1
EXHIBIT ___
EXECUTION COPY
SUPPLY AGREEMENT
between
Raven Industries, Inc. d/b/a Omni-Pak Industries, a California corporation
and
Herbalife International of America, Inc., a California corporation
Dated as of September 2, 1997
2
EXECUTION COPY
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Agreement") is entered into as of September 2, 1997,
by and between Raven Industries, Inc. d/b/a Omni-Pak Industries, a California
corporation ("SUPPLIER"), and Herbalife International of America, Inc., a
California corporation ("HERBALIFE"), with reference to the following facts:
RECITALS
A. Supplier and Herbalife are parties to that certain agreement executed
on May 12, 1993, as modified by a First Addendum To Agreement executed on May
18, 1993, which agreement may have thereafter been amended or modified from time
to time (as amended, the "OMNI INITIAL AGREEMENT").
B. Likewise, Herbalife and Dynamic Products, Inc., a California
corporation ("DYNAMIC"), are parties to that certain agreement executed on May
12, 1993, as modified by a First Addendum To Agreement executed on May 18, 1993,
which agreement may have thereafter been amended or modified from time to time
(as amended, the "DYNAMIC INITIAL AGREEMENT"), and Herbalife and D&F Industries,
a California corporation ("D&F"), are parties to that certain agreement executed
on May 12, 1993, as modified by a First Addendum To Agreement executed on May
18, 1993, which agreement may have thereafter been amended or modified from time
to time (as amended, the "D&F INITIAL AGREEMENT").
C. The D&F Initial Agreement, the Dynamic Initial Agreement and the Omni
Initial Agreement are collectively referred to herein as the "INITIAL
AGREEMENTS." Supplier, Dynamic and D&F are collectively referred to herein as
the "D&F SUPPLIERS."
D. Each of the Initial Agreements will expire on January 11, 1998, in the
event that either of the parties thereto gives written notice of its decision to
cease the contractual relationship, which notice must be given not less than six
months prior to such expiration date.
E. Herbalife has provided written notice (which was delivered on a date
six months or more prior to January 11, 1998) to each of the D&F Suppliers of
its decision to cease the contractual relationship under the Initial Agreements
on January 11, 1998 and the Initial Agreements will expire on January 11, 1998.
F. Each of the D&F Suppliers and Herbalife desires to enter into new
supply agreements to provide for the supply of certain nutritional supplement
products and certain non-nutritional products to Herbalife on and after January
12, 1998, which products are intended to be similar in type and form to those
historically manufactured and supplied by each of the D&F Suppliers to
Herbalife.
G. The new supply agreement between Herbalife and D&F entered into
contemporaneously herewith is referred to herein as the "NEW D&F SUPPLY
AGREEMENT".
1
3
EXECUTION COPY
H. The terms and conditions of this Agreement and the New D&F Supply
Agreement are substantially similar except for product identity, pricing and
purchase amounts (this Agreement and the New D&F Supply Agreement are
collectively referred to herein as the "NEW D&F SUPPLY AGREEMENTS").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
undertakings set forth below, and in reliance on the recitals set forth above,
Supplier and Herbalife hereby agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall
bear the meanings and construction given to them below:
(a) General Definitions.
"AFFILIATE": Any business entity (not including any individual)
which, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with Herbalife and which sells,
markets, deals with or comes into possession of Supplied Products during the
Term, including without limitation Herbalife of Japan K.K. If during the Term
any current Affiliate ceases to qualify as an Affiliate it shall continue to be
deemed an Affiliate for the purpose of this Agreement provided such business
entity sells, markets, deals with, or comes into possession of Supplied Products
during the Term.
"CURRENT COUNTRIES": The territories or countries set forth in
Exhibit B hereto.
"NUTRITIONAL SUPPLEMENT": Any powdered food or tea containing
vitamin, herb or mineral constituents for ingestion by humans, which are of a
type and form historically similar to those manufactured and supplied by
Supplier to Herbalife, and excluding, without limitation, (i) any food in
tablet or capsule form, whole foods, prepared foods, prepackaged and convenience
foods, dehydrated foods, snack foods, and energy bars, (ii) any tablet or
capsule containing vitamin, herbs or mineral constituents for ingestion by
humans, and (iii) all items of a non-nutritional nature, including without
limitation, personal care items, cosmetics, clothing, exercise equipment, and
water or air filtration or purification items.
"OTHER SUPPLIERS": Persons or entities other than Supplier, D&F or
Dynamic.
"Quality Standards": Written quality standards, for the manufacture
of Supplied Products, which are consistent with accepted industry practices and
standards and all applicable laws in the jurisdiction in which the Supplied
Products are sold by Supplier to Herbalife, including, without limitation,
standards as to quality assurance, preparation And manufacture in a clean, safe
and sanitary manner, which are mutually agreed upon by Supplier and Herbalife.
If Herbalife advises Supplier of the regulatory requirements of any other
jurisdictions relating to Quality Standards,
2
4
EXECUTION COPY
Supplier shall use its best efforts to comply therewith in the manufacture of
Supplied Products for distribution in those jurisdictions.
(b) Formula Related Definitions.
"FORMULAS": The formulas and product specifications necessary for
the manufacture of products, together with any modification, improvement,
alteration, enhancement or successor to such formulas and product
specifications.
"SUPPLIER FORMULAS": Supplier Exclusive Formulas and Supplier
Non-Exclusive Formulas.
"SUPPLIER EXCLUSIVE FORMULAS": All Formulas for Current Products and
Supplier Developed New Exclusive Products, together with any modification or
improvement of, any alteration or enhancement to, and any successor to the
Formulas for Current Products and Supplier Developed New Exclusive Products
derived, developed, created or invented by Supplier or any agent of Supplier or
by any person or entity for whom Supplier is a valid licensee thereof.
"SUPPLIER NON-EXCLUSIVE FORMULAS": All Formulas for Supplier
Developed New Non-Exclusive Products, together with any modification or
improvement of, any alteration or enhancement to, and any successor to the
Formulas for Supplier Developed New Non-Exclusive Products derived, developed,
created or invented by Supplier or any agent of Supplier or by any person or
entity for whom Supplier is a valid licensee thereof.
"CONSTRUCTIVELY IDENTICAL FORMULAS": All Formulas, excluding
Substitute Formulas and Independent Formulas, the chemical composition of which
are not materially different from any Supplier Formula, and which are derived,
developed, created or invented by Herbalife or any Affiliate or any agent
thereof or any Other Supplier providing services to Herbalife.
"SUBSTITUTE FORMULAS": All Formulas, excluding Constructively
Identical Formulas and Independent Formulas, the chemical composition of which
are materially different from any Supplier Formula, and which are derived,
developed, created or invented by Herbalife or any Affiliate or any agent
thereof or any Other Supplier providing services to Herbalife, and which are a
substitute for any Supplier Formula.
"INDEPENDENT FORMULAS": All Formulas, excluding Constructively
Identical Formulas and Substitute Formulas, (including any modification or
improvement to such Formulas, any alteration or enhancement to such Formulas,
and any successor to such Formulas or substitute for such Formulas), the
chemical composition of which are materially different from any Supplier
Formula, and which are derived, developed, created or invented by Herbalife or
any Affiliate or any agent thereof or any Other Supplier providing services to
Herbalife, and which are not a modification or improvement of, an alteration or
enhancement to, or a successor to or substitute for any Supplier Formula.
3
5
EXECUTION COPY
"COMPETITIVE PRIMARY MANUFACTURE FORMULAS": Those of the Substitute
Formulas, which are Formulas for Rights Of First Refusal Substitute Products For
Primary Manufacture and listed on Exhibit E hereto pursuant to Section
5(b)(ii)(F) below, as a result of being competitive as referred to in Section
5(b)(ii)(D) below.
(c) Product Related Definitions.
"CURRENT PRODUCTS": The products set forth on Exhibit A hereto made
in accordance with Supplier Exclusive Formulas (other than for Supplier
Developed New Exclusive Products).
"MODIFIED CURRENT PRODUCTS": Current Products made in accordance
with any modification, improvement alteration, enhancement or successor to the
Formulas for the initial Current Products set forth on Exhibit A, derived,
developed, created or invented by Supplier or any agent of Supplier or by any
person or entity for whom Supplier is a valid licensee thereof, and which are
not Supplier Developed New Products.
"NEW PRODUCTS": All Supplier Developed New Products listed from time
to time, or deemed hereunder to be listed from time to time, on Exhibit F; and
all Other Offered New Products listed from time to time, or deemed hereunder to
be listed from time to time, on Exhibit E; in each case, which products are
ordered by Herbalife or any Affiliate pursuant to the terms and conditions of
this Agreement.
"SUPPLIED PRODUCTS": All Current Products and all New Products.
"SUPPLIER DEVELOPED NEW PRODUCTS": Those products developed by
Supplier made in accordance with Supplier Formulas, the chemical composition of
which is materially different from any Formula for a Current Product and which
is derived, developed, created or invented by Supplier or any agent of Supplier
or by any person or entity for whom Supplier is a valid licensee thereof, (and
including any product made in accordance with any Formula, the chemical
composition of which is materially different from any Formula for a Current
Product derived, developed, created or invented by Supplier or any agent of
Supplier or by any person or entity for whom Supplier is a valid licensee
thereof, which is a substitute for any Formula for a Current Product).
"SUPPLIER DEVELOPED NEW EXCLUSIVE PRODUCTS": All Supplier Developed
New Products which Supplier offers to sell to Herbalife or any Affiliate on an
exclusive basis pursuant to the terms of this Agreement.
"SUPPLIER DEVELOPED NEW NON-EXCLUSIVE PRODUCTS": All Supplier
Developed New Products which Supplier offers to sell to Herbalife or any
Affiliate on a non-exclusive basis pursuant to the terms of this Agreement.
"OTHER OFFERED NEW PRODUCTS": Those products derived, developed,
created or invented by Herbalife or any Affiliate or any agent thereof or any
Other Supplier providing services to
4
6
EXECUTION COPY
Herbalife made in accordance with Constructively Identical Formulas, Substitute
Formulas or Independent Formulas.
"RIGHTS OF FIRST REFUSAL CONSTRUCTIVELY IDENTICAL PRODUCTS FOR
PRIMARY MANUFACTURE": Those Other Offered New Products made in accordance with
Constructively Identical Formulas.
"RIGHTS OF FIRST REFUSAL SUBSTITUTE PRODUCTS FOR PRIMARY
MANUFACTURE": Those Other Offered New Products made in accordance with
Substitute Formulas.
"RIGHTS OF FIRST REFUSAL INDEPENDENT PRODUCTS FOR ADDITIONAL
MANUFACTURE": Those Other Offered New Products made in accordance with
Independent Formulas.
"THIRD PARTY LICENSED PRODUCTS": Those Supplier Developed New
Products that, pursuant to a license from one or more third parties, Supplier
after the date hereof manufactures, supplies and offers to sell to Herbalife or
any Affiliate.
(d) Minimum Purchase Order Amount Related Definitions
"SUPPLIER'S NUTRITIONAL SUPPLEMENT PRODUCT LINE BUSINESS IN CURRENT
COUNTRIES": The aggregate dollar amount of all firm purchase orders made during
the Term by Herbalife or any Affiliate for: (i) all Nutritional Supplement
products manufactured by Supplier in accordance with Supplier Formulas,
Constructively Identical Formulas, or Competitive Primary Manufacture Formulas,
and which are ordered by Herbalife or any Affiliate for sale in Current
Countries pursuant to the terms and conditions of this Agreement, plus (ii) all
Nutritional Supplement products manufactured by Other Suppliers in accordance
with Supplier Formulas, and which are ordered by Herbalife or any Affiliate for
sale in Current Countries pursuant to the terms and conditions of this
Agreement.
"HERBALIFE'S INDEPENDENT NUTRITIONAL SUPPLEMENT PRODUCT LINE
BUSINESS IN CURRENT COUNTRIES": The aggregate dollar amount of all firm purchase
orders made during the Term by Herbalife or any Affiliate for: all Nutritional
Supplement products manufactured by Other Suppliers in accordance with
Independent Formulas, and which are ordered by Herbalife or any Affiliate for
sale in Current Countries pursuant to the terms and conditions of this
Agreement.
(e) Categorization of Formulas
Whenever a Formula is categorized herein as falling within any of
(A) Supplier Formulas, (B) Constructively Identical Formulas, (C) Substitute
Formulas, or (D) Independent Formulas (each of (A) through (D) above being
referred to herein as a "CATEGORY"), or any sub-category of a Category, that
Formula shall be deemed to fall only within the closest Category and shall not
fall within any other of the Categories, so that for example any Formula that
falls within the category of being a Substitute Formula may also be a
Competitive Primary Manufacture Formula but shall not also be an Independent
Formula. It is expressly agreed and understood that there shall be no
5
7
EXECUTION COPY
double-counting or overlap in construing the definitions of Supplier's
Nutritional Supplement Product Line Business in Current Countries and
Herbalife's Independent Nutritional Supplement Product Line Business in Current
Countries and in construing either of clauses (i) and (ii) of the definition of
Supplier's Nutritional Supplement Product Line Business in Current Countries.
2. TERM AND SCOPE.
(a) Application and Termination of the Omni Initial Agreement. The
Omni Initial Agreement will expire on midnight, January 11, 1998. Any product
for which an order is placed by Herbalife or any Affiliate on a date prior to
January 12, 1998, for which the latest scheduled delivery date to Herbalife or
any Affiliate is on a date prior to January 12, 1998, shall be governed by the
terms and conditions of the Omni Initial Agreement (notwithstanding that the
actual date of delivery shall occur on or after January 12, 1998, through no
fault or failure on the part of Supplier to observe or perform the terms and
conditions of the Omni Initial Agreement). The parties hereto agree to execute a
Release Agreement, in the form attached hereto as Exhibit C (the "RELEASE
AGREEMENT"), simultaneously with the execution of this Agreement.
(b) Application of this Agreement. The term of this Agreement (the
"TERM") shall commence upon execution of this Agreement, and shall continue
until December 31, 2000, unless previously terminated pursuant to the provisions
hereof; provided however, the terms and conditions of this Agreement shall
govern all Supplied Products to be delivered on a date on or after January 12,
1998 to Herbalife or any Affiliate. Prior to January 12, 1998, Supplier shall be
prepared to meet all of its obligations under the terms and conditions of this
Agreement, including delivery of Supplied Products to be delivered on a date on
or after January 12, 1998 to Herbalife or any Affiliate. Certain obligations of
this Agreement may be extended for a period of one hundred and twenty (120) days
after the expiration of the Term in order to satisfy the terms and conditions of
Section 4 below, which obligations when performed will be construed for the
purposes of this Agreement as having occurred "during the Term" hereof.
3. QUALITY STANDARDS. Promptly upon execution of this Agreement, the
parties agree to cooperate fully with each other, and in a timely manner, to
prepare Quality Standards for all Current Products, and in any event to prepare
such standards within ninety (90) days of execution of this Agreement. With
respect to New Products, the parties shall cooperate fully with each other, and
in a timely manner, to prepare Quality Standards prior to or at such time as any
New Product is ordered by Herbalife from Supplier. Any changes or alterations to
the Quality Standards (once initially agreed between the parties hereto) must be
mutually agreed to in writing by the parties hereto.
4. SUPPLY.
(a) Supply Obligation. For all Supplied Products to be delivered
on a date on or after January 12, 1998 or ordered thereafter until midnight of
the last day of the Term, Herbalife or any Affiliate may order from Supplier and
Supplier shall be obligated to manufacture and supply to
6
8
EXECUTION COPY
Herbalife or any Affiliate, Supplied Products in any quantity ordered at any
time by Herbalife or any Affiliate, at Herbalife's or any Affiliate's sole
discretion, for sale at any time anywhere in the world, whether during the Term
or after expiration of the Term. After expiration of the Term, Herbalife or any
Affiliate may order from Supplier and Supplier shall be obligated to manufacture
and supply to Herbalife or any Affiliate, in accordance with the terms and
conditions hereof, Supplied Products in an amount necessary for Herbalife or any
Affiliate to make up any shortfall in the Minimum Purchase Order Amount, as set
forth in Section 4(f) below.
(b) Non-Exclusive Manufacture. For all Supplied Products to be
delivered on a date on or after January 12, 1998 or ordered thereafter until
midnight of the last day of the Term, Supplier shall manufacture and supply the
Supplied Products exclusively for Herbalife or any Affiliate, subject to the,
provisions of this Section 4(b). Supplier shall not develop, manufacture,
distribute or otherwise sell other than for and to Herbalife or any Affiliate at
any time any of the Supplied Products or any product incorporating Supplier
Formulas, Constructively Identical Formulas, Substitute Formulas, or Independent
Formulas sold by or on behalf of Herbalife or any Affiliate; provided however,
Supplier may manufacture and sell any of the Supplier Developed New
Non-Exclusive Products for and to any persons or entities. Notwithstanding the
foregoing, and subject (during the Term but not thereafter) to Sections 4(c),
5(b) and 8(c) below, Herbalife or any Affiliate shall have the right to (i)
itself manufacture, supply and sell, (ii) have manufactured, supplied and sold
on its behalf and (iii) otherwise order and procure from any third party
(including without limitation from any Other Suppliers), any and all products
made in accordance with or otherwise based upon, developed or derived from
Independent Formulas, Constructively Identical Formulas, Substitute Formulas, or
Supplier Formulas (whether or not such products are similar or identical to the
Supplied Products and whether in Current Countries or otherwise); provided
however, that, in the case of any of the Supplier Formulas for any of the
Supplied Products which consist of a Third Party Licensed Product, Herbalife's
or any Affiliate's rights set forth in (i), (ii) and (iii) above shall be
limited to those rights and licenses obtained from any person or entity whose
consent or license is required.
(c) Minimum Purchase Order Amount. Herbalife shall be obligated,
and Herbalife shall cause Herbalife's Affiliates to be obligated, subject to the
terms and conditions hereof, to place firm purchase orders from Supplier for
Supplied Products to be delivered on a date on or after January 12, 1998 and
ordered from Supplier at any time on or after the date hereof during the Term of
this Agreement, but not thereafter, to be delivered on a date on or after
January 12, 1998, of an aggregate dollar amount (the "MINIMUM PURCHASE ORDER
AMOUNT") equal to and no more than:
(x) 80% of Supplier's Nutritional Supplement Product Line
Business in Current Countries; plus
(y) 80% of one-half of Herbalife's Independent Nutritional
Supplement Product Line Business in Current Countries.
7
9
EXECUTION COPY
The Minimum Purchase Order Amount shall be satisfied by any combination of
orders so long as the aggregate dollar amount of orders referred to in clauses
(x) and (y) above meets or exceeds the Minimum Purchase Order Amount; provided
however, that firm purchase orders placed during the Term, or thereafter
pursuant to Section 4(f) below, by Herbalife or any of Herbalife's Affiliates
referred to under clause (i) of the defined term Supplier's Nutritional
Supplement Product Line Business in Current Countries in order to make up for
any amount owed under any of clauses (x) or (y) above shall not increase the
aggregate dollar amount of firm purchase orders that Herbalife or Herbalife's
Affiliates shall be obligated to place under any of clauses (x) or (y) above in
order to satisfy the Minimum Purchase Order Amount.
(d) Credit Towards Minimum Purchase Order Amount. It is hereby
expressly agreed and, understood that, notwithstanding any other provision
hereof, any purchase order for Supplied Products to be delivered anywhere in the
world on a date on or after January 12, 1998, placed by Herbalife or any
Affiliate with Supplier at any time on or after the date hereof during the Term,
and for one hundred and twenty (120) days after the expiration of the Term to
the extent necessary to make up any shortfall as referred to below in Section
4(f), shall count and be credited towards the Minimum Purchase Order Amount.
(e) Reports. Herbalife shall provide, not later than forty-five
(45) days after the end of each of the first three calendar quarters of each
calendar year, beginning with the quarter ending March 31, 1998, and within
ninety (90) days after the end of each calendar year, written reports (each a
"QUARTERLY REPORT") to Supplier setting forth the dollar amount of firm purchase
orders that Herbalife or any Affiliate has placed or credited with respect to
satisfaction of the Minimum Purchase Order Amount, together with a reasonably
detailed breakdown of total firm purchase orders placed by Herbalife or any
Affiliate consisting of Supplier's Nutritional Supplement Product Line Business
in Current Countries and Herbalife's Independent Nutritional Supplement Product
Line Business in Current Countries to verify the dollar amount of firm purchase
orders that Herbalife or any Affiliate has placed or credited towards
satisfaction of the Minimum Purchase Order Amount Herbalife shall be entitled to
a credit at any time in any Quarterly Report for any overages of firm purchase
orders placed at any time in any quarter during the Term.
(f) Herbalife's Making Up Shortfall Order Amount. In the event
that any Quarterly Report reveals that at the end of the quarter concerned,
Herbalife and its Affiliates have during that period placed or credited less
than the dollar amount of firm purchase orders which would be sufficient for
that period to meet the Minimum Purchase Order Amount (the "SHORTFALL ORDER
AMOUNT"), Herbalife shall use its best efforts to cause any Shortfall Order
Amount to be made up in the immediately succeeding quarter; provided that
Herbalife, in computing any Shortfall Order Amount, shall be entitled to a
credit for any overages of firm purchase orders placed at any time in any
quarter during the Term. If, however, there shall remain any Shortfall Order
Amount at the end of the Term as a result of any Shortfall Order Amount in any
quarter during the Term, Herbalife shall be entitled to have until midnight on
the date being one hundred and twenty (120) days after
8
10
EXECUTION COPY
the end of the Term to place firm purchase orders from Supplier to make up any
such Shortfall Order Amount.
(g) Adjustments to Minimum Purchase Order Amount.
(i) Governmental Impact. If the action of any foreign or
domestic governmental entity or any law, rule, regulation or order, including
without limitation, tariffs, duties, quotas, quality control, manufacturing or
health standards or other trade barriers of such governmental entity (each, a
"GOVERNMENTAL IMPACT"), renders it economically unfeasible for Herbalife or any
Affiliate to continue shipping any of the Supplied Products into any Current
Country, and Herbalife or any Affiliate thereafter arranges to and has the
affected Supplied Products manufactured by any Other Supplier and sells those
products in the affected Current Country, then the amount of purchase orders
placed by Herbalife or any Affiliate with any Other Supplier for sale of
affected Supplied Products in the affected Current Country that would have been
included in the computation of the Minimum Purchase Order Amount pursuant to
Section 4(c) above, but for this provision, shall not be included in the
computation of the Minimum Purchase Order Amount for the remainder of this
Agreement; provided however, such reduction in the Minimum Purchase Order Amount
shall only be made if Herbalife or any Affiliate actually discontinues shipping
the amount of such Supplied Products manufactured or supplied by Supplier
affected by the Governmental Impact into such Current Country, and Herbalife or
any Affiliate thereafter arranges to and has the affected Supplied Products
manufactured by any Other Supplier and sells those products in the affected
Current Country. If following any such reduction in the Minimum Purchase Order
Amount, Herbalife or any Affiliate recommences shipping such Supplied Product
manufactured or supplied by Supplier during the Term, the Minimum Purchase Order
Amount shall be restored as to such Supplied Product for the then remaining
balance of the Term. A Governmental Impact for a particular Supplied Product
manufactured or supplied by Supplier which increases Herbalife's or any
Affiliate's then current cost by 25% or more shall be presumptively sufficient
to render it economically unfeasible for Herbalife or any Affiliate to continue
shipping that Supplied Product manufactured or supplied by Supplier into any
Current Country. Prior to such adjustment, Herbalife or any affected Affiliate
shall use its commercially reasonable efforts and cooperate with Supplier to
eliminate the Governmental Impact so that the Supplied Product manufactured or
supplied by Supplier can continue to be manufactured by Supplier without
adjustment to the Minimum Purchase Order Amount.
(ii) Defective Products or Shortfalls. If there is any
failure by Supplier to comply with the obligations of Sections 9(c) or 9(d)
below, and this Agreement has not been terminated by Herbalife or a cure has not
been effectuated by Supplier, without prejudice to any other remedy available to
Herbalife hereunder, Herbalife may reduce the Minimum Purchase Order Amount by
an amount equal to the aggregate dollar amount for all purchase orders made by
Herbalife or any Affiliate for Supplied Products which are Defective Products
(as defined in Section 9(c) below), or for which a Shortfall (as defined in
Section 9(d) below) exists which has not been remedied by Supplier as outlined
in Section 9(c) or 9(d) below.
9
11
EXECUTION COPY
5. PRODUCTS.
(a) Supplied Products. For all Supplied Products to be delivered
on a date on or after January 12, 1998, and throughout the remainder of the
Term, subject to extension as needed to satisfy Section 4(f) above, Herbalife
agrees to purchase from Supplier, subject to and on the terms and conditions set
forth herein, those of the Supplied Products that Herbalife or any Affiliate may
determine to order from Supplier hereunder, and Supplier agrees to manufacture
and sell to Herbalife or any Affiliate such Supplied Products, subject to and on
the terms and conditions set forth herein.
(b) Other Offered New Products. At any time during the Term, Other
Suppliers (including Herbalife itself or any Affiliate) may develop Other
Offered New Products on behalf of Herbalife or any Affiliate. In the event any
of the Other Suppliers (including Herbalife itself or any Affiliate) develops an
Other Offered New Product, then Herbalife or any Affiliate may designate any
person or entity (including Herbalife itself or any Affiliate) as a
manufacturer (including primary manufacturer) thereof for and on behalf of
Herbalife or any Affiliate, but subject only to the following:
(i) Rights Of First Refusal Independent Products For
Additional Manufacture. In the event Herbalife or any Affiliate chooses to
obtain more than one manufacturer of a Rights Of First Refusal Independent
Product For Additional Manufacture, then Supplier shall have the right of first
refusal to become an additional manufacturing source of the Rights Of First
Refusal Independent Product For Additional Manufacture for order by Herbalife or
any Affiliate during the Term in Current Countries prior to Herbalife offering
for additional manufacturing the Rights Of First Refusal Independent Product
For Additional Manufacture to any other person or entity for order by Herbalife
or any Affiliate during the Term in Current Countries, subject to and in
accordance with the following terms:
(A) Herbalife shall request in writing that Supplier
provide Herbalife with a proposal, including pricing, for the additional
manufacture by Supplier of the Rights Of First Refusal Independent Product For
Additional Manufacture for order by Herbalife or any Affiliate in Current
Countries and possible inclusion in this Agreement. Subject to the provisions of
Section 14 of this Agreement Herbalife shall provide Supplier with the Formula,
a range of prices, and all other terms and conditions that were provided to
Herbalife by at least three of the entities listed from time to time on Exhibit
D hereto for the manufacture of like quantity and quality of the Rights Of First
Refusal Independent Product For Additional Manufacture.
(B) Supplier shall then have thirty (30) days from
receipt of such request to make a proposal to Herbalife in writing, including,
the pricing thereof that Supplier supply Herbalife as an additional
manufacturing source for the Rights Of First Refusal Independent Product For
Additional Manufacture.
10
12
EXECUTION COPY
(C) Herbalife shall be entitled in good faith to reject
Supplier's proposal if Supplier is unable to offer competitive terms, taking
into account, among other things, cost differentials (e.g., pricing, shipping,
tariffs, warehousing). Supplier's terms shall be treated as competitive for such
purpose if Supplier's proposed terms are as good as or better than the range of
terms offered to Herbalife by any three of the entities listed from time to time
on Exhibit D hereto for the manufacture of like quantity and quality of the
Rights Of First Refusal Independent Product For Additional Manufacture; provided
however, that, in the case of price, Supplier's proposed price shall be treated
as competitive if that price is as good as or better than the arithmetic average
of the two prices remaining, after deleting the lowest price, offered to
Herbalife by any three of the entities listed from time to time on Exhibit D
hereto for the manufacture of like quantity and quality of the Rights Of First
Refusal Independent Product For Additional Manufacture; and, provided further,
that if any of such three entities used for comparison is unable to provide a
bid for like quantity due to manufacturing limitations, then Herbalife shall be
entitled to obtain bids from multiple manufacturers listed on Exhibit D hereto
which in the aggregate would be capable of providing a like quantity of product
and the price shall then be treated as competitive if Supplier's price is as
good as or better than the weighted average of all bidder's prices.
(D) In the event that Supplier's proposal is
competitive, Herbalife shall inform Supplier thereof within thirty (30) days of
Supplier's proposal having been received by Herbalife, and Supplier shall then
manufacture and sell as an additional manufacturing source to Herbalife or any
Affiliate and Herbalife shall then buy from Supplier those of the Rights Of
First Refusal Independent Products For Additional Manufacture that Herbalife or
any Affiliate may determine to order from Supplier hereunder subject to the
terms and conditions set forth herein and at a price at least as good as the
price set forth in Supplier's proposal.
(E) In the event that Herbalife concludes that
Supplier's proposal is not competitive, then Herbalife will notify Supplier in
writing within thirty (30) days of its receipt of Supplier's proposal of its
basis, in reasonable detail, including the ranges of prices, for its conclusion
that Supplier's proposal is not competitive and, therefore, rejected by
Herbalife.
(F) Each Rights Of First Refusal Product For
Additional Manufacture agreed to be ordered by Herbalife from Supplier shall be
listed on Exhibit E hereto, including without limitation the price; provided
however, that any firm purchase order placed by Herbalife or any Affiliate with
Supplier for a Rights Of First Refusal Independent Product For Additional
Manufacture shall be deemed to have been listed on Exhibit E hereto.
(G) If Supplier declines to make any proposal to
Herbalife that Supplier supply Herbalife or any Affiliate as an additional
manufacturing source for the Rights Of First Refusal Independent Product For
Additional Manufacture or Supplier is unable to offer competitive terms as set
forth above, then (x) Herbalife or any Affiliate shall have the unrestricted
right to obtain at any time an additional manufacturing source for the Rights Of
First Refusal Independent Product For Additional Manufacture from any Other
Supplier (including Herbalife itself or any Affiliate), provided however, that
in the event that during the Term the terms obtained by Herbalife from any
11
13
EXECUTION COPY
Other Supplier change or increase so as to render Supplier's terms competitive,
Herbalife or its Affiliates shall so advise Supplier and afford it the
opportunity to present Herbalife with a proposal pursuant to Section 5(b)(i)(B)
above, (y) Herbalife or any Affiliate shall have no obligation to purchase or
order any amount of Rights of First Refusal Independent Product For Additional
Manufacture from Supplier, and (z) Supplier shall promptly return to Herbalife
all materials, documents and information provided to Supplier and all copies
thereof regarding the Rights Of First Refusal Independent Product For Additional
Manufacture.
(ii) Rights Of First Refusal Substitute Products For Primary
Manufacture. Supplier shall have the right of first refusal to become the
primary manufacturing source of a Rights Of First Refusal Substitute Product For
Primary Manufacture for order by Herbalife or any Affiliate during the Term in
Current Countries prior to Herbalife offering for primary manufacture the Rights
Of First Refusal Substitute Product For Primary Manufacture to any other person
or entity for order by Herbalife or any Affiliate during the Term in Current
Countries, subject to and in accordance with the following terms:
(A) Herbalife shall request in writing that Supplier
provide Herbalife with a proposal, including pricing, for the primary
manufacture by Supplier of the Rights Of First Refusal Substitute Product For
Primary Manufacture for order by Herbalife or any Affiliate in Current Countries
and possible inclusion in this Agreement. Subject to the provisions of Section
14 of this Agreement, Herbalife shall provide Supplier with the Formula, a range
of prices and all other terms and conditions provided to Herbalife by at least
three of the entities listed from time to time on Exhibit D hereto for the
manufacture of like quantity and quality of the Rights Of First Refusal
Substitute Product For Primary Manufacture.
(B) Supplier shall then have thirty (30) days to make
a proposal to Herbalife in writing, including the pricing thereof, that Supplier
supply Herbalife as the primary manufacturing source for the Rights Of First
Refusal Substitute Product For Primary Manufacture.
(C) Herbalife shall be entitled in good faith to
reject Supplier's proposal if Supplier is unable to offer competitive terms,
taking into account, among other things, cost differentials (e.g., pricing,
shipping, tariffs, warehousing). Supplier's terms shall be treated as
competitive for such purpose if Supplier's proposed terms are as good as or
better than the range of terms offered to Herbalife by any three of the entities
listed from time to time on Exhibit D hereto for the manufacture of like
quantity and quality of the Rights Of First Refusal Substitute Product For
Primary Manufacture; provided however, that, in the case of price, Supplier's
proposed price shall be treated as competitive if that price is as good as or
better than the arithmetic average of the two prices remaining, after deleting
the lowest price, offered to Herbalife by any three of the entities listed from
time to time on Exhibit D hereto for the manufacture of like quantity and
quality of the Rights Of First Refusal Substitute Product For Primary
Manufacture; and, provided further, that if any of such three entities used for
comparison is unable to provide a bid for like quantity due to manufacturing
limitations, then Herbalife shall be entitled to obtain bids from multiple
manufacturers listed on Exhibit D hereto which in the aggregate would be capable
of providing a
12
14
EXECUTION COPY
like quantity of product, and the price shall then be treated as competitive if
Supplier's price is as good as or better than the weighted average of all
bidder's prices.
(D) In the event that Supplier's proposal is
competitive, Herbalife shall inform Supplier thereof within thirty (30) days of
Supplier's proposal having been received by Herbalife, and Supplier shall then
manufacture and sell as the primary manufacturing source to Herbalife or any
Affiliate and Herbalife shall then buy from Supplier those of the Rights Of
First Refusal Substitute Products For Primary Manufacture that Herbalife or any
Affiliate may determine to order from Supplier hereunder subject to the terms
and conditions set forth herein and at a price at least as good as the price set
forth in Supplier's proposal.
(E) In the event that Herbalife concludes that
Supplier's proposal is not competitive, then Herbalife will notify Supplier in
writing within thirty (30) days of its receipt of Supplier's proposal of its
basis, in reasonable detail, including the ranges of prices, for its conclusion
that Supplier's proposal is not competitive and, therefore, rejected by
Herbalife.
(F) Each Rights Of First Refusal Substitute Product
For Primary Manufacture agreed to be ordered by Herbalife from Supplier shall be
listed on Exhibit E hereto, including without limitation the price; provided
however, that any firm purchase order placed by Herbalife or any Affiliate with
Supplier for a Rights Of First Refusal Substitute Product For Primary
Manufacture shall be deemed to have been listed on Exhibit E hereto.
(G) If Supplier declines to make any proposal to
Herbalife that Supplier supply Herbalife or any Affiliate as the primary
manufacturing source for the Rights Of First Refusal Substitute Product For
Primary Manufacture or Supplier is unable to offer competitive terms as set
forth above, then (x) Herbalife or any Affiliate shall have the unrestricted
right to obtain at any time manufacturing sources for the Rights Of First
Refusal Substitute Product For Primary Manufacture from any of the Other
Suppliers (including Herbalife itself or any Affiliate), provided however, that
in the event that during the Term the terms obtained by Herbalife from any Other
Supplier change or increase so as to render Supplier's terms competitive,
Herbalife or its Affiliates shall so advise Supplier and afford it the
opportunity to present Herbalife with a proposal pursuant to Section 5(b)(ii)(B)
above, (y) Herbalife or any Affiliate shall have no obligation to purchase or
order any amount of Rights Of First Refusal Substitute Products For Primary
Manufacture from Supplier, and (z) Supplier shall promptly return to Herbalife
all materials, documents and information provided to Supplier and all copies
thereof regarding the Rights Of First Refusal Substitute Product For Primary
Manufacture.
(iii) Rights Of First Refusal Constructively Identical
Products For Primary Manufacture. Supplier shall have the right of first refusal
to become the primary manufacturing source of a Rights Of First Refusal
Constructively Identical Product For Primary Manufacture for order by Herbalife
or any Affiliate during the Term in Current Countries prior to Herbalife
offering for primary manufacture the Rights Of First Refusal Constructively
Identical Product For Primary
13
15
EXECUTION COPY
Manufacture to any other person or entity for order by Herbalife or any
Affiliate during the Term in Current Countries, subject to and in accordance
with the following terms:
(A) Herbalife shall request in writing that Supplier
provide Herbalife with a proposal for the primary manufacture by Supplier of the
Rights Of First Refusal Constructively Identical Product For Primary Manufacture
for order by Herbalife or any Affiliate in Current Countries and possible
inclusion in this Agreement. The initial price for a product made in accordance
with any Constructively Identical Formula (the "CONSTRUCTIVELY IDENTICAL
PRODUCT") shall be the price set forth respectively on Exhibit A hereto against
that Current Product that is not materially different from the Constructively
Identical Product, or, as the case may be, as set forth in Exhibit F hereto
against that Supplier Developed New Product that is not materially different
from the Constructively Identical Product.
(B) Supplier shall then have thirty (30) days to
determine whether Supplier wishes to supply Herbalife or any Affiliate as the
primary manufacturing source for the Rights Of First Refusal Constructively
Identical Product For Primary Manufacture.
(C) In the event that Supplier determines that
Supplier wishes to supply Herbalife or any Affiliate as the primary
manufacturing source for the Rights Of First Refusal Constructively Identical
Product For Primary Manufacture, and notifies Herbalife thereof within the
thirty (30) days, then Supplier shall manufacture and supply as the primary
manufacturing source to Herbalife or any Affiliate and Herbalife shall then buy
from Supplier those of the Rights Of First Refusal Constructively Identical
Products For Primary Manufacture that Herbalife or any Affiliate may determine
to order from Supplier hereunder subject to the terms and conditions set forth
herein.
(D) Each Rights Of First Refusal Constructively
Identical Product For Primary Manufacture ordered by Herbalife from Supplier
shall be listed on Exhibit E hereto, including without limitation the price;
provided however, that any firm purchase order placed by Herbalife or any
Affiliate with Supplier for a Rights Of First Refusal Constructively Identical
Product For Primary Manufacture shall be deemed to have been listed on Exhibit E
hereto.
(E) In the event that Supplier determines that
Supplier does not wish to supply Herbalife or any Affiliate as the primary
manufacturing source for the Rights Of First Refusal Constructively Identical
Product For Primary Manufacture (or Supplier fails to notify Herbalife of
Supplier's determination) within thirty (30) days as provided in Section
5(b)(iii)(B) above, then (x) Herbalife or any Affiliate shall have the
unrestricted right to obtain at any time manufacturing sources for the Rights Of
First Refusal Constructively Identical Product For Primary Manufacture from any
of the Other Suppliers (or Herbalife itself or any Affiliate), (y) Herbalife or
any Affiliate shall have no obligation to purchase or order any amount of Rights
Of First Refusal Constructively Identical Product For Primary Manufacture from
Supplier, and (z) Supplier shall promptly return to Herbalife all materials,
documents and information provided to Supplier and all copies thereof regarding
the Rights Of First Refusal Constructively Identical Product For Primary
Manufacture.
14
16
EXECUTION COPY
(c) Supplier Developed New Modified Current Products.
(i) Gatekeeper Protocol for Supplier Developed New Products
and Modified Current Products. During the Term, Supplier may from time to time
develop Supplier Developed New Products and Modified Current Products. If
Supplier, at Supplier's sole discretion, chooses to communicate (whether in
writing or otherwise) with Herbalife with respect to any aspect of a Supplier
Developed New Product, or a Modified Current Product, or any Formula relating
thereto, then Supplier shall provide written notice (the "WRITTEN NOTICE") (i)
advising Herbalife's general counsel or any other person Herbalife designates in
writing to receive such information (the "HERBALIFE DESIGNEE") of Supplier's
intention to propose or discuss a Supplier Developed New Product or a Modified
Current Product, (ii) generally describing such proposed product and, if
available, proposed intellectual property rights relating thereto (the
procedures described in this Section 5(c)(i) shall be referred to herein as the
"SECTION 5(c)(i) GATEKEEPER PROTOCOL"). If Supplier's Written Notice shall
comply with the Section 5(c)(i) Gatekeeper Protocol, then the confidentiality
provisions of Section 14 below shall apply to such information.
(ii) Herbalife's Interest in Modified Current Products. If
after receipt of the Written Notice, Herbalife determines that Herbalife is
interested in receiving further information concerning any Modified Current
Product Herbalife shall advise Supplier within thirty (30) days of receipt of
the Written Notice and Supplier shall then provide a written description (the
"WRITTEN DESCRIPTION"). The Written Description shall be subject to the
confidentiality provisions of Section 14 below and shall reasonably describe the
Modified Current Product, including the Formula, if available, and provide a
proposed schedule of when the Modified Current Product will be available for
sale, and proposed intellectual property rights relating thereto. Supplier shall
xxxx the Written Description "Confidential" and address the Written Description
to the Herbalife Designee.
(d) Rights On Offering of Supplier Developed New Product, At
Supplier's sole discretion, Supplier may offer Herbalife any Supplier Developed
New Product subject to and in accordance with the following terms:
(i) At Supplier's sole discretion, if Supplier chooses to
offer Herbalife any Supplier Developed New Product, Supplier shall first have
given the Written Notice to Herbalife in accordance with the Section 5(c)(i)
Gatekeeper Protocol. If after receipt of the Written Notice, Herbalife
determines that Herbalife is interested in receiving further information
concerning the Supplier Developed New Product, Herbalife shall advise Supplier
within thirty (30) days of receipt of the Written Notice and Supplier shall then
provide a "written offer (the "Written Offer"). The Written Offer shall be
subject to the confidentiality provisions of Section 14 below and shall
reasonably describe the Supplier Developed New Product, including the Formula
and pricing, and provide a proposed schedule of when the Supplier Developed New
Product will be available for sale, proposed intellectual property rights
relating thereto, whether Supplier proposes that the Supplier Developed New
Product shall be a Supplier Developed New Exclusive Product or a Supplier
Developed New Non-Exclusive Product, and, if applicable, if Supplier proposes
that the Supplier Developed New Product shall be a Third Party Licensed Product
or a Generic Product.
15
17
EXECUTION COPY
Supplier shall xxxx the Written Offer "Confidential" and address the Written
Offer to the Herbalife Designee. Upon Herbalife's written request, Supplier
shall provide samples of each Supplier Developed New Product. Thereafter,
Herbalife and Supplier shall each negotiate with each other on an exclusive
basis for a period of thirty (30) days (the "THIRTY-DAY EXCLUSIVE NEGOTIATION
PERIOD").
(ii) Herbalife, in its sole discretion, may determine whether
to accept or reject any Supplier Developed New Product offered to Herbalife by
Supplier. In the event that Herbalife agrees to accept any offered Supplier
Developed New Product, and agreement is reached as to Supplier's proposal,
Herbalife shall place a firm purchase order for the Supplier Developed New
Product within the time specified in the offer referred to in Section 5(d)(i)
above. Supplier shall then manufacture and sell the Supplier Developed New
Product to Herbalife, and Herbalife shall then buy those of the Supplier
Developed New Product that Herbalife or any Affiliate may determine to order
from Supplier hereunder, subject to the terms and conditions set forth herein,
and the rights in and to any Formula for such Supplier Developed New Product
shall be licensed and/or conveyed, transferred and assigned to Herbalife (or any
Affiliate) as and to the extent set forth in Section 8 of this Agreement.
(iii) Each Supplier Developed New Product agreed to be ordered
by Herbalife from Supplier shall be listed on Exhibit F hereto, including
without limitation the price; provided, however, that any firm purchase order
placed by Herbalife or any Affiliate with Supplier for a Supplier Developed New
Product shall be deemed to have been listed on Exhibit F hereto.
(iv) In the event that agreement is not reached within the
Thirty-Day Exclusive Negotiation Period, then Supplier shall be entitled to sell
the Supplier Developed New Product to any third party on terms and conditions,
including price, no more favorable than those offered to Herbalife, and
Herbalife shall promptly return to Supplier all materials, documents and
information provided to Herbalife and all copies thereof regarding the Supplier
Developed New Product.
(e) Failure To Comply With The Section 5(c)(i) Gatekeeper
Protocol. If Supplier fails to comply with the Section 5(c)(i) Gatekeeper
Protocol, then, notwithstanding any provision hereof to the contrary, Supplier
hereby forever releases and discharges, and waives any claim Supplier may have
against, Herbalife and all Affiliates and their respective successors, assigns,
directors, officers, employees, agents, attorneys, representatives and advisors
of and from, or with respect to, any and all claims, demands, causes of action,
damages, liabilities, losses, costs or expenses of any nature or kind, fixed or
contingent arising from or in connection with the use by Herbalife or any third
party of any information delivered to Herbalife with respect to any aspect of a
Supplier Developed New Product, or a Modified Current Product, or any Formula
relating thereto, other than in compliance with the Section 5(c)(i) Gatekeeper
Protocol (the "RELEASED CLAIMS"). It is understood by Supplier and Herbalife
that there is a risk that subsequent to the execution of this Agreement
Herbalife may incur or suffer loss, damage, or injuries which are unknown or
unanticipated at the time of the execution of this Agreement relating to the
Released Claims. Further, there is risk that loss or damage relating to the
Released Claims presently known may be or become greater
16
18
EXECUTION COPY
than the parties hereto now expect or anticipate. Supplier assumes said risks,
acknowledges that the releases contained herein shall apply to all unknown and
all unanticipated results arising from or relating to the Released Claims to
above, as well as those known and anticipated, and, upon the advice of legal
counsel, Supplier waives all rights under California Civil Code Section 1542 and
any comparable provision under the law of any other jurisdiction with respect to
the Released Claims. California Civil Code Section 1542 reads as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor.
6. ORDER PROCEDURE FOR PRODUCTS.
(a) Open Blanket Purchase Order. At the commencement of each
calendar year during the Term commencing with purchase orders for Supplied
Products to be delivered on or after January 12, 1998, Herbalife or any
Affiliate shall initiate orders hereunder by placing a preliminary estimated
order as to the Supplied Products for each territory or country (the "Open
Blanket Purchase Order") listing the types and quantities of the Supplied
Products estimated to be purchased by Herbalife for delivery in the ensuing
year. Each Open Blanket Purchase Order shall be in substantially the form of the
Open Blanket Purchase Order for the first calendar year, which commences on
January 12, 1998 and ends on December 31, 1998.
(b) Open Blanket Purchase Order Subject to Approval of Samples.
Each Open Blanket Purchase Order shall not be effective as a preliminary
estimated order in relation to any New Product until Herbalife, upon Herbalife's
request, has been provided with samples of each type of New Products ordered
therein and has determined that the samples are in conformity with the Quality
Standards established by Herbalife and Supplier pursuant to Section 3 of this
Agreement.
(c) Shipping Schedules and Firm Purchase Orders. For each delivery
of Supplied Products requested hereunder, Herbalife or any Affiliate shall, not
later than twelve (12) weeks prior to the anticipated shipping date of Supplied
Products, provide Supplier with a shipping schedule specifying the products and
quantities estimated to be purchased. Supplied Products on the shipping schedule
may be modified by Herbalife or any Affiliate up until and shall not become firm
binding purchase orders until the date being eight (8) weeks prior to the
scheduled shipping date. Supplier shall receive from Herbalife or any Affiliate
purchase orders or order addenda, formula approval, product specifications,
packaging specifications, and any other materials supplied by Herbalife or any
Affiliate to Supplier to the extent necessary to produce and ship the Supplied
Product, including sufficient labels and product inserts (collectively, the
"SHIPPING MATERIALS"). If Supplier is unable to make a shipment due to a failure
on Herbalife's or any Affiliate's part to provide the Shipping Materials
described above, the affected Supplied Product requirement shall remain on the
shipping schedule and shall be shipped as soon as commercially reasonable after
all the necessary Shipping Materials are received by Supplier. Upon receipt by
Supplier of all Shipping Materials, Supplier shall accept the shipping schedule
as submitted by Herbalife or any
17
19
EXECUTION COPY
Affiliate by signing and returning a copy to Herbalife's Material Control
Department. Modifications to the shipping schedule may be made by Herbalife at
any time; provided however, if modifications are made by Herbalife or any
Affiliate less than eight (8) weeks prior to the scheduled shipping date,
Supplier shall use commercially reasonable efforts to attempt to satisfy the
requested modification.
(d) Cooperative Efforts In Establishing Schedules. The parties
shall cooperate fully with each other to provide pertinent information to each
other to enable timely delivery by Supplier of Supplied Products to Herbalife
hereunder.
(e) Affiliate Invoicing. If at any time on or after the date
hereof during the Term any Affiliate shall place any order for Supplied Products
to be delivered on or after January 12, 1998, Supplier agrees to transmit any
applicable invoice directly to the Affiliate concerned, with a copy thereof
being sent by facsimile transmission to Herbalife at the time of transmission to
the Affiliate concerned.
7. Prices.
(a) For Supplied Products. For all Supplied Products to be
delivered on a date on or after January 12, 1998 and continuing in effect for
the remainder of the Term, Herbalife shall pay Supplier the prices set forth
respectively on Exhibit A hereto and the prices agreed to by Supplier and
Herbalife set forth on Exhibits E and F hereto (collectively, the "PRICES");
provided however, that on March 31, 1998, and at the end of each calendar
quarter thereafter during the Term (an "Adjustment Date"), either party may
request that the prices for the Supplied Products be adjusted upwards or
downwards, effective from the next succeeding Adjustment Date forward for the
next succeeding calendar quarter, according to the adjustment calculations
described in this Section 7. The Prices with respect to any of the Modified
Current Products shall be the same as those prices set forth respectively on
Exhibit A hereto against the initial Current Products of which the Modified
Current Products are a modification, improvement, alteration, enhancement or
successor, and shall be subject to adjustment only as set forth in this Section
7(a). The Prices with respect to any of the Constructively Identical Products
shall be the same as those prices set forth respectively on Exhibit A hereto
against those initial Current Products that are not materially different from
the Constructively Identical Products, or, as the case may be, as set forth in
Exhibit F against those Supplier Developed New Products that are not materially
different from the Constructively Identical Products and shall be subject to
adjustment only as set forth in this Section 7(a). Supplier shall advise
Herbalife in writing in the event that there is any net variation upwards or
downwards in the aggregate actual cost of all raw materials used to produce a
Supplied Product. The Prices shall be adjusted upwards or downwards by the
amount that the net variation in the aggregate actual cost of all raw materials
used to produce a Supplied Product, if added to or subtracted from, as the case
may be, that Supplied Product's Price, exceeds five percent (5%); provided
however, that the party requesting the adjustment shall first have delivered to
the other party independent documentation in reasonable detail (including
published commodity prices or other relevant published information where
available) verifying such variation and that the variation is not due to
18
20
EXECUTION COPY
factors solely applicable to or solely affecting Supplier. Once the adjustment
has been justified by independent documentation as described above, the
adjustment shall be effective as of the next succeeding Adjustment Date. Any
variation in Supplier's labor or overhead expenses shall not be taken into
account in determining any change in cost of the Supplied Product pursuant to
this Section 7 on any Adjustment Date. If no adjustment is requested by either
party or if any requested adjustment is not justified, the prices shall remain
unchanged until the next succeeding Adjustment Date. The Prices for Supplied
Products shall include the cost of manufacturing, packaging (with product insert
and materials provided by Herbalife), labeling (with labels provided by
Herbalife), insuring, shipping and delivery by Supplier to the Local Delivery
Point set forth in Section 10 below. The initial Prices for any New Products
ordered by Herbalife or any Affiliate during the Term, including New Products
for any territory or country other than a Current Country, shall be negotiated
by the parties in accordance with and subject to the terms and conditions of
Sections 5(b)(i), 5(b)(ii), 5(b)(iii), and 5(d) hereof and shall then be subject
to adjustment only as set forth in this Section 7(a).
(b) For Certain Materials or Ingredients.
(i) Supplier has license agreements governing its right to
the use of AMINOGEN(R) and raw materials, ingredients, or rights called for by
and utilized in certain of the Supplier Formulas. During the Term and thereafter
Supplier will use its best efforts to provide such raw materials, ingredients,
or rights to Herbalife or any Affiliate in the quantities, manner and at the
times required by Herbalife or any Affiliate. Supplier shall sell or cause to be
sold such raw materials or ingredients for AMINOGEN(R) to Herbalife or any
Affiliate at the price during the Term which shall be the lower of (x) the price
Supplier charges any third party for the purchase of AMINOGEN(R) from Supplier
at any time on or after the date hereof during the Term or (y) $190 per kilogram
for AMINOGEN(R). Supplier shall sell or cause to be sold such raw materials or
ingredients for AMINOGEN(R) to Herbalife or any Affiliate at the price
thereafter which shall be the most favorable that such raw materials or
ingredients shall be sold by Supplier at that time to any third party.
(ii) If, during the Term and thereafter, Supplier obtains a
license or patent governing its right to the use of any raw material,
ingredient, or right called for by or utilized in any Supplier Developed New
Formula, then during the Term and thereafter Supplier will use its best efforts
to provide such raw material, ingredient or right to Herbalife or any Affiliate
in the quantities, manner and at the times required by Herbalife or any
Affiliate upon terms and conditions to be mutually agreed to by the parties
during the negotiation period referred to in Section 5(d) above.
(iii) In the event that Supplier is required to use a specific
trade xxxx or trade name in connection with the use of any raw material or
ingredient called for by any Formula, which material or ingredient is purchased
by Herbalife or any Affiliate from Supplier hereunder, then Herbalife or the
Affiliate concerned shall use such trade xxxx or trade name in connection with
its use of such raw material or ingredient.
19
21
EXECUTION COPY
8. Intellectual Property.
(a) Licenses of the Formulas.
(i) Initial License for Formulas for Current Products. Upon
execution of this Agreement, (A) Supplier hereby grants to Herbalife or any
Affiliate a royalty-free right and license, until midnight on January II, 1998,
to use the Formulas for Current Products in connection with (1) selecting or
qualifying Other Suppliers to manufacture on behalf of Herbalife or any
Affiliate all of the Current Products (which use includes manufacturing Current
Products in non-commercial quantities for testing and evaluation purposes) and
(2) manufacturing on behalf of Herbalife or any Affiliate, on and after
September 1, 1997, in commercial and non-commercial quantities Current Products
to be delivered to or on behalf of Herbalife or any Affiliate on and after
January 12, 1998 pursuant to the terms and conditions hereof, and (B) Supplier
shall provide Herbalife or any Affiliate with the Formulas for all Current
Products sold or to be sold to Herbalife or any Affiliate pursuant to the terms
and conditions hereof to enable Herbalife or any Affiliate to exercise the
rights and licenses granted hereunder.
(ii) Initial License for Formulas for Any Supplier Developed
New Exclusive-Products Other Than Those Consisting of a Third Party Licensed
Product. At any time after execution of this Agreement and until midnight on
January 11, 1998, if Herbalife or any Affiliate orders from Supplier any
Supplier Developed New Exclusive Product, other than one which consists of a
Third Party Licensed Product, (A) Supplier hereby grants to Herbalife or any
Affiliate, effective upon such purchase by Herbalife or any Affiliate, a
royalty-free right and license, until midnight on January 11, 1998, to use the
Formulas for such Supplier Developed New Exclusive Products in connection with
(1) selecting or qualifying Other Suppliers to manufacture on behalf of
Herbalife or any Affiliate all such Supplier Developed New Exclusive Products
(which use includes manufacturing such Supplier Developed New Exclusive Products
in noncommercial quantities for testing and evaluation purposes) and (2)
manufacturing on behalf of Herbalife or any Affiliate, on and after September 1,
1997, in commercial and non-commercial quantities such Supplier Developed New
Exclusive Products to be delivered to or on behalf of Herbalife or any Affiliate
on and after January 12, 1998 pursuant to the terms and conditions hereof, and
(B) Supplier shall provide Herbalife or any Affiliate with the Formulas for all
such Supplier Developed New Exclusive Products sold or to be sold to Herbalife
or any Affiliate pursuant to the terms and conditions hereof to enable Herbalife
or any Affiliate to exercise the rights and licenses granted hereunder.
(iii) License for Formulas for any Supplier Developed New
Non-Exclusive Product, or any Supplier Developed New Exclusive Product,
Consisting of a Third Party Licensed Product. At any time after execution of
this Agreement, if Herbalife or any Affiliate orders from Supplier any Supplier
Developed New Non-Exclusive Product, or any Supplier Developed New Exclusive
Product, which consists of a Third Party Licensed Product, then, subject to the
confidentiality provisions in Section 14 below with respect to the obtaining of
any consent or license of any person
20
22
EXECUTION COPY
or entity whose consent or license is required, effective upon such purchase by
Herbalife or any Affiliate:
(A) Any Supplier Developed New Non-Exclusive Product
Consisting of a Third Party Licensed Product. Supplier shall use its best
efforts throughout the Term to obtain the consent of or license from each such
person or entity whose consent or. license is required so as to enable Herbalife
or any Affiliate to use, for as long as permitted by such person or entity, on
terms' no less favorable than those obtained by Supplier, the Formulas for any
Supplier Developed New Non-Exclusive Product which consists of a Third Party
Licensed Product, or any Supplier Developed New Exclusive Product which consists
of a Third Party Licensed Product, in connection with (1) selecting or
qualifying Other Suppliers to manufacture on behalf of Herbalife or any
Affiliate all of such Supplier Developed New Products (which use includes
manufacturing such Supplier Developed New Products in non-commercial quantities
for testing and evaluation purposes) and (2) manufacturing on behalf of
Herbalife or any Affiliate, on and after September 1, 1997, in commercial and
non-commercial quantities such Supplier Developed New Products to be delivered
to or on behalf of Herbalife or any Affiliate on and after January 12, 1998,
pursuant to the terms and conditions hereof Promptly following the granting of
such consent or license to such a Supplier Developed New Product, if Herbalife
or any Affiliate has not received the Formulas for any such product from the
third party licensee thereof, Supplier shall provide Herbalife or any Affiliate
with those Formulas pursuant and subject to the terms and conditions hereof and
of any;, third party license to enable Herbalife or any Affiliate to exercise
the rights and licenses so granted.
(b) Transfer of the Formulas.
(i) Transfer of Formulas for Current Products. Subject to
Section 8(c) below, effective on January 12, 1998, Supplier (A) hereby conveys,
transfers and assigns to Herbalife or any Affiliate all rights, title and
interests in and to all of the Formulas for all Current Products ordered by
Herbalife or any Affiliate pursuant to the terms and conditions hereof, free
from ANY liens or encumbrances and (B) shall provide Herbalife or any Affiliate
with the Formulas for all Current Products ordered by Herbalife or any Affiliate
pursuant to the terms and conditions hereof. The parties agree to execute any
and all documents necessary to effectuate the conveyance, transfer and
assignment to Herbalife or any Affiliate of all rights, title and interests in
and to all of the Formulas for all Current Products ordered by Herbalife or any
Affiliate pursuant to the terms and conditions hereof, free from any liens or
encumbrances.
(ii) Initial Transfer of Formulas for Supplier Developed New
Exclusive Products. Subject to Section 8(c) below, effective on January 12,
1998, Supplier (A) hereby conveys, transfers and assigns to Herbalife or any
Affiliate all rights, title and interests in and to all of the Formulas for all
then existing Supplier Developed New Exclusive Products ordered by Herbalife or
any Affiliate pursuant to the terms and conditions hereof, free from any liens
or encumbrances and (B) shall provide Herbalife or any Affiliate with the
Formulas for all such Supplier Developed New Exclusive Products ordered by
Herbalife or any Affiliate pursuant to the terms and conditions
21
23
EXECUTION COPY
hereof. The parties agree to execute any and all documents necessary to
effectuate the conveyance, transfer and assignment to Herbalife or any Affiliate
of all rights, title and interests in and to all of the Formulas for all such
Supplier Developed New Exclusive Products ordered by Herbalife or any Affiliate
pursuant to the terms and conditions hereof, free from any liens or
encumbrances.
(iii) Subsequent Transfer of Formulas for Supplier Developed
New Exclusive Products. Subject to Section 8(c) below, at any time after January
11, 1998 during the Term, if Herbalife orders from Supplier any Supplier
Developed New Exclusive Product, then, effective at such time, Supplier (A)
hereby conveys, transfers and assigns to Herbalife or any Affiliate, effective
upon such order by Herbalife or any Affiliate, all of Supplier's rights, title
and interests in and to all Formulas for any such Supplier Developed New
Exclusive Product, free from any liens or encumbrances, and (B) shall provide
Herbalife or any Affiliate with the Formulas for any Supplier Developed New
Exclusive Product ordered by Herbalife or any Affiliate pursuant to the terms
and conditions hereof, if and to the extent not already provided to Herbalife or
any Affiliate. The parties agree to execute any and all documents to effectuate
the conveyance, transfer and assignment to Herbalife or any Affiliate of all
rights, title and interests in and to all of the Formulas for any Supplier
Developed New Exclusive Product ordered by Herbalife or any Affiliate pursuant
to the terms and conditions hereof, free from any liens or encumbrances.
(iv) Transfer of Formulas on Termination of Agreement Prior
to January 12, 1998. In the event this Agreement is terminated prior to January
12, 1998, by either party for any reason of whatsoever nature or kind, Supplier
hereby agrees that, in such event, all rights, title and interests in and to the
Supplier Exclusive Formulas without any further action required to be taken by
either party, hereby are immediately and automatically conveyed, transferred and
assigned by Supplier to Herbalife or any Affiliate on the same terms and
conditions as set forth in, respectively, Sections 8(b)(i), 8(b)(ii) and
8(b)(iii) above, except that (a) such conveyances, transfers and assignments
shall not be subject to Section 8(c) below and (b) the effective date of such
conveyances, transfers and assignments shall be the effective date of such
termination of this Agreement and shall not be delayed until January 12, 1998 as
set forth in Sections 8(b)(i), 8(b)(ii) and 8(b)(iii) above. In the event this
Agreement is terminated prior to January 12, 1998, by either party for any
reason of whatsoever nature or kind, Supplier hereby agrees that, in such event,
all rights and licenses in and to those of the Supplier Formulas granted to
Herbalife or any Affiliate on the terms and conditions set forth in Section
8(a)(iii) above shall remain unaffected thereby and shall continue in full force
and effect.
(c) Restrictions on Herbalife's use of the Supplier Formulas for
Additional Manufacturing. Herbalife hereby agrees that, for the period
commencing with the execution of this Agreement and ending upon the expiration
of the Term only, and not thereafter, and at all times subject to the terms and
conditions of this Agreement, Herbalife or any Affiliate shall not, without the
prior written approval of Supplier (such approval not to be unreasonably
withheld but may be conditioned upon a written agreement reasonably satisfactory
to Supplier to which an Other Supplier is party containing terms and conditions
for use consistent with this Agreement), license to any Other Supplier the use
of any of the Supplier Formulas for the purpose of additional manufacturing in
22
24
EXECUTION COPY
commercial quantities any Current Products or Supplier Developed New Exclusive
Products agreed to be purchased hereunder by Herbalife or any Affiliate for sale
during the Term in Current Countries; provided however, that Herbalife or any
Affiliate shall at all times during the Term be entitled to license to any Other
Supplier the use of any of the Supplier Formulas for the purpose of (i)
manufacturing on and after September 1, 1997 in non-commercial quantities or
qualifying to manufacture any person or entity to manufacture any Current
Products or Supplier Developed New Exclusive Products (and, in the case of any
of the Supplier Developed New Exclusive Products which consist of a Third Party
Licensed Product, to the extent any person or entity whose consent or license is
required has so consented) at any time during the Term, or (ii) manufacturing on
and after September 1, 1997 in commercial quantities any Current Products or
Supplier Developed New Exclusive Products (and, in the case of any of the
Supplier Developed New Exclusive Products which consist of a Third Party
Licensed Product, to the extent any person or entity whose consent or license is
required has so consented) at any time for sale during the Term in any territory
or country other than the Current Countries.
(d) Limited Grant-back License to Supplier for the Term. After the
effective date of the licenses referred to in (a)(i), (a)(ii), and (a)(iii)
above in this Section 8, and each transfer and assignment by Supplier of or
other arrangement with respect to the Supplier Formulas referred to in (b) (i),
(b)(ii), (b)(iii) and (b)(iv) above in this Section 8, and in connection with
any Other Offered New Product to be manufactured by Supplier, Herbalife hereby
grants to Supplier a limited, nonexclusive, non-transferable, royalty-free,
right and license to use the Supplier Exclusive Formulas, and the Independent
Formulas, the Constructively Identical Formulas and the Substitute Formulas for
the Other Offered New Product, solely to manufacture the Supplied Products for
Herbalife or Herbalife's Affiliates for the remainder of the Term only (subject
to Section 4(f) above) and not thereafter, and at all times subject to the terms
of this Agreement. The license shall (i) be granted solely for the purpose set
forth in the prior sentence, and (ii) be granted subject to the confidentiality
provisions of Section 14 below. After January 11, 1998, Supplier is not granted
by this Section 8(d) any title or ownership rights, in whole or in part, in or
to any of the Supplier Formulas conveyed, transferred and assigned by Supplier
hereunder. At any time after execution of this Agreement, Supplier is not
granted by this Section 8(d) any, and shall have no, title or ownership rights,
in whole or in part, in or to any of the Independent Formulas, the
Constructively Identical Formulas and the Substitute Formulas, and all title and
rights in or to any of the Supplier Formulas conveyed, transferred and assigned
by Supplier hereunder after January 11, 1998, shall remain with Herbalife or any
Affiliate and all title and rights in or to any of the Independent Formulas
shall at all times remain with Herbalife or any Affiliate. Following any
termination, expiration, or non-renewal of this Agreement, all of the Supplier
Exclusive Formulas shall be the exclusive property of Herbalife or any
Affiliate, and Supplier shall relinquish all rights licensed to Supplier
hereunder with respect thereto, and all rights and licenses in and to those of
the Supplier Formulas granted to Herbalife or any Affiliate on the terms and
conditions set forth in Section 8(a)(iii) above shall remain unaffected thereby
and shall continue in full force and effect. Supplier acknowledges and agrees
that Herbalife or any Affiliate reserves and retains any and all rights not
23
25
EXECUTION COPY
expressly granted hereunder to Supplier and Supplier shall not claim any rights
that are not expressly granted or set forth hereunder to Supplier.
(e) Trademarks. Herbalife or any Affiliate hereby grants to
Supplier a limited, nonexclusive, non-transferable royalty-free license solely
to use Herbalife's trademarks, trade names, and logos (the "TRADEMARKS") in
labeling and packaging the Supplied Products for Herbalife, for the remainder of
the Term only (subject to Section 4(f) above) and not thereafter, and at all
times subject to the terms and conditions of this Agreement. Supplier hereby
agrees that only the Trademarks shall be affixed to the Supplied Products.
Supplier shall have no rights to use the Trademarks other than for purposes of
labeling and packaging Supplied Products pursuant to this Agreement, which
labeling and packaging shall be in form and substance satisfactory to Herbalife
or any Affiliate. Supplier agrees to submit copies of the proposed manner, use
and layout of the Trademarks for approval by Herbalife, in Herbalife's or any
Affiliate sole discretion, prior to Supplier using the Trademarks as set forth
herein. Supplier shall not use the Trademarks in advertising or promotional
campaigns or otherwise, or use any confusingly similar names, marks or logos, in
any manner that, in Herbalife's sole discretion, may be inconsistent with
Herbalife's public image or be misleading or harmful to Herbalife. In the event
of termination, expiration, or non-renewal of this Agreement, Supplier shall not
have any right to sell any Supplied Products remaining in any of Supplier's
inventory unless all Trademarks are removed from the Supplied Products. Supplier
acknowledges and agrees that Herbalife reserves and retains any and all rights
not expressly granted hereunder to Supplier and Supplier shall not claim any
rights that are not expressly granted or set forth hereunder to Supplier.
(f) Infringement. Supplier shall promptly notify Herbalife or any
Affiliate of any actual or apparent infringement of Herbalife's or any Affiliate
rights to any of the Formulas for the Supplied Products or Trademarks of which
Supplier obtains actual knowledge. Herbalife may, at its sole option and
expense, prosecute any suit it deems necessary or appropriate to protect any of
Herbalife's or any Affiliate rights to the Formulas for the Supplied Products or
Trademarks from and against infringement by third parties anywhere in the world
and Supplier shall cooperate fully with Herbalife or any Affiliate in connection
with any such action.
9. SERVICE LEVELS.
(a) Required Service Levels. For all Supplied Products to be
delivered on a date on or after January 12, 1998 and continuing thereafter until
midnight of the last day of the Term, Supplier shall use its best efforts to
provide the same level of service and quality of products that it has provided
to Herbalife and Herbalife's Affiliates, taken as a whole, under the Omni
Initial Agreement (the "INITIAL SERVICE LEVEL"). However, in the event of a
Change in Control (as defined in Section 13(d) below) of Supplier and this
Agreement has not been terminated by Herbalife, Supplier shall for each Supplied
Product, meet an industry standards service level (the "SUBSEQUENT SERVICE
LEVEL"), calculated in reference to the ratio of the number of cases of Supplied
Products delivered which meet the Quality Standards to the number of cases
ordered, based on Herbalife's and Herbalife's Affiliates, taken as a whole,
eight (8) week ordering volume; provided however, that the
24
26
EXECUTION COPY
determination of any Subsequent Service Level shall take into account, and give
Supplier a credit for, the extent to which Supplier shall have timely satisfied
any modification to any shipping schedule which accelerates a delivery date or
substitutes Supplied Products to be delivered, which modification shall have
been made by Herbalife or any Affiliate less than eight (8) weeks prior to the
scheduled shipping date. If Supplier fails to meet the Initial Service Level or
the Subsequent Service Level (on a rolling average) for any Supplied Product for
any sixteen (16) week period and, after receipt of notice of such failure, also
fails to meet the Initial Service Level or Subsequent Service Level (on a
rolling average) for any Supplied Product for the eight (8) week period
subsequent to receipt of the notice, Supplier shall be deemed to be in breach of
this Agreement, and Herbalife may, without prejudice to any other remedy
available to Herbalife hereunder, terminate this Agreement under Section 13(b),
or alternatively terminate this Agreement only with respect to such Supplied
Product and Herbalife or the Affiliate concerned shall be able to enter into
agreements with third party suppliers with respect to such Supplied Product as
may no longer be covered by this Agreement, and the Minimum Purchase Order
Amount shall be correspondingly reduced by the dollar amount of orders of such
Supplied Product that Herbalife or the Affiliate concerned could reasonably have
purchased from Supplier but for such failure.
(b) Compliance with Shipping Schedules. Supplier agrees to use its
best efforts in accordance with industry standards to meet the shipping
schedules as determined in accordance with Section 6(c) and (d) above. Except as
provided in Section 6(c) above, under no circumstances shall Supplier alter any
agreed-upon shipping schedule without the prior written consent of Herbalife,
which consent may not be unreasonably withheld by Herbalife. Notwithstanding any
provision in this Agreement to the contrary, if Herbalife has failed (other than
following a breach of this Agreement by Supplier) to meet its payment
obligations under Section 11 with respect to any good faith undisputed portion
of any invoice, and within ten (10) days after receipt of written notice from
Supplier that the good faith undisputed portion of such invoice has not been
paid, Supplier, in its sole discretion, shall be entitled to refrain from
shipping Supplied Product to Herbalife or the Affiliate concerned until such
time as all then delinquent payments have been caused to be made by Herbalife.
(c) Defective Products. Upon inspection of any Supplied Product by
Herbalife or any Affiliate, if Herbalife or any Affiliate reasonably determines
that any Supplied Product or an entire lot of Supplied Products delivered by
Supplier fails to meet the Quality Standards or is otherwise defective (the
"DEFECTIVE PRODUCTS"), Herbalife shall notify Supplier thereof within twenty-one
(21) business days (or such other period as may be mutually agreed for
particular Supplied Products or shipments) after Herbalife or the Affiliate
concerned have received such Supplied Products from Supplier or discovery of the
defect, whichever is later. Within said twenty-one (21) day period, Herbalife or
the Affiliate concerned shall provide Supplier with a sample of each such
Defective Product, lot identification information and the original package for
Supplier's review and analysis. Upon mutual agreement between Herbalife and
Supplier that such product is a Defective Product, Supplier shall, (i) at
Supplier's expense, ship replacement Supplied Products to the prior final
destination of the Defective Product as soon as commercially possible and, (ii)
in its sole discretion,
25
27
EXECUTION COPY
determine whether Defective Products should be returned to Supplier or
destroyed, in each case at Supplier's expense.
(d) Shortfall. Upon inspection of any Supplied Product by
Herbalife or any Affiliate, if Herbalife or any Affiliate reasonably determines
that there is a shortfall in any Supplied Product delivered by Supplier
hereunder (the "SHORTFALL"), Herbalife shall notify Supplier thereof within
twenty-one (21) business days (or such other period as may be mutually agreed
for particular Supplied Products) after Herbalife or the Affiliate concerned
have received such Supplied Products from Supplier, or discovery of the
shortfall, whichever is later. In the event of a Shortfall in any delivery of
Supplied Products by Supplier hereunder, Herbalife or the Affiliate concerned
shall, within said time period, advise Supplier of the quantity of the claimed
shortfall, the product lot number and date of shipment for Supplier's review.
Upon mutual agreement between Herbalife and Supplier that a Shortfall exists,
Supplier shall, at Supplier's expense, ship replacement quantity of Supplied
Products to the Local Delivery Point (as defined in Section 10) of the Supplied
Products suffering from the Shortfall to fulfill the entire obligation to be
performed by Supplier as soon as commercially possible, provided that Supplier
shall use its best efforts to make any such shipment within twenty-one (21)
business days after receiving notification of such Shortfall.
(e) Inventory Levels. Supplier shall use its best efforts to
maintain inventory levels of raw materials of a sufficient quantity of Supplied
Products to meet purchase order requirements on a timely basis.
10. DELIVERY AND TITLE. The Supplied Products shall be delivered F.O.B.
to Herbalife's distribution center in Carson, California or to such other
destination within Los Angeles County or Orange County, California determined by
Herbalife or any Affiliate and designated in writing by Herbalife or any
Affiliate (the "LOCAL DELIVERY POINT"), or to any other destination determined
by Herbalife or any Affiliate and designated in writing by Herbalife or any
Affiliate. In the case of delivery to a Local Delivery Point, the risk of loss
and title shall pass to Herbalife or any Affiliate upon delivery to the Local
Delivery Point, and transport, insurance, and other costs, charges, and duties
beyond the Local Delivery Point shall be borne by Herbalife or the Affiliate
concerned; provided however, that title and risk of loss shall not pass to
Herbalife or any Affiliate for any Defective Products rejected by Herbalife
pursuant to Section 9(c) above. For deliveries made to a location other than a
Local Delivery Point, unless the parties otherwise agree, risk of loss and title
shall pass to Herbalife or any Affiliate at Supplier's dock and transport,
insurance and other costs, charges and duties beyond Supplier's dock shall be
borne by Herbalife or the Affiliate concerned; provided however, that title and
risk of loss shall not pass to Herbalife or any Affiliate for any Defective
Products rejected by Herbalife pursuant to Section 9(c) above. No delivery shall
be made and title shall not pass under this Agreement for any Supplied Product
until January 12, 1998.
