar assessments.


(e) "Force Majeure" shall have the meaning ascribed to that term in Section 13.7 herein.


(f) "Improvement" shall mean any innovation, variation, enhancement, derivative, modification, improvement or changes relating to the Products, including, without limitation, any derivative product(s), new product(s) or product line(s), whether patentable or not or capable of being protected by other means, limited to use for the mitigation, remediation and decontamination of mold and mycotoxin.


(g) "IP Rights" means all forms of intellectual property rights and protections throughout the world, whether arising under United States (state or federal) or foreign statutory law, common law, or by contract, and whether or not perfected or currently existing or hereafter developed or acquired or recognized, including without limitation, all: (i) patents and all filed, pending or potential applications for patents, including any patent disclosures, utility models, reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations or continuations-in-part; (ii) discoveries, developments, inventions (whether or not patentable or reduced to practice), useful articles, concepts, ideas, improvements, designs (ornamental or otherwise), compositions of matter, manufacturing and production processes and techniques, technical data and information, drawings, specifications, customer and supplier lists, pricing and cost information, trade secrets, know-how, rights to confidential or other proprietary information; (iii) copyrightable works, copyrights and all applications, registrations and renewals in connection therewith; (iv) mask works and all applications, registrations and renewals in connection therewith; (v) moral rights, literary property or authors' rights, and equivalent rights; (vi) proprietary indicia, trademarks, service marks, trade names, trade dress, logos, symbols, domain names, logos and/or brand names (including all applications, registrations and renewals related thereto) and all goodwill associated therewith; (vii) innovations, variations, enhancements, modifications, improvements or changes relating to any of the foregoing; (viii) contract and/or licensing rights relating to any of the foregoing; and (ix) all copies and tangible embodiments thereof (in whatever form or medium).


(h) "Indemnified Party" shall have the meaning ascribed to that term in Section 9.1 hereof.


(i) "Indemnifying Party" shall have the meaning ascribed to that term in Section 9.1 hereof.


(j) "Initial Term" shall have the meaning ascribed to that term in Section 10.1 hereof.


(k) "Modec Confidential Information" shall mean all Confidential Information relating to and/or necessary or useful for the commercial exploitation of the Products, which is now or hereafter owned or licensed by Modec and which Modec has the lawful right to disclose, irrespective of whether the same shall be the subject of patents, patent applications or other forms of protections or applications therefor and consisting of or contained or exhibited in any form whatsoever. Modec Confidential Information includes all toxicology, clinical and other scientific data relating to the Technology or any Product.


(l) "Modec Trademarks" shall mean the trademarks or service marks of Modec related to the Products, as identified on attached Exhibit B.


(m) Reserved.


(n) "Person" shall be broadly interpreted to mean an individual, partnership, joint venture, limited liability company, association, corporation, and any other form of business organization, government, regulatory or governmental agency, commission, department or instrumentality.


(o) "Product" or "Products" shall mean the Modec Decon Formulation 500 Series (MDF-500) for the mitigation, remediation and decontamination of mold and mycotoxin, Part A and /or Part B separately or combined, as delivered through a spray, foam, aerosol or other delivery system or device(s) as registered under FIFRA with the US Environmental Protection Agency, and any Improvements thereto. The parties recognize that SLG may in the future launch a consumer product version of MDF-500 in its powder form during the term of this Agreement, and such powder form shall also be considered a Product. Hereinafter, Product(s) may also be referred to as "MDF-500".


(p) "Purchase Price" shall have the meaning ascribed to that term in Section 5.1 and Exhibit A hereof.


(q) "Renewal Term" shall have the meaning ascribed to that term in Section 10.1 hereof.


(r) "Specifications and Standards" shall mean the official written standards used in formulating the Products, including, without limitation, any and all application protocols designated herein, which are attached as Exhibit C, but excluding the specific formula for MDF-500.


(s) "Technology" shall mean all IP Rights owned or licensed by Modec, whether or not such items are patentable, copyrightable, or protectible as trade secrets or otherwise, relating to and/or necessary or useful for the commercial exploitation of the Products, including, but not limited to, the Modec Confidential Information, and any Improvements to the foregoing, whether now or hereafter owned or licensed by Modec.


