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EXHIBIT 10.2
EXCLUSIVE MANUFACTURING AGREEMENT
This EXCLUSIVE MANUFACTURING AGREEMENT is made effective as of December
6, 1999, between Natural Alternatives International, Inc., a Delaware
corporation, with offices at 0000 Xxxxx Xxxxx Xxxxx, Xxx Xxxxxx, Xxxxxxxxxx
00000 ("NAI") and Custom Nutrition, LLC, a Delaware limited liability company
with offices at 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xx Xxxxx, XX 00000 (the
"Company"). NAI and the Company may hereinafter be referred to as the "Parties."
W I T N E S S E T H :
WHEREAS, on March 17, 1999, NAI and FitnessAge Incorporated, Inc.
("FitnessAge") executed a letter or intent which contemplated the formation of a
strategic alliance, including further definitive agreements, including this
Agreement, to carry out the transactions proposed in the letter of intent;
WHEREAS, substantially concurrently herewith, NAI and FitnessAge have
executed documentation to create and operate the Company; and
WHEREAS, NAI has agreed to develop and manufacture for the Company
nutritional products as developed from time to time for promotion and resale by
the Company.
NOW, THEREFORE, in consideration of these recitals and the agreements
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Definitions
1.1 "FDCA" means the Federal Food, Drug and Cosmetic Act, as amended
from time to time, together with all regulations issued by the Food and Drug
Administration and other governmental agencies pursuant thereto.
1.2 "FTCA" means the Federal Trade Commission Act, as amended from time
to time, together with all regulations issued by the Federal Trade Commission
and other governmental agencies pursuant thereto.
1.3 "Plant" means NAI's production facilities wherever located.
1.4 "Product" or "Products" means nutritional products, nutritional and
dietary supplements and related materials or products of any description,
including but not limited to capsules, tablets, powders, liquids, bars and other
forms packaged in any and all manners and intended to be distributed by,
through, or for the benefit of the Company.
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1.5 "Specifications" means such specifications and quality control
requirements for the Products and for any ingredients and packaging materials as
determined by the Company from time to time.
1.6 "Technical Information" means all customer and business information
and all formulae, quality control data, test data and all other scientific and
technical data and information relating to the Products which are now owned or
controlled by the Parties or which may hereafter be developed by any Party in
connection with the Products.
1.7 "Product Cost." The cost of Products developed and manufactured for
the Company by NAI shall be as defined in Section 6.1 hereinbelow.
2. Product Development
2.1 Initial Development and Formulation. The Company will develop the
types of Products the Company wishes to sell and distribute directly or for its
benefit, all of which shall be subject to this Agreement, and shall establish
the Specifications therefore. NAI will assist the Company in the design and
formulation of the Products as requested by the Company. NAI shall manufacture
and package the Products, as more specifically provided for herein.
2.2 Packaging and Labels. The Company and NAI shall collaborate and
cooperate in the design and development of the Products and the marketing plans
therefore, including the Specifications, packaging and labeling of the Products.
2.3 Ownership of Formulae. It is expressly agreed by the Parties that
the formulae relating to the Products that are the subject of this Agreement,
whether developed by NAI or the Company, shall be and become the sole and
exclusive property of the Company, and NAI agrees to deliver copies of all
formulations to the Company at the time of their initial development or when the
Products are modified according to new formulae developed pursuant to this
Agreement.
3. Production, Purchase Orders, Rolling Forecast, Inventory, Storage,
Shipping and Reports
3.1 Production. NAI shall manufacture and package Products in quantities
ordered by the Company in accordance with the Specifications, and the terms and
conditions set forth in this Agreement. NAI shall manufacture all Products it
sells to the Company and shall not purchase such Products from other sources for
resale to the Company unless agreed to by the Company in writing and at the
Company's sole discretion. NAI may develop for its own use in manufacturing the
Products such specifications and quality control parameters as it may deem
appropriate, provided they do not contradict the Specifications. The Parties
agree NAI may supplement or otherwise modify such parameters at any time and
from time to time provided they are in conformance with the Specifications or,
if not within those Specifications, are subject to the Company's prior written
approval which shall be granted or declined within ten (10) business days of a
request therefore. The Company's failure to
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provide written approval to such modifications within the ten (10) business days
shall be deemed a denial of NAI's right to deviate from the Specifications.
3.2 Purchase Orders. The Company has provided NAI with its initial
purchase order. On or before January 10, 2000, and on or before the tenth day of
each March, June, September and December thereafter, the Company shall provide
NAI with a purchase order covering all Company projected Product requirements
for the calendar quarter commencing on the first day of the following month.
Such production/purchase orders shall be firm on submission and shall be filled
by NAI in conformance with NAI's reasonable and customary procedures, and in
accordance with this Agreement.
3.3 On-Line Ordering. NAI or its designee shall design, develop and
establish an Internet based ordering system which will permit NAI to receive,
process and fulfill orders from the Company, its distributors and customers via
the world wide web. The Company shall design, develop and establish an Internet
based order placing software that will interface with NAI's Internet based order
processing system and allow the Company, its distributors and customers to place
orders to NAI via the world wide web. The Company and NAI shall meet, confer and
agree upon the structure and operation of the on-line ordering system.
