EXCLUSIVE SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made and entered into as of
the 5th day of May, 1997 by and between PDK Labs Inc., a New York corporation
("PDK") and Body Dynamics, Inc., an Indiana corporation ("BDI").
W I T N E S S E T H:
WHEREAS, PDK is engaged in the business of manufacturing, marketing and
distributing vitamins, herbs and non-prescription pharmaceutical products; and
WHEREAS, PDK owns and operates a factory for the manufacture of
vitamins and non- prescription pharmaceutical products; and
WHEREAS, BDI is engaged in the business of marketing and distributing
vitamin, herbs and non-prescription pharmaceutical products; and
WHEREAS, PDK and BDI wish to enter into an agreement whereby PDK
supplies certain products containing ephedrine and pseudoephedrine to BDI's
customers; and
WHEREAS, BDI acknowledges that PDK may incur substantial expenses and
will expend significant resources in order to acquire additional equipment,
incur obligations and employ additional personnel in order to fulfill its
obligations to BDI under this Agreement.
NOW, THEREFORE, the parties for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, agree as follows:
1. Exclusive Sale of Products.
(a) Commencing from the date of this Agreement, and during the
term hereof (the "Term"), as defined at paragraph 3 hereof, BDI and its
successors, assigns, subsidiaries and affiliates (collectively, "BDI") agree
upon the terms of this Agreement that PDK shall be the exclusive supplier of all
products containing ephedrine and/or pseudoephedrine as a single ingredient or
in combination with other ingredients, which BDI distributes or markets within
the United States ("US") as set forth on Schedule 1.1 hereof (the "Products")
for sale to BDI's customers (the "Customer").
(b) Nothing herein shall restrict or limit in any manner the
right of PDK to sell any products (whether such products contain ephedrine,
and/or pseudoephedrine or not; except that PDK shall not, during the term of
this Agreement, sell any Products to the Customers except pursuant to, and in
accordance with, the terms hereof.
(c) BDI shall be responsible for all marketing and sales
efforts and all costs relating thereto, including, without limitation, trade
shows, brokers' commissions and advertising expenses.
(d) BDI shall ensure that all terms of this Agreement relating
to the sale and delivery of Products to the Customers are included in any
contract or agreement between the Customers and/or BDI and PDK.
(e) PDK represents and warrants that the Products it
manufactures for supply to BDI are produced in compliance with good
manufacturing practices as stated in the Code of Federal Regulation Parts 210 &
211.
2. Term of Agreement.
(a) The term of this Agreement (the "Term") shall commence on
the date hereof (the "Effective Date") and shall continue for a period of three
(3) years, and thereafter will be automatically renewed for successive one (1)
year terms unless either party provides written notice of intent to terminate
the Agreement as set forth in paragraphs (b), (c), (d) and (e) below.
(b) BDI may give PDK a minimum of thirty days' written notice
of intent to terminate this Agreement from and after the first day of the
eleventh month from and after the Effective Date, provided that BDI shall pay
PDK the sum of Two Million Dollars ($2,000,000) (the "Termination Fee") on the
date such notice is given.
(c) BDI may give PDK three months' written notice of intent to
terminate this Agreement from and after the first day of the twenty first month
from and after the Effective Date, without payment of the Termination Fee or any
part thereof.
(d) PDK may, at its sole option and in its sole discretion,
for any reason whatsoever, give BDI written notice to terminate this Agreement
at any time upon such date as PDK shall set forth.
(e) BDI may give PDK written notice of its intent to terminate
this Agreement at any time prior to August 1, 1997, if BDI has received written
evidence permitting PDK to supply the Product to BDI from the Drug Enforcement
Administration or a United States District court.
(f) The parties hereto shall execute and deliver to PDK, to be
held in escrow by PDK, an Exclusive Supply Agreement in the form of Exhibit A
attached hereto (the "Alternate Agreement"). In the event of any termination of
this Agreement by PDK or BDI, under Section 2(d) or (e) above at PDK's sole
option and discretion, the Alternate Agreement shall be released from escrow and
shall become effective as of the date of termination of this Agreement for a
period of three (3) years therefrom, as set forth in the Alternate Agreement.
