EXHIBIT 10.16
EXCLUSIVE MANUFACTURING AGREEMENT
This EXCLUSIVE MANUFACTURING AGREEMENT (this "Agreement") is entered
into as of April 11, 2002, between Garden State Nutritionals, a division of
Vitaquest International, Inc., a Delaware Corporation, with offices located at 0
Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx 00000 ("Garden State"), and HEALTH &
NUTRITION SYSTEMS INTERNATIONAL, INC., with offices located at 0000 Xxxxxxxxxx
Xxxx, Xxxxx 0, Xxxx Xxxx Xxxxx, XX 00000 ("HNS").
Whereas, HNS desires that Garden State manufacture for HNS its
requirements of dietary supplements as such term is defined by the Food, Drug
and Cosmetic Act of 1938 and any amendments thereto ("Product(s)"), and Garden
State desires to manufacture and supply such Products to HNS;
Now, therefore, in consideration of the mutual covenants and promises
hereinafter set forth and other good and valuable consideration received, the
parties hereto agree as follows:
GENERAL TERMS AND CONDITIONS
1) Supply and Purchase. During the Term (as hereinafter defined), Garden State
shall manufacture and supply to HNS all of HNS's requirements of Products, and
HNS agrees to exclusively purchase its Product requirements from Garden State;
provided, however, that in the event that HNS requires a Product in a form which
Garden State does not manufacture (including, for example, bars or gel caps),
then HNS shall be entitled to purchase such Products from another source without
restriction or limitation after giving Garden State the first right to
manufacture such products in accordance with the terms hereof.
2) Product Pricing. Garden State shall supply the Products currently
manufactured by Garden State for HNS at the Net Sale Prices set forth on Exhibit
A attached hereto; provided, however, Garden State may unilaterally increase one
or more prices listed on Exhibit A, from time to time, upon ten days (10) prior
written notice to HNS, but only if (i) Garden State provides substantiation
reasonably satisfactory to HNS that the market price of a component ingredient
of the Product affected has increased, and (ii) the increase in the Price of the
Product does not exceed the increase in the cost of the ingredient. All other
price increases shall be mutually agreed to by the Parties. "Net Sale Price"
shall mean the price at which the Products are sold by Garden State to HNS under
this Agreement, excluding all freight and delivery charges, and all sales,
excise or similar taxes which shall be the responsibility of HNS.
Notwithstanding anything to the contrary contained herein, Garden State agrees
that in no event at any time during the term of this Agreement shall the Prices
for the Products to HNS exceed the best price for such Product (or a similarly
formulated Product) offered by Garden State to any other Garden State customer
based on like quantities and lead times. The parties hereto agree to negotiate
in good faith prices for any new Products Garden State may manufacture for HNS
in the future pursuant to the terms of this Agreement, and, once agreed upon,
the prices of such new Products shall be added to an amendment to Exhibit A,
which amendment shall be attached to this Agreement and deemed to be made a part
hereof.
3) Payment Terms. Garden State will invoice HNS for the Products on the date
such Products are shipped from Garden State FOB, East Xxxxxxxx, NJ. Terms will
be net payment within sixty (60) days with a line of credit of Four Hundred and
Fifty Thousand Dollars ($450,000), which shall include both finished goods and
works in process; provided, however, in the event that HNS develops a new
Product not in existence on the date of this Agreement, terms with respect to
such new Product shall be net payment within ninety (90) days within the
existing the credit line. Payment for the Products shall be F.O.B. West
Xxxxxxxx, New Jersey. All Product sales shall be final; provided, however,
Garden State shall accept Product returns if (i) such returned Products fail to
meet the Specifications provided for in Section 4 hereof, or (ii) Garden State
fails to ship such Products to HNS in accordance with the terms of Section 5
hereof.
4) Purchase Orders. HNS will submit from time to time to Garden State purchase
orders for the Products along with requested time and place of delivery. Garden
State shall be required to confirm in writing any such purchase orders within
two (2) days from receipt thereof indicated its acceptance or otherwise of such
purchase orders. Any purchase orders not confirmed within the time indicated
above shall be deemed not accepted by Garden State.
5) Delivery; Title. Garden State agrees that it shall exercise its best efforts
to ship Products to HNS within four weeks from the date that Garden State
receives a purchase order from HNS for Products hereunder. Title to Products
sold hereunder shall pass from Garden State to HNS at West Xxxxxxxx, New Jersey;
and all risk of loss and damage to such Products shall thereafter be borne by
HNS.
6) Specifications. Garden State hereby agrees that the Products will be
manufactured in strict compliance with the specifications attached hereto as
Exhibit B (the "Specifications").
7) Inspection. Based upon its inspection and testing, HNS may reject any
shipment or part thereof which, in the reasonable discretion of HNS, does not
materially meet (a) all of the Specifications, or (b) any other term or
condition of this Agreement. HNS will not be deemed to have accepted any
shipment of Products and HNS will be entitled to a pro-rata refund of the
purchase price paid for any shipment of Products which fail to meet the Product
specifications or the terms of this Agreement. If HNS rejects any Products,
Garden State shall promptly provide replacement Products to HNS at Garden
State's cost expeditiously.
8) Indemnification. Garden State shall hold harmless, defend and indemnify HNS
and its affiliates and their respective officers, directors, stockholders,
employees and agents from and against any and all loss, liability, cost and
expense, including but not limited to attorneys' fees and costs of
investigation, arising out of (i) the manufacture of the Products by Garden
State, or (ii) any failure of Garden State to comply with the terms and
conditions of this Agreement. Garden State shall not be responsible for any
defects caused in whole or in part by HNS or its agents in connection with the
storage of the Product. HNS shall promptly notify Garden State of any event for
which HNS is indemnified hereunder. If Garden State has not assumed the defense,
HNS may defend this matter and any and all costs and expenses, including but not
limited to attorneys' fees and costs of investigation, shall be the
responsibility of Garden State. Garden State's selection of counsel to defend
the indemnified event shall be reasonably acceptable to HNS. Garden State shall
not settle any claim without the prior written consent of HNS which may be
withheld in HNS's sole discretion.
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HNS shall hold harmless, defend and indemnify Garden State and its
affiliates and their respective officers, directors, stockholders, employees and
agents and its customers from and against any and all loss, liability, cost and
expense, including but not limited to attorneys' fees and costs of
investigation, arising out of Product labels or other intellectual property
issues or the marketing or distribution from the HNS warehouse of the Product.
This provision shall survive any termination of this Agreement.
9) Packaging. HNS shall bear full responsibility for the text of its Product
labels, the legitimacy of its intellectual property, all actions of 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. HNS shall defend, indemnify and hold
Garden State its agents and shareholders harmless in connection with such
conduct. This provision shall survive any termination of this Agreement.
10) Insurance. Each party shall provide to the other party at execution of this
Agreement certificates of insurance with minimum policy limits of $5,000,000 per
occurrence and $5,000,000 annual aggregate, with respect to each of general
liability insurance and product liability insurance naming the other party as an
additional insured under such party's insurance policies relating to the
manufacture of the Products. This provision shall survive any termination of
this Agreement.
11) No Default. The parties mutually affirm that their performance hereunder is
not in violation of any existing or past contractual obligation, judicial,
governmental, or regulatory decree.
12) Confidentiality. The Parties shall treat as confidential all confidential
information and materials exchanged 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 prior to the date of this Agreement, becomes part of the public domain
through a means that is not due to any action on the part of either party or is
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 non-breaching Party may seek all
means of legal redress, including injunctive relief, and shall be reimbursed for
all expenses and legal costs if deemed successful on the merits. This provision
shall survive any termination of this Agreement.
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13) Warranties. Garden State warrants that the Products supplied hereunder shall
be manufactured (i) to comply in all respects with the Specifications therefor,
and (ii) to comply with good manufacturing practices.
14) Term. The term of this Agreement shall be for a period of two (2) years,
commencing as of the date first above written and expiring on the second
anniversary of such date (the "Term").
15) Termination.
