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PRODUCT SUPPLY AGREEMENT
This Agreement is entered into this 2nd day of November 1993 by and
between Eco Soil Systems, Inc., a Nebraska Corporation (hereinafter referred to
as Eco Soil) having its principal place of business at Suite 200, 00000
Xxxxxxxxx Xxxx, Xxx Xxxxx, XX 00000, and V.I.T. Product, Inc. a California
Corporation (hereinafter referred to as V.I.T.) having its principal place of
business at Suite 100, 00000 Xxxxxxxxx Xxxx, Xxx Xxxxx, XX 00000.
Whereas Eco Soil Systems has developed a proprietary and patented lake
treatment system that introduces and circulates oxygen and biological products
through a pond, lake, or similar body of water to restore and then maintain a
balanced eco system, thereby substantially reducing algae formations and blooms.
Whereas V.I.T. has produced a prototype of Eco Soil's lake restoration
system, and possesses the manufacturing ability and capacity to produce these
systems on a timely basis to specifications that will vary according to the
physical dimensions of the pond, lake, or body of water that these systems are
placed in;
Whereas, Eco Soil is developing opportunities to sell a substantial
number of its lake restoration systems to distributors and to golf courses,
agricultural customers, nurseries, etc., and desires to sub-contract the
production of these systems to V.I.T.;
Now therefore, in consideration of the mutual covenants and conditions
herein contained, the parties agree as follows:
SECTION 1. TERM:
The term of this Agreement is five years from the date of the
Agreement.
SECTION 2. APPOINTMENT:
Eco Soil hereby grants V.I.T. Products the exclusive rights to
manufacture and build the first one hundred fifty (150) lake
restoration systems that Eco Soil Systems sells in each twelve month
period. In the furtherance of such a grant, V.I.T. agrees to sell to
Eco Soil, subject to the terms and conditions stated herein these lake
restoration systems, and to refrain from producing these systems for
any other party.
SECTION 3. ECO SOIL'S OWNERSHIP OF THE LAKE RESTORATION SYSTEMS:
V.I.T. recognizes that Eco Soil Systems has designed the lake
restoration system and such design is covered by a patent that Eco Soil
Systems has filed on this design (U.S. Patent # 5,227,067) V.I.T.
agrees to disclose to Eco Soil all improvements and developmental work
which V.I.T. discovers during the manufacturing process and to work
with Eco Soil to the extent necessary in amending its patents so that
the improvements in technology so developed are covered in its amended
filings. V.I.T. recognizes that this is a contract manufacturing
agreement and all rights to and ownership in the lake restoration
system are the property of Eco Soil Systems.
SECTION 4. COST:
(A) COMPONENT COST BASIS:
Base cost for all components, both procured by or
manufactured/assembled by V.I.T., are according to Appendix
"A" attached to this agreement. Costs have been determined
based on a standard design of a system as shown in Appendix
"B". Both partners acknowledge that costs will change to the
extent that the design of the system is modified.
(B) COST:
V.I.T. will markup from base cost to determine sales price to
Eco Soil. Markup from base cost will be 25%. Because it is
anticipated that each installed system will vary in component
quantities, all equipment will be ordered, manufactured and
billed in component increments.
(C) BASE COST ADJUSTMENT:
The base cost may from time to time be adjusted due to
inflationary cost increases or in the event of cost decrease
generated by competitive downward pricing. The base cost may
also be adjusted upward or downward due to design changes.
V.I.T. will generate base cost adjustments requests for
approval by Eco Soil. Approval by Eco Soil will not be
unreasonably withheld.
(D) ECONOMIES OF VOLUME PROCUREMENT AND VOLUME PRODUCTION:
V.I.T. will vigorously seek price concessions for volume
buying on all procured items (submersible pump, metering pump,
electric and electronic components, ratcheting valve,
proprietary items as needed). Both parties agree that 67% of
any cost savings generated by volume purchasing will inure to
the benefit of Eco Soil and 33% will inure to the benefit of
V.I.T. Products.
V.I.T. Products will additionally vigorously strive to reduce
costs as a result of increased order quantities for items
manufactured and/or assembled. Reduced costs in the production
of manufactured or assembled items (control center, cradle,
valve distribution platform, distribution outlets) will be
shared 50/50 by the parties.
SECTION 5. INITIAL ORDER:
Eco Soil agrees that during the first twelve months of this
Agreement, that Eco Soil will order a minimum of 35 systems from V.I.T.
