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Manufacturing and License Agreement - Powell Manufacturing Co. Inc. and Star Scientific Inc.

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                              AMENDED AND RESTATED
                       MANUFACTURING AND LICENSE AGREEMENT

            THIS AMENDED AND RESTATED MANUFACTURING AND LICENSE AGREEMENT (this
"AGREEMENT") is entered into this 12th day of October, 1999 between POWELL
MANUFACTURING COMPANY, INC, a South Carolina corporation with its executive
offices at P.O. Box 707, Bennettsville, South Carolina 29512-707 ("POWELL") and
STAR SCIENTIFIC, INC., a Delaware corporation with its executive offices at 16
South Market Street, Petersburg, Virginia 23803 ("STAR"). This Agreement amends
and restates the terms of that certain Manufacturing and License Agreement dated
as of January 25, 1999, by and between Powell and Star, as amended prior to the
date hereof.

                                    RECITALS

            WHEREAS, Star holds certain exclusive licensing rights under United
States patents and patents pending for methods of curing tobacco and tobacco
products (the "STAR PATENT RIGHTS"); and

            WHEREAS, Star desires to have tobacco curing barns manufactured for
it pursuant to its specifications to be used by Star and others for the curing
of tobacco pursuant to Star's licensing rights; and

            WHEREAS, Powell is in the business of manufacturing tobacco curing
barns and is willing to manufacture barns for Star as described above;

            NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                    AGREEMENT

1.          PURCHASE AND SALE REQUIREMENTS.

            1.1         TERM; TERMINATION.

                         (a)         The terms of this Agreement (as amended
hereby) shall become effective on the date hereof and expire on [***] (the
"EXPIRATION DATE"). Notwithstanding the foregoing, this Agreement will
automatically renew for three successive one year periods unless either party
provides written notice to the other on or before the date which is nine (9)
months prior to the expiration of the then current term of the Agreement of such
party's election to terminate the Agreement.




Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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                        (b)         Either party (the "NONBREACHING PARTY")
shall have the right to terminate this Agreement upon [***] prior
written notice to the other party (the "BREACHING PARTY") upon the occurrence of
the breach of any material provision of this Agreement, unless the Breaching
Party cures or corrects such breach within the [***] after the
written notice by the Nonbreaching Party.

            1.2         REQUIREMENTS; SPECIFICATIONS. Upon the terms and subject
to the conditions set forth in this Agreement, Star will order and purchase from
Powell, and Powell will sell to Star, Star Barns (as defined below) to be
delivered on or prior to the Expiration Date. Star shall purchase exclusively
from Powell up to [***] Star Barns per Production Period (as defined below).
Thereafter, Star may purchase additional Star Barns during such Production
Period [***] The Star Barn shall be manufactured to the specifications set forth
on Exhibit A attached hereto. Subject to the preceding sentence, and with the
prior written consent of Star, which shall not be withheld unreasonably, Powell
will have the right to make changes in the design, components and materials used
in the Star Barn so long as such alterations do not change the specifications
set forth on Exhibit A and, in Powell's reasonable judgment, negatively effect
the Star Barn's quality, performance or conformance to applicable warranties.

            1.3         GOVERNING TERMS. All Star Barns purchased under the
terms and conditions of this Agreement shall be subject to the commercial terms
and conditions set forth on the Star purchase order attached hereto as Exhibit
B. Any attempt by the parties to alter such terms and conditions shall be null
and void, unless otherwise agreed by the parties in writing. In the event of any
conflict between the purchase order and this Agreement, the terms of this
Agreement will prevail.

2.          ORDERS AND PRODUCTION.

            2.1         PRIOR ORDER. The parties acknowledge that, on
July 16, 1999, Star submitted, and Powell accepted, Powell purchase order No. 4
for two hundred (200) Star Barns for delivery by January, 2000 (the "PRIOR
ORDER").








Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
<PAGE>   3
            2.2         FUTURE ORDERS.

                        (a)         The parties agree that, contemporaneously
with the execution of this Agreement, Star will: (i) resubmit the Prior Order to
reflect the [***] (the "REPLACEMENT ORDER"); (ii) submit a purchase
order for four hundred (400) Star Barns for delivery by June 30, 2000; and (iii)
submit a purchase order for four hundred (400) Star Barns for delivery by
December, 2000. All such purchases shall be subject to the terms and conditions
of this Agreement, including the pricing provisions of Section 3. [***]

                        (b)         Star will submit all future orders for Star
Barns using the purchase order attached hereto as Exhibit B. Star agrees to use
commercially reasonable efforts to submit purchase orders for all Star Barns
that are to be delivered during any Production Period (as defined below) that
begins on or after July 1, 2000, prior to the commencement of such Production
Period. As used herein, "PRODUCTION PERIOD" shall mean (i) the period commencing
on the date hereof and ending June 30, 2000, or (ii) any subsequent twelve month
period commencing July 1 and ending June 30. All future orders must be
accompanied by a production schedule mutually agreed upon by the parties. [***]


            2.3         PRODUCTION.

                        (a)         Powell agrees to manufacture all Star Barns
to be delivered hereunder using new materials of good quality and good
manufacturing practices. Powell shall deliver the Star Barns on the dates set
forth in the purchase orders submitted by Star to they extent they are
consistent with the agreed upon production schedules; provided, that Powell will
not be required to manufacture and deliver, in any Production Period, more than
nine hundred and sixty (960) Star Barns unless it has received a binding
purchase order for such additional Star Barns at least four (4) months prior to
the commencement of such Production Period; provided, further, that Powell will
not be required to manufacture and deliver, in any Production Period, more than
[***]

                        (b)         In the event Powell breaches its obligations
under Section 2.3(a) by failing to deliver Star Barns on the dates set forth in
Star's purchase orders, the Purchase Price of such delayed Star Barns shall be
subject to reduction as provided in this Section 2.3(b). [***]








Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.



                                        3

<PAGE>   4

[***]


3.          PRICING; PAYMENT.

            3.1         PURCHASE PRICE. The purchase price (the "PURCHASE
PRICE") for each of the Star Barns ordered and purchased pursuant to the terms
of this Agreement shall be [***] subject to the adjustments set forth in Section
4 below.

            3.2         PAYMENT TERMS. The parties acknowledge that Powell's
standard payment terms for qualifying customers are net thirty (30) days. Under
the standard payment terms, any payments received after thirty days will incur a
late fee of [***]. Star will provide Powell with evidence of available credit
facilities, financial statements and such other information as Powell shall
reasonably request in order to determine whether Star qualifies for such terms.
[***] On the first Monday of each Payment period during the term of this
Agreement, Star shall make the Payments, in the amount of the applicable
Purchase Price multiplied by the weekly estimate (or by two or four times
the Weekly Estimate, as applicable, by wire transfer into Powell's account
pursuant to the wiring instructions set forth on Exhibit C attached hereto.
Powell will send invoices to Star with each shipment of Star Barns and the
Payments will be applied against such invoices in chronological order. Any
Payment which is not received by Powell within three (3) days of its due date
will incur a one and [***] late fee charge. Powell will apply a credit for the
Payments made under the Prior Order at the Standard Price toward the Payments to
be made pursuant to the Replacement Order at the Discount Price.








Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.




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<PAGE>   5

4.          PRICE ADJUSTMENTS.

[***]







Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.



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<PAGE>   6


[***]

5.          DELIVERY.

            All Star Barns will be delivered F.O.B. Powell's facility in
Bennettsville, South Carolina, unless otherwise agreed to in writing by the
parties. If requested by Star, Powell will use its reasonable best efforts to
assist in the delivery and setting of the Star Barns, however, Star shall be
solely responsible for all transport costs, setting charges, permit costs, taxes
and insurance costs for deliveries to customer sites. If Star contracts with
Powell for transport and setting, transport charges shall be based on [***].
Star shall have the responsibility to provide the hook-up of all utilities at
the customer site.

6.          LIMITED WARRANTY.

            Each Star Barn sold to Star hereunder shall be sold with the Limited
Warranty attached hereto as Exhibit E. [***] In addition to the limitations set
forth in said Exhibit E, it is further agreed that no warranty is granted or to
be implied that the Star Barn will cure tobacco to Star's specifications or
those of any other party. EXCEPT AS EXPRESSLY PROVIDED HEREIN, POWELL MAKES NO
EXPRESS OR IMPLIED WARRANTIES OF ANY KIND OR NATURE WITH RESPECT TO THE STAR
BARNS.








Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.



                                        6

<PAGE>   7

7.          SPARE PARTS.

            Attached hereto as Exhibit F is a list of spare parts for the Star
Barn recommended by Powell. Powell shall make such spare parts available to Star
and others directly and/or through normal dealer networks, for a period of [***]
following the delivery of the last Star Barn to be delivered hereunder.

8.          TRAINING.

            Powell will provide to Star and/or others, at Powell's expense,
three (3) annual training seminars on the mechanical and electrical operation of
a Star Barn. At least two of such seminars shall be at locations in Virginia,
North Carolina and/or Kentucky, as specified by Star.

9.          LICENSE.

            For so long as this Agreement remains in effect, Star hereby grants
to Powell a limited, non-transferable license under the Star Patent Rights for
the purpose of manufacturing and selling, exclusively to Star, the Star Barns
pursuant to purchase orders submitted by Star. [***]

10.         TRADE SECRETS AND CONFIDENTIAL INFORMATION.

            10.1        CONFIDENTIALITY. Powell acknowledges that it will be
entrusted with Trade Secrets and Confidential Information that Star has
developed and has a legitimate business interest in protecting. Pursuant
thereto, Powell agrees:

                        (a)         to treat confidential information and not,
without the prior written approval of Star, to use (other than in the
performance of its duties hereunder), publish, disclose, copyright or authorize
anyone else to use, publish, disclose or copyright: any Trade Secrets during the
terms of this Agreement and subsequent thereto; or Confidential Information
either during the term hereof or for three (3) years following the expiration or
termination of this Agreement;

                        (b)         to disclose the Confidential Information
only to those employees, consultants or other agents necessary for Powell to
perform this Agreement.

            10.2        EXCEPTIONS.  The restrictions in Section 10.1 shall not
apply to any information which:









Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.



                                        7

<PAGE>   8

                        (a)         is in the public domain by use and/or
publication at the time of its receipt by Powell or enters the public domain
thereafter through no fault of Powell;

                        (b)         was validly in Powell's possession from a
source other than Star prior to receipt;

                        (c)         was properly obtained by Powell from a third
party, provided Powell was not under any confidentiality obligation to such
third party; or

                        (d)         was previously developed independently by
Powell, as shown by written documentation delivered to Star within thirty (30)
days of the receipt of such information.

            10.3        BINDING ON OTHERS. Powell further agrees that it will
require each of its employees, consultants or other agents to be bound by the
restrictions stated herein and that, upon the request of Star, Powell will
provide evidence satisfactory to Star of having fulfilled such requirement to
Star.

            10.4        DEFINITIONS.

                        (a)         "CONFIDENTIAL INFORMATION" shall mean any
and all information, whether or not in tangible form, of a confidential,
proprietary or secret nature belonging to Star or licensed by it, other than
Trade Secrets, which is material to Star and not generally known by the public,
including but not limited to, all information annotated by a legend, stamp or
other written identification as "Confidential."

                        (b)         "TRADE SECRET" shall mean any and all
information, whether or not in tangible form, belonging to Star or licensed by
it, which derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use and which is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy. Without limiting the generality of the foregoing, Trade Secrets shall
include but are not limited to studies, results, reports, price lists, product
codes, product strategies, technical or nontechnical data, formulae, techniques,
drawings, designs, processes, financial data, financial plans, product plans,
marketing plans, advertising plans, lists of actual or potential customers or
suppliers, and related items.