3.4 Rolling Forecast. On or before January 15, 2000, the Company shall
provide NAI with its forecast of Product requirements for the twelve (12) months
January through December 2000. On or before the tenth day of each March, June,
September and December following the date of the first forecast, the Company
shall provide NAI with production forecast updates covering the following twelve
(12) months commencing on the first day of the following month. Such forecasts
provided by the Company shall be for the convenience of NAI only, and shall not
be binding nor constitute purchase orders.
3.5 Inventory. NAI shall order and maintain an inventory of raw
materials and packaging materials sufficient to meet the Company's production
needs as determined by the purchase orders provided by it under this Section 3
and NAI's reasonable estimation of its own production needs. NAI shall not be
required to maintain such inventory in excess of a rolling ninety (90) day
supply.
3.6 Storage and Shipment. NAI shall provide suitable storage and
warehousing space for all Products for the time and to the extent required for
NAI to perform its obligations under this Agreement, which time shall not exceed
fifteen (15) days from the originally scheduled shipping date set forth in the
applicable purchase order for the Products. Products are to be stored in clean
space suitable for storage of food and protection of its contents with respect
to integrity and quality, in compliance with good commercial practice and all
applicable laws, rules and regulations, including, without limitation, FDCA
regulations. Charges, if any, for such storage and warehousing for Products will
be paid by NAI and shall be considered a part of the actual cost of production
and shall be charged to the Company as a part thereof pursuant to Section 6. NAI
shall load Products onto such carriers as it may determine. All Products are
delivered F.O.B. NAI's dock and all risk of loss of the Products shall remain
with NAI until loaded onto such carriers unless the Company and NAI otherwise
mutually agree. The carrier selection, shipment and payment procedures and xxxx
of lading requirements shall be subject to the Company's
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approval which approval shall not be unreasonably withheld, and shall be in
accordance with any reasonable instructions issued by the Company. Products are
to be shipped via clean trucks and trailers suitable for transportation of food
and protection of its contents with respect to integrity and quality, in
compliance with good commercial practice and all applicable laws, rules and
regulations, including, without limitation, Department of Transportation
regulations. NAI is responsible for shipping all Products in accordance with
this Agreement. Shipping charges shall be considered a part of the actual cost
of production and shall be charged to the Company as a part thereof under
Section 6 below.
3.7 Shipping Instructions. NAI shall prepare the Products for shipment
to the Company or its designees in quantities and on dates designated by the
Company. The Company shall send shipping instructions via facsimile to NAI at
least three weeks before the shipment date designated by the Company. NAI shall
use its best efforts to accommodate any adjustments to shipping instructions the
Company wishes to make; however, adjustments to shipping instructions made less
than three weeks prior to the requested shipping date may delay shipping dates,
or otherwise be made only upon the mutual agreement of the Company and NAI.
3.8 Production and Shipping Reports. NAI shall regularly provide the
Company with production reports and shipment of finished goods reports, in such
form as the Company reasonably requests. Reports from NAI's facilities shall be
sent to the Company by facsimile in the manner set forth in Section 17.1.
3.9 Inventory Reports. NAI shall provide the Company with regular
periodic reports of NAI's inventories of finished Products and raw materials.
The report shall be delivered by facsimile in the manner set forth in Section
17.1.
4. NAI's Exclusive Status
4.1 Exclusive Supplier. Except as provided for herein, the Company
agrees to order and purchase all requirements it may have, from time to time,
for all Products from NAI. The Company may enter into other agreements for the
purchase or manufacture of Products during the term of this Agreement without
the prior written consent of NAI if any of the following occur:
(a) NAI does not currently directly manufacture or produce the
Products that the Company requires or desires and declines to commence
manufacturing or producing them within 15 days of request by the Company;
(b) The Company can acquire the Products from other supplier(s)
on substantially identical terms as provided in this Agreement and at a lower
cost than that charged by NAI and NAI fails or refuses to meet such price; or
(c) Any other failed conditions as set forth in Section 4.2 below
occurs.
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4.2 Failed Conditions. In connection with the Products referenced
herein, if following diligent investigation, inquiry and conference with NAI,
the Company in good faith does not believe NAI satisfies any one or more of the
conditions contained herein or any Products are not being manufactured in
accordance with the Specifications, or that NAI is unable to provide the
Products required, the Company shall give NAI written notice of such
determination. Such notice shall state in detail the condition(s) NAI does not
satisfy, the reasons the Company believes NAI does not satisfy the stated
condition(s), and a detailed statement of facts that would have to exist for NAI
to satisfy the failed condition(s). NAI shall have fourteen (14) days following
receipt of the written notice referenced in this Section to cure any inability
or failure to satisfy any condition(s) listed in a notice from the Company. In
the event such failure cannot be reasonably cured within fourteen (14) days, NAI
may request from the Company whatever longer period is reasonably required,
provided NAI commences such cure within seven (7) days of receipt of a notice
from the Company and thereafter diligently pursues the cure to completion. The
Company shall not unreasonably withhold its consent to such an additional cure
period.
4.3 Effect of Failed Condition. In the event NAI does not cure its
inability to satisfy the conditions contained in a notice received from the
Company pursuant to Section 4.2 within the time periods set forth therein, then
the Company may, upon the earlier to occur of: (i) expiration of such time
periods; or (ii) receipt of NAI's written notice it will not cure such
conditions, enter into a manufacturing, supply or similar agreement provided the
agreement is with an independent third party to purchase the Products that are
the subject of the failed condition.