2
3. Placement and Acceptance of Orders; Delivery Schedule..
(a) PDK shall not be obligated to manufacture for
distribution, or supply to any Customer any item, and shall have the right to
reject any order, in whole or in part, whether based upon geographic location,
Customer identity, regulatory standards, requirements or concerns or otherwise.
In such event, all provisions of this agreement will continue to remain in full
force and effect and BDI is prohibited from assisting such customer from
obtaining the Product from any other source.
(b) BDI will not market any Product supplied by PDK hereunder
to any party or entity that BDI knows, or has reason to know or reason to be
suspicious, will utilize such product in any manner that is inconsistent with or
contrary to prevailing federal and state regulations or laws, including the
rules and regulations of any state or federal regulatory organization.
4. Exclusive Supply Rights
4.1 Rights Granted.
(a) BDI hereby grants to PDK the exclusive right (the "Supply
Rights") to supply to the Customers the Products bearing such names and
consisting of the components set forth in Schedule 4.1 hereto (the "Supplied
Products"). During the Term, BDI will not grant any distribution rights, supply
rights or license for the Supplied Products to any other person, without the
express written consent of PDK.
(b) BDI agrees to disclose to PDK all information,
documentation and related materials within its possession or knowledge in
connection with the Supplied Products, including but not limited to distributor
and customer lists, sales contracts, customer credit history, price, sale terms,
any rebates or other negotiated contracts, either oral or written, verbal
promises or other deals relating to the sale or distribution of the Supplied
Products, any existing pending or potential litigation claims relating or
involving the Supplied Products, any existing or pending rulings or regulations
relating to or involving the use of the Supplied Products, and any other
information that PDK may request in connection with carrying out the terms of
this Agreement. PDK agrees to receive such information subject to the
restrictions imposed by all regulatory laws and shall exercise the standards of
care utilized by PDK treating its own information which it does not wish
disclosed outside PDK; provided, however, that this restriction shall not be
construed to limit the rights granted by BDI to PDK under the terms of this
Agreement.
(c) In consideration for the Supply Rights, PDK agrees to pay
to BDI a fee ("Fee") as follows: PDK shall pay BDI the difference between (i)
the purchase price for the Supplied Products as billed to the Customer, and (ii)
an amount equal to two hundred percent (200%) of the Material Cost of the
Supplied Products. "Material Cost" shall mean PDK's actual material expenses
incurred in the manufacture and packaging of the Supplied Products. The Material
Costs for each item ordered will be determined, in advance, each forty-five (45)
days
3
during the term of this Agreement. Upon written request from BDI, PDK will
provide to BDI an MRP Schedule reflecting PDK's Material Cost per item. PDK
shall receive a premium of (i) five cents (5(cent)) per vial on any products
packaged in a vial containing 100 count or less and (ii) eight cents (8(cent))
per vial on any product packaged in a vial containing greater than 100 count.
The Fee is payable monthly, in arrears, within fifteen (15) days of the end of
the month in which PDK received payment for the related Supplied Products and is
only payable upon receipt of the purchase price from the related Customer.
(d) The Fee shall be deemed to exclude a shipping allowance of
1(cent) per bottle (the "Shipping Allowance"). To the extent the actual shipping
costs exceed the Shipping Allowance, then PDK shall offset such amount against
the next installment of the Fee.
(e) PDK has the absolute right in its sole and absolute
discretion, if an invoice remains unpaid for a period in excess of 150 days to
offset 100% of the material cost of the Supplied Products delivered pursuant to
the delinquent invoice, against the next installment of the Fee.
(f) PDK agrees to be responsible for all returns of Supplied
Products sold from and after the date of this contract.
(g) If BDI terminates this agreement pursuant to any of the
provisions hereof, PDK shall have ten (10) days to offer to sell to BDI the
finished goods of the Products in PDK's inventory at a price of 200% of Material
Cost. BDI shall have ten (10) days to accept such offer and upon such acceptance
PDK shall ship the finished goods (with 60 day credit terms). If BDI shall not
accept such offer, PDK shall have the right to sell the finished goods in its
sole and absolute discretion.
(h) PDK must use its best efforts to obtain the lowest
material cost with respect to the manufacturing and packaging of Supplied
Products.
4.2 Exclusivity.
(a) The Supply Rights granted to PDK pursuant to this Section
are exclusive and BDI shall not grant any right to distribute the Supplied
Products to the Customers to any other party during the Term (except as
otherwise set forth in this Agreement).
4.3 Indemnification.
(a) BDI hereby agrees to indemnify and hold PDK, its officers,
directors, agents, servants, employees, subsidiaries and affiliates, harmless
from and against any and all claims, suits, demands, losses, liabilities,
damages, court costs, (including reasonable attorneys' fees), whether based in
contract or in tort, arising out of or related to, or as a consequence of any
act or omission of BDI relating to the Supplied Products.
4
(b) PDK hereby agrees to indemnify and hold BDI, its officers,
directors, agents, servants, employees, subsidiaries and affiliates, harmless
from and against any and all claims, suits, demands, losses, liabilities,
damages, court costs, (including reasonable attorneys' fees), whether based in
contract or in tort, arising out of or related to, or as a consequence of any
act or omission of PDK relating to the Supplied Products.
4.4 Termination of Supply Rights.
(a) PDK shall have the right to terminate the Supply Rights at
its sole discretion, at any time, upon being advised that any regulatory
authority objects to the sale of the Supplied Products by PDK to the Customers.
(b) In addition, in the event any regulatory agency restricts
or denies further use of any trademarks used by PDK in connection with the
Supplied Products, all rights and obligations of the parties relating to the
Supply Rights shall remain in effect, except that the Supplied Products will be
marketed under a name or names mutually acceptable to PDK and BDI and consistent
with the determination of such regulatory authorities.
(c) PDK shall not have the right or authority to substitute
another brand for any order that calls for the BDI brand with out the express
written consent of BDI.
(d) PDK shall properly package and timely ship all orders from
BDI for shipment to BDI's customers consistent with BDI's instructions relating
thereto. PDK shall not, with regard to the shipment of Supplied Products to
BDI's customers, use any art, text, labels or packaging which has not been
specifically approved by BDI, nor may PDK change, alter or modify any such art,
labels, text or packaging with out BDI's specific written approval to do so.
5. Termination of Agreement.
(a) BDI acknowledges that it shall have earned income from its
performance under this Agreement, and that in the event of termination of this
Agreement for any reason, the income earned thereby shall constitute its sole
earnings, and it shall not be entitled to reimbursement, lost profits or
indemnity payments of any kind. However, upon the expiration or termination of
this Agreement, PDK shall return to BDI, all items that were supplied by or paid
for by BDI within fifteen (15) days. This includes, but is not limited to,
customer information and tooling.
(b) Any failure by either party to terminate this Agreement
pursuant to Clauses 2(b), (c), (d), or (e) hereunder and the Supply Rights
pursuant to Clause 4.4 hereunder by reason of one or more of the foregoing acts
or events shall not constitute a waiver of the right to terminate this Agreement
and the Supply Rights hereunder upon reoccurrence or continuance of such acts or
events.
5
6. Representations and Warranties of BDI. BDI (including all of its
subsidiaries and affiliates) represents and warrants to PDK as follows:
6.1 Organization and Qualification. BDI is a corporation validly
existing and in good standing under the laws of the State of Indiana, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. BDI is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of BDI.
6.2 Subsidiaries and Affiliates. Except as set forth on Schedule 6.2
hereof, BDI has no subsidiaries or affiliates.
6.3 Validity and Execution of Agreement. BDI has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The stockholders and the board of directors of BDI has approved
the transactions contemplated pursuant to this Agreement. This Agreement has
been duly executed and delivered by BDI and constitutes the valid and binding
obligation of BDI enforceable against it in accordance with its terms.
6.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by BDI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
By-laws or other organizational documents of BDI; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any lien in or upon their respective assets or constitute a default (or an event
which might, with the passage of time or the giving of notice, or both,
constitute a default) under any contract, (c) any order, judgment, regulation or
ruling of any governmental or regulatory body to which BDI are a party or by
which any of its property or assets may be bound or affected or with any
provision of any law, rule, regulation, order, judgment, or ruling of any
governmental or regulatory body applicable to BDI.
6.5 Licenses and Permits. BDI maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local) which are necessary in connection with its operations and properties, and
no others are required. All such permits, licenses, registrations and consents
are in full force and effect and in good standing and shall continue to be in
full force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.
6.6 Compliance with Laws. BDI has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental
6
or regulatory body, court or arbitrator affecting the business or the assets the
failure to comply with which could have a material adverse effect on the
business of BDI.
6.7 Products. There are no statements, citations or decisions by any
governmental or regulatory body that any product marketed or distributed at any
time by BDI is defective or fails to meet in any material respect any standards
promulgated by any such governmental or regulatory body. There have been no
recalls ordered by any such governmental or regulatory body with respect to any
product. To the best knowledge of BDI, there is no (a) fact relating to any
product that may impose upon the Companies a duty to recall any product or a
duty to warn customers of a defect in any product, other than defects about
which BDI has issued appropriate and adequate warnings or (b) latent or overt
design, manufacturing or other defect in any product.
6.8 Survival. All of the representations and warranties of BDI
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.
7. Representations and Warranties of PDK.
7.1 Organization and Qualification. PDK is a corporation validly
existing and in good standing under the laws of the State of New York, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. PDK is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of PDK.
7.2 Subsidiaries and Affiliates. Except as set forth on Schedule 7.2
hereof, PDK has no subsidiaries or affiliates.
7.3 Validity and Execution of Agreement. PDK has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The board of directors of PDK has approved the transactions
contemplated pursuant to this Agreement. This Agreement has been duly executed
and delivered by PDK and constitutes the valid and binding obligation of PDK
enforceable against it in accordance with its terms.
7.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by PDK of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
By-laws or other organizational documents of PDK; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any lien in or upon their respective assets or constitute a default (or an event
which
7
might, with the passage of time or the giving of notice, or both, constitute a
default) under any contract, (c) any order, judgment, regulation or ruling of
any governmental or regulatory body to which PDK are a party or by which any of
its property or assets may be bound or affected or with any provision of any
law, rule, regulation, order, judgment, or ruling of any governmental or
regulatory body applicable to PDK.
7.5 Insurance and Indemnification. At all times during the Term and for
two (2) years thereafter, PDK agrees to be responsible for maintaining products
liability coverage on all products sold to the Customers hereunder. Such
coverage shall be in an amount not less than $3 million, per occurrence. BDI
shall be named as an additional insured on any and all products liability
policies maintained by PDK. Each such policy shall require the insurance carrier
to give at least thirty (30) days but not more than ninety (90) days written
notice to BDI of cancellation. PDK shall provide proof of adequate insurance
coverage to BDI at least annually. Any failure by PDK to maintain the foregoing
insurance shall entitle BDI to terminate this Agreement with out payment of any
termination fee.
7.6 Survival. All of the representations and warranties of PDK
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.
8. Force Majeure. PDK shall not be liable for any delay or failure to
perform in accordance with this Agreement if such delay or failure to perform is
a result of a strike, lock-out or other labor dispute; riot, insurrection, civil
disturbance or other hostility; embargo; inability or delay in obtaining fuel,
energy, equipment or power; inability or delay in obtaining labor or materials;
inability or delay in obtaining government approvals, permits or licenses;
inability or delay in obtaining transportation or other services; fire, flood,
lightning, storm, earthquake, or other Act of God; or is a result of causes
beyond PDK's reasonable control including but not limited to governmental
actions or inactions.
9. Injunctive Relief.
(a) BDI acknowledges that PDK will incur considerable expenses
in connection with the purchase of equipment and materials and the employment of
personnel in order to fulfill its obligations under this Agreement. BDI further
acknowledges that its obligations to PDK hereunder are of a special, unique and
extraordinary character, and would be difficult or impossible to replace and
that any breach of this Agreement by BDI would result in irreparable and
continuing damages to PDK for which there would be no adequate remedy at law.
Accordingly, BDI agrees that any breach or threatened breach by it of this
Agreement shall entitle PDK, its successors and assigns, to injunctive relief,
and to such further relief as may be proper, including damages at law and
equitable relief, and further agrees to hold PDK harmless from, and indemnify
PDK from any losses or damages sustained, including lost profits, and any
expenses incurred, including attorneys fees, arising out of any breach by BDI of
this Agreement. The parties understand and intend that each restriction agreed
to by BDI hereinabove shall be
8
construed as separable and divisible from every other restriction, that the
unenforceability of any restriction shall not limit the enforceability, in whole
or in part, of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances warrant.
In the event that any restriction in this Agreement is more restrictive than
permitted by law in the jurisdiction in which PDK seeks enforcement thereof,
such restriction shall be limited to the extent permitted by law. Nothing
contained herein shall waive or limit any right or remedy which PDK may have,
either in law or equity, to enforce this Agreement and its rights hereunder.
(b) PDK acknowledges that BDI will incur considerable expenses
in connection with its obligations under this Agreement. PDK further
acknowledges that its obligations to BDI hereunder are of a special, unique and
extraordinary character, and would be difficult or impossible to replace and
that any breach of this Agreement by PDK would result in irreparable and
continuing damages to BDI for which there would be no adequate remedy at law.
Accordingly, PDK agrees that any breach or threatened breach by it of this
Agreement shall entitle BDI, its successors and assigns, to injunctive relief,
and to such further relief as may be proper, including damages at law and
equitable relief, and further agrees to hold BDI harmless from, and indemnify
BDI from any losses or damages sustained, including lost profits, and any
expenses incurred, including attorneys fees, arising out of any breach by PDK of
this Agreement. The parties understand and intend that each restriction agreed
to by PDK hereinabove shall be construed as separable and divisible from every
other restriction, that the unenforceability of any restriction shall not limit
the enforceability, in whole or in part, of any other restriction, and that one
or more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which BDI seeks
enforcement thereof, such restriction shall be limited to the extent permitted
by law. Nothing contained herein shall waive or limit any right or remedy which
BDI may have, either in law or equity, to enforce this Agreement and its rights
hereunder.
10. Nondisclosure. Neither party, nor any person controlled by it,
shall for any reason other than fulfilling it obligations hereunder, directly or
indirectly, for itself or any other person, use or disclose any trade secrets or
confidential information, know-how or proprietary information relating to the
other party, except to the extent (i) within the public domain; or (ii) pursuant
to a subpoena, court order or applicable law.
11. Relationship of the Parties. The relationship of the parties
created hereby is that of independent contractors, and neither party shall have
any right or authority to create or assume any obligation of any kind on behalf
of the other.
12. Disclaimer of Warranties. PDK makes no other representations or
warranties except as set forth in this agreement, and PDK expressly disclaims
any implied warranties of merchantability, fitness for use or fitness for a
particular purpose.
9
13. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telefaxed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission and
confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 13):
If to PDK, to:
PDK Labs Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
If to BDI, to:
Body Dynamics, Inc.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx-Xxxxxxx
14. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Neither party shall assign any of its rights or delegate any of its
duties or obligations hereunder without the prior written consent of the other
party. Notwithstanding the foregoing, the parties hereto do not intend to create
hereby, and this Agreement shall not be read or construed to create or grant,
any rights or benefits in or for any person or entity other than the parties
hereto and any and all such third party rights or benefits are hereby expressly
disclaimed and denied.
15. Governing Laws. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law, and the parties irrevocably agree to submit any
controversy or claim arising out of or relating to this Agreement to a court of
competent jurisdiction located in the State of New York. The parties agree that
any proceedings arising out of, relating to, or brought for the purpose of
enforcing this Agreement, or remedying any breach thereof shall be instituted in
the courts of the State of New York, and in no other jurisdiction.
16. Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.
10
17. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
18. Amendment. This Agreement may be amended only by a writing signed
by all parties hereto.
19. Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to its subject matter and supersedes any
prior arrangements or understandings (written or otherwise) between them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date written above.
PDK LABS INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------
BODY DYNAMICS, INC.
By: /s/ Xxxxx Xxxxxx-Xxxxxxx
-----------------------