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(a) Automatic Termination. This Agreement will automatically
terminate immediately upon the occurrence of any of the
following events by either party: an assignment for the
benefit of creditors, filing of a petition in bankruptcy,
applying to or petitioning any tribunal for the appointment of
a custodian, receiver, intervenor or trustee for either party
or for a substantial part of its assets, or if either party
shall commence any proceeding under any bankruptcy,
arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter
in effect, or if any such petition or application shall have
been filed or proceeding commenced against either party and
either party shall have not dismissed the same within sixty
(60) days, or if any such custodian, receiver, intervenor or
trustee shall have been appointed for either party or for it's
properties or assets.
b) Termination in the Event of Breach. If either party fails to
perform its obligations under this Agreement and such failure
continues for a period of thirty (30) days after written
notice thereof, the other party shall have the right to
terminate this Agreement immediately. In addition, if HNS
fails to make a payment when due hereunder, Garden State shall
not be required to ship any additional product or accept or
process any Product orders until such payment default has been
cured by HNS.
16) Notice. Any notice required to be given hereunder will be in writing and
sent by overnight courier, e.g., FedEx, (overnight delivery or the earliest
delivery will be specified) or by facsimile (with confirmation of receipt) as
set forth below:
If to HNS:
Health and Nutrition Systems International, Inc.
Attention: President
0000 Xxxxxxxxxx Xxxx, Xxxxx 0
Xxxx Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
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Copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxxx Traurig, P.A.
000 X. Xxxxxxx Xx., Xxxxx 000X
Xxxx Xxxx Xxxxx, XX 00000
Facsimile: 561-655-6222
If to Garden State:
Garden State Nutritionals
President
0 Xxxxxxxxx Xx.
Xxxx Xxxxxxxx, XX 00000
Facsimile:
17) Binding Effect; Assignment. 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. This Agreement may
not be assigned by either party without the prior written consent of the other
party. Any attempted assignment in violation of this provision shall be void.
18) No Third Party Beneficiaries. Nothing contained in this Agreement, express
or implied, shall confer upon any person who is not a party hereto any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
19) HNS and Garden State are independent parties. This Agreement does not in any
way create the relationship of principal and agent, joint-venture or partnership
between the parties or any other form of association which would impose on any
party liability for the act or failure to act of the other party or parties; and
under no circumstances will one party be considered to be the agent of the other
party. Neither party will act or attempt to act, or represent itself, directly
or by implication, as an agent of the other party or in any manner assume or
create, or attempt to assume or create, any obligation on behalf of, or in the
name of, the other party.
20) Force Majeure. Except for the obligation to pay for the Products provided
under this Agreement, neither party hereto will be liable for its failure to
perform hereunder, in whole or in part, due to contingencies beyond its
reasonable control, including strikes, riots, war, fire, explosions, acts of
God, injunctions, compliance with any law, regulation or order, whether or not
valid, of the United States of America or any governmental body or any
instrumentality thereof, whether now existing or hereto created; provided,
however, that the parties will use reasonable efforts to continue to meet their
obligations for the duration of the force majeure condition; and provided
further, that the party declaring force majeure will notify the other party
promptly in writing of the commencement of the force majeure condition, the
nature of such condition, and the termination of the such condition. In the
event of a force majeure condition, HNS will have the right to immediately
purchase Products from another source during the force majeure event.
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21) Entire Agreement; Amendments. 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.
22) Governing Law. This Agreement shall be governed by the laws of the State of
Florida. Any controversy or claim arising out of or relating to this Agreement,
except injunctive relief discussed, shall be settled by arbitration administered
by the American Arbitration Association in Palm Beach County, Florida, under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction with respect to
this Agreement.
23) Severability. 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 such invalidity or unenforceability shall not effect the other sections of
this Agreement, and the remaining provisions of this Agreement shall remain in
full force and effect.
24) Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original, and all of which together shall
constitute a single agreement.
25) Attorneys Fees. In the event that any suit or proceeding is brought for the
enforcement of any of the provisions of this Agreement, the parties hereto agree
that the prevailing party or parties shall be entitled to recover from the other
party or parties upon final judgment on the merits reasonably attorneys' fees,
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
[The remainder of this page has been left blank intentionally. The
signature page follows.]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement,
effective as of the date first above written.
GARDEN STATE NUTRITIONALS, a
division of Vitaquest International, Inc.
/s/ Xxxxx Xxxxxxx
----------------------------
By: Xxxxx Xxxxxxx
Its: President and C.E.O.
HEALTH & NUTRITION SYSTEMS INTERNATIONAL, INC.
/s/ Xxxxxxxxxxx Xxxx
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By: Xxxxxxxxxxx Xxxx
Its: Chief Executive Officer