4.4 Alternative Source for Products. The Company may investigate
alternative suppliers of the Products in order to (i) determine whether there
are Products which the Company may desire to purchase that are not directly
manufactured or produced by NAI; (ii) determine whether the Products that the
Company is purchasing from NAI are being offered at the lowest available price;
and/or (iii) to determine the availability of an alternative source for Products
should NAI be unable or unwilling to supply such Products as provided for
herein. The Company reserves the right to enter into Agreements and/or purchase
Products from such alternative sources on terms and conditions substantially
identical to the terms and conditions of this Agreement. NAI shall assist in the
investigation and may recommend possible alternative sources of Products, but
the Company reserves the right to approve any such alternative sources.
5. Means of Production. NAI shall furnish and maintain, at its own cost and
expense, all equipment or resources necessary to manufacture and package the
Product in accordance with the Specifications and in compliance with federal,
state and local laws, rules and regulations.
6. Compensation, Payment, Materials and Title
6.1 Compensation. As full and complete compensation for all services
performed and Products sold hereunder, NAI shall be entitled to receive
compensation on a per Product basis at a price set forth in the then current,
approved price schedule for all Products. From time to time, upon a change in
costs, modification of a Product or development of a new Product, NAI shall
deliver a revised price schedule along with the underlying documentation or
explanation for the price change(s), to the
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Company for the Company's approval, which approval shall not be unreasonably
withheld. Prices for all Products shall not exceed the Company's fully burdened
actual cost of producing the Products, including but not limited to materials,
testing, capitalized equipment costs, labor, capitalized leasehold improvements,
storage, shipping, general and administrative costs. It is the intent of the
Parties that NAI shall charge the Company the full cost of the Products as
determined by Generally Accepted Accounting Principles prior to any profit. The
price paid by the Company to NAI shall include all federal, state and local
taxes that may be imposed on the sale or manufacture of the Products. In no
event, however, shall the price paid by the Company to NAI exceed the price for
which the Company could obtain the same Products from an alternative source on
substantially identical terms as this Agreement. The price to the consumer for
each Product will be established by the Company at the time of establishment of
the Specifications and all subsequent changes thereto shall be made only with
the approval of the Company.
6.2 Costs. NAI shall to use its best efforts to contain costs by
obtaining competitive prices on raw materials and packaging materials and by
continually reviewing and adjusting its operations in the manner deemed
desirable by NAI to maintain the quality of the Products at the lowest
reasonable cost to the Company, and otherwise to operate efficiently. The
Company shall be entitled, at any reasonable time following advance notice to
NAI, to audit any underlying documents relating to ingredients, packaging
materials and other costs used by NAI to determine the price for Products.
6.3 Research. The Parties agree that from time to time, the other may
suggest research, development, testing, and studies concerning the Products.
Prior to commencement of such research, the Parties will meet, confer and
cooperate in an effort to determine how to conduct, direct, control, and fund
such research. The conduct of all studies shall be approved by the Company. The
cost of any such research, development, testing and studies will be borne by the
Company, unless otherwise agreed. This Section 6.3 shall not apply to NAI's
testing or development of Products in the ordinary course of NAI's performance
of its obligations under the terms of this Agreement.
6.4 Invoices. Invoices for Products shall be sent to the Company at the
time of shipment. Payment in full shall be due within thirty (30) days after
receipt by the Company of invoice. A late charge of 1.5% shall be paid by the
Company for every 30-day period, or part thereof, any invoice remains unpaid
after 30 days.
6.5 Production, Inventory and Audits. The Company and its agents shall
have access to NAI's production plants once each calendar quarter, or otherwise
following reasonable notice, for the purpose of performing production and
inventory audits pertaining to this Agreement. NAI shall be notified in advance
of the names of all visiting personnel or agents and their intended dates and
times of arrival.
6.6 Title. Title to all Products shall be and remain in NAI until
shipped, at which time title shall transfer to the Company, unless the Parties
otherwise mutually agree.
7. Quality Control, Testing
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7.1 Specifications. NAI shall manufacture the Products strictly in
accordance with all applicable laws, rules and regulations, and the
Specifications.
7.2 Raw Materials. NAI shall store all raw materials, packaging
materials and finished Products in a clean, dry area, free from insects and
rodents, in a manner to prevent entry of foreign materials. Storage and handling
shall be strictly in accordance with the provisions of all applicable laws,
rules, regulations and the Specifications and any reasonable written
instructions issued by the Company.
7.3 Quality of Materials. NAI shall have each shipment of raw materials
and packaging materials, analyzed for such matters as it may reasonably elect
before any said materials can be used in making and packaging the Product. Such
analysis will be in the nature of quality control and may be conducted in-house
or by an outside laboratory of NAI's choosing. Outside lab tests are intended as
an exception and expenses of the same will be considered a part of the actual
cost of production and shall be charged to the Company as a part thereof. Prior
to the retention of an outside lab, NAI shall notify the Company of its
intention to retain such lab and the reasons therefore. If the Company objects
to paying the cost of the use of an outside lab to perform the tests, NAI will
proceed with the retention and use of such lab at its own risk. All unresolved
disputes related to this issues shall be resolved pursuant to Section 16.3
hereto. All test results are to be documented and copies provided to the Company
at its request and expense.