Eco Soil agrees with the execution of this document to issue V.I.T. a
Purchase Order for the first 10 of these 35 systems.
SECTION 6. TERMS OF ORDERS:
Eco Soil agrees to the following payment terms based on unit
order sizes.
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On Order On Delivery 30 Days from Delivery
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Initial 10 System Order 33% 33% 33%
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10 or less Systems 25% 33% 42%
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10-25 Systems 33% 33% 34%
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Over 25 Systems 40% 33% 27%
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SECTION 7. DELIVERY:
V.I.T. agrees to supply all systems ordered by Eco Soil
Systems, Inc within 60 days of the date of order for all orders under
25 systems. For orders that exceed 25 systems, V.I.T. agrees to supply
all systems ordered within 90 days of the value of the order. To assist
V.I.T. in efficiently scheduling its manufacturing, at least thirty
(30) days prior to the start of each calendar quarter, Eco Soil will
provide V.I.T. with a good faith quarterly forecast of the units it
expects to order by month. However, purchases will only be initiated by
Eco Soil's firm purchase orders.
SECTION 8. WARRANTY:
V.I.T. agrees to warrant that the lake restoration systems
will comply in all respects with the specifications therefor (or
amendments thereto) at the time of each such delivery and will be
suitable for their intended purpose. V.I.T. may disclaim liability to
end users of the system for any consequential damages or for loss,
damage or expense directly or indirectly arising from the use of the
system or from any other cause and may expressly limit its liability to
the replacement of defective material and not for any value added to
the material. Every claim on account of defective product or
workmanship or for any other cause shall be deemed waived by V.I.T.
unless made in writing within 180 days from Eco Soil's receipt of
products to which such claim relates. In no event will V.I.T. be liable
to endorsers for any special, consequential or contingent damages
resulting from breach of warranty, delay of performance or any other
cause. The V.I.T. warranty will not apply to systems or other products
altered in any way after leaving its control, unless such alterations
have been performed by V.I.T. or authorized by V.I.T. in writing.
SECTION 9. RISK OF LOSS:
Delivery shall occur and risk of loss shall pass to Eco Soil
when systems are on board common carrier as may be designated by Eco
Soil. V.I.T. shall not be liable for delays or damages in transit.
SECTION 10. RESULTS:
Each party agrees to promptly make available to one another
any and all results in development and experimentation with the
systems. Eco Soil will undertake to conduct field tests of the systems,
at its costs, the results of which shall promptly be made available to
V.I.T. at no cost to V.I.T.
SECTION 11. NON-DISCLOSURE:
Each party, recognizing that it or its agents or employees may
obtain knowledge of confidential matters, trade secrets and techniques
or other expertise developed by the other, agrees to take all
reasonable steps, at its sole expense, to protect said confidential
information, and that no party will divulge said confidential
information at any time, other than disclosures contemplated by the
terms of this Agreement, without the prior written consent of the other
party.
SECTION 12. TERMINATION:
The parties recognize that prompt and full compliance with the
terms of this Agreement are essential, and the failure to perform
hereunder may be deemed a material breach of this Agreement creating in
the non-breaching party the right to treat the Agreement in default.
Upon such default and after sixty (60) days notice of default and the
failure of the defaulting party to remedy the default within such
period, this Agreement may be deemed terminated by the non-defaulting
party, such party then having the right to pursue such further remedies
as it may deem appropriate, at law or otherwise.
Either party may, by written notice delivered to the other
party, terminate this Agreement if the other party terminates or
suspends business; or initiates or becomes subject to any bankruptcy or
insolvency proceeding or similar proceeding under federal or state law;
or becomes insolvent or subject to the direct control of a trustee,
receiver or similar authority or makes an assignment for the benefit of
its creditors.
In the event of termination of this Agreement, this Agreement
shall remain applicable to any order for systems which Eco Soil has
previously placed and which has been accepted by V.I.T.
SECTION 13. MISCELLANEOUS PROVISIONS:
A. NOTICES. Any and all notices provided herein shall be in
writing and delivered personally or sent by registered or
certified mail with return receipt requested, and confirmed by
telegraph, telex or telefax to the other party at the address
hereinabove set forth, or at such other address as shall be
designated from time to time by the parties. Notice shall be
deemed to be effective upon personal service or transmittal of
telegraph, telex or telefax or upon the date of receipt
indicated on the postal proof of delivery, whichever date is
earlier.
