EXCLUSIVE MANUFACTURING AGREEMENT
AGREEMENT, entered into as of March , 2002, between Vitaquest
International, Inc. (hereinafter "Manufacturer"), a Delaware Corporation, with
offices located at 0 Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx and American
Health & Diet Centers, Inc., with offices located at 000 Xxxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxxxx, 00000 (hereinafter "Customer");
WHEREAS, Customer would like Manufacturer to manufacture Customer's
requirements for Customer's existing and future dietary supplement, food and
cosmetic lines of products, including any and all current and future dietary
supplements, foods, and cosmetics as those terms are defined under the Food,
Drug and Cosmetic Act of 1938 and any amendments thereto (hereinafter
"Product(s)", all as more specifically set forth on Exhibit A hereto); and
Manufacturer is interested in undertaking such duties, as long as it is
appointed as Customer's exclusive manufacturer and exclusive source of supply
for Customer's requirements for Products;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth and other good and valuable consideration received, the
parties hereto agree to the following:
1. Manufacturer will manufacture both current and future Products for
Customer, in consideration for being appointed Customer's exclusive manufacturer
and exclusive source of supply for its Product requirements both in the United
States, and for all international markets. For purposes of this Agreement,
"exclusive" manufacturer or source of supply shall be defined as at least eighty
percent (80%) of Customer's requirements for all Products.
2. Manufacturer shall supply the Products to Customer at competitive
prices, having regard to other customers of Manufacturer purchasing similar
Products in similar quantities at similar times. The initial Product prices
shall be as set forth on Schedule A hereto. Manufacturer may increase its
prices, from time to time, for the Products unilaterally, upon ten days (10)
written notice to Customer, as long as it provides reasonable substantiation of
any increases in the cost of such Products (including without limitation, any
increases in ingredients, formulation, distribution, overhead or other costs).
In any event, such Product prices shall not be greater than (a) ten percent
(10%) higher than the lowest competitive market price for the same products upon
the same terms and conditions (including without limitation, similar quantities,
similar times, and similar quality) and (b) the lowest prices offered by
Manufacturer to its other customers for the Products upon the same terms and
conditions (including without limitation, similar quantities, similar times, and
similar quality). Subject to the foregoing, Customer agrees that Manufacturer
shall have the right to manufacture or otherwise supply to Customer under the
terms of this Agreement any and all new or additional products (i.e., those
products not currently supplied or otherwise offered for sale by Customer)
introduced by Customer during the term of this Agreement.
3. During the period of time the Outstanding Vitaquest Payable (defined
below) remains outstanding, payment for the Products shall be FOB, West
Xxxxxxxx, New Jersey, on
terms of COD (Cash on Delivery); upon payment in full of the Outstanding
Vitaquest Payable in accordance with the terms set forth below, payment for the
Products shall be FOB, West Xxxxxxxx, New Jersey, on terms of net 30 from date
of shipment with an initial line of credit of $500,000 for finished product
accounts receivable and open order work in process. All Product sales shall be
final, with Manufacturer accepting no Product returns, aside from those
manufacturing defects mutually agreed to by the Parties. In the event that
Customer fails to make any required payment for goods, and such default fails to
be cured within 10 days of written notice, then Manufacturer shall be under no
obligation to accept additional purchase orders or make additional product
shipments.
4. Customer acknowledges and agrees that Customer has an outstanding
balance due and owing to Manufacturer of approximately $1,800,000 (the
"Outstanding Vitaquest Payable"). Customer and Manufacturer agree that the
Outstanding Vitaquest Payable shall be paid by Customer to Manufacturer by
making the payments set forth on Schedule A attached hereto, until payment in
full of the Outstanding Vitaquest Payable.
5. Manufacturer shall warrant that at the time of shipment the Products
are manufactured in substantial accordance with the Product formulas provided in
writing by Customer to Manufacturer; provided, however, that Manufacturer shall
not bear any liability for any ensuing failure of the Products to conform to any
Product formulas or other product defects or nonconformities caused in whole, or
in part, by Customer, its agents or employees, or any other third parties or
persons, whether in the manner of the storage, handling, or distribution of the
Products or in any other manner whatsoever. Moreover, Customer shall hold
Manufacturer harmless, and shall indemnify and provide a defense for
Manufacturer for any such claims or resulting liabilities, and shall provide
Manufacturer at the time of execution with copies of all existing insurance
policies and a certificate of insurance naming Manufacturer as an additional
insured thereunder. This provision shall survive any termination of this
Agreement.
6. Customer shall bear full responsibility for the text of its Product
labels, the legitimacy of its intellectual property and the rights to use its
Product formulas, all efforts by its employees and agents in connection with the
marketing, advertising, and distribution of the Products, and the Product
formulation's compliance with all applicable law and regulatory requirements,
and shall hold Manufacturer harmless, and shall indemnify and defend
Manufacturer in connection with any claims, investigations, actions, judgments,
penalties, fines, settlements, directly or indirectly connected therewith.
