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[PORTIONS OF THIS EXHIBIT HAVE BEEN REDACTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
EXHIBIT 10.49
EXCLUSIVE MANUFACTURING & SUPPLY AGREEMENT
This Exclusive Manufacturing and Supply Agreement ("Agreement") is made
and entered into as of April 21, 2005 by and between Xxxxx-Xxxxxx Corporation, a
Delaware corporation ("GRC"), with principal offices located at 00-000 Xxxxxxxx
Xxxxxx, Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000 and CirTran Corporation, a
Nevada corporation, with principal offices at 0000 Xxxxx 0000 Xxxx, Xxxx Xxxx
Xxxx, XX 00000 ("Manufacturer").
RECITALS
GRC is engaged in the business of marketing and distributing various
consumer products;
Manufacturer is engaged in, among other things, the business of
manufacturing of and the marketing of certain fitness products; each product
manufactured by Manufacturer and supplied to GRC hereunder shall be referred to
herein as a "Product".
GRC desires to have Manufacturer manufacture, on an exclusive basis,
and package the Product and future generations of the Products as described
herein, upon the terms and conditions set forth herein.
In consideration of the mutual promises contained herein, and for other
good and valuable consideration, the receipt of which are hereby acknowledged,
the parties hereto agree as follows:
DEFINITIONS
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For purposes of this Agreement:
1. Definitions. For purposes of this Agreement the following terms shall
have the following meanings:
(a) "Applicable Laws" means all applicable determinations
of any governmental authority and all applicable federal,
state or local laws, statutes, ordinances, rules, regulations
and orders.
(b) "Patent Applications" means any and all patent
applications, registrations and all other related materials
filed by or at the request or direction of Xxxxxxx Xx or
Manufacturer (or any of its employees, agents, licensees, or
any other person acting on its behalf or direction) relating
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to the Product and/or its intellectual property, including,
without limitation, the patent applications filed by Xxxxxxx
Xx'x nominee in the following territories: China, Japan and
the European Communities.
(c) "Product" means the product comprised of a padded
platform with a foldable stanchion which may be erected to a
90 degree angle for performing Pilates-type exercises, which
is generally depicted in Schedule A to Exhibit A hereto, and
the related "collateral/promotional" items also listed on the
attached Exhibit A. Product shall include variations on a
Product, which are derived from, a Product so long as such
product is comprised of a platform with a stanchion that can
be erected to an approximately 90 degree position for
performing Pilates-type exercises (a "Subsequent Generation
Product"), if the Specifications and pricing for the
Subsequent Generation Product have been approved as provided
in Section 5.3.2. The parties may mutually agree in writing to
amend this Agreement to add additional Products.
(d) "Specifications" means the specifications for the
Product, packaging and labeling (if any) as set forth on the
attached Exhibit A. In the event that complete specifications
are not attached to this Agreement at the time it is executed,
the parties shall thereafter mutually agree in writing upon
the completion of the Specifications.
2. Sale of Products; Packaging.
2.1 Requirements. Subject to the terms and conditions hereafter
set forth, during the "Term" of this Agreement (as defined in Section 6
below), GRC agrees to buy from Manufacturer, on an exclusive basis, all
of its requirements for the Product identified in Exhibit "A" (i.e.,
Manufacturer shall provide all of GRC's requirements for the hard
fitness product and related components identified in Exhibit A, but
excluding any requirements for items not listed on Exhibit "A" but
which may be sold with the Product [e.g., vitamin supplements,
paper/promotional inserts, etc.].During the Term (as defined below),
GRC agrees to purchase a minimum of XXXXXX (XXXXXX) xxxxx xx the
Product (the "Minimum Quantity"), subject to the terms and conditions
of this Agreement, including, without limitation, Manufacturer's
compliance with its obligations hereunder. GRC shall submit purchase
orders for the Product from time to time in accordance with Section 2.3
below. It is acknowledged and agreed that Manufacturer shall not
modify, or otherwise deviate from manufacturing the Product in
accordance with, the Specifications without the prior written
notification to GRC, and GRC's prior written consent, which consent may
be withheld by GRC in its sole discretion.
2.2 Packaging. If requested by GRC in writing or as otherwise set
forth herein, Manufacturer shall be responsible for the selection,
sourcing and purchasing of all materials and packaging for the Product
(collectively, the "Packaging").
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2.3 Purchase Orders. Each purchase order ("Purchase Order") for
the Product shall be in writing and shall specify the particular
Product to be manufactured and packaged, the quantity of Product and
the date upon which GRC desires to have the Product ready for delivery
(the "Requested Delivery Date"). The initial Purchase Order for the
Product is attached hereto as Exhibit "B". Minimum lead time for
shipment and other terms are set forth in Exhibit "A" attached hereto.