(t) "Territory" shall mean North America.


ARTICLE 2 GRANT OF RIGHTS; INFRINGEMENT


2.1 Grant of Rights: Modec hereby grants to SLG a royalty-free, exclusive right and license, with right to sublicense (upon Modec's written consent, which consent shall not be unreasonably withheld, conditioned or delayed), to use, develop, produce, market, offer and sell, and have developed, produced, marketed, offered and sold, the Products and any Improvements thereto in the Territory through the Channels covered by this Agreement. SLG will retain product naming and private labeling rights for the Products.


2.2 Right to Sue Infringers:


(a) In the event that Modec learns of the infringement or misappropriation of any rights with respect to any Products sold, marketed or distributed in the Territory through the Channels covered by this Agreement, Modec immediately shall notify SLG in writing and shall provide SLG with reasonable evidence of such infringement or misappropriation. Modec shall not notify any third party of such infringement or misappropriation without first obtaining the written consent of SLG, which consent will not be unreasonably withheld. The parties will use good faith and commercially reasonable efforts in cooperation with each other to resolve such matter without litigation.


(b) SLG shall have the first right, but not the obligation, to take and control any action and/or initiate suit regarding any alleged infringement or violation of any rights with respect to any Products sold, marketed or distributed in the Territory through the Channels covered by this Agreement. Modec may bring suit for such infringement or misappropriation if and only if SLG elects not to commence suit and notifies Modec of such election in writing.


(c) Any legal action under this Section 2.2 shall be at the expense of the party initiating the legal action. If legal action is brought by SLG, all damages, awards, settlement proceeds or other recovery or special or punitive damages shall belong solely and exclusively to SLG. If legal action is brought by Modec, all damages, awards, settlement proceeds or other recovery or special or punitive damages shall belong solely and exclusively to Modec. Legal action brought jointly by SLG and Modec and fully participated in by both will be at the joint expense of the parties and all recoveries will be shared jointly by them in proportion to the share of expenses paid by each.


(d) Each party shall cooperate with the other in proceedings instituted hereunder, provided expenses are borne by the party bringing suit. Litigation shall be controlled by the party bringing suit, except that SLG shall control the litigation if brought jointly. Notwithstanding anything herein to the contrary, either party shall have the right, at any time, to employ separate counsel of its choice and to join and participate in any suit brought by the other party, but the fees and expenses of such counsel shall be at the expense of such party.


(e) Notwithstanding anything herein to the contrary, neither party shall settle or compromise any such suit without the other party's written consent, such consent not to be unreasonably withheld, delayed or conditioned.


2.3 Nature of Relationship: This Agreement does not constitute or create (and the parties do not intend to create hereby) a joint venture, pooling arrangement, partnership, or formal business organization of any kind between Modec and SLG, and the rights and obligations of the parties shall be only those expressly set forth herein. Each of Modec and SLG is an independent contractor engaged in the operation of its own respective business. Neither party shall be considered to be an agent of the other for any purpose whatsoever. Each party shall be responsible for providing its own personnel workers' compensation, medical coverage or similar benefits, and any life, disability or other insurance protection. Each party shall be solely responsible for the payment of social security benefits, unemployment insurance and pension benefits with respect to its own employees, withholding any required amounts for income and other employment-related taxes with respect to its own employees and the provision of any other benefits to its own employees. Neither party has the power or authority to act for, represent, or bind the other in any manner except as specifically set forth in this Agreement.


ARTICLE 3 REPRESENTATIONS AND WARRANTIES


3.1 Representation and Warranties of Modec: Modec represents, warrants and covenants to SLG as follows:


(a) Modec shall use its best efforts to maintain its license (a copy of which accompanies this document as Exhibit A) with Sandia National Laboratory "Sandia", License Agreement Number 00-C00872 (the "License Agreement"), in good standing. Should Modec breach any term of the License Agreement, Modec, in addition to using Modec's best efforts to promptly cure such breach, shall immediately notify SLG of such breach. SLG shall have the right, at its option, to assist Modec, and Modec will cooperate with SLG, in connection with promptly curing any such breach; provided, however, that (i) SLG shall not directly contact Sandia National Laboratory in connection therewith without the consent of Modec, (ii) the remedy set forth in this Section is cumulative and in no way limits or waives any other rights or remedies available to SLG, and (iii) SLG's obligations in connection therewith shall be limited solely to those obligations expressly set forth in this Agreement. Notwithstanding anything herein to the contrary, any breach of any terms or conditions of the License Agreement by Modec that would adversely affect in any way the rights of SLG hereunder with respect to the Products shall be deemed to be a breach of this Agreement by Modec.


(b) Modec has and shall use its best efforts to continue to have during the term of this Agreement, the right to manufacture and distribute the MDF-500 in the manner set forth in this Agreement.


(c) Modec is not currently, and shall use its best efforts during the term of this Agreement to not become, prohibited by any law, rule or regulation or by any judgment, order, directive or policy from selling the MDF-500 to SLG or entering into this Agreement.


(d) All consents, approvals, authorizations and orders necessary for the execution, delivery and performance of this Agreement by Modec have been, and will be during the term of this Agreement, duly and lawfully obtained. Modec has a valid licensable interest in and to the Technology and Products and Modec has, and will have during the term of this Agreement, full right, power, authority and capacity to execute, deliver and perform this Agreement in accordance with its terms, including without limitation, the full right and power to grant the rights and license hereunder and otherwise fulfill Modec's obligations under this Agreement, without the consent of any governmental body, any regulatory authority, or any third party. This Agreement has been duly executed by an authorized officer of Modec and constitutes a legal, valid and binding agreement of Modec enforceable against Modec in accordance with its terms.


(e) Modec, at its sole cost and expense, shall comply with all local, state, federal and international laws and regulations relating to its performance under this Agreement, including without limitation, the development, manufacture and sale of the Products. Without limiting the foregoing, the MDF-500 has been, and during the term of this Agreement will be, formulated, manufactured, packaged, labeled, advertised, promoted, and handled and is otherwise in accordance with all applicable laws and regulations; and does not constitute an article that may not properly be introduced into commerce under federal or state law or the rules and regulations of the Environmental Protection Agency ("EPA") or any other state or federal regulatory authority.


(f) If this Agreement, the Products or any associated transaction is required by any applicable law or national, federal, state, prefecture, local, municipal, foreign, or other government, governmental, or quasi-governmental authority to be approved, permitted or registered, Modec will assume all legal obligations to do so and will make all necessary findings and pay all costs including fees, penalties and all other out-of-pocket costs associated with such permitting, registration or approval process. Without limiting the generality of the foregoing, during the term of this Agreement and except as otherwise expressly set forth in this Section, Modec shall, at its sole cost and expense, be solely responsible for (i) obtaining regulatory approval by any applicable national, federal, state, prefecture, local, municipal, foreign, or other government, governmental, or quasi-governmental authority of any nature which now is, or later becomes, necessary for SLG to develop, use, produce, market, offer or sell any Product or Improvement thereto, (ii) obtaining any toxicology studies which now are, or later become, necessary for SLG to develop, use, produce, market, offer or sell any Product or Improvement thereto, as mutually agreed by the parties, (iii) registering any Product or Improvement thereto in each state in which it will be developed, produced, used, marketed, offered or sold by SLG and any renewals thereof, but excluding registration/renewals for more than one brand name per Product and/or re-branded Products, unless otherwise mutually agreed by the parties and (iv) insuring regulatory compliance of the SLG product label, including amendments to registered labels. Modec will assist SLG in getting the SLG label reviewed and approved by the USEPA within 90 days of the signing of this Agreement. It is expressly understood and agreed that SLG shall have no obligations under this Agreement until the applicable permitting, registrations or approvals referenced in this Section have been obtained and SLG has received evidence of the same. In the event that any governmental entity requires material changes to be made to the terms of this Agreement or the relationship between the parties, SLG may terminate this Agreeme ...