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Exhibit 10.7
[Portions of this Exhibit have been omitted pursuant
to a Request for Confidential Treatment]
Brackets [ ]" ARE USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT HAS BEEN
OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE OMITTED
PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT.
EXCLUSIVE
CUSTOM MANUFACTURING AGREEMENT
This Exclusive Custom Manufacturing Agreement ("Agreement") is made
effective this _____ day of January, 2005, by and between [REDACTED -
CONFIDENTIAL TREATMENT REQUESTED]* ("Contractor") and Pacifichealth
Laboratories, a Delaware corporation with its principal offices at 000 Xxxxxxx
Xxxx, Xxxxx 000, Xxxxxxx, XX 00000-0000 ("PHL").
1. PRODUCTS. This Agreement is for the processing, manufacturing, and packaging
on an exclusive basis of nutritional supplements and other items, as more
particularly identified in Exhibit A ("Products") by PHL, according to the
formulas, specifications and procedures set forth in Exhibit B, as such
formulas, specifications and procedures may be amended from time to time by PHL
(the "Specifications"). Products may be added to Exhibit A by the mutual
agreement of the parties. Products shall be distributed by PHL under labels,
trademarks and trade names designated by PHL.
2. TERM; TERMINATION. This Agreement shall be effective as of the date first
written above and shall continue for a period of one (1) year without
interruption, and thereafter shall continue year to year thereafter unless
terminated by either party on ninety (90) days written notice to the other
party. This Agreement may be terminated by either party at any time during the
term and any extension thereof for a material breach of this Agreement by the
other party, such termination to be effective immediately upon delivery to the
defaulting party specifying the nature of such breach and defaulting party's
failure to remedy the breach within ten (10) days of its receipt.
3. PRICES. Products shall be purchased from Contractor at the prices set forth
in Exhibit A, as the same may be modified annually by the mutual agreement of
the parties. In the event the parties are unable to agree on a proposed revision
of the price for a particular Product, then the price of such Product shall be
extended and such
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Product may be removed from this Agreement by PHL pursuant to paragraph 1 or by
Contractor upon at least sixty (60) days advance written notice to PHL.
4. PURCHASE ORDER,PRODUCT SCHEDULEING. Contractor agrees to sell, and PHL agrees
to purchase the quantity specified in each Purchase Order. It is agreed that a
variation of plus or minus ten (10%) from the Purchase Order quantity may be
invoiced and will be accepted by PHL based upon the actual production run
amount. Lead times are approximately six (6) weeks from receipt of a complete
Purchase Order to date of shipment and will be no greater than eight (8) weeks;
however, lead times may drop to four (4) weeks for emergency shipments or during
periods of high demand. PHL may notify or cancel an unproduced but scheduled
Purchase Order at any time up to ten (10) days prior to scheduled production
date without incurring additional charges. In the event Contractor is unable to
certify that it will produce the requirements of a Purchase Order with a lead
time of eight (8) weeks or less, PHL may have the requirements under such
Purchaser Order manufactured elsewhere. Should PHL cancel or delay any Purchase
Order accepted by Contractor, then PHL is responsible for any and all "special
ingredients" (i.e. ingredients or packaging used exclusively in PHL products)
purchased by Supplier for the production of a canceled or delayed Purchase
Order, provided such special ingredients cannot be used by Contractor to fulfill
other Purchase Orders placed by PHL. If PHL does not place other Purchase Orders
that would give Contractor the opportunity to use such special ingredients
within a reasonable time then Contractor shall, at PHL's option and expense,
dispose of special ingredients or ship the special ingredients as requested by
PHL. . Purchase orders will be placed in quantities not less than 8,000 lbs. per
formulation (blend).
5. PAYMENT TERMS. [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* PHL shall pay
invoices within [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* days after xxxx
of lading date.
6. QUANTITY. Contractor shall process, manufacture, accurately weigh, package,
palletize, warehouse and load PHL Products and supply quantities of Products
specified by PHL on dates as PHL shall direct. All finished product shall at all
times be kept free and clear from all encumbrances.
7. PHL TO FURNISH. (a) Packaging Materials: PHL shall provide labels and coupons
necessary for packing Products covered by the Agreement. PHL shall deliver, or
cause to be delivered, only such quantities of these items as are mutually
agreed upon by the parties, based upon Contractor's storage capacity and PHL's
product needs. (b) Art Work and Design: PHL, at its expense, agrees to provide
art work, printing plates and design work which is necessary to produce labeling
components for Products during the term of this Agreement. PHL shall furnish and
Contractor shall use PHL's batch or date codes, which codes shall be printed or
embossed on all packages of the Products in accordance with PHL's standard
practice. (c) Equipment: PHL may furnish certain items of equipment, to be
mutually agreed upon by the parties, for use by Contractor in the manufacture of
Products. Said items of equipment supplied by PHL shall at all times be
designated and labeled as PHL's property, shall be used only for the manufacture
of PHL's Products and no other products, and shall be promptly returned to PHL
upon request. A list of the equipment provided by PHL is attached to this
Agreement as Exhibit C.
8. CONTRACTOR TO FURNISH. (a) Raw Materials: Contractor shall provide all raw
materials and packaging materials not covered in paragraph 7 necessary for the
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manufacture of the Products. (b) Labor and Maintenance: Contractor shall provide
all necessary labor, administrative, quality control, maintenance and
supervisory staff necessary to fulfill its obligations under this Agreement. (c)
Equipment: Contractor shall furnish all equipment necessary to manufacture
Products except those items of equipment supplied by PHL, as set forth in the
preceding paragraph. (d) Packaging Materials: Contractor shall provide all
packaging materials not specified in paragraph 7, to include master shipping
cartons, inside cartons, and master shipping labels necessary for packing
Products covered by this Agreement . Upon termination of this agreement or
discontinuance of a sku, PHL shall be responsible to purchase any unique
ingredients in Contractor's possession provided quantities on hand do not exceed
a six (6) month supply based on prior orders.
9. PRODUCTION AND QUALITY CONTROL. Contractor shall produce all Products
manufactured pursuant to this Agreement according to the Specifications and in
compliance with all federal, state and local laws. Contractor shall send
production samples to PHL at PHL's expense for examination and testing to assure
conformity with the Specifications. If examination of such samples reveals that
the production in question fails to conform to the Specifications or the "Pure
Food Guaranty" set forth below, Contractor shall dispose of such production in a
manner agreed to by both parties. Any lot of Products (i.e., an entire days
production, including rework and secondary products from the sampled lot) tested
for the presence of pathogens shall be withheld from shipment until acceptable
laboratory results are obtained. PHL may, during normal business hours and on
notice, have access to Contractor's plant and production records and quality
control records with respect to Contractor's performance under this Agreement.
10. CONTAMINATION & GUARANTEE. Contractor warrants and guarantees that all
Products produced or delivered to PHL are of merchantable quality, pure and free
from defects and at the time of shipment are (a) in compliance with the laws,
rules, regulations, requirements and various programs administered pursuant to
the Wholesome Meat and Poultry Products Acts or the Federal Food, Drug and
Cosmetic Act, as applicable, and any other applicable federal, state or local
food and drug law then in effect; and (b) wholesome, not adulterated or
misbranded within the meaning of the Wholesome Meat and Poultry Products Acts or
the Federal Food, Drug and Cosmetic Act, as applicable, and otherwise in
compliance with all applicable federal, state and local laws.
11. INSURANCE. Contractor shall maintain and keep in force adequate fire and
extended coverage insurance covering the selling of all finished product, and
the replacement value of all equipment, packaging materials and ingredients
supplied by PHL. This insurance shall include "all risk" coverage for PHL's
packaging materials and finished product. Contractor further agrees to carry
Workers Compensation insurance as required by the laws of the State of
Wisconsin. Contractor also agrees to carry commercial general liability
insurance with minimum limits of $500,000 for each occurrence, including
coverage for products liability and operations liability with a $1,000,000
umbrella as supplementary protection. These policies shall be with carriers with
a B or better rating through Bests Cumulative Rating. PHL acknowledges that
Contractor is self-insured on matters of this type and such self-insurance
satisfies the requirements set forth herein.
12. PRODUCT RECALL. In the event that it is deemed necessary or appropriate by
PHL, either in response to government action or otherwise, to recall any
Products produced by Contractor pursuant to this Agreement due to Contractor's
negligence, Contractor agrees to be responsible for all costs of such recall and
recovery.
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13. PROPRIETARY AND TRADEMARK RIGHTS. Contractor hereby recognizes PHL as owner
or licensee of its trademarks and labeling used on packaging and Contractor
shall not acquire any rights, title or interest to trademarks or other label
features owned or licensed by PHL and applied to the containers of Products
pursuant to this Agreement. Contractor shall not sell to any person other than
PHL or persons designated by PHL any of the Products produced under this
Agreement.
Any manufacturing processes or procedures, and ideas relating thereto, arising
from Contractor's efforts in connection with this Agreement shall be the
property of Contractor; provided that if PHL, or a independent consultant acting
on behalf of PHL, substantially participates in the development of such process,
procedure or idea, then PHL shall have a non-exclusive right to use such
development. Any develop or idea relating to the formulations and specifications
of the Products developed during the performance of this Agreement shall be
owned by PHL.
14. CONFIDENTIALITY. The parties recognize the secret and proprietary nature of
certain information shared with each other, including without limitation product
formulas, specifications, and procedures, product volume and cost information,
product destinations and customers, and processing and manufacturing information
("Confidential Information"). The disclosing party shall endeavor to xxxx all
written disclosures of its own confidential information as "CONFIDENTIAL" and
the receiving party shall xxxx as "CONFIDENTIAL" any writings made by it that
contain any of the disclosing party's confidential information; provided, that
the failure of any such written disclosure or writing to be so marked shall not
affect the confidentiality of such information.
Both parties shall keep Confidential Information received from the other party
strictly confidential and shall not use, except as expressly provided for in
this Agreement, or disclose to others such Confidential Information.
The secrecy obligations herein shall cease to apply to Confidential Information
after the earliest date on which the receiving party provides the disclosing
party with written evidence clearly establishing that such Confidential
Information: (a) has become generally known to the public in the U.S.A. through
no fault of the receiving party; or (b) was known to the receiving party and its
value appreciated before it was obtained from the disclosing party; or (c) has
been disclosed to the receiving party free of any obligation of confidentiality
by a third party who has the right to disclose the same and who did not derive
the information from the disclosing party. The secrecy obligations contained
herein shall survive the expiration or termination of this Agreement.
The parties each acknowledge that the Confidential Information which they
receive from the other is the property of the disclosing party, and the
receiving party has no claim of ownership to the Confidential Information of the
other party. At the written request of the disclosing party, the receiving party
shall promptly return to the disclosing party any documents provided by the
disclosing party containing any Confidential Information, and the receiving
party shall segregate in a separate file or destroy any documents generated by
the receiving party which contain Confidential Information of the disclosing
party.
15. FORCE MAJEURE. Neither party shall be liable for damages due to failure to
perform any obligation under this Agreement if such failure is due to strike or
other labor difficulties, breakdown or damage to plant facilities, acts of war,
civil commotions, acts of any government or governmental authority, interference
in telephone or electronic communications, fire, flood, windstorms, or other
acts of God,
4
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CONFIDENTIAL
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or any cause of a like or different kind beyond the reasonable control of such
party. If, however, any failure to perform which is otherwise excusable under
this provision continues for more than ten (10) days, then the other party shall
be entitled to terminate this Agreement at any time during such continuing
failure to perform by giving the nonperforming party written notice of such
termination.
16. POST-TERMINATION. Upon termination of this Agreement for any reason
Contractor agrees to promptly ship to PHL, at PHL's expense, all unused
PHL-owned materials and all PHL-owned equipment. PHL agrees to purchase from
Contractor all finished goods which Contractor has manufactured in accordance
with PHL's orders and specifications, at prices set forth herein, and similarly
all authorized work then in process upon its completion. Contractor hereby
agrees that upon termination of this Agreement, it shall immediately discontinue
any and all uses of PHL's trademarks, trade names and artwork and shall promptly
return any and all items upon which PHL's trademarks or trade names appear to
PHL.
17. TRANSPORTATION AND PALLET EXCHANGE. Contractor shall properly palletize
Product per PHL's pallet pattern specifications. PHL shall be responsible for
selecting carriers for transporting of finished products and supplies. Pallets
shall be billed as a separate line item to PHL.
18. NOTICES. All notices, requests and demands to or upon either party shall be
in writing and shall be deemed given: (a) upon delivery by hand; (b) one
business day after being sent by overnight courier; (c) three business days
after being deposited in the United States mail, postage prepaid; or (d) upon
transmission by facsimile, with confirmation. Such communications shall be
addressed to the parties as follows, or to such other address as either party
may designate in a notice to the other party:
[REDACTED - [REDACTED - CONFIDENTIAL
CONFIDENTIAL TREATMENT REQUESTED]*
TREATMENT
REQUESTED]*:
(Contractor)
Pacific HealthLabs: Pacifichealth Laboratories, Inc.
(PHL) 000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, XX 00000-0000
Attention: Chief Financial Officer
Facsimile no.: (000) 000-0000
cc: Xxxx X. Xxxxxx, Fax 000-000-0000
19. GOVERNING LAW. This Agreement and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Wisconsin, U.S.A. without regard to conflict of laws principles.
20. ALTERNATIVE DISPUTE RESOLUTION. Except with respect to injunctive relief as
provided in paragraph 15., the parties agree to explore the use of mediation and
arbitration to resolve any claim or dispute between the parties arising out of
or relating to this Agreement; provided, however, this paragraph 23. shall not
obligate either party to submit any such claim or dispute to mediation or
arbitration.
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21. JURISDICTION AND VENUE. PHL consents to the personal jurisdiction and venue
of the Federal and State Courts of the State of Wisconsin, U.S.A. with respect
to any matter arising from the breach or performance of this Agreement..