7.4 Production Quality. NAI shall perform all in-process and finished
Product checks necessary to assure Product quality. These tests are to be
undertaken as a routine part of the manufacturing process, the cost of which
will be included in the actual costs of production and shall be charged to the
Company as a part thereof. All test results shall be documented and summarized
by NAI.
7.5 Product Release. A Product shall not be released for shipment unless
it strictly complies with the Specifications and all applicable laws, rules and
regulations. NAI shall place any noncomplying Products on hold. Products that do
not strictly comply shall be put on hold and may be released only with the prior
approval of the Company.
7.6 Rejected Products. All rejected Products will be disposed of in a
manner consistent with the law and as approved by all Parties to this Agreement.
Approval thereof shall be provided within two (2) business days of request
therefor, and shall not be unreasonably withheld. The Company shall not be
charged for the cost of such rejected Products.
7.7 Codes. Production codes for Products will be maintained in
accordance with NAI's existing policies as of the date hereof. NAI shall
maintain detailed records on raw and packaging materials usage, finished Product
production by code date and shipping of Products, so that Products can be traced
in case of a recall. Unless necessary to prevent serious injury or death, NAI
cannot initiate a recall or withdrawal of the Products ordered by or shipped to
the Company without the consent of the Company. If a recall or withdrawal must
be initiated before consent of the Company can be obtained, in order to prevent
serious injury or death, notice to the Company must be provided as soon as is
reasonably feasible.
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7.8 FDCA Standards. NAI's Premises shall be kept and maintained in
conformity with all applicable FDCA requirements and all Products shall be
manufactured consistently with all applicable FDCA requirements.
8. Plant Inspections, Regulatory Action
8.1 Plant Inspection. NAI's plant shall meet all requirements
established by state, local or federal regulations including, but not limited
to, Good Manufacturing Practices, Hazard Analysis Critical Control Points
programs and EPA requirements, rules and regulations. The Company and its agents
shall have access to NAI's plant at any reasonable time and all reasonable times
while Products are in process for the purpose of conducting inspections and
performing quality control audits, and shall have access to the results of any
test performed by NAI or at NAI's direction.
8.2 Regulatory Action. If the Food and Drug Administration or any other
federal, state or local government agency gives notice of or makes an inspection
at any party's premises, seizes any Products or requests a recall, directs any
party to this Agreement to take or cease taking any action, the other Parties
shall be notified immediately, but in no event later than the next business day.
Duplicates of any samples of Products taken by such agency shall be sent to the
other party promptly. In the event of any action described in this Section, the
Parties shall cooperate in determining the response, if any, to be made to such
action and each party agrees to cooperate with, assist and allow NAI to be the
primary spokesperson in responding to any communication or inquiry, and/or
attempting to resolve any such action, and to refrain from any activity with
respect to such action which is not previously approved by NAI, unless otherwise
required by law.
9. Samples. At its own cost and expense, NAI shall collect and keep
retention samples in accordance with reasonable manufacturer's general practices
for similar products.
10. Warranty and Inspection
10.1 Warranty. The Products furnished to the Company or its customers
under this Agreement shall be in conformance with Specifications and free from
adulteration, and NAI does hereby warrant and guarantee to the Company that at
the time of delivery the Products shall: (i) comply with all applicable federal,
state and local laws and regulations, including, without limitation, the FDCA
and the FTCA, including any and all laws, rules and regulations regarding the
labeling, warning and instructions to be placed upon or included with the
Products; (ii) not be adulterated or misbranded within the meaning of the FDCA;
(iii) not be an article which, under the provisions of Section 404 and 505 of
the FDCA, may not be introduced into interstate commerce; (iv) not be in
violation of the provisions of the Food Additives Amendment of 1958; and (v) be
in full compliance with California's Safe Drinking Water and Toxic Enforcement
Act of 1986, as amended from time to time, and all regulations promulgated
thereunder, and are Products which do not require any form of warning under such
act.
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10.2 Inspection of Products. The Company shall inspect all of the
Products shipped to it promptly upon receipt thereof, and in no event later than
fifteen (15) days after receipt thereof. NAI warrants that the Products: (i)
will, when delivered, conform to the description on the face of the purchase
order relating to such Products; (ii) will be free of defects in materials and
workmanship; and (iii) will meet the Specifications. NAI shall, at the Company's
option, replace (F.O.B. the Company's point of destination) or issue a credit or
refund to the Company for any nonconforming Products provided, however, that the
Company furnishes to NAI written notice, in reasonable detail, of the
nonconformity of the Products within fifteen (15) days after the receipt thereof
by the Company, and the Company provides NAI with a reasonable opportunity to
inspect such goods and offers to return such goods to NAI at NAI's cost.
10.3 Limitation. The warranty set forth in Section 10.1 hereof shall not
extend to the Company's customers or their customers, if any. NAI shall
indemnify, defend and hold the Company and its employees, agents,
representatives, directors, officers, members and shareholders harmless for,
from and against all liabilities, suits, actions, proceedings, claims, demands,
losses, damages, fees, taxes, costs, penalties and expenses including, but not
limited to, reasonable attorneys' and accountants' fees caused by, arising out
of or otherwise related to any defective Products or product liability claims
brought by any person or entity with respect to any Products manufactured for
the Company by NAI. NAI agrees to name the Company as an additional insured on
NAI's current insurance policy and maintain product liability coverage in an
amount of no less than Ten Million Dollars ($10,000,000), and NAI shall maintain
an additional Ten Million Dollars ($10,000,000) in excess product liability
coverage for the entire term of this Agreement.
10.4 Standards. In connection with orders of Products hereunder, NAI
will formulate, manufacture and package the Products for the Company of the same
quality and with the same care as it uses for Products it produces for its
valued customers. NAI will not change the packaging or shipping of Products
hereunder without the Company's prior written consent except for minimum
deviations that do not affect the quality of the Products or legal compliance of
the labels, packaging and Product documentation.
10.5 NO ADDITIONAL WARRANTIES. THE WARRANTIES SET FORTH HEREIN, AND ANY
ADDITIONAL WARRANTY EXPRESSLY STATED TO BE A WARRANTY AND SET FORTH IN WRITING
AS PART OF THESE TERMS HEREIN ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
10.6 NO CONSEQUENTIAL DAMAGES. UNDER NO CIRCUMSTANCES SHALL NAI OR ANY
AFFILIATE OF NAI HAVE ANY LIABILITY WHATSOEVER FOR INCIDENTAL OR CONSEQUENTIAL
DAMAGES, such as, but not limited to, loss of profit or revenue; loss of use of
the Products; cost of capital; or claims resulting from contracts between the
Company, its customers and/or suppliers. Unless expressly provided for herein,
in no event shall NAI or any affiliate of NAI assume responsibility or liability
for (i) penalties, penalty clauses or liquidated damages clauses of any
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description, or (ii) indemnification of the Company or others for costs, damages
or expenses arising out of or related to the actions of the Company or its
distributors, agents, licensees, or customers.
10.7 Labor Laws. NAI warrants and represents that NAI will comply with
all applicable labor and employment laws, including, without limitation, all
laws and regulations under the federal Occupational Safety Hazards Act (OSHA),
as amended.
10.8 Cumulative Rights. The foregoing provisions are in addition to and
are not intended to limit or replace any of the Company's rights or NAI's duties
and obligations arising out of any other provision of this Agreement or any
other applicable law.
11. Trademark: Proprietary Information
11.1 Proprietary Assets. During the course of its performance of this
Agreement, NAI may, employing artwork, mechanical and packaging cylinders
furnished by the Company or FitnessAge, and in compliance with all applicable
laws, cause to be printed on the packaging materials and shipping containers of
the Products those trademarks and/or trade names that the Company or FitnessAge
may designate in writing from time to time. NAI will not use in any way, and
will not remove, alter or change in any way, any trademark, trade name, logo or
other commercial symbol of the Company or FitnessAge, without the prior
permission of the Company or FitnessAge. NAI agrees to execute any and all
consents or other documents that the Company or FitnessAge may deem reasonably
required in relation to NAI's use, display or reproduction of any trademark,
trade name, logo or other commercial symbol or designation belonging to the
Company or Fitness Age.
11.2 Limited Use. Nothing set forth in this Agreement shall be construed
to grant to NAI any right to or interest in any trademark, trade name,
copyright, patent or know-how owned or asserted to be owned by FitnessAge or any
of its affiliates. NAI's use of such trademarks, trade names, copyrights,
patents or know-how shall be limited exclusively to its performance of this
Agreement and in accordance with any written consent reasonably required by the
Company and/or FitnessAge. NAI will exercise due care to protect the trade name,
trademarks and general goodwill of FitnessAge and refrain from any activities
detrimental thereto. NAI shall immediately cease any further use or display of
any intellectual property owned by the Company or FitnessAge if this Agreement
is terminated (even if such termination is determined to be wrongful) or the
owner of the intellectual property withdraws, resigns, or otherwise terminates
its relationship with the Company or with NAI. NAI recognizes that money damages
are not adequate to compensate Company or FitnessAge for any unauthorized use of
the intellectual property in violation of this Section 11, and consents to the
imposition of injunctive relief by any court or administrative body, including
without limitation, temporary protective orders, preliminary injunctions and
permanent injunctions, to prevent NAI from so using the intellectual property in
a manner contrary to the provisions of this Agreement.
12. Indemnification, Insurance
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12.1 Indemnification NAI. NAI shall provide all proper safeguards and
shall assume all risks in its performance of this Agreement and shall indemnify
and save the Company (including its employees, agents, representatives,
directors, officers, members and shareholders) harmless from and against any and
all loss, liability, damages, claims for damages, suits, recoveries, judgements
or executions, including costs, expenses and reasonable attorneys' fees, that
may be claimed asserted or recovered against the Company by any person, firm or
corporation whatsoever or whomsoever, on account of any actual or alleged injury
to person or property or death occurring to any person whatsoever and arising
out of: (i) any obligation of NAI under this Agreement; (ii) any possession, use
of, or consumption by, any person of the Products supplied by NAI to the Company
under this Agreement; (iii) any actual or alleged injury to person or property
or death occurring to any of NAI's employees, agents or any individual on NAI's
premises; or (iv) any damages or loss caused by NAI's breach of any warranties
or representations made herein or any provision of this Agreement. In no event
shall NAI be required to indemnify the Company or any other person (other than
NAI) for any liability arising solely as a result of any statement or claim made
by such person with respect to Products.
