SCOTTSDALE, Ariz., Sept. 8, 2010 (GLOBE NEWSWIRE) -- Health Enhancement Products, Inc. (OTCBB:HEPI) today announced it has executed a multi-year exclusive worldwide distribution agreement ("Agreement") regarding its ProAlgaZyme® product ("ProAlgaZyme®" or "Product") with an international distributor of health and nutritional products ("Distributor").
Under the terms of this exclusive agreement, HEPI has granted the Distributor the exclusive right to distribute ProAlgaZyme® to customers and distributors worldwide, excluding pharmaceutical applications and food, supplement, and medicinal ingredient applications outside of multi level, network or affiliate marketing ("MLM"). In addition, HEPI has reserved the right to market and sell isolates and natural and synthetic derivatives of ProAlgaZyme® in pharmaceutical applications, as well as ingredient applications outside of MLM. The Agreement prohibits HEPI from selling ProAlgaZyme® for the benefit of customers and distributors worldwide, other than for pharmaceutical and ingredient applications. HEPI is also prohibited from selling any product in the MLM market. The Agreement will remain in effect until the expiration of the last patent with respect to the Product, subject to earlier termination as provided in the Agreement.
The Distributor has agreed to make certain minimum guaranteed payments to HEPI for the term of the Agreement, subject to renegotiation if the Distributor is unable to meet the specified minimum purchase requirements. The Distributor will not be obligated to make the minimum monthly payments to maintain exclusivity until the Product is determined to meet the Food and Drug Administration's "generally recognized as safe" ("GRAS") standard or the Product receives "New Dietary Ingredient" ("NDI") status from the FDA (HEPI has already engaged GRAS Associates of Oregon to assist it in determining whether the Product will meet the requirements associated with the FDA's GRAS standard). Minimum monthly payments may also be suspended if a regulatory agency restricts the sale of the Product.
The Agreement provides for a thirty day due diligence review period, during which the Distributor will conduct a due diligence review and HEPI will determine whether it is able to meet the minimum production requirements established by the Agreement. If the Distributor is satisfied with its due diligence review, the Agreement calls for HEPI to receive a payment of $255,000 for the exclusive distribution rights for the initial four month period (through December 31, 2010). (The Distributor may cancel the agreement if it is not satisfied with its due diligence review). If HEPI determines that it cannot meet the Distributor's minimum purchase requirements, then the minimum guaranteed payments are subject to reduction. Otherwise, HEPI will be required to provide the first of its guaranteed monthly minimum shipments in January of 2011, at which point, the distributor will commence making guaranteed minimum monthly payments, subject to the conditions set forth in the Agreement. Minimum monthly payments will not begin until one of these standards has been met. The agreement calls for periodic increases in guaranteed monthly payments to HEPI during the first two years. Guaranteed minimum payments for years three and after will be negotiated during the thirty day due diligence period, subject to a specified minimum. If the Distributor fails to make the required monthly minimum purchases of Product, HEPI and the Distributor will renegotiate the minimum purchases. If the parties are unable to agree on revised minimum purchases, the agreement will become non-exclusive.
Beginning nine months after the effective date of the Agreement, If HEPI is unable to produce specified minimum percentages of the Distributor's purchase orders, the Distributor shall have the right to take over manufacturing of the Product.
The Distributor may terminate the Agreement upon ninety days written notice. If the Agreement is terminated during the first ninety days, the Distributor will have no further obligation to HEPI, beyond the initial payment of $255,000. If the Agreement is terminated after the initial ninety day period, in addition to the initial payment of $255,000, the Distributor is obligated to pay 150% of certain HEPI costs, subject to a minimum payment of $250,000.
This agreement does not affect HEPI's right to develop and market isolates, synthetic and natural derivatives or products naturally derived from ProAlgaZyme® for specific applications outside MLM that are branded by and resold to third parties, such as prescription products/ingredients.
The distributor is currently conducting due diligence and developing a comprehensive marketing plan. HEPI expects to announce additional details, including the name of the distributor after completion of the thirty day due diligence period.
HEPI Director John Gorman commented, "The focus of HEPI over the past several years has been to identify the active molecules in PAZ™, which have the potential to take us into major markets such as pharmaceutical, food additive and nutraceutical/supplements. We believe that we are very close to identifying that first active molecule. Upon satisfactory completion of the due diligence period, this distribution contract provides for an immediate cash payment to HEPI and the potential of worldwide distribution of ProAlgaZyme® in its current liquid form. This is the first time in the Company's history that its ProAlgaZyme® product will be marketed on a mass scale with guaranteed minimum revenues. As we complete the characterization of the bioactive molecules that testing indicates potentially regulate cholesterol, the demand for ProAlgaZyme® should increase and the opportunity to sell more ProAlgaZyme® will be greatly enhanced. This new distribution agreement and our new partner will cover the sale and distribution of ProAlgaZyme® worldwide (except for the pharmaceutical and ingredient applications that are reserved for HEPI)."
About Health Enhancement Products, Inc.
Health Enhancement Products, Inc. (OTCBB:HEPI) is a health & wellness company engaged in the development of a product comprised of pure, all-natural compounds that can be used as a dietary supplement and food additive. The Company's product is ProAlgaZyme® (PAZ™), a liquid product drawn from living algae grown in purified water. The water in which the algae are grown is drawn off, filtered and bottled under the trademark ProAlgaZyme®.
Safe Harbor Statement
Except for any historical information, the matters discussed in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve risks and uncertainties. A number of factors could cause actual results to differ from those indicated in the forward-looking statements, including the timing of completion of a trial, actual future clinical trial results being different than the results the company has obtained to date, and the company's ability to secure funding. Such statements are subject to a number of assumptions, risks and uncertainties. Readers are cautioned that such statements are not guarantees of future performance and those actual results or developments may differ materially from those set forth in the forward-looking statements. The company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information or otherwise.