SERVICE AND CONSULTING AGREEMENT
THIS SERVICE AND CONSULTING AGREEMENT (this "Agreement"), is dated as of
December_______, 2003, by and between XXXXXXX LABORATORIES, INC., an Illinois
Corporation (hereinafter "Xxxxxxx"), and AVITAR, INC. (hereinafter "Avitar"):
Section 1
SCOPE AND NATURE OF SERVICES
1.1 Services. Xxxxxxx shall provide to Avitar and its subsidiaries
commercial lab- based testing services (using oral fluid, hair and any other
materials Xxxxxxx then tests), research and development analytical services and
consultation services in accordance with the Schedule of Fees and Services,
attached hereto as Schedule X. Xxxxxxx shall at all times use its best efforts
to prepare and complete the services and test results submitted by Avitar and to
provide the consulting services requested by Avitar under this Agreement.
1.2 Relationship. Avitar agrees to use its best efforts to utilize Xxxxxxx
for its analytical services and consulting services during the term of this
Agreement. Avitar agrees to provide to Xxxxxxx an opportunity to review and bid
on any laboratory and consulting services required by Avitar and to meet the
prices and terms offered by any other laboratory or consulting source, provided
that Xxxxxxx can provide services that are equal or better in quality to the
laboratory services offered by the other source and meet Avitar's requirements,
as determined by Avitar in its sole discretion. Xxxxxxx agrees that its pricing
for services provided to Avitar shall not be higher than the lowest prices
charged by Xxxxxxx to its other customers for similar or comparable services.
1.3 Conduct of Services. All work shall be performed in a workmanlike and
professional manner by Xxxxxxx with a level of skill and service commensurate
with the requirements of this Agreement. Xxxxxxx shall be required at all times
to implement and observe its own security and safety policies and procedures and
Xxxxxxx shall observe all reasonable safety policies and procedures of Avitar.
Section 2
METHOD OF PERFORMING SERVICES
2.1 Method of Performing Services. Xxxxxxx shall have the right to
determine the method, details, and means of performing the work to be done for
Avitar. Avitar shall have no right to, and shall not, control the manner or
determine the method of accomplishing Xxxxxxx 's services. Avitar may, however,
require Xxxxxxx to observe any security and safety policies of Xxxxxxx. Avitar
shall be entitled to exercise broad general power of supervision and control
over the results of work performed by Xxxxxxx to ensure satisfactory
performance, including the right to inspect, the right to stop work, the right
to make suggestions or recommendations as to the details of the work, and the
right to require modifications to the work.
2.2 Reporting. Avitar and Xxxxxxx shall develop appropriate administrative
procedures for coordinating delivery and completion schedules, workload and work
assignments.
2.3 Place of Work. Xxxxxxx will perform the work for Avitar at Xxxxxxx'x
premises except when such projects or tasks are required to be performed in
Avitar's offices or elsewhere.
Section 3
TERM AND TERMINATION
3.1 Term. Xxxxxxx shall provide services to Avitar under this Agreement
beginning on the dates of this Agreement.
3.2 Termination. The Term of this Agreement may be terminated on the third
anniversary of this Agreement; provided, however, that the Term shall continue
thereafter for additional one year terms until either party terminates the Term
on the third anniversary or at the end of any subsequent one year term by at
least ninety (90) days prior written notice from the party desiring to terminate
to the other party.
Section 4
FEES, EXPENSES, AND PAYMENT
4.1 Fees. In consideration of the services to be performed, Avitar shall
pay to Xxxxxxx the fees and rates established in accordance with Schedule A. It
is understood and agreed that the payments due to Xxxxxxx under this Agreement
will be used by Xxxxxxx to offset the payments otherwise due to Avitar from
Xxxxxxx under the terms of the Asset Purchase Agreement dated as of December 1,
2003.
4.2 Reimbursement of Expenses. In addition to the foregoing, Avitar shall
pay to and reimburse Xxxxxxx for all of its actual out-of-pocket travel and
accommodation expenses as reasonably incurred by Xxxxxxx in furtherance of its
performance of this Agreement. Any out-of-pocket expenses in excess of $250.00
shall be submitted to Avitar in advance for approval. Xxxxxxx agrees to provide
Avitar with such receipts, and other records as may be appropriate for Avitar to
verify the amount and nature of any such expenses. The foregoing reimbursable
expenses shall not be used as offsets between the parties, but Avitar shall
promptly pay the balances due to Xxxxxxx by cash or by check within 30 days
after receipt of an expense invoice from Xxxxxxx.
4.3 Summary of Charges. Xxxxxxx shall provide to Avitar a quarterly summary
of all expenses (other than Section 4.2 expenses) and charges due Xxxxxxx on
March 1st, June 1st, September 1st and December 1st of each year during the term
of his Agreement, in each case covering the immediately preceding calendar
quarter. In addition, not later than March 1st of each year, Xxxxxxx shall
provide to Avitar a comprehensive accounting of all expenses and charges due to
Xxxxxxx together with sufficient and complete copies of the business records of
Xxxxxxx so that Avitar can calculate: (a) the amounts due under this Agreement
to Xxxxxxx and (b) the amounts due to Avitar under the Asset Purchase Agreement
dated as of December 1, 2003. All such expenses and charges due to Xxxxxxx shall
be applied to the balance due to Avitar.