12.2 Indemnification Company. The Company shall provide all proper
safeguards and shall assume all risks in its performance of this Agreement and
shall indemnify, defend and hold harmless NAI, its subsidiaries, affiliated
and/or controlled companies and all sublicensees, as well as their respective
officers, directors, agents and employees, harmless from and against any and all
damage, loss, expense (including reasonable attorneys' fees and costs), award,
settlement or other obligation arising out of any claims, demands, actions,
suits or prosecutions that may be made or instituted against them or any of
them, arising out of: (i) any alleged breach of the Company's warranties as set
forth herein; (ii) any injury or death caused by the Company's breach of any
provision of this Agreement; and (iii) any misrepresentations or warranties
beyond those provided for herein made by the Company related to the marketing,
distribution, promotion, sale or use of Products.
12.3 Insurance. NAI shall carry with companies reasonably satisfactory
to the Company: (i) Workers' Compensation and Employee's Liability Insurance;
(ii) Standard Form Fire and Extended Coverage Insurance for the full replacement
value of any of the Product or any premiums or packaging materials; and (iii)
Comprehensive General Liability Insurance including Contractual Liability and
Products Liability Coverage (with Broad Form Vendor's Endorsement naming the
Company and its authorized distributors, licensees and agents as additional
insureds) with a combined single limit of not less than Ten Million Dollars
($10,000,000). NAI shall submit policies and/or certificates of insurance
evidencing the above coverage (which shall include an agreement by the insurer
not to cancel or materially alter its coverage except upon thirty (30) days
prior written notice to the Company) to the Company within five (5) days after
execution of this Agreement. Products Liability Insurance shall continue in
effect for the Company's benefit for a period of one (1) year from the date of
the last delivery of Products to the Company. In case of NAI's failure to carry
said policies and/or furnish certificates of insurance or upon cancellation of
any required insurance, the Company may, at its option, immediately terminate
this Agreement unless (in the case of cancellation) NAI has obtained substitute
insurance coverage before such insurance becomes canceled and provides the
Company with satisfactory evidence thereof or the Company, at its option,
obtains equivalent insurance at a reasonable rate, the premiums for which will
be charged to NAI.
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13. Relationship of the Parties. NAI shall be deemed an independent
contractor with respect to the terms and provisions of this Agreement and it
shall not in any respect act as an agent, employee, partner or joint venturer of
the Company or of FitnessAge, except as specifically set forth in the Operating
Agreement of the Company. All persons employed in connection with the
manufacture and/or supply of the Products shall be employees or agents of NAI
and under no circumstances shall NAI or any of its employees or agents be deemed
to be employees or agents of the Company or of FitnessAge.
14. Term of Agreement
14.1 Term. This Agreement shall remain in effect for a period of ten
(10) years unless earlier terminated in accordance with this Section. Upon
expiration of the initial term, the term of this Agreement will automatically be
extended for successive one (1) year periods unless terminated by either party
by written notice delivered at least ninety (90) days prior to the expiration of
any such period in accordance with Section 17.1.
14.2 Termination for Non-compliance. Either party may terminate this
Agreement prior to the end of its term only after notice to the other and only
if the other materially fails to comply with any covenant in this Agreement and
such failure continues for more than thirty (30) days after written notice
thereof from the other party, unless such failure cannot be cured within thirty
(30) days then only if the defaulting party fails to commence such cure within
thirty (30) days and diligently thereafter prosecute such cure to completion.
This paragraph 14.2 shall not affect the rights and obligations of the Parties
as set forth in Paragraph 4.2 above.
14.3 Termination on Other Specific Events. Either party may terminate
this Agreement immediately only if:
14.3.1 The other party dissolves, suspends or discontinues its
business operations, makes any assignment for the benefit of its creditors,
commences voluntary proceedings for liquidation in bankruptcy, admits in writing
its inability to pay its debts generally as they become due or consents to the
appointment of a receiver, trustee or liquidator of the other party or of all or
any material part of its property, or if there is an execution which applies to
a material portion of its assets.
14.3.2 The other party shall commence any case, proceeding or
other action under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts.
14.3.3 (A) There shall be commenced against the other party any
case, proceeding or other action of a nature referred to in clause 14.3.2 above
which results in the entry of an order for relief or any such adjudication or
appointment or remains undismissed, undischarged, unstayed or unbonded for
period of ninety (90) days; or (B) there shall be commenced against the other
party any case,
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proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets, which results in the entry of an order for any such relief which
shall not have been vacated, discharged or stayed or bonded pending appeal
within ninety (90) days from the entry thereof; or (C) the other party shall
take any action in furtherance of, or indicating its consent to, approval of or
acquiescence in, any of the acts set forth in clause (A) or (B) above.
14.3.4 A party to this Agreement assigns its rights to an
unrelated third person who is at the time of transfer involved as an adverse
party in material and adverse litigation against the other party to this
Agreement or its Affiliate.
14.3.5 A party to this Agreement is in substantial breach of the
terms and conditions of this Agreement, including the expiration of any cure
period provided for herein.
14.4 Duties on Termination. Upon termination of this Agreement, copies
of all records related to the Company shall be kept by NAI for a minimum of
three (3) years following production. In addition, NAI shall complete all work
in process in a timely fashion and deliver the same to the Company as provided
herein against payment as provided herein. The Parties shall cooperate and
utilize their best efforts to prepare such final reconciliations of Products and
amounts to be provided as between them in connection with such termination. Upon
termination of this Agreement, NAI shall immediately return to the Company and
FitnessAge all of such party's artwork and other materials containing such
party's trademarks, trade names, logos, brands, slogans, trade dress or other
intellectual property, and thereafter cease any further use thereof. The
obligations of the Parties with respect to Intellectual Property (Section 11),
Indemnity and Insurance (Section 12) and Confidentiality (Section 15) shall
survive the termination of this Agreement and remain fully enforceable.
15. Confidentiality
15.1 Duty to Protect Confidential Information. Any confidential
information disclosed or conveyed by any party to another in connection with its
business by written communication and marked as confidential, or by oral
communication and confirmed in writing to be confidential within thirty (30)
working days of oral disclosure, shall be treated by the receiving party as a
trade secret of the disclosing party and as confidential proprietary
information. The information disclosed shall be held in trust by the receiving
party for the benefit of the disclosing party. The receiving party shall treat
such information as confidential proprietary and/or trade secret information,
and shall take such steps to assure its continued confidentiality in like manner
as it would use to protect its own trade secrets or confidential information and
will not, except as required by law, disclose any such confidential information
received from the other party to any person unless such disclosure is approved
in writing by the disclosing party.
15.2 Means of Protecting Confidential Information. NAI and the Company
agree to take reasonable steps to ensure the proprietary and confidential nature
of one another's confidential information and of the Plants, Products,
Specifications and Technical Information in which confidential
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information is embodied or included and to protect the same form loss or theft
and agree to clearly xxxx such confidential information and properly indicate
its proprietary nature.
15.3 Terms of Agreement. The Parties agree that the terms contained in
this Agreement are proprietary and confidential, as is the existence of this
Agreement. Other than as required by law, including NAI's compliance with the
1934 U.S. Securities and Exchange Act, each party agrees to maintain the
existence of this Agreement and the terms and information contained herein
strictly confidential and will not disclose any such information to any person
who is not a party hereto without the prior written consent of all Parties,
which consent may be granted or withheld in the absolute discretion of each
party.
15.4 Plant, Products, Specifications and Technical Information. The
Parties agree that the Plant, Products, Specifications and Technical Information
pursuant to Sections 1.3, 1.4, 1.5 and 1.6 are proprietary and confidential and
are furnished only for the purpose of designing, researching, formulating,
developing, manufacturing and packaging the Nutritional Products for the
Company. Other than as required by law, including NAI's compliance with the 1934
U.S. Securities and Exchange Act, any other use of the information by the
Company is understood and agreed by the Parties to constitute a material breach
of this Agreement that cannot be cured.
15.5 Audits. The Parties agree the information arising, created,
compiled or developed in connection with inspections and audits permitted
pursuant to Sections 6.2, 6.5, 7.3 and 8.1 are proprietary and confidential, and
the information revealed therein is furnished only for the purpose of confirming
compliance with the terms of this Agreement. Any other use of the information
revealed by such inspections or audits is understood and agreed by the Parties
to constitute a material breach of this Agreement that cannot be cured.
15.6 Extended Term of Confidentiality. It is recognized by all Parties
that due to their respective positions of confidence giving rise to access to
confidential, proprietary information during the term of this Agreement, that
the provisions of this Section 15 apply during the term of this Agreement and
for a period of three (3) years thereafter.
15.7 Provisions Divisible. It is agreed by all Parties that the
foregoing covenants are appropriate and reasonable in light of the nature and
extent of the business conducted by the Parties and their respective
relationships. It is further agreed that the covenants set forth herein are
divisible in the event they are held to be invalid, unreasonable, arbitrary or
against public policy. Further, it is agreed by the Parties that if any court of
competent jurisdiction makes such a determination, the court may determine what
time period and geographical area are reasonably necessary to protect the
Parties' legitimate business interests and which are enforceable. Nothing
contained in this Agreement shall be construed or interpreted to prevent the
Parties hereto from using such confidential information in any dispute between
themselves, so long as reasonable care is taken to implement a protective order
to prevent such confidential information from being disclosed to unnecessary
third Parties.
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15.8 Irreparable Injury. Each party acknowledges that damages at law
will be an insufficient remedy for violation of the terms of this Article and
that the other Parties would suffer irreparable injury as a result of such
violation. Accordingly, it is agreed the Parties may obtain injunctive relief to
enforce the provisions of this Article of this Agreement, which injunctive
relief shall be in addition to any other rights or remedies available to it or
them.
16. Applicable Law
16.1 Law. This Agreement shall be construed in accordance with the laws
of the State of California, without regard to its rules on conflicts of law.
16.2 Venue. Subject to the obligation to arbitrate disputes set forth
herein any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
Parties only in the courts of the State of California, County of San Diego, or,
if it has or can acquire jurisdiction, in the United States District Court for
the Southern District of California, and each of the Parties consents to such
venue and to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
16.3 Arbitration. Any dispute, controversy or claim arising from, out of
or in connection with, or relating to, this Agreement or any breach or alleged
breach of this Agreement, except allegations of violations of Federal or State
securities laws, will upon the request of any party involved be submitted to the
Judicial Arbitration and Mediation Service or any other private arbitration
service utilizing former judges as mediators and approved by the Parties. The
dispute once submitted shall be resolved by arbitration in the County of San
Diego, California (or at any other place or under any other form of arbitration
mutually acceptable to Parties involved). The arbitrator shall follow and apply
the California Evidence Code in the conduct of the arbitration, and the Parties
shall be entitled to discovery in accordance with the provisions of the
California Code of Civil Procedure. Any award rendered shall be final, binding
and conclusive upon the Parties and shall be non-appealable, and a judgment
thereon may be entered in the highest State or Federal court of the forum,
having jurisdiction. The expenses of the arbitration shall be borne equally by
the Parties to the arbitration, provided that each party shall pay for and bear
the cost of its own experts, evidence and attorneys' fees, except that in the
discretion of the arbitrator, any award may include the costs, fees and expenses
of a party's attorneys. Neither this Section 16.3 nor this arbitration provision
shall preclude any party to this Agreement from seeking and obtaining
enforcement of this arbitration provision from a court of competent jurisdiction
or from seeking and obtaining equitable relief, including injunctive relief, to
enforce the terms and conditions of the sections of this Agreement which relate
to Intellectual Property (Section 11), Indemnity (Section 12) and
Confidentiality (Section 15).