11.         MISCELLANEOUS.

            11.1        ENTIRE AGREEMENT. This Agreement and the attached
exhibits constitute the entire agreement of the parties with respect to the
subject matter hereof, and supersede any prior agreement or understandings of
the parties. There are no other oral or written understandings or agreements
between Powell and Star relating to the subject matter hereof. This Agreement
may not be modified except by a writing signed by both parties. This Agreement
may be executed in multiple originals



                                        8

<PAGE>   9

and counterparts. Both parties agree and acknowledge that the terms of any sales
orders, invoices, confirming memoranda, standard business form or other similar
writing issued after the date of this Agreement shall be governed by this
Agreement and shall not modify the terms hereof unless expressly agreed to in
writing by the parties hereto.

            11.2        SEVERABILITY. All provisions of this Agreement are
severable, and any which are deemed invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining provisions hereof and this Agreement shall be
enforced and interpreted as if the invalid or unenforceable provisions were not
contained herein and any partially valid and enforceable provisions shall be
enforced to the extent valid or enforceable.

            11.3        FORCE MAJEURE. Notwithstanding anything herein to the
contrary, any failure or delay in the performance by Powell or Star of its
obligations hereunder (other than performance of any obligations to make any
payment) shall not be a breach of this Agreement if such failure or delay arises
out of or results from fire, storm, flood, earthquake, or other acts of God,
explosions, wars, insurrections, government order or regulation, strikes, work
stoppages or slowdowns, unavailability of fuel or utilities, unforeseen
equipment failure, inability to obtain raw materials or components despite best
efforts to do so, or other causes beyond the control of such party. Any such
delay shall extend the time allowed for performance or excuse performance, in
whole or in part, as may be reasonable, provided that as soon as performance is
possible the non-performing party shall immediately resume performance and, in
no event shall performance be excused for more than sixty (60) days.

            11.4        NOTICES. Any notices required by this Agreement shall be
deemed given if sent by certified or registered mail, return receipt requested,
by a recognized overnight delivery service, or by confirmed facsimile
transmission, to the address of the party as follows, unless and until otherwise
notified in writing, with receipt effective only on actual receipt:



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<PAGE>   10


                                         
TO POWELL :                                    TO STAR:

Powell Manufacturing , Inc.                    Star Scientific, Inc.
P.O. Box 707                                   16 South Market Street
Bennettsville, South Carolina 29512-707        Petersburg, Virginia 23803
Attn.: Richard Herskowitz                      Attn.: Jim McNulty
Fax : (843) 479-7739                           Fax : (804) 861-6215

With a copy (which shall not constitute
Notice) to:                                    Paul, Hastings, Janofsky & Walker LLP
                                               1299 Pennsylvania Avenue, N.W.
                                               Tenth Floor
                                               Washington, D.C. 20004-2400
                                               Attention:  Paul L. Perito, Esq.
                                               Telecopier No.:  (202) 508-9700
and

                                               Paul, Hastings, Janofsky & Walker LLP
                                               600 Peachtree Street
                                               Suite 2400
                                               Atlanta, Georgia 30308
                                               Attention:  W. Andrew Scott, Esq.
                                               Telecopier No.:  (404) 815-2424


            11.5        GOVERNING LAW. This Agreement and the relationship
between the parties hereunder shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Virginia. Any claim or action
under this Agreement shall be brought in the state or federal courts sitting in
the Commonwealth of Virginia, and the parties hereby consent to the personal
jurisdiction of such courts.

            11.6        BINDING EFFECT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing neither this Agreement nor
the license granted hereunder may be assigned by Powell to any other party
without the prior written consent of Star.

                         (SIGNATURES ON FOLLOWING PAGE)



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            IN WITNESS WHEREOF, the parties have cause this Agreement to be duly
executed as of the date first written above.

POWELL MANUFACTURING COMPANY, INC.                   STAR SCIENTIFIC, INC.

By:____________________________              By:___________________________
Name: A. Richard Herskowitz                  Name:



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