22. MISCELLANEOUS. (a) Independent Contractor: It is specifically understood and
agreed that in the performance of this Agreement and for all other purposes
[REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* is an independent contractor and
not the agent of PHL. (b) Entire Agreement: Except for any executed secrecy
agreement between the parties, this Agreement constitutes the entire agreement
between Contractor and PHL and supersedes any prior or contemporaneous oral or
written agreement or understanding between the parties with respect to the
subject matter hereof. Any Custom Manufacturing Agreement between the parties
relating to the Products in effect on the effective date of this Agreement shall
be deemed amended and restated in its entirety by this Agreement. (c) Amendment:
This Agreement may be amended or supplemented only in a writing signed by
authorized representatives of both parties, and not by any course of dealing or
prior performance. (d) Waiver: The failure of either party to enforce at any
time any of the provisions of this Agreement, or to exercise any right which is
herein provided, or to require at any time performance by the other party of any
of the provisions hereof, shall in no way be construed to be a waiver of such
provisions, nor in any way affect the validity of this Agreement or any part
thereof, or the right of either party to thereafter enforce each and every such
provision. No waiver shall be valid unless in a writing signed by the waiving
party and then only to the extent specified. (e) Remedies: In the event of a
default by the other party, each party shall have the right to pursue any and
all remedies available at law or in equity, including without limitation any
remedies granted such party by this Agreement. The pursuit of any one or more
remedies shall not foreclose the pursuit of any other remedies which may be
available and the remedies shall be considered cumulative and not exclusive. (f)
Exhibits: All Exhibits attached hereto are expressly made a part of this
Agreement. (g) Severability: If any term or provision of this Agreement is held
to be illegal or in conflict with any federal, state or local law or regulation,
the validity of the remainder of this Agreement shall not be affected, and the
rights and obligations of the parties shall be construed and enforced as if this
Agreement did not contain the particular term or provision held to be invalid.
(h) Counterparts: This Agreement may be executed in one or more counterparts,
all of which taken together shall constitute one document.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives effective as of the date first above
written.
[REDACTED - CONFIDENTIAL PACIFICHEALTH LABORATORIES, INC.
TREATMENT REQUESTED]* (PHL)
(Contractor)
By: ___________________________ By: _______________________________
Its: __________________________ Its: ______________________________
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EXHIBIT A
PRODUCTS AND PRICES
PRODUCT: DESCRIPTION: PRICE:
AC07BR06 77400-Accelerade, BR, 28 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07BRLS06 77450-Accelerade, BR, 56 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07FP006 77300-Accelerade, FP, 28 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07FPLS006 77350-Accelerade, FP, 56 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07LL06 77200-Accelerade, LL, 28 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07LLLS006 77250-Accelerade, LL, 56 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07MSBR06 77420-Accelerade, BR, 12 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07MSFP06 77320-Accelerade, FP, 12 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07MSLL06 77220-Accelerade, LL, 12 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07MSTO06 77120-Accelerade, TO, 12 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07SSLL200 77896-Accelerade SS Packets-LL [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07TO06 77100-Accelerade, TO, 28 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07TOLS006 77150-Accelerade, TO, 56 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
AC07TOSS200 77895-Accelerade SS Packets-TO [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
CD12CH006 79500-Countdown, CH, 14-servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
CD12LSCH006 79550-Countdown, CH, 28-servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
CD12LSVN006 00000-Xxxxxxxxx, XX, 28-servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
CD12VN006 00000-Xxxxxxxxx, XX, 14-servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN050006 71700-EnduroxR4, FP, 14 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05CH006 72500-EnduroxR4, CH, 14 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05CHLS06 72550-EnduroxR4, CH, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05LL006 72100-EnduroxR4, LL, 14 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05LLLS06 72150-EnduroxR4, LL, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05LS06 71900-EnduroxR4, FP, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05SP200FP 71898-Single Serve 100pc. FP [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05SP200TO 71899-Single Serve 100pc. TO [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05T006 71800-EnduroxR4, TO, 14 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05TOLS06 71950-EnduroxR4, TO, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05VN006 72600-EnduroxR4, VN, 14 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
EN05VNLS06 72650-EnduroxR4, VN, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
MA14FP006 73300-MuscleAde, FP, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
XX00XX000 73200-MuscleAde, LL, 28 servs, [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
NT15CH006 74500-NTS Xxxxxxx, XX, 00 servs [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]*
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EXHIBIT B
SPECIFICATIONS
Products shall be processed, manufactured and packaged in accordance with the
attached "PHL and [REDACTED - CONFIDENTIAL TREATMENT REQUESTED]* Safety and
Quality Requirements," subject to additional modification from time to time by
mutual agreement.
Formulas, specifications and procedures for particular Products are attached.
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EXHIBIT C
CUSTOMER SUPPLIED MATERIALS
All labels, carton, pouch film, and all printed material
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EXHIBIT D
EQUIPMENT
NONE