11. PAYMENT TERMS. Herbalife shall cause payment for the Supplied
Products purchased from Supplier under the terms of this Agreement to be made no
later than thirty (30) days from the later of the date of delivery of or the
date of invoice for Supplied Products meeting the Quality Standards. Payment
made on any invoice within ten (10) days from the date of delivery or invoice,
26
28
EXECUTION COPY
as the case may be, for Supplied Products meeting the Quality Standards shall be
entitled to a 1% discount (the "1% DISCOUNT"), provided there is no outstanding
unpaid portion of any invoice from Supplier to Herbalife or any Affiliate which
predates the invoice to be paid by Herbalife or any Affiliate to Supplier and
which is not subject to a good faith dispute (a "PREDATED INVOICE"). In the
event that Supplier objects to Herbalife's or any Affiliate's taking of the 1%
Discount, which objection is as a result of Supplier's good faith belief that
there exists a Predated Invoice, then Supplier shall give Herbalife five (5)
business days' written notice to cause payment to be made of the Predated
Invoice. If Supplier fails to give Herbalife the five (5) business days' written
notice, or if Supplier does give the five (5) business days' written notice and
Herbalife causes payment of the Predated Invoice within two (2) business days of
receipt of the notice, then Herbalife or the Affiliate concerned shall be
entitled to the 1% Discount. Any invoice or portion thereof which is the subject
of a good faith dispute shall not prevent Herbalife from being entitled to take
the 1% Discount. Without prejudice to any other remedy that Herbalife may have
at law or in equity, Herbalife or the Affiliate concerned shall be entitled, at
its option, to (i) a refund of the amount paid for any Defective Product or
Shortfall that is not cured pursuant to the terms and conditions of this
Agreement or (ii) a credit of the amount paid for any Defective Product or
Shortfall that is not cured pursuant to the terms and conditions of this
Agreement against future purchases of Supplied Products.
12. QUALITY ASSURANCE, INSPECTION AND DOCUMENTS. Supplier shall maintain
Good Manufacturing Practices and Standard Operating Procedures as defined and
required by the United States Food and Drug Administration, and shall fully
comply with all other United States Food and Drug Administration regulatory
requirements and the regulatory requirements of the State of California and make
such adjustments as may be necessary to effect and maintain such compliance. If
Herbalife advises Supplier of the regulatory requirements of any other
jurisdiction, then Supplier shall use its best efforts to comply therewith in
the manufacture of Supplied Products. Herbalife, or Herbalife's designated
agents (approved by Supplier, which approval shall not be unreasonably
withheld), shall have the right from time to time, on reasonable notice and
during business hours, to inspect Supplier's manufacturing facility, production
line, raw materials storage areas and all other places, that relate to the
production of Supplied Products, including a general quality assurance review of
Supplier's facilities used in the production and manufacture of Supplied
Products. Additionally, Herbalife, or Herbalife's designated agents (approved by
Supplier, which approval shall not be unreasonably withheld), may submit any
Supplied Product to any and all forms of chemical analysis, testing and review
as may be appropriate to determine whether such Supplied Product contains the
ingredients set forth on any label thereto and otherwise meets the Quality
Standards and the other terms and conditions hereof. Upon request by Herbalife,
or Herbalife's designated agents (approved by Supplier, which approval shall not
be unreasonably withheld), of Supplier, Supplier shall furnish Herbalife with
(i) a Certificate of Analysis, prepared in accordance with the requirements of
the Food, Drug and Cosmetic Act of 1938 and the rules and regulations of the
United States Food and Drug Administration promulgated thereunder as an
assurance that the Supplied Products were made in compliance with Supplier's
Good Manufacturing Practices and Standard Operating Procedures, (ii) information
and copies of documents to enable Herbalife to
27
29
EXECUTION COPY
assure that the Supplied Products comply with the labeling claims made for the
Supplied Products, (iii) information and copies of documents necessary for
Herbalife to secure all U.S., state and foreign governmental licenses,
registrations or approvals for the Supplied Products, and (iv) information and
copies of documents necessary for Herbalife to respond to all U.S., state and
foreign governmental inquiries or requests.
13. TERMINATION.
(a) Supplier's Right to Terminate. Supplier may terminate this
Agreement (i) sixty (60) days following written notice to Herbalife of a default
in Herbalife's net payment obligation under Section 11, (ii) sixty (60) days
following written notice to Herbalife of a material breach by Herbalife of any
of its obligations, representations, warranties or covenants hereunder or under
any other written agreement between Supplier and Herbalife (including without
limitation the Omni Initial Agreement after the date hereof, but prior to
expiration thereof or the Release Agreement executed concurrently herewith), if
such breach has not been cured within such sixty (60) day period, or (iii)
immediately, following the Insolvency (as defined in (c) below) of Herbalife.
(b) Herbalife's Right to Terminate. Herbalife may terminate this
Agreement (i) sixty (60) days following written notice to Supplier, of a
material breach by Supplier of Supplier's obligations, representations,
warranties or covenants hereunder or under any other written agreement between
Supplier and Herbalife (including without limitation the Omni Initial Agreement
after the date hereof but prior to the expiration thereof or the Release
Agreement executed concurrently herewith), if such breach has not been cured
within such sixty (60) day period, (ii) immediately, following the Insolvency
(as defined in (c) below) of Supplier, (iii) immediately following a failure by
Supplier to meet the service level requirements of Section 9 above, or (iv)
immediately following a Change in Control (as defined in (d) below) of Supplier.
(c) Insolvency. "INSOLVENCY" shall mean that, with respect to
Supplier or Herbalife, as the case may be, such entity shall (i) make a general
assignment for the benefit of creditors or an agent authorized to liquidate its
assets, (ii) become the subject of an "order for relief" within the meaning of
the United States Bankruptcy Code, and such order is not stayed within thirty
(30) days, (iii) file a petition in bankruptcy or for reorganization, or effect
a plan or other arrangements with creditors, (iv) file an answer to a creditor's
petition, admitting the material allegations thereof, for involuntary bankruptcy
or for reorganization or to effect a plan or other arrangement with creditor,
(v) apply to a court for the appointment of a receiver or custodian for
substantially all of its assets or properties, with or without consent, and such
receiver is not discharged within thirty (30) days after appointment or (vi)
adopt a plan of complete liquidation of its assets.
(d) Change in Control. A "CHANGE IN CONTROL" shall mean that,
without the prior written consent of Herbalife, which consent shall not be
unreasonably withheld, (i) any sale, merger, reorganization, transfer, pledge,
granting of an option, or any other like event or action that results in a third
party having an interest in any of the issued and outstanding capital stock of
Supplier (on a fully-diluted basis) such that Xxxx Xxxxxx and Xxxxxxx Xxxxxxx
(A) no longer own more than fifty
28
30
EXECUTION COPY
percent (50%) of such capital stock, or (B) no longer have the authority and
power to elect a majority of the directors of Supplier or (C) no longer have the
authority to direct and control the management and affairs of Supplier, (ii) any
assignment, sale, transfer, pledge, granting of an. option, hypothecation or any
other like event or action that results in a THIRD party having an interest in
all or substantially all of Supplier's assets, or (iii) both of Xxxx Xxxxxx and
Xxxxxxx Xxxxxxx ceasing to be actively involved as senior executive employed
officers of Supplier and responsible for the day-to-day operation and management
of Supplier for a period greater than sixty (60) days, without the prior written
consent (in each such case) of Herbalife, which consent shall not be
unreasonably withheld. Any hypothecation made in the ordinary course of business
that does not result in a Change in Control shall not require the consent of
Herbalife. In determining whether to withhold its consent, Herbalife may
consider the reputation of, and the qualifications and financial ability of any
person or entity in whose favor any Change in Control is proposed to be made
(the "TRANSFEREE") to manufacture and supply Supplied Products of at least the
same level of quality and service level as Supplier, the business of the
Transferee, and in particular whether or not the Transferee engages in
multi-level marketing activities.
(e) Remedies on Termination. Supplier, on the one hand, and
Herbalife, on the other hand, have each considered the possibility that the
parties will incur expenses in preparing for performance of this Agreement and
that the parties will incur expenses and suffer losses as a result of
termination (if other than as a result of expiration or non-renewal of this
Agreement). In the event of a breach by a party of this Agreement, the
non-defaulting party may pursue whatever remedies are available under this
Agreement or by law. Any termination hereof shall not impair any rights nor
discharge any obligations which have accrued to the parties as of the effective
date of such termination.
(f) Effect of Expiration or Termination. Subject to Supplier's
rights under Section 13(g) if this Agreement is terminated by Supplier pursuant
to Section 13(a) hereof, in the event of any termination, expiration or
non-renewal of this Agreement for any reason, (i) the provisions of the Release
Agreement and this Section 13 and Sections 2(a), 7(b), 8, 11 and 12 above and
Sections 14, 18, 22 and 30 below shall be unaffected thereby, (ii) all of the
Supplier Exclusive Formulas and the Independent Formulas, the Constructively
Identical Formulas and the Substitute Formulas shall remain the exclusive
property of Herbalife or any Affiliate, (iii) all rights and licenses in and to
those of the Supplier Formulas granted to Herbalife or any Affiliate on the
terms and conditions set forth in Section 8(a)(iii) above shall remain
unaffected thereby and shall continue in full force and effect, and (iv)
Herbalife or any Affiliate shall be entitled to sell and distribute all Supplied
Products in its inventory.
(g) Effect of Termination for Cause. If Supplier terminates this
Agreement pursuant to Section 13(a) hereof, then in that event:
(i) Herbalife shall purchase (A) all Supplied Products
remaining in Supplier's inventory for which an estimated or firm purchase order
had been placed, at the prices specified in this Agreement, and (B) following
Supplier's reasonable efforts to mitigate, all raw materials in
29
31
EXECUTION COPY
Supplier's inventory specifically procured by Supplier for use in manufacturing
Supplied Product to Herbalife under this Agreement at a price equal to
Supplier's actual cost, including incoming freight, plus costs incurred for
labor, material testing and storage. Notwithstanding any contrary provision, if
Herbalife terminates this Agreement pursuant to Section 13(b) hereof, Herbalife
shall have no obligation to purchase any Supplied Products or raw materials in
Supplier's inventory, or to take delivery of any Supplied Products ordered prior
to the date of such termination.
(ii) Notwithstanding any contrary provision herein, Supplier
may pursue whatever remedies are available to it by law or otherwise, including
but not limited to any monetary damages available to Supplier for any breach of
this Agreement by Herbalife.
14. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. Subject to Sections 5(c), 5(d), 5(e) and 8
above, and 14(b) and 14(d) below, each party shall preserve in strict confidence
any confidential information obtained or made available pursuant to this
Agreement, on or after the date hereof, from the other party by it or any of its
subsidiaries or affiliates or any of its or their directors, officers,
employees, agents or other representatives concerning the Supplied Products,
Other Offered New Products, Supplier Developed New Products, the Supplier
Formulas, Constructively Identical Formulas, Substitute Formulas, or the
Independent Formulas or in order for each party to exercise its rights or
perform its obligations under this Agreement, including, without limitation,
Supplied Product prices, marketing surveys, and information concerning the
design and specifications of, the Supplied Products, Other Offered New Products,
Supplier Developed New Products, the Supplier Formulas, Constructively Identical
Formulas, Substitute Formulas, or the Independent Formulas ("CONFIDENTIAL
INFORMATION"), and agrees to refrain from (i) disclosing, during the Term or at
any time thereafter, any such Confidential Information to any person or entity
or (ii) using, during the Term or, at any time thereafter, such Confidential
Information for any purpose; except as otherwise necessary to exercise its
rights or perform its obligations under this Agreement or for evaluation of
Supplied Products or Other Offered New Products or Supplier Developed New
Products for possible inclusion in this Agreement. In connection with such
Agreement, each party agrees to keep confidential, not disclose, provide or
otherwise make available in any form such Confidential Information to any person
other than authorized employees, agents or other representatives of each party
with a need to know.
(b) Permitted Disclosure. Notwithstanding the foregoing, nothing
contained in this Section 14 shall prohibit any party from disclosing
Confidential Information in the event such disclosure (i) is permitted pursuant
to Section 14(d) below, (ii) is, or becomes, during the Term, available in the
public domain not as a result of a breach of this Agreement, (iii) was
rightfully in the receiving party's possession or was part of the receiving
party's general knowledge at the time of its disclosure by the disclosing party;
provided however, that any information concerning the Supplier Formulas, the
contents of the Supplier Formulas or any portion thereof, or any information
related to the Supplier Formulas, or their specifications in Herbalife's
possession or part of its general knowledge as of the date of execution of this
Agreement may and shall not be disclosed by
30
32
EXECUTION COPY
Herbalife until January 12, 1998 except to the extent necessary prior to January
12, 1998 to utilize the rights and licenses granted to Herbalife pursuant to
Section 8(a) of this Agreement, or (iv) is rightfully received by the receiving
party from a third party without any duty of confidentiality and the receiving
party can clearly demonstrate the independent origin of such information, or (v)
is required by any governmental authority having jurisdiction over that party
asserting a right to obtain such information; provided however, that prior to
any such disclosure pursuant to this clause (v) (except where such disclosure is
required to be made to a governmental authority in order for Herbalife to
qualify Formulas, Supplier or Other Suppliers in any jurisdiction) the party
concerned shall promptly advise the other party in the event of any request by a
governmental authority for the Confidential Information and shall cooperate with
the other party to assert any right of objection to such request or to seek a
protective order or to take other appropriate action to protect the Confidential
Information.
(c) Return of Materials Upon Termination. Upon termination of this
Agreement, each party shall use reasonable efforts to return to the other party
all material and documents containing Confidential Information, or submitted by
the other party in confidence, including any copies or extracts thereof.
(d) Disclosure to Herbalife's Licensees. It is hereby expressly
agreed and understood that, Herbalife or any Affiliate may at any time disclose
or make available to any licensee of Herbalife or any licensee of any Affiliate
(approved pursuant to Section 8(c) above, if applicable, by Supplier) (each a
"HERBALIFE LICENSEE") the Supplier Formulas or the contents of the Formulas or
any portion of the Formulas, (in the case of any of the Supplier Formulas for
any of the Supplied Products which consist of a Third Party Licensed Product, to
the extent any person or entity whose consent or license is required has so
consented), for the purpose of manufacturing or selecting or qualifying any
person or entity to manufacture in commercial and non-commercial quantities any
Supplied Products to be delivered by or on behalf of Herbalife on a date on or
after January 12, 1998; provided however, that during the Term, with respect to
any Rights Of First Refusal Substitute Products For Primary Manufacture,
Herbalife shall first have complied with the provisions of Section 5(b)(ii)
above, and, with respect to any Rights Of First Refusal Constructively Identical
Products For Primary Manufacture, Herbalife shall first have complied with the
provisions of Section 5(b)(iii) above, and the Herbalife Licensee who shall have
access thereto shall have agreed in writing to be bound by substantially the
same confidentiality obligations as contemplated by this Section 14.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) By Herbalife: Herbalife represents, warrants and covenants as
follows:
(i) Herbalife is a corporation duly organized, validly
existing and in good standing under the laws of California. Herbalife has full
power and authority to execute and deliver and
31
33
EXECUTION COPY
perform its obligations under this Agreement. This Agreement has been duly
executed and delivered by Herbalife and constitutes a legal, valid and binding
obligation of Herbalife.
(ii) The execution and delivery of, and performance by
Herbalife of its obligations under this Agreement, and the grant of rights and
licenses by Herbalife to Supplier and the consummation of the transactions
contemplated hereunder, will not result in a violation of, or be in conflict
with, any provision of its Articles of Incorporation, or result in a breach of,
or be in conflict with, any material agreement to which Herbalife is a party or
by which it or its property is bound, or result in a violation of, or be in
conflict with, or result in a breach of any term or provision of any judgment,
order, decree or award of any court, arbitrator or governmental authority
binding upon Herbalife or its property.
(b) By Supplier: Supplier represents, warrants and covenants as
follows:
(i) Supplier is a corporation duly incorporated, validly
existing and in good standing under the laws of California. Supplier has full
power and authority to execute and deliver and perform its obligations under
this Agreement. This Agreement has been duly authorized, executed and delivered
by Supplier and constitutes a legal, valid and binding obligation of Supplier.
(ii) The execution and delivery of, and performance by
Supplier of its obligations under, this Agreement, and the grant of rights and
licenses by Supplier to Herbalife and the consummation of the transactions
contemplated hereunder, will not result in a violation of, or be in conflict
with, any provision of the articles of incorporation of Supplier, or result in a
breach of, or be in conflict with, any material agreement to which Supplier is a
party or by which it or its property is bound, or result in a violation of, or
be in conflict with, or result in a breach of, any term or provision of any
judgment, order, decree or award of any court, arbitrator or governmental
authority binding upon Supplier or its property.
(iii) Supplier has, or will have, the ability to manufacture
and supply all Supplied Products to be supplied by Supplier hereunder on January
12, 1998 and all Supplied Products to be supplied by Supplier hereunder as set
forth in the Open Blanket Purchase Orders delivered during the Term of this
Agreement.
(iv) Upon delivery by Supplier to Herbalife or any Affiliate
of Supplied Products, subject to and in accordance with the terms and conditions
of this Agreement, Herbalife shall acquire good title free from all liens and
encumbrances.
(v) Supplier has complied, is complying and will continue to
comply with accepted industry practices and standards and all applicable laws in
the jurisdiction in which the Supplied Products are sold to Herbalife,
including, without limitation, state and local laws of the United States and the
State of California and the rules, orders, ordinances, decrees and regulations
of the United States and the State of California relating to or affecting the
manufacture of the Supplied Products. If Herbalife advises Supplier of the
regulatory requirements of any other jurisdiction,
32
34
EXECUTION COPY
then Supplier shall use its best efforts to comply therewith in the manufacture
of Supplied Products. All Supplied Products delivered to Herbalife or any
Affiliate shall be prepared and manufactured in a clean, safe and sanitary
manner in full compliance with all applicable federal and State of California
laws, rules and regulations, including without limitation, the Food, Drug and
Cosmetic Act of 1938 and the rules and regulations of the United States Food and
Drug Administration (including as to Good Manufacturing Practices or Standard
Operating Procedures). All Current Products delivered to Herbalife or any
Affiliate shall be manufactured in accordance with the Supplier Formulas used
for products currently supplied to Herbalife or any Affiliate under the Omni
Initial Agreement and shall be of no less quality than those products currently
supplied to Herbalife or any Affiliate under the Omni Initial Agreement.
(vi) All Supplied Products have been and will be clearly and
accurately labeled and packaged in the manner requested by Herbalife with labels
and inserts supplied by Herbalife or any Affiliate.
(vii) Supplier's manufacturing facility complies with all
applicable federal and California state laws, rules and regulations relating to
the operation thereof, including without limitation, all product safety,
sanitation and environmental laws, rules and regulations.
(viii) All Supplied Products purchased by Herbalife or any
Affiliate are free from defect, comply with the Quality Standards and are
merchantable and fit for their intended purpose. All Supplied Products shall be
supplied in commercial quantities sufficient to meet Herbalife's or any
Affiliate's orders, free of contamination or defect, and all reasonable care and
skill shall be used in manufacturing the Supplied Products.
(ix) Supplier owns as of the date hereof beneficially and of
record all right, title and interest in the Supplier Exclusive Formulas, and
shall not, at any time on or after the date hereof during the Term, deal with
the Supplier Exclusive Formulas except as expressly provided in Section 8 above.
(x) AMINOGEN(R) is the only material, ingredient or right
utilized in any of the Current Products which require the consent or license of
a third party to be utilized therein, to be sold to Herbalife or any Affiliate
by Supplier and/or to be marketed by Herbalife or any Affiliate.
(xi) None of the Current Products and none of the ingredients
in the Current Products, other than AMINOGEN(R) require the consent or license
of a third party to be sold to Herbalife or any Affiliate by Supplier and/or to
be marketed by Herbalife or any Affiliate.
(xii) There are as of the date hereof no Current Products the
intellectual property rights for which are owned, controlled or licensed by any
person or entity other than Supplier.
33
35
EXECUTION COPY
(xiii) Except as otherwise expressly provided in Section 8
above, Supplier has not and shall not make any assertion, claim or demand
against Herbalife or any Affiliate, any Herbalife Licensee, or any officer,
director, shareholder, authorized employee, agent or other representative of
Herbalife or any Affiliate or of any Herbalife Licensee, with respect to any of
the foregoing's use or exploitation of any Supplier Formulas transferred or
licensed pursuant to Section 8 above.
(xiv) Herbalife or any Affiliate shall acquire such rights and
licenses as are required to be granted to Herbalife or any Affiliate by Section
8 above, free from any liens or encumbrances. So long as Supplier manufactures
Supplied Products subject to any license, grant or agreement (including royalty
agreements) in favor of any third party, Supplier shall remain responsible for
paying the third party concerned any royalties or license fees due on such
Supplied Products.
(xv) Supplier is the valid licensee of AMINOGEN(R). To the
extent necessary to meet the obligations of Supplier under this Agreement,
Supplier has been and shall remain at all times in full compliance with any
license, grant or agreement to which any of the Supplied Products is subject,
and each such license, grant or agreement remains and shall remain valid and in
full force and effect throughout the Term. Supplier has the power to grant the
rights and licenses granted by Supplier to Herbalife under this Agreement.
(xvi) None of the Supplier Formulas or Supplied Products (or
any raw material or ingredient therein) transferred or licensed pursuant to
Section 8 above or supplied hereunder by Supplier, nor the use thereof by
Herbalife or any Affiliate in accordance with the terms and conditions set forth
herein, infringes or shall infringe in any respect on any patents, copyrights,
trademarks, service marks, trade dress, trade secrets, proprietary or
confidential information or other intellectual property rights of any third
parties.
(xvii) Supplier agrees that, subject to Section 8 above, it
shall not at any time in any way infringe upon, any rights in or to any of the
Formulas or Trademarks or other intellectual property rights belonging to
Herbalife or any Affiliate or any Formulas or Trademarks or other intellectual
property registration belonging to Herbalife or any Affiliate in any territory
or country.
16. INSURANCE. Supplier shall maintain with effect from January 12, 1998
throughout the remainder of the Term, at its sole cost and expense, insurance
with financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the companies of
established repute in Supplier's line of business, such insurance to include
without limitation, products liability insurance an amount no less than five
million dollars ($5,000,000) per occurrence. Supplier shall provide to
Herbalife, at least annually and otherwise upon reasonable request by Herbalife,
true copies of the certificates of coverage in respect of such insurance
policies, and Supplier shall not do anything or permit anything to be done that
may prejudice such insurance policies or omit to do anything where such omission
may prejudice those insurance policies, and shall observe and perform the terms
and conditions contained in each of such insurance policies.
34
36
EXECUTION COPY
17. AMENDMENT OR WAIVER. This Agreement will not be amended, nor will
any of its terms be deemed to have been waived by either party, unless such
amendment or waiver is in writing in a document that specifically refers to this
Agreement and specifically states that it intends to amend this Agreement or
waive a term of this Agreement and such document is signed by the parties
hereto. General correspondence between the parties, invoices, purchase orders or
any other document exchanged between the parties not meeting the requirements
of this Section 17, will not be deemed to amend or waive any term of this
Agreement. In the event of any conflict between this Agreement and any other
document, including any purchase order, this Agreement shall prevail.
18. GOVERNING LAW AND VENUE; ARBITRATION
(a) Governing Law and Venue. This Agreement will be governed by
and construed in accordance with the laws of the State of California, without
regard to its conflicts of laws principles. Any legal proceedings arising out of
or in connection with this Agreement which are not arbitrated pursuant to
Section 18(b) below, shall be commenced and prosecuted in a court located within
Orange County, California.
(b) Arbitration. Any disputes, controversies or differences which
may arise between the parties out of, in connection with or in relation to any
of Sections 4(c) through 4(g) and 11 of this Agreement, or the interpretation,
enforceability, performance, breach or validity of any of Sections 4(c) through
4(g) and 11 of this Agreement ("DISPUTES"), shall be determined by arbitration
in Orange County, California in accordance with the rules and procedures of
J.A.M.S./Endispute from time to time in effect, as modified by the provisions of
this Section 18(b); provided however, that the parties reserve the right to seek
injunctive relief from any court of competent jurisdiction.
(i) Procedure. Either party may give to the other written
notice of the existence and nature of any Dispute proposed to be arbitrated
under this Section 18(b). Any such notice shall specify in reasonable detail the
nature of and background to any such Dispute. Within ten (10) days thereafter,
the parties shall agree on three persons drawn from a list of potential
arbitrators provided by J.A.M.S./Endispute. If the parties cannot agree on any
of the three arbitrators within ten (10) days after a party initiates such
process, the arbitrator(s) whom the parties cannot mutually agree on shall be
selected by J.A.M.S./Endispute within seven (7) days following the end of such
ten (10) day period. The three arbitrators shall determine all Disputes by
majority vote.
(ii) Conduct of the Proceeding. The parties agree that the
arbitrators shall be subject to and apply the laws of California and be a judge
for all purposes (excluding the power to (a) grant equitable relief, (b) change
any term or condition of this Agreement, (c) deprive either party of a remedy
expressly provided herein, or (d) provide any right or remedy that has been
excluded hereunder, but including, without limitation, (x) ruling on any and all
discovery matters and motions, including without limitation ruling on the
availability, timing and scope of discovery, and ruling on any and all pretrial
or trial motions, (y) setting a schedule of pretrial proceedings in accordance
with this Agreement, and (z) making any other orders or rulings a sitting judge
of the Superior Court of California (the "Superior Court") would be empowered to
make in any action
35
37
EXECUTION COPY
or proceeding in the Superior Court (subject to the limitations of this clause
(ii)), and shall try and decide any or all of the issues in any action or
proceeding arising out of such dispute (whether of fact or of law, or a
combination thereof) and, no later than one hundred and twenty (120) days
following their selection, shall report a statement of decision thereon and hear
and consider objections to the statement of decision. Any such statement of
decision shall be submitted to the Superior Court by the prevailing party within
fourteen (14) days and judgment shall be entered thereon in the same manner as
if the action or proceeding had been tried by a sitting judge of the Superior
Court (the "Judgment"). The decision of the arbitrators appointed hereunder
shall be final and conclusive among the parties as of the date of entry of the
Judgment.
(iii) Security Arrangements.
(A) Upon presentation by Supplier of a certified copy
of a Judgment which includes a finding that Herbalife breached its obligations
to Supplier under any of Sections 4(c) through 4(g) and 11, Supplier shall
receive, as payment applied against any monetary damages awarded Supplier under
such Judgment, funds from any monies remaining outstanding as the Security (as
defined below) up to the amount of said Judgment.
(B) As security for the performance of its obligations
under any of Sections 4(c) through 4(g) and 11 to Supplier and Omni under each
of the New D&F Supply Agreements, including this Agreement (the "SECURITY"),
Herbalife shall post a single bond pursuant to this Agreement and the New D&F
Supply Agreement (the "BOND") in the aggregate maximum total amount of
twenty-five million dollars ($25,000,000), subject to the terms and conditions
hereof, on a combined basis, with respect to (i) any Judgment obtained by
Supplier against Herbalife, and (ii) the equivalent of any Judgment obtained by
D&F against Herbalife under the New D&F Supply Agreement. Herbalife shall
provide a copy of the Bond to Supplier, which copy shall identify the bonding
company. Subject to the terms and conditions hereof, the Bond shall be in effect
from January 12, 1998 and for so long as the Bond shall not be fully applied
against any Judgment obtained by either Supplier or D&F, or both, against
Herbalife as the case may be. In no event shall the aggregate maximum total
amount claimed due at any time with respect to Supplier and/or D&F under the
Bond exceed on a combined basis twenty-five million dollars ($25,000,000). The
Bond shall, if payable, be solely payable in favor of either Supplier or D&F, or
both, as the case may be, as set forth above and shall not be assignable in any
event to any other person or entity at any time, without the prior written
consent of Herbalife, which consent shall not be unreasonably withheld.
19. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, which taken together will constitute one instrument and each of
which will be considered an original for all purposes.
20. TIME IS OF THE ESSENCE. The parties agree that time is of the
essence under this Agreement.
21. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
(except as may otherwise be specifically
36
38
EXECUTION COPY
provided herein to the contrary) if delivered by hand, by a nationally
recognized overnight delivery service, by facsimile transmission followed by
mail, or mailed by certified or registered mail with postage prepaid:
(a) If to Supplier:
Omni-Pak Industries
00000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, President
Facsimile No.: (000) 000-0000
(b) If to Herbalife:
Herbalife International of America, Inc.
0000 Xxxxxxx Xxxx Xxxx, x0xx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Executive Vice-President and General Counsel
Facsimile No.: (000) 000-0000
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered or telecopied, or if
mailed, two business days thereafter.
22. BINDING EFFECT; NON-ASSIGNABILITY. This Agreement shall inure to the
benefit of and be binding upon, the parties hereto, their respective successors
and assigns; provided however, that, subject to Section 13(d), neither this
Agreement nor the rights and obligations of Supplier shall be assignable or
delegable by Supplier nor shall there be any Change in Control of Supplier
without the prior written consent of Herbalife, which consent shall not be
unreasonably withheld. Any purported transfer, assignment or delegation in
breach of this Section 22 shall be null and void.
23. RELATIONSHIP OF THE PARTIES. The parties expressly understand and
agree that Supplier is an independent contractor in the performance of each and
every part of this Agreement, is solely responsible for all of its employees and
agents and its labor costs and expenses arising in connection therewith. It is
understood and agreed that no joint venture, partnership or agency relationship
is created or intended to be created by this Agreement and Supplier shall not be
deemed to be or become the representative or agent of Herbalife or any Affiliate
in any way in performing its obligations hereunder. Supplier shall make no
representation to any third party, either directly or indirectly, that it is in
any way authorized to; act for or on behalf of Herbalife or any Affiliate or to
obligate Herbalife or any Affiliate in any way without the prior written consent
37
39
EXECUTION COPY
of Herbalife. Nothing in this Agreement is intended to, nor shall it be
construed to violate any statutes, rules or regulations of any jurisdiction
pertaining to anti-trust or anti-competition.
24. AFFILIATES. Herbalife shall assume the obligations under this
Agreement of any Affiliate failing to comply with any of the obligations of any
Affiliate pursuant to this Agreement
25. IRREPARABLE HARM. The parties agree that their failure to comply
with the provisions of this Agreement may cause irreparable harm for which there
may be no adequate remedy at law and each may, therefore, enforce through
equitable as well as legal remedies the obligations set forth in this Agreement.
26. FORCE MAJEURE. Neither party shall be liable to the other party for
failure or delay in the performance of any of the obligations under this
Agreement (including delivery of Supplied Products supplied by Supplier or
satisfaction by Herbalife of its obligation with respect to the Minimum Purchase
Order Amount) for the time and to the extent such failure or delay is caused by
reason of acts of God or other cause beyond its reasonable control, including
acts of government, riots, war, interruption of transportation, strikes or other
labor trouble, shortage of labor, fire, storm, flood, earthquake, inability to
obtain suitable raw materials, products, parts, components, fuel or power, or
extraordinary price increases. The performance of obligations hereunder shall be
suspended during the existence of such causes, and upon cessation of such
causes, shall again be required; provided however, that the parties hereto shall
use their reasonable commercial efforts to the consequences of such causes.
27. EXHIBITS AND SCHEDULES. Any Exhibit or schedule attached hereto is
made a part hereof and is fully incorporated herein by reference. Exhibit D
shall in any event at all times during the Term consist of at least five
entities listed thereon and it is expressly agreed and understood by the parties
hereto that no addition or deletion of any of the entities listed on Exhibit D
shall be made except with the mutual agreement of the parties hereto.
28. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
of the parties hereto in relation to the purchase of Supplied Products by
Herbalife or any Affiliate from Supplier to be delivered on a date on or after
January 12, 1998 and with respect to the subject matter of this Agreement. This
Agreement supersedes any other agreement between the parties with respect to the
purchase of Supplied Products by Herbalife or any Affiliate from Supplier to be
delivered on a date on or after January 12, 1998 and with respect to the subject
matter of this Agreement. There are no representations, promises, warranties,
understandings or agreements, express or implied, oral or otherwise, in relation
thereto, except expressly referred to or set forth herein.
29. AGREEMENT NEGOTIATED. The parties hereto are sophisticated and have
been represented by lawyers throughout this transaction who have carefully
negotiated the provisions hereof.
30. REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be
38
40
EXECUTION COPY
cumulative and will be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies will not constitute a waiver of the right
to pursue other remedies available according to law.
31. PARTIAL INVALIDITY. In the event that any of the provisions or
portions thereof of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions or portions hereof will not be affected thereby.
32. INTERPRETATION. Section headings are included solely for convenience
and shall not constitute a part hereof. Unless the context otherwise requires,
words importing the singular shall be deemed to import the plural and vice
versa.
33. THIRD PARTY BENEFICIARIES. No person or entity shall be a third
party beneficiary of this Agreement, except that any Affiliate shall be
entitled to enforce against Supplier the rights conferred upon that Affiliate by
Supplier hereunder.
39
41
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
HERBALIFE INTERNATIONAL OF AMERICA, INC.
By: /s/ XXXXXXXXXXX PAIR
-------------------------------------
Its: Chief Operating Officer
------------------------------------
By: /s/ XXXXXX XXX XXXXX
-------------------------------------
Its: Chief Business Affairs Officer
------------------------------------
RAVEN INDUSTRIES, INC. d/b/a
OMNI-PAK INDUSTRIES
By: /s/ XXXX X. XXXXXX
-------------------------------------
ITS: President
------------------------------------
40
42
EXECUTION COPY
RELEASE AGREEMENT
THIS RELEASE AGREEMENT (the "Agreement") is entered into as of September
2, 1997, by and between Raven Industries, Inc. d/b/a Omni-Pak Industries, a
California corporation ("Omni") and Herbalife International of America, Inc., a
California corporation ("Herbalife"), with reference to the following facts:
RECITALS:
A. Omni and Herbalife are parties to that certain agreement executed on
May 12, 1993, as modified by a First Addendum To Agreement executed on May 18,
1993, which agreement may have thereafter been amended or modified from time to
time (as amended, the "Omni Initial Agreement").
B. Likewise, Herbalife and Dynamic Products, Inc., a California
corporation ("Dynamic"), are parties to that certain agreement executed on May
12, 1993, as modified by a First Addendum To Agreement executed on May 18, 1993,
which agreement may have thereafter been amended or modified from time to time
(as amended, the "Dynamic Initial Agreement "), and Herbalife and D&F
Industries, a California corporation ("D&F") are parties to that certain
agreement executed on May 12, 1993, as modified by a First Addendum To Agreement
executed on May 18, 1993, which agreement may have thereafter been amended or
modified from time to time (as amended, the "D&F Initial Agreement").
C. The D&F Initial Agreement, the Dynamic Initial Agreement and the
Omni Initial Agreement are collectively referred to herein as the "Initial
Agreements". D&F, Dynamic and Omni are collectively referred to herein as the
"D&F Suppliers".
D. Each of the Initial Agreements will expire on January 11, 1998, in
the event that either of the parties thereto gives written notice of its
decision to cease the contractual relationship, which notice must be given not
less than six months prior to such expiration date.
E. Herbalife has provided written notice (which was delivered on a date
which was six months or more prior to January 11, 1998) to each of the D&F
Suppliers of its decision to cease the contractual relationship under the
Initial Agreements on January 11, 1998 and the Initial Agreements will expire on
January 11, 1998.
F. Each of the D&F Suppliers and Herbalife desires to enter into new
supply agreements to provide for the supply of certain nutritional supplement
and certain non-nutritional products to Herbalife on and after January 12, 1998,
which products are intended to be similar in type and form to those historically
manufactured and supplied
1
43
EXECUTION COPY
by each of the D&F Suppliers to Herbalife. The supply agreement between
Herbalife and Omni (the "Omni Supply Agreement") and the two other new supply
agreements between Herbalife and D&F and Herbalife and Dynamic entered into
contemporaneously with the Omni Supply Agreement are collectively referred to
herein as the "New D&F Supply Agreements."
G. In addition, each of the D&F Suppliers and Herbalife will
concurrently with execution of the New D&F Supply Agreements enter into
substantially identical release agreements to provide for the release of all the
disputes between Herbalife and each of the D&F Suppliers, including without
limitation, with respect to the Initial Agreements or the amendment, extension
or renewal thereof and all other claims arising from events, actions or conduct
relating to the Initial Agreements on or prior to execution of the New D&F
Supply Agreements, except as set forth in the release agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
undertakings set forth below, and in reliance on the recitals set forth above,
Omni and Herbalife hereby agree as follows:
1. Resolution and Releases. This Agreement is intended to resolve all
of the parties' disputes, including without limitation, those arising with
respect to the Omni Initial Agreement or the amendment, extension or renewal
thereof and all other claims arising from events, actions or conduct relating to
the Omni Initial Agreement, or any other agreement or arrangement involving the
parties relating to the supply, procurement, development manufacturing,
production, marketing, sale or distribution of products (each a "Related
Arrangement"), as set forth herein. Nothing contained herein is intended to, nor
does it, constitute an admission of fault or liability of either party to the
other. To effectuate the resolution of their differences the parties hereto
agree as follows:
(a) Release of Herbalife. Omni, on behalf of itself, and its
affiliates, its successors, assigns, directors, officers, employees, agents,
attorneys, representatives and advisors (the "Omni Associates"), hereby releases
and forever discharges Herbalife, and its affiliates, successors, assigns,
directors, officers, employees, agents, attorneys, representatives and advisors
(the "Herbalife Associates"), of and from any and all claims, demands, causes of
action, damages or liabilities, losses, costs or expenses of any kind in nature,
fixed or contingent, direct or indirect, whether or not known, suggested or
claimed, existing on the date hereof or which any such person at any time
heretofore had, including without limitation, those that are contained in, arise
from or relate in any way to the Omni Initial Agreement or its amendment,
extension or renewal or any Related Arrangement and all other claims arising
from events, actions or conduct relating to the Omni Initial Agreement or any
Related Arrangement, which occurred or was done, suffered or omitted on or prior
to the date of this Agreement, except as set forth in Exhibit A hereto. It is
hereby expressly agreed and understood that Omni, and the Omni Associates,
release and waive all royalties that Omni, or the Omni Associates, at any time
2
44
EXECUTION COPY
may have been or would at any time in the future be entitled to receive in
respect of Herbalife's products, including without limitation Herbalife's
fragrances and personal care products. Omni, on behalf of itself, and the Omni
Associates, hereby expressly releases and forever discharges Herbalife, and the
Herbalife Associates, of and from any and all claims, demands, causes of action,
damages or liabilities, losses, costs or expenses of any kind in nature, fixed
or contingent, direct or indirect, whether or not known, suggested or claimed,
with respect to the use or exploitation at any time on, prior to or after the
date hereof of any patent, copyright trade secret, know-how, information,
documentation, technique, method, concept formula, formulation, recipe,
ingredient specification, design, menu, work product, work-in-progress or
intellectual property right, of any nature or kind whatsoever, developed,
conceived, created or learned by Omni, or the Omni Associates, on or prior to
the date of this Agreement ("Intellectual Property"), except for that
Intellectual Property arising or derived from the combination of ingredients for
those items identified on Exhibit B hereto. Herbalife reserves its right to
challenge any rights Omni may assert with respect to any aspect of any of the
items set forth on Exhibit B hereto and the parties hereto agree that the
identification of any item on Exhibit B hereto shall not in and of itself give
rise to the presumption that any rights of Omni exist in the items identified on
Exhibit B hereto. The releases set forth above in this Section 1(a) shall not
apply to the obligations required to be performed under this Agreement or the
Omni Supply Agreement.
(b) Release of Omni. Herbalife, on behalf of itself, and the
Herbalife Associates, hereby releases and forever discharges Omni, and the Omni
Associates, of and from any and all claims, demands, causes of action, damages
or liabilities, losses, costs or expenses of any kind in nature, fixed or
contingent, direct or indirect, whether or not known, suggested or claimed,
existing on the date hereof or which any such person at any time heretofore
had, including without limitation, those that are contained in, arise from or
relate in any way to the Omni Initial Agreement or its amendment, extension or
renewal or any Related Arrangement and all other claims arising from events,
actions or conduct relating to the Omni Initial Agreement or any Related
Arrangement which occurred or was done, suffered or omitted on or prior to the
date of this Agreement, except as set forth in Exhibit C hereto. The releases
set forth above in this Section 1(b) shall not apply to the obligations
required to be performed under this Agreement or the Omni Supply Agreement.
(c) Releases Apply to All Known and Unknown Causes of Action. It
is understood by Omni and Herbalife that there is a risk that subsequent to the
execution of this Agreement either party may incur or suffer loss, damage, or
injuries which are unknown or unanticipated at the time of the execution of this
Agreement. Further, there is risk that loss or damage presently known may be or
become greater than the parties now expect or anticipate. The parties assume
said risks, acknowledge that the releases contained herein shall apply to all
unknown and all unanticipated results arising from or relating to the matters
referred to above, as well as those known and anticipated, and, upon the advice
of respective legal counsel, Omni, and Herbalife each waive all rights under
California Civil Code Section 1542 and any comparable provision under the law of
3
45
EXECUTION COPY
any other jurisdiction with respect to the matters released. California Civil
Code Section 1542 reads as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
(d) Representations and Warranties as to No Assignment of Claims.
Omni and Herbalife each represents and warrants to the other that each has not
assigned or transferred to any other person, firm or corporation in any manner,
including by way of subrogation or operation of law or otherwise, all or any
portion of any claim, demand, right, action or cause of action that each has
had, have or might have arising out of the matters released hereby nor all nor
any portion of any recovery or settlement to which they might be entitled. In
the event that any claim, demand or suit should be made because of any such
purported assignment, subrogation or transfer, the party from whom such
purported assignment, subrogation or transfer was alleged to have been made
agrees to indemnify and hold the other party hereto harmless against such claim,
demand or suit and any necessary expenses of investigation, attorneys' fees and
costs.
(e) Representations and Warranties as to No Material Breach of the
Omni Initial Agreement. Omni and Herbalife each represents and warrants to the
other that, as of the date of this Agreement, to the best of its knowledge, each
has not committed any material breach of, nor has there occurred any event which
would require or permit or could reasonably be anticipated to permit the
termination of the Omni Initial Agreement prior to January 11, 1998.
(f) Representations and Warranties as to Advice of Counsel. Omni
and Herbalife each represents and warrants to the other that each has received
advice from legal counsel of its own choice, as to the form and substance of
this Agreement, and as to the advisability of agreeing to its terms, and that,
based upon such advice, such party agrees to be bound by the terms of this
Agreement.
(g) Media-Relations. Omni and Herbalife will issue a mutual press
release regarding this Agreement and the matters covered herein in the form
attached hereto as Exhibit D hereto. The parties further agree that they will
not disparage each other in any oral or written public statements concerning any
matters related to or arising from this Agreement.
(h) Authority. Omni and Herbalife each represents and warrants to
the other that its execution of this Agreement has been fully and validly
authorized and approved by all requisite corporate action, and no further action
is necessary to make this Agreement and all acts contemplated hereby valid and
binding on itself in accordance with the terms hereof.
2. Amendment or Waiver. This Agreement will not be amended, nor will
any of its terms be deemed to have been waived by either party, unless such
amendment
4
46
EXECUTION COPY
or waiver is in writing in a document that specifically refers to this Agreement
and specifically states that it intends to amend this Agreement or waive a term
of this Agreement and such document is signed by the parties hereto. General
correspondence between the parties, invoices, purchase orders or any other
document exchanged between the parties not meeting the requirements of this
Section 2, will not be deemed to amend or waive any term of this Agreement. In
the event of any conflict between this Agreement and any other document this
Agreement shall prevail.
3. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflicts of laws principles. Any legal proceedings arising out of or in
connection with this Agreement shall be commenced and prosecuted in a court
located within Orange County, California.
4. Counterparts. This Agreement may be executed in multiple
counterparts, which taken together will constitute one instrument and each of
which will be considered an original for all purposes.
5. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
(except as may otherwise be specifically provided herein to the contrary) if
delivered by hand, by a nationally recognized overnight delivery service, by
facsimile transmission followed by mail, or mailed by certified or registered
mail with postage prepaid:
(a) If to Omni:
Omni-Pak Industries
00000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, President.
Fax: (000) 000-0000
(b) If to Herbalife:
Herbalife International of America, Inc.
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered or telecopied, or if
mailed, two business days thereafter.
5
47
EXECUTION COPY
6. Binding Effect. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto, their respective successors and assigns.
7. Exhibits. Any Exhibit hereto is made a part hereof and is fully
incorporated herein by reference.
8. Entire Agreement. This Agreement embodies the entire understanding
of the parties hereto with respect to the subject matter of this Agreement. This
Agreement supersedes any other agreement between the parties with respect to the
subject matter of this Agreement. There are no representations, promises,
warranties, understandings or agreements, express or implied, oral or otherwise,
in relation thereto, except expressly referred to or set forth herein.
9. Partial Invalidity. In the event that any of the provisions or
portions thereof of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions or portions hereof will not be affected thereby.
10. Irreparable Harm. The parties agree that their failure to comply
with the provisions of this Agreement may cause irreparable harm for which there
may be no adequate remedy at law and each may, therefore, enforce through
equitable as well as legal remedies the obligations set forth in this Agreement.
11. Agreement Negotiated. The parties hereto are sophisticated and have
been represented by lawyers throughout this transaction who have carefully
negotiated the provisions hereof.
6
48
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
HERBALIFE INTERNATIONAL OF
AMERICA, INC.
By: /s/ XXXXXXXXXXX PAIR
-------------------------------------
Its: Chief Operating Officer
------------------------------------
By: /s/ XXXXXX XXX XXXXX
-------------------------------------
Its: Chief Business Affairs Officer
------------------------------------
RAVEN INDUSTRIES, INC. d/b/a OMNI-
PAK INDUSTRIES
By: /s/ XXXX X. XXXXXX
-------------------------------------
Its: President
------------------------------------
7
