Strategic Alliance Agreement

STRATEGIC ALLIANCE AGREEMENT


THIS AGREEMENT is made as of the 8th day of April, 2004 (the "Effective Date"), by and between ARCHER-DANIELS-MIDLAND COMPANY, a Delaware corporation ("ADM"), and EUGENE SCIENCE INC., a Korean corporation ("EUGENE").


WITNESSETH


WHEREAS, ADM is engaged in the business of procuring and processing fatty acid distillate ("Distillate") into, among other things, products containing sterols and steryl esters using multiple technologies, and marketing those products worldwide; and


WHEREAS, EUGENE is engaged in the business of producing and marketing products containing sterols and steryl esters utilizing EUGENE proprietary technology (the "EUGENE Products"); and


WHEREAS, the parties desire to enter into a strategic alliance involving the procurement of Distillate, the procurement and sale of sterols and the sale and distribution of EUGENE Products, all pursuant to the terms and conditions set forth herein.


NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, it is agreed as follows:


1. Term


(a) The term of this Agreement commence on the Effective Date, and shall continue for an initial term of five (5) years from the date ADM commences offering one or more EUGENE Products for commercial sale unless earlier terminated as hereinafter provided. After the initial term, this Agreement shall be automatically renewed for successive one (1) year periods unless and until terminated as hereinafter provided. The initial term and each of the successive renewal terms, if any, are hereinafter referred to as the "Term".


(b) Notwithstanding anything to the contrary, either party may terminate this Agreement, without liability, at the end of the initial term or any renewal term by providing the other party with at least ninety (90) days advance written notice prior to the end of such term.


(c) Upon the happening of any one or more of the following events, in addition to all other rights and remedies available to it, either party shall have the right to cancel and terminate this Agreement immediately by written notice to the other party:


(i) The failure of the other party to perform or comply
with any one or more of any of the terms or
conditions of this Agreement and the failure to cure
such failure within thirty (30) days from receiving
written notice of such failure;


(ii) The insolvency of the other party; or the assignment
by the other parry for the benefit of creditors; or
the filing of a voluntary or involuntary bankruptcy,
judicial liquidation, or reorganization petition by
or against the other party; or the appointment of a
receiver, liquidator or judicial administrator, or a
trustee for either party, of any part or interest of
its business; or the failure of either party to
vacate, set


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aside or have dismissed any insolvency proceeding
under any law governing, or in effect for, the
Territory, within sixty (60) days from the date of
the commencement of any such proceeding; or the
dissolution of the entity of the other party for any
cause whatsoever; or the suspension of check/note
clearance privilege;


(iii) The failure to commence the sales of EUGENE Products
to any customers in the Territory within one year
after obtaining final regulatory approval to market
the EUGENE Products.


2. RIGHTS AND OBLIGATIONS UPON TERMINATION


(a) Neither party shall be liable for compensation or consequential damages of any kind, whether on account of the loss of present or prospective profits, or anticipated sales, expenditures, investments, or commitments made in connection with-this Agreement.


(b) The parties shall abide by and uphold any rights or obligations accrued or existing on the date of such termination.


(c) For a period of six (6) months after the expiration or earlier termination of this Agreement, ADM shall have the right to sell its inventories of EUGENE Products through its regular channels of distribution and upon terms consistent with those offered before expiration or termination.


3. PROCUREMENT OF DISTILLATE Subject to the terms and conditions set forth in this Agreement, ADM shall and hereby does appoint EUGENE as its exclusive agent to purchase Distillate from vegetable oil refining in. Korea. As needed in ADM's discretion. ADM shall inform EUGENE of the price, specifications, terms and conditions upon which ADM is willing to purchase Distillate. EUGENE shall use commercially reasonable efforts and diligence to purchase Distillate at or below the price requested by ADM, conforming with the specifications, terms and conditions requested by ADM. To the extent EUGENE is able to source such Distillate, EUGENE shall procure such Distillate for EUGENE's account. EUGENE shall then sell such Distillate to ADM at the price requested by ADM, conforming with the specifications, terms and conditions requested by ADM. To the extent EUGENE is able to procure the Distillate at a price lower than requested by ADM, EUGENE shall retain such margin for its account. In addition, the parties may mutually agree upon a commission payable from ADM. to EUGENE for procuring Distillate pursuant to this section ADM will remit payment to EUGENE by wire transfer of irrevocable funds within one (1) business day of receiving the faxed documents outlined in ADM's request, which will include, but is not necessarily limited to, bill of lading, invoice, kosher certificate and wash certificates. ADM shall reserve for EUGENE the equivalent-quantity of sterols (finished product basis) in the Distillate that EUGENE procured for ADM for sale to EUGENE pursuant to Section 4 below.


4. STEROL SUPPLY For EUGENE Products sold in North America and Europe, EUGENE shall purchase all of its requirements for sterols from ADM, The contract with respect to any such sale shall consist of this Agreement, plus EUGENE'S purchase order, and ADM'S sales confirmation and/or invoice; however, any provisions in EUGENE'S purchase order or ADM'S sales confirmation and/or invoice that are inconsistent with the provisions of this Agreement shall be of no force or effect. The terms and conditions shall include those set forth below:


(a) PRICE The price for sterols sold hereunder shall be ADM's weighted average resale price of sterols and sterol steryl esters (on a pure sterol basis deducting processing costs of intersterification) for food applications and pharmaceutical applications (the "ADM's Weighted Average Sterol Price"). The price shall be set at the commencement of the Term using ADM's Weighted Average


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Sterol Price for the immediately preceding six-month period, and shall be adjusted each six months based upon ADM's Weighted Average Sterol Price for the immediately preceding six month period.


(b) LIMITATIONS The sterols sold hereunder are for EUGENE's internal use for the production of EUGENE Products, and are not for resale. To the extent EUGENE requires sterols for resale to third parties in Korea, Eugene would purchase all of its requirements from ADM upon the terms and conditions set forth herein, except for the price, which is to be mutually agreed.


(c) RELEASE To the extent EUGENE requires quantities of sterols hereunder in excess of the amounts reserved for EUGENE pursuant to Section 3 above, and ADM is unable to supply such quantities, EUGENE may purchase such sterols from a third party.


(d) DELIVERY The product shall be sold CIF Busan. All interpretation of the delivery terms shall be in accordance with the Incoterms, latest edition.


(e) PAYMENT ADM shall invoice EUGENE for sterols purchased, and EUGENE shall make payment within 45 days of shipment.


(f) ORDERS EUGENE shall place all orders in writing for sterols at least 30 days prior to the date of shipment. Orders shall set out the quantity of product desired, any special instructions and the requested date product should be available. EUGENE shall order sterols in approximately equal amounts each month during the Term.


(g) WEIGHTS ADM's weights shall govern settlement; provided, however, if any substantial discrepancy with EUGENE's weights exists, the parties shall attempt in good faith to resolve the same.


(h) WARRANTIES; INDEMNIFICATION ADM warrants that the sterols shall conform to the specifications set forth in Schedule A, attached hereto. EXCEPT AS SET FORTH IN THIS PARAGRAPH, SELLER MAKES NO WARRANTIES, WHETHER EXPRESS OR IMPLIED. THE IMPLIED WARRANTIES OF MERCHANTABILITY, IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT ARE HEREBY DISCLAIMED. IN NO EVENT WHATSOEVER SHALL EITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES UNDER ANY TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, EVEN IF SAID PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF OR COULD HAVE FORESEEN SUCH DAMAGES.


5. DISTRIBUTION OF EUGENE PRODUCTS Subject to the terms and conditions set forth in this Agreement, EUGENE shall and hereby does appoint ADM as the exclusive distributor of the EUGENE Products for shipment and sale to customers in North America and Europe (the "Territory"). ADM shall and hereby does accept such appointment. The terms of such appointment are as follows:


(a) PRE-COMMERCIALIZATION ADM shall use commercially reasonable efforts and diligence to proceed with the regulatory approval, promotion, marketing and sale of the EUGENE Products in the Territory. As part of such efforts, ADM shall pursue regulatory approval and conduct a review of intellectual property rights in the Territory. These expenses ADM incurs and other expenses ADM incurs related to preparing for the commercial sale of the EUGENE Products in the Territory, and that are pre-approved by EUGENE, such approval not to be unreasonably withheld, shall be defined as "Pre-Commercialization Expenses." As further set forth below, EUGENE shall reimburse ADM for one-half of the Pre-Commercialization Expenses. In the event, ADM has not been reimbursed for one-half of the Pre-


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Commercialization Expense pursuant to the method set forth below, then EUGENE shall promptly remit such unpaid amounts, including accrued interest, to ADM unless the parties mutually agree to extend the period of repayment.


(b) PURCHASE OF PRODUCTS From time to time during the Term, ADM may place purchase orders with EUGENE for the purchase of the EUGENE Products, and to the extent EUGENE has EUGENE Products available or capacity to produce. EUGENE Products available, EUGENE shall accept such purchase orders. EUGENE shall produce the EUGENE Products at its production facility in Korea. The contract with respect to any such sale shall consist of this Agreement, plus ADM'S purchase order, and EUGENE'S sales confirmation and/or invoice; however, any provisions in ADM'S purchase order or EUGENE'S sales confirmation and/or invoice that are inconsistent with the provisions of this Agreement shall be of no force or effect. The terms and conditions of such purchase and sale shall include those set forth below:


(i) Price The price for EUGENE Products sold hereunder
shall be (y) 115% of EUGENE's cost of manufacture
calculated in accordance with Generally Accepted
Accounting Principles, as have been consistently
applied by EUGENE (the 'Transfer Price"), plus (z)
50% of ADM's net margin from the resale of EUGENE
Products less an amount described below for EUGENE's
one-half share of the Pre-Commercialization Expenses
(the "Bonus Price"). For purposes of this paragraph,
EUGENE's cost of manufacture shall only include
actual costs incurred by EUGENE for raw materials,
labor, depreciation of production facility, utilities
and overhead necessary for the production. For
purposes of this paragraph, ADM's net margin shall be
calculated by subtracting from ADM's gross margin any
expenses, including rebates, returns, commissions and
license fees payable to any third parties, but not
including any Pre-Commercialization Expenses. For
purposes of this paragraph, ADM's gross margin shall
equal the sales received from ADM's sale of EUGENE
Products less the Transfer Price, less freight, taxes
and duties. The amount to be deducted for EUGENE'S
one-half share of the Pre-Commercialization Expenses
shall be calculated by amortizing-one-half of the
Pre-Commercialization Expenses over a period of three
(3) years, accruing interest per annum at an interest
rate equal to the Prime Rate, as published in THE
WALL STREET JOURNAL, plus 3%, such rate to be
adjusted semi-annually.


(ii) DELIVERY The product shall be sold CIF US port or
European port to be mutually agreed. All
interpretation of the delivery terms shall be in
accordance with the Incoterms, latest edition.


(iii) PAYMENT EUGENE shall invoice ADM for the EUGENE
Products purchased, and ADM shall make payment within
45 days of shipment.


(iv) ORDERS ADM shall place all orders in writing for
sterols at least 60 days prior to the date of
shipment. Orders shall set out the quantity of
product desired, any special instructions and the
requested date product should be available.


(v) WEIGHTS EUGENE'S weights shall govern settlement;
provided, however, if any substantial discrepancy
with ADM's weights exists, the parties shall attempt
in good faith to resolve the same.


(vi) WARRANTIES; INDEMNIFICATION EUGENE warrants that the
EUGENE Products shall conform to the specifications
set forth in Schedule B, attached hereto. EXCEPT AS
SET FORTH IN THIS PARAGRAPH, SELLER MAKES NO
WARRANTIES, WHETHER EXPRESS OR IMPLIED. THE IMPLIED
WARRANTIES OF MERCHANTABILITY


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IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
AND NON-INFRINGEMENT ARE HEREBY DISCLAIMED. IN NO
EVENT WHATSOEVER SHALL EITHER PARTY SHALL BE LIABLE
FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTALDAMAGES
UNDER ANY TORT, CONTRACT, STRICT LIABILITY OR OTHER
LEGAL OR EQUITABLE THEORY, EVEN IF SAID PARTY HAS
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