16.4 Attorneys Fees. If any arbitration or legal proceeding is brought
for the enforcement of this Agreement, or because of an alleged breach, default
or misrepresentation in connection with any provision of this Agreement or other
dispute concerning this Agreement, the successful or prevailing
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party shall be entitled to recover reasonable attorneys fees incurred in
connection with such arbitration or legal proceeding. The term "prevailing
party" shall mean the party which is entitled to recover its costs in the
proceeding under applicable law, or the party designated as such by the court or
the arbitrator.
17. Notice; Designation
17.1 Notices. Unless otherwise indicated herein, all notices, requests,
demands or other communication sot the respective Parties hereto shall be deemed
to have been given or made when deposited in the mails, registered or certified
mail, return receipt requested, postage prepaid, or by means of overnight
delivery service when delivered to such service addressed to the respective
party at the following address:
If to NAI:
Natural Alternatives International, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx XxXxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Natural Alternatives International, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, Executive Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and with an additional copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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If to Company:
FitnessAge Nutrition, LLC
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx, Xxxxxxxxx & Xxxxxx
000 Xxxx "X" Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. XxXxxx, Esq.
17.2 Designated Contact. If a specific contact person is designated in a
provision, notice concerning the subject matter of such provision shall be
directed to such person. The address or the name of any party or contact person
may be changed by sending notice in the manner set forth above.
18. Successors, Assignment. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns of the Parties. NAI and the
Company may assign their rights and obligations under this Agreement to their
Affiliate. Any such assignment will not release or discharge them from any
liability or obligation hereunder. The rights and obligations of the Company and
NAI may only be assigned after first obtaining the other party's written
consent, which consent may not be unreasonably withheld. As used herein,
Affiliate shall refer to any person or entity that is under direct or indirect
control of the applicable party. The term "control" includes without limitation,
ownership of interest representing a majority of the total voting power in an
entity or the ability to manage or direct such entity.
19. Modification, Severability
19.1 Modification. Neither this Agreement nor any part hereof may be
changed, altered or amended orally. Any modification must be by written
instrument signed by the party against whom enforcement of the change,
alteration or amendment is sought.
19.2 Severability. If any provisions of the Agreement is held
ineffective for any reason, the other provisions shall remain effective.
20. Further Assurances. The Parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts
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and things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this
Agreement.
21. Waiver. The rights and remedies of the Parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
22. Entire Agreement. This Agreement supersedes all prior agreements between
the Parties with respect to its subject matter and, together with the Operating
Agreement of the Company and its Exhibits, constitutes a complete and exclusive
statement of the terms of the agreement between the Parties with respect to its
subject matter.
23. Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
24. Time of Essence. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
25. Severability of Provisions. Each provision of this Agreement shall be
considered severable, and if for any reason any provision which is not essential
to effect the basic purposes of this Agreement is determined to be invalid and
contrary to any existing or future law, then such invalidity shall not impair
the operation of or affect those provisions of this Agreement which are valid.
26. Saving Clause. If and to the extent any provision of this Agreement is,
or is found by an arbitrator or court of competent jurisdiction to be,
prohibited under, contrary to or ineffective under any existing or future law,
this Agreement shall be considered amended to the smallest degree necessary to
make this Agreement conform to such law and effective thereunder.
27. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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28. Conflicts. Each party represents and warrants to the other that neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereunder will violate or constitute a default under
any agreement or instrument previously entered into by any party by which any
party is bound.
29. Force Majeure. No party shall be liable to any other for its failure to
timely perform any such obligations such as a result of fire, flood, epidemic,
earthquake, explosion, accident, labor dispute or strike, an act of God or
public enemy, riot or civil disturbance, war (whether declared or undeclared) or
armed conflict, inability to obtain personnel or facilities, failure of common
carrier, any municipal ordinance, any state or federal law, governmental order
or regulation, or order of any court of competent jurisdiction, or any other
similar event or occurrence not within the control of the defaulting party, as
the case may be.
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Manufacturing Agreement as of the day and year first above written.
NATURAL ALTERNATIVES INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Xxxx XxXxxx
------------------------------------
Xxxx XxXxxx, Chief Executive Officer
CUSTOM NUTRITION, LLC, a Delaware limited liability company By its
Members:
FitnessAge Incorporated
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Xxxxxxx X. Xxxx, President
NATURAL ALTERNATIVES INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Xxxx XxXxxx
------------------------------------
Xxxx XxXxxx, Chief Executive Officer
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