B. AMENDMENTS. This instrument contains all of the agreements,
understandings, representations, conditions, warranties, and
covenants made between the parties hereto. Unless set forth
herein, neither party shall be liable for any representations
made, and all modifications and amendments hereto must be in
writing and signed by both parties.
C. AUTHORITY TO ENTER INTO THE AGREEMENT. Each of the parties
represents that it has full power and authority to enter into
this Agreement.
D. WAIVER. The failure of either party at any time to require
performance by the other party of any provision hereof shall
not affect in any way the right to require such performance at
any time thereafter. Nor shall a waiver by either party of a
breach of any provision hereof be taken or held to be a waiver
of the provision itself.
E. SEPARABILITY. Each of the terms of the Agreement is exclusive
and the invalidity of one or more terms shall not void or make
voidable any other terms of the Agreement.
F. COST OF DEFAULT. The parties agree that in the event of a
default of a term or condition of this Agreement, the
defaulting party shall be liable for attorney's fees and costs
in the event of engagement of legal counsel to represent the
non-defaulting party's interest.
G. INTEGRATION. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions
whether oral or written, of the parties and there are no
warranties, representations or agreements among the parties in
connection with the subject matter hereof except as set forth
or referred to herein.
H. BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to
the benefit of and bind the parties' successors, assigns,
transferees, heirs and personal representatives.
I. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but
all of which taken together shall constitute one and the same
document.
J. FORCE MAJEURE. The obligations of either party hereunder shall
be excused by reason of fire, explosion, or flood, or other
actions of the elements, strikes, labor disputes however
caused, accident, acts of public enemies, lawful rules and
regulations or orders of any court or any civil or military
authority, loss or shortage of raw materials, supplies or
energy sources or failure of unusual means of supply and other
causes beyond the reasonable control of any of the parties.
In the event that any of the parties is prevented by any of
the contingencies of the type set forth in this subparagraph,
said party shall be free of all liability as would otherwise
be determined by the requirements of this Agreement, but only
for so long as the circumstances of force majeure exist. For
any cause whatsoever, whether or not beyond the control of Eco
Soil or V.I.T., liability of either for failure or delay in
performances shall not include consequential damages.
K. DISCLAIMER OF AGENCY. This Agreement shall not constitute
either party the legal representative or agent of the other,
nor shall either party have the right or authority to assume,
create, or incur any liability or any obligation of any kind,
express or implied, against or in the name of, or on behalf of
the other party in any manner.
L. INTERPRETATION. The validity, interpretation, and performance
of this Agreement shall be controlled by and construed under
the laws of the state of California, the state in which this
Agreement is accepted.
M. ASSIGNMENT. The rights and obligations under this Agreement
may not be assigned by either party to any person, firm or
corporation without the prior written consent of the other
party first obtained. Any attempted assignment without such
other party's consent shall be null and void. Except as
limited by the preceding sentence, this Agreement shall be
binding upon and inure to the benefit of the parties hereto,
their successors and assigns.
N. HEADINGS. Paragraph headings are not to be considered part of
this Agreement and are included solely for convenience and are
not intended to be full or accurate descriptions of the
content thereof.
O. TIME OF ESSENCE. Time is of the essence in this Agreement and
the failure of either party to promptly pay when due any and
all payments, or perform any and all obligations required
herein, may be treated by the other party as a material breach
of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in San Diego, California, on the date appearing above.
ECO SOIL SYSTEMS, INC V.I.T. PRODUCTS, INC.
00000 Xxxxxxxxx Xxxx, Xxx 000 00000 Xxxxxxxxx Xxxx, Xxx 000
Xxx Xxxxx, XX 00000 Xxx Xxxxx, XX 00000
/s/Xxxxxxx X. Xxxxx /s/Xxxxxx Xxxx
Xxxxxxx X. Xxxxx Xxxxxx Xxxx
Chief Executive Officer Chief Executive Officer
APPENDIX "A"
Base Cost for Standard System
COMPONENT: Model 21124
UNIT COST PER TOTAL
QUANTITY UNIT COST
Submersible pump 1 786 786
Mounting Cradle 1 200 200
Control Center 1 1800 1800
Valve Center 2 292 584
Distribution Outlets 24 32 768
Injection Point Assembly 1 40.50 40.50
TOTAL COST: 4178.50