4.4 Audits. Avitar shall have the right to conduct an annual review or
audit of Xxxxxxx' comprehensive accounting of expenses and charges. Xxxxxxx
shall, upon reasonable terms and at reasonable times, provide access to those
financial records of Xxxxxxx that are necessary for the purpose of allowing
Avitar to review or audit the accuracy of the annual accounting of expenses and
charges. Any such access to financial records shall be granted with due regard
by Avitar to the protection of Xxxxxxx' confidential and private financial
information. If the annual accounting by Xxxxxxx reports expenses and charges of
5% or more greater than the actual expenses and charges as determined by Avitar
after review or audit, then Xxxxxxx shall be obligated to reimburse for all
costs incurred in the review or audit.
Section 5
CONFIDENTIALITY
5.1 Confidentiality. Xxxxxxx and Avitar acknowledge that each may be given
access to information and materials of a competitively sensitive and proprietary
nature to both Xxxxxxx and Avitar. Xxxxxxx and Avitar shall maintain in strict
confidence, and shall use and disclose only as authorized, all information and
materials of a competitively sensitive or proprietary nature that received in
connection with the work performed pursuant to this Agreement. These
restrictions shall not be construed to apply to: (1) information and materials
generally available to the public; (2) information and materials released by
Xxxxxxx or Avitar generally without restriction; (3) information and materials
independently developed or acquired by Xxxxxxx or Avitar without reliance in any
way on other protected information and materials; or (4) information and
materials approved for the use and disclosure by Xxxxxxx or Avitar without
restriction.
5.2 Xxxxxxx shall not at any time use Avitar's name or trademark(s) or
trade name(s) in any advertising or publicity without the prior written consent
of Avitar.
Section 5A
NON-COMPETITION; NON-SOLICITATION
5A.1 During the Term of this Agreement and for a period of one year
thereafter, and, if longer, while any part of the Purchase Price as provided in
the Asset Purchase Agreement dated as of December 1, 2003 remains unpaid,
Xxxxxxx and its affiliates shall not, directly or indirectly, without the prior
written consent of Avitar:
(i) sell, distribute or manufacture rapid oral fluid products or materials
or services, including consulting in connection with any of the
foregoing.
(ii) solicit or accept business, including lab based oral fluid drug
testing business from, or be retained by, any person who, at any time
during the Term, was a customer or supplier of Avitar or any
affiliate, where such business or retention will be related to and
competitive with the rapid oral fluid drug testing business of Avitar
or any affiliate.
(iii)solicit or accept the business of any person who, at any time during
the Term, was a customer or supplier of Avitar or any affiliate, with
respect to products, including lab based oral fluid drug testing
products, similar to those sold by the rapid oral fluid drug testing
business of Avitar or any affiliate.
(iv) solicit or induce any employee of Avitar or any affiliate to leave
such employment or hire for any purpose any person who is at such time
or has been within the preceding six months an employee of Avitar or
any affiliate.
Items (i) through (iii) above concern the rapid oral fluid drug testing
business of Avitar or the effects on such business. Nothing herein shall
prohibit Xxxxxxx from conducting any confirmation testing of rapid oral fluid
drug tests or any lab-based drug testing (except for customers of Avitar as
provided above) and validation testing related to this lab-based drug testing,
or providing of forensic consulting services in support of rapid oral fluid
confirmation testing or in other matters not related to the rapid oral fluid
drug testing business.
Section 6
LIMITATION OF LIABILITY
6.1 No Consequential Damages, etc. Neither neither party to this Agreement
shall be liable under this Agreement, or as a result of any contractual
relationship between the parties, for any incidental, indirect, or consequential
damages or lost profits.
6.2 Force Majeure. Xxxxxxx shall not be liable to Avitar for any failure or
delay caused by events beyond Xxxxxxx 's control, including, without limitation,
Avitar's failure to furnish necessary specimens or information; sabotage;
failure or delays in transportation or communication; failures or substitutions
of equipment; labor disputes; accidents; acts of terrorism or war; shortages of
labor, fuel, raw materials or equipment; or technical failures.
Section 7
MISCELLANEOUS
7.1 Governing Law; Forum Selection. This Agreement shall be governed and
construed in all respects in accordance with the laws of the State of Illinois
as they apply to a contract entered into and performed in that State. Any legal
action to enforce this Agreement shall be brought in the Circuit Court of Xxxx
County, Illinois, or in the Federal District Court sitting at Chicago, Illinois.
7.2 Independent Contractors. The parties are and shall be independent
contractors to one another, and nothing herein shall be deemed to cause this
Agreement to create an agency, partnership, or joint venture between the parties
7.3 Notices. All notices required or permitted hereunder shall be given in
writing addressed to the respective parties as set forth herein, and shall be
delivered by hand or by registered or certified mail, postage prepaid.
7.4 Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto and supersedes all prior representations, proposals,
discussions, and communications, whether oral or in writing. This Agreement may
be modified only in writing and shall be enforceable in accordance with its
terms when signed by the party sought to be bound.
7.5 Parties in Interest. This Agreement is enforceable only by the parties
hereto and this Agreement is not enforceable by any successor or assignee of
either party without the consent of both parties to the assignment of this
Agreement. No person or entity shall be considered to be a third-party
beneficiary under or pursuant to the terms of this Agreement.
7.6 No Assignment. Neither party may assign or transfer any of its rights
under this Agreement without the consent of both parties to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, on the date and year indicated below.
XXXXXXX LABORATORIES, INC. AVITAR, INC.
0000 Xxxxx Xx. Xxxxxxxx Xxxx 00 Xxx Xxxx
Xxx Xxxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxxxxxxx 00000
By: ______________________________ By: ___________________________
Date: ___________________, 2003 Date: ____________________, 2003