Subject to Section 2.4, Manufacturer shall deliver the Product on or
before the Requested Delivery Date. Upon GRC delivering a written
purchase order to Manufacturer, Manufacturer shall confirm
Manufacturer's receipt of such Purchase Order in writing to be
delivered by Manufacturer to GRC.
2.4 Shipment. All Product will be shipped FOB Ningbo Harbor, China
to the GRC destination, which destination shall be specified by GRC in
the applicable purchase order. Product will be inspected by "PRO QC" or
other inspectors mutually acceptable to the parties and upon approval
by the inspector will be deemed accepted by GRC. All risk of damage and
loss to the Product which is the subject of a shipment transfers to GRC
upon such acceptance, unless such damage is caused by Manufacturer's
gross negligence or willful misconduct in connection with
Manufacturer's manufacturing, packaging, shipping or warehousing of
Product. Manufacturer understands and acknowledges that time is of the
essence with regard to this Agreement and the delivery of Product
hereunder. Subject to all of GRC's rights and remedies as set forth in
this Agreement, if Product is delivered outside the agreed upon Lead
Time as set forth herein (a failure to timely deliver for any reason
other than as set forth in subsections (i) and (ii) in this Section
shall be deemed to be a "Material Delay"), Manufacturer shall reimburse
GRC for any third party costs incurred and paid by GRC as a result of
Manufacturer's failure to timely deliver the Product (including,
without limitation, "rush" shipment costs, replacement manufacturing,
cancellation of Product promotions, lost or cancelled orders due to
delay in delivery of Product etc.). The parties acknowledge and agree
that in addition to the force majeure provisions of Section 13, the
following two (2) conditions shall be deemed exceptions to the "time is
of the essence" requirement, and shall not be deemed a "Material
Delay": (i) a late delivery of the Product caused by GRC's
instructions, changes, or modifications to the Products (including
purchase orders for quantities of Product in excess of that
contemplated by the forecasts described in Section 2.6) or (ii) any
period of no more than two (2) weeks during which Product is not
available for delivery to GRC FOB Ningbo Harbor, China due to a delay
caused by a decision of a United States or Chinese governmental agency
to review any Product which is the subject of any shipment.
2.5 Artwork; Spare Parts. GRC shall produce and deliver to
Manufacturer all artwork for Product logos and marks, when applicable
and necessary. Manufacturer shall maintain spare parts for the Product
during the Term hereof and for six (6) months thereafter ("Six Month
Post-Term Period"). Manufacturer agrees to maintain such spare parts in
its United States facilities equal to at least 1/2 of 1% of the average
dollar value of GRC's monthly purchases of the Product. GRC shall pay
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Manufacturer its actual documented costs paid to third parties for such
replacement parts (including shipping and duties) (i) for all such
replacement parts needed by GRC other than replacements for defective
parts covered by Manufacturer's warranty, and (ii) for Manufacturer's
inventory of such replacement parts on hand at the end of the Six Month
Post-Term Period, but not to exceed the 1/2 of 1% limit described in
this Section.
2.6 Inventory Forecast. For purposes of production and inventory
planning, GRC will provide to Manufacturer, when submitting a Purchase
Order, a non-binding forecast of Purchase Orders to be submitted by it
during the next six (6) months by number of units of the Product
estimated to be purchased through Purchase Orders for such six (6)
month period and anticipated delivery dates (the "180 Day Forecasts")
and at least once every six (6) months during the Term a forecast of
demand by month for the remainder of the next twelve months
(collectively, the "Annual Forecasts" and, together with the 180 Day
Forecasts, "Forecasts"). Notwithstanding the above, to enable GRC to
more accurately gauge initial demand for the Product, GRC is not
required to submit 180 Day Forecasts with any Purchase Orders submitted
within the first 45 days after the date hereof. The Forecasts are not
firm orders for the total quantity of Product reflected therein, and
specific delivery dates may be accelerated or delayed by up to 30 days
as reflected by the Purchase Orders. The parties acknowledge that the
Forecasts are estimates only, and shall be based on GRC's good faith
efforts to accurately reflect the timing and amount of Product orders
on all relevant information available to GRC at the time of the
Forecast. GRC will promptly notify Manufacturer of any material change
in the applicable Forecast, which GRC anticipates as a result of market
developments or other relevant factors. The parties acknowledge and
agree that any failure or inability of GRC to meet any Forecast shall
not be deemed a breach of this Agreement as such Annual Forecasts are
for informational purposes only. Manufacturer shall supply GRC with up
to twenty (20%) over the amount forecasted in the relevant Forecast,
but shall not be liable, nor shall it be a breach of this Agreement,
for its failure to provide in excess of twenty percent (20%) over the
amount in the Forecast for the applicable time period.
3. Miscellaneous Supply Issues.
3.1 Procedures. Manufