EXHIBIT 10.38
CULTURE AGREEMENT DATED MARCH 1, 1997
Exhibit 10.38
* Portions of this agreement marked "[TEXT REDACTED]*" indicate
portions that have been omitted from this agreement and filed
separately with the Commission pursuant to a Confidential Treatment
Request.
CULTURE AGREEMENT
This Agreement is made as of this 1st day of March, 1997 and is
between Zelenka Nursery, Inc. of 16127 Winans, Grand Haven, MI 49417
("Zelenka") and NaPro BioTherapeutics, Inc. of 6304 Spine Road, Unit
A, Boulder, CO 80301 ("NaPro") with respect to the culture of certain
Taxus Media Hicksii trees.
STATEMENT OF BACKGROUND INFORMATION
A. NaPro has agreed to purchase approximately [TEXT REDACTED]*
Taxus Media Hicksii trees from Zelenka pursuant to an Agreement for
Sale and Purchase of Nursery Stock effective as of the date of this
Agreement, between Zelenka Nursery, Inc. and NaPro BioTherapeutics,
Inc. ("Purchase Agreement").
B. NaPro expects to acquire and to deliver to Zelenka
approximately [TEXT REDACTED]* Taxus Media Hicksii trees for culture
by Zelenka hereunder.
C. NaPro desires to lease from Zelenka certain real property on
which all of the Zelenka Trees (defined below) and the Non-Zelenka
Trees (defined below) will be transplanted and located. NaPro has
agreed to lease such real property from Zelenka pursuant to a certain
Lease ("Lease") of even date herewith.
D. NaPro desires that Zelenka transplant, care for, and culture
the Zelenka Trees and the Non-Zelenka Trees, and that Zelenka harvest,
cut, store, and ship to NaPro all or certain portions of the Zelenka
Trees and the Non-Zelenka Trees, and Zelenka has agreed to do so.
E. NaPro has previously purchased certain other Taxus Media
Hicksii Trees from Zelenka pursuant to a Purchase Agreement dated May
1, 1996. Zelenka is culturing such trees for NaPro pursuant to a
Culture Agreement dated March 1, 1996 and the trees are growing on
real property subleased to NaPro by Zelenka pursuant to certain
Subleases dated April 1, 1996. All such agreements are collectively
referred to herein as the "Spring Agreements".
F. The parties desire to set forth the terms of their agreements
in this writing.
STATEMENT OF AGREEMENT
For their mutual convenience and protection, and in consideration
of the mutual covenants and benefits contained in this Agreement, the
parties agree as follows:
SECTION ONE: DEFINITIONS
1.1 Definition of Zelenka Trees. The "Zelenka Trees" for
purposes of this Agreement shall be defined as all of those [TEXT
REDACTED]* Taxus Media Hicksii Trees [TEXT REDACTED]* and all of those
[TEXT REDACTED]* Taxus Media Hicksii Trees [TEXT REDACTED]* purchased
by NaPro from Zelenka under the Purchase Agreement.
1.2 Definition of Non-Zelenka Trees. The "Non-Zelenka Trees"
for purpose of this Agreement shall be defined as those Taxus Media
Hicksii Trees [TEXT REDACTED]* owned by and acquired from sources
other than Zelenka which are delivered by NaPro to Zelenka for
transplantation and culture by Zelenka under this Agreement.
1.3 Definition of Trees. The Zelenka Trees and the Non-Zelenka
Trees shall be collectively referred to as the "Trees".
SECTION TWO: CULTURE OBLIGATIONS
2.1 Transplanting. During the term of this Agreement, Zelenka
agrees to accept and transplant the Trees pursuant to the instructions
of NaPro and pursuant to the schedule described below in paragraph
5.2.
2.2 Transplant, Care and Culture of Trees. During the term of
this Agreement, Zelenka agrees to transplant, grow, maintain, and care
for all of the Trees pursuant to the instructions of NaPro. In the
absence of such instructions, Zelenka agrees that its care of the
Trees shall be consistent with Zelenka's normal reasonable cultural
practices. Zelenka shall bear all costs and expenses in connection
with the transplanting, care, and maintenance of the Trees, provided
that Zelenka shall be reimbursed for such expenses as provided in
below under Section Three.
2.3 Harvesting & Storing. In addition to Zelenka's obligations
described above in paragraphs 2.1 and 2.2, Zelenka agrees to harvest,
cut, place in cold storage, pack, and prepare for shipping any of the
Trees or Tree cuttings in accordance with the NaPro specifications
attached hereto as Exhibit 2.2 ("NaPro Specifications").
Notwithstanding the foregoing, Zelenka shall not be required to ship
any Trees or Tree cuttings to NaPro if NaPro is not current in all of
its obligations to Zelenka under the Purchase Agreement, this
Agreement, the Lease, and the Spring Agreements.
Any schedules for any activities described in this paragraph shall be
mutually agreed upon by Zelenka and NaPro. All Trees or Tree cuttings
shall be shipped to NaPro FOB Zelenka at NaPro's expense. Further,
Zelenka shall not be required to store, after harvest, any Trees or
Tree cuttings for a period exceeding six months, and Zelenka shall be
entitled to ship to NaPro any Trees or Tree cuttings (in accordance
with the NaPro Specifications) as necessary to ensure that such limit
is not exceeded, unless the parties have otherwise agreed in writing.
SECTION THREE: COMPENSATION AND EXCLUSIVITY
3.1 Compensation. As compensation for its services under this
Agreement, Zelenka shall be entitled to receive [TEXT REDACTED]*
3.2 Invoices and Payment. Zelenka shall be entitled to invoice
NaPro for any sums due hereunder on a monthly basis. Such invoices
shall be paid within thirty (30) days of the invoice date and pursuant
to Zelenka's other standard terms and conditions, which are attached
hereto as Exhibit 3.2 ("Zelenka Terms").
3.3 Exclusivity. During the term of this Agreement, NaPro
agrees that Zelenka shall be the exclusive provider of all
transplanting services, cultural services, all harvesting and cutting
services, all storage services, and any other services provided
hereunder, with respect to all of the Trees, and that NaPro will not
contract or arrange for any other provider of such services with
respect to the Trees or the cuttings thereof. NaPro further agrees
that all products and materials which may be used in connection with
the above-described services shall be purchased and/or acquired
exclusively by and through Zelenka under the terms of this Agreement
and that NaPro shall not contract or arrange for any such materials or
products to be provided by any other person or entity in any other
manner.
SECTION FOUR: TERM AND TERMINATION
4.1 Term. The term of this Agreement shall commence as of the
effective date hereof and shall continue through 11:59 p.m. on
February 28, 2006, unless earlier terminated by the parties hereunder.
4.2 Extensions of Term. NaPro shall be entitled to renew the
term of this Agreement, on the same terms and conditions set forth
herein, for two separate five year renewal terms; provided, however,
that NaPro shall not be entitled to renew this Agreement for any
extended term unless NaPro simultaneously renews the Lease for an
extended term for the same duration. If NaPro desires to exercise any
such option, it shall do so in writing to Zelenka at least 180 days
prior to the expiration of the original or extended term.
4.3 Termination. This Agreement may not be terminated by either
party hereto except as provided in this paragraph 4.3. If either
party fails to pay any sums due hereunder or any sums due under this
Agreement, the Purchase Agreement, the Lease, or the Spring Agreements
within five (5) days after such sums are due, or if either party
defaults under any of its other obligations under this Agreement, the
Purchase Agreement, the Lease, or the Spring Agreements, and such
default continues for ten (10) days after written notice thereof, then
the non-defaulting party shall be entitled to terminate this Agreement
and recover any damages resulting from the breach, in addition to any
other legal or contractual remedy available to the non-defaulting
party. Further, Zelenka shall be entitled to terminate this Agreement,
effective immediately upon written notice to NaPro, if NaPro defaults
under any of its obligations under this Agreement, the Culture
Agreement, the Lease, or the Spring Agreements more than four (4)
times during any twelve (12) month period.
4.4 Obligations Upon Termination. Upon the termination or
expiration of this Agreement, all amounts due to either party under
this Agreement shall become due and payable within 10 days following
the termination or expiration.
SECTION FIVE: LEASE ISSUES
5.1 Lease. As of the effective date of this Agreement, Zelenka
and NaPro shall enter into a lease with respect to any real property
owned by Zelenka on which the Trees may be located ("Leases"). Such
Lease shall be in the form attached hereto as Exhibit 5.1. The Lease
shall form a part of this Agreement and any breach of the provisions
of the Lease shall be deemed a breach of this Agreement. NaPro's
obligations under the Lease and the legal description of the leased
premises thereunder shall not be reduced, limited, or changed even if
NaPro causes the harvest and/or removal of any or all of the Trees
from such leased premises prior to the termination of the Lease.
5.2 Transplanting and Lease. The Lease will initially lease
approximately [TEXT REDACTED]* acres of Zelenka-owned real property to
NaPro. Zelenka and NaPro agree that NaPro will instruct Zelenka to
transplant on such real property, on or before June 30, 1997, all of
those six year old Trees purchased from Zelenka by NaPro under the
Purchase Agreement, as well as a certain number of trees which have
not been purchased by NaPro from Zelenka. As of the effective date of
this Agreement, the parties do not know whether there will be
sufficient space (after the aforementioned transplanting) on such
parcel to transplant any of the [TEXT REDACTED]* Trees purchased from
Zelenka by NaPro under the Purchase Agreement. If there is room to
transplant any of the [TEXT REDACTED]* Trees, then the parties agree
that Zelenka shall transplant, on or before June 30, 1997, as many of
the [TEXT REDACTED]* Trees as possible on the such parcel. If,
however, all of the [TEXT REDACTED]* Trees purchased under the
Purchase Agreement cannot be transplanted onto the such parcel prior
to June 30, 1997, then Zelenka and NaPro agree to use good faith
efforts to negotiate a lease, with NaPro as lessee and Zelenka as
lessor, pursuant to which NaPro shall lease from Zelenka such real
estate as may be necessary for the transplanting, growing, and
culturing of such remaining [TEXT REDACTED]* trees. Such lease shall:
(i) commence after January 1, 1998 and before June 30, 1998 and before
the transplanting of any such trees on the land, (ii) expire at 11:59
p.m. on February 28, 2006, (iii) include two five year renewal options
subject to the same terms and conditions of the two five year renewal
options under the Lease, and (iv) include terms substantially similar
to the terms of the Lease. The transplanting of such [TEXT REDACTED]*
trees shall occur after January 1, 1998 and before June 30, 1998.
SECTION SIX: GENERAL TERMS
6.1 Arbitration. Any disagreements or dispute between the
parties with regard to this Culture Agreement shall be resolved
exclusively by arbitration which shall be binding upon both of the
parties. The arbitration shall be conducted by a panel of three
arbitrators under the rules of the American Arbitration Association.
One arbitrator shall be selected by Zelenka, one by NaPro, and one by
the two selected arbitrators. Any arbitration shall be conducted in
Grand Haven, Michigan and the arbitrators shall apply Michigan law.
Unless otherwise allocated or assessed by the arbitrators, the parties
shall share equally the fees and expenses of the arbitrators.
6.2 Definition of Zelenka's Costs.
a. Zelenka's actual costs and expenses shall be calculated
based upon Zelenka's current cost accounting system. Such cost
accounting system will base Zelenka's costs and expenses upon, among
other things, the number of hours of labor times Zelenka's loaded
labor rate, plus any other actual costs incurred by Zelenka such as
crate rental, electricity charges, shipping charges, etc. The parties
acknowledge and agree that Zelenka's loaded labor rate includes
charges for items related to Zelenka's performance under this
Agreement such as insurance, irrigation costs (including well drilling
and irrigation equipment), acquisition of equipment (including
harvesting equipment), and repair and maintenance charges. Such actual
costs and expenses shall not include: (i) marketing costs or general
administrative costs except to the extent that those costs are part of
Zelenka's loaded labor rate, (ii) monthly rental payments due under
the Lease, or (iii) those real estate taxes which are Zelenka's
responsibility under the Lease.
b. NaPro shall have the right to audit Zelenka's books and
records pertaining to calculation of Zelenka's costs. Any such
inventory shall be conducted at reasonable intervals and at reasonable
times, and shall not interfere with the business operations of
Zelenka. Furthermore, NaPro agrees to keep confidential and not to
disclose to any other party (except to any professional advisors or
employees who have a need to know) any information or documents
learned or discovered by NaPro in connection with any such audit. If
any such audit uncovers overcharges or undercharges, the parties shall
attempt to agree upon the amounts of such overcharges or undercharges
and pay to one another any such amount as may be necessary to correct
the overcharge or undercharge. If the parties cannot agree on any
overcharge or undercharge, either party shall be entitled to submit
their question to arbitration under paragraph 6.1. If the parties
agree or an arbitration determines that Zelenka has overcharged NaPro
an amount greater than ten (10%) percent, then Zelenka shall bear the
cost of the audit by NaPro and the cost of the arbitration. Otherwise,
the cost of the audit and arbitration shall be borne by NaPro.
6.3 Zelenka's Limited Warranty. Zelenka hereby warrants to
NaPro that: (i) ninety two percent (92%) or more of the Zelenka Trees
transplanted between January 1, 1997 and June 30, 1997 by Zelenka
hereunder will be alive as of August 31, 1997, and (ii) 92% or more of
the Zelenka Trees transplanted by Zelenka by January 1, 1998 and June
30, 1998 hereunder will be alive as of August 31, 1998. NaPro or its
representatives shall be entitled to inspect all such Zelenka Trees,
with a Zelenka representative, at a time mutually agreed on by Zelenka
and NaPro within ten (10) days before or after the above-described
applicable August 31 date for the purpose of determining the survival
rates under this paragraph 6.3. If NaPro notifies Zelenka in writing,
on or before the date 10 days after the above- described applicable
August 31 date, that the survival rate of the relevant transplanted
Zelenka Trees is less than ninety two percent (92%), then Zelenka
shall be required to elect one of the following remedies, in its sole
discretion: (1) Zelenka may reimburse NaPro for the purchase price
under the Purchase Agreement, for the number of Zelenka Trees
purchased by NaPro under the Purchase Agreement multiplied by 92%
minus the number of surviving Zelenka Trees, or (2) Zelenka may
replace and transplant (at Zelenka's cost) the non- surviving Zelenka
Trees with a number of comparable Trees which is equal to the number
of Zelenka Trees purchased and paid for by NaPro under the Purchase
Agreement multiplied by 92% minus the number of surviving Zelenka
Trees. Notwithstanding anything to the contrary in this paragraph 6.3,
if NaPro (or its representatives) fails to inspect the Zelenka Trees
within 10 days before or after the above-described applicable August
31 date, or if NaPro fails to notify Zelenka in writing on or before
the date 10 days after the above-described applicable August 31 date,
that the survival rate of the Zelenka Trees is less than 92%, then
NaPro shall be deemed to have waived all of its rights under this
paragraph 6.3.
6.4 No Warranties. Zelenka offers no warranties or guarantees
regarding any aspect (including survival or viability) of any
Non-Zelenka Trees which are transplanted or cultured by Zelenka under
the terms of this Agreement. Further, except as otherwise provided in
paragraph 6.3, Zelenka offers no warranties or guarantees regarding
any aspect (including the survival or viability) of any Zelenka Trees
or the Non- Zelenka Trees which are transplanted or cultured under the
terms of this Agreement. Without limiting the generality of the
foregoing, Zelenka also offers no warrantees or guarantees regarding:
(1) the quantity of Tree cuttings which will be harvested, cut, or
produced hereunder, or (2) the quality or suitability of the Trees or
Tree cuttings for any purpose. Finally, Zelenka offers no warrantees
of merchantability or fitness for any particular purpose.
6.5 Force Majeure. Neither party shall be liable to the other
in the event that performance of its obligations hereunder shall be
prevented by any cause beyond its reasonable control, including
without limitation acts of God, acts of government, accident, fire,
flood, natural disaster, delay or destruction of means of transport,
or other disaster ("events of force majeure"), but the affected party
shall use best efforts to avoid or remove the cause of such
nonperformance and shall continue performance hereunder with the
utmost dispatch whenever such cause is removed.
SECTION SEVEN: MISCELLANEOUS
7.1 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither party shall assign any of
their rights, privileges, or obligations under this Agreement without
the written consent of the other party, which shall not be
unreasonably withheld.
7.2 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered by hand or mailed certified or
registered mail, return receipt requested with postage prepaid, to the
parties at their addresses on page one of this Agreement. Any party
may change its address by providing notice hereunder to all of the
other parties.
7.3 Headings. The headings of sections herein and in the
exhibits referred to herein are for convenience only and shall not
control of effect any meaning or interpretation of any provision of
this Agreement.
7.4 Entire Agreement; Modifications. This Agreement contains
the entire agreement among the parties hereto with respect to the
transactions contemplated hereby. This Agreement may be modified only
by a written agreement signed by all of the parties hereto.
7.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.6 Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Michigan.
7.7 Severability. In the event that any of the provisions of
this Agreement shall be held to be invalid or unenforceable, the same
shall not affect the validity or enforceability of any other
provisions of this Agreement, unless such validity or unenforceability
shall materially affect and frustrate the intentions of the parties.
7.8 Time is of the Essence. All of the parties hereto agree and
acknowledge that time is of the essence in connection with this
Agreement.
7.9 No Waiver. No waiver of any rights of either party
hereunder shall be effective against such party unless set forth in
writing and signed by such party. Further, no waiver of any right
hereunder shall be construed to be a waiver of such right or any other
right hereunder or in the future.
ZELENKA NURSERY, INC.
/s/ Paul Zelenka
Paul Zelenka
Vice President
NAPRO BIOTHERAPEUTICS, INC.
/s/ Sterling K. Ainsworth
Sterling K. Ainsworth
President and Chief Executive Officer