Moreover, Manufacturer shall receive at execution certificates of insurance
naming Manufacturer as an additional insured under any Customer insurance
policies currently in effect relating to these matters. This provision shall
survive any termination of this Agreement.
7. The parties under this Agreement mutually affirm that their
performance hereunder is not in violation of any existing or past contractual
obligation, judicial, governmental, or regulatory decree. Moreover, in the event
of any breach of this provision by either party, the offending party will not
only be liable for any damages in connection with such breach, but shall
indemnify, defend and hold harmless the nonbreaching party from any damages
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due any third party or governmental entity. This provision shall survive any
termination of this Agreement.
8. The parties shall treat as Confidential all proprietary information
disclosed during the term of this Agreement, including but not limited to
customer lists, product formulation, pricing information, marketing concepts,
and will not divulge such information, even upon the termination of this
Agreement, unless such information is within the public domain (other than by
either party's breach), or disclosed by a third party in lawful possession of
such information. Upon the termination of this Agreement, all such Confidential
information and any copies of such information, shall be returned to the
originating party. If any party breaches the provisions of this paragraph, the
nonbreaching party may seek all means of legal redress, including injunctive
relief, and such nonbreaching party shall be reimbursed for all expenses and
legal costs if deemed successful on the merits. This provision shall survive any
termination of this Agreement.
9. Customer shall defend, indemnify and hold Manufacturer harmless from
and against any and all claims, suits or demands for liability, damages, costs
and expenses (including the costs and expenses of attorneys and other
professionals), arising or resulting from: (i) personal injury, product
liability, property damage, and economic loss of any kind relating to or arising
from the manufacture (in accordance with Customer's specifications), use or sale
of Products by the Customer or any of its affiliates to distributors, resellers,
repackagers, remanufacturers and any other parties in the line of distribution
of the Products through and including end users (other than liabilities arising
solely and directly as a result of the failure of the Products to substantially
conform to the Product formula); (ii) the Customer's acts or omissions relating
to any government approvals necessary, received or applied for in connection
with the production of the Products or otherwise relating to the failure of the
Products to comply with any laws, rules, regulations, orders or decrees of any
nature (whether federal, state, local or foreign); or (iii) facts constituting a
material misrepresentation or material breach of any warranty, covenant or
agreement of the Customer contained in this Agreement or in any other agreement,
instrument or document delivered to the Manufacturer pursuant hereto. As the
parties intend complete indemnification, all costs and expenses (including the
costs and expenses of attorneys and other professionals) of enforcing this
provision shall also be reimbursed. This provision shall survive any termination
of this Agreement.
10. The term of this Agreement shall be for five years, and shall be
renewable upon mutual agreement between the parties for successive periods of
three years. If either party materially breaches this Agreement and fails to
cure such breach within fifteen (15) days, then either party may terminate this
Agreement upon written notice within thirty (30) days. Upon termination of this
Agreement, Customer will honor any existing orders placed with Manufacturer and,
at the request of Manufacturer, Customer will purchase any existing ingredient
inventories relating to the Products at the prevailing prices then in effect
between the parties.
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11. This Agreement shall be binding upon both parties, their predecessors
and successors in interest, assigns, existing and future related entities under
common ownership or control.
12. This Agreement shall not be deemed to constitute either party as the
agent or employee of the other party. In addition, either party's hereunder may
be excused as a result of a force majeure, as defined in accordance with
traditional legal principles.
13. This Agreement represents the entire Agreement between the parties,
and supersedes any prior oral or written agreements or negotiations between the
parties. Any modification to this Agreement shall be in writing and signed by
both parties.
14. This Agreement shall be governed by the laws of the State of New
Jersey. Any controversy or claim arising out of or relating to this contract,
except injunctive relief discussed, shall be settled by arbitration administered
by the American Arbitration Association, Somerset, N.J. office, under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
15. In the event that for any reason any section or provision of this
Agreement should be held invalid or otherwise unenforceable, it is agreed that
the same shall not affect the other sections of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the date provided above.
VITAQUEST INTERNATIONAL INC. AMERICAN HEALTH AND DIET
CENTERS INC.
By: By:
------------------------------- ---------------------------------
Name: Name:
Title: Title:
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Schedule A
PAYMENT SCHEDULE FOR OUTSTANDING VITAQUEST PAYABLE
April 1, 2002 $100,000
April 8, 2002 $100,000
April 14, 2002 $100,000
April 22, 2002 $100,000
April 29, 2002 $500,000
May 6, 2002 $100,000
May 14, 2002 $100,000
May 22, 2002 $100,000
May 27, 2002 $100,000
June 3, 2002 $100,000
June 14, 2002 $100,000
June 21, 2002 $100,000
June 28, 2002 $100,000
July 5, 2002 $100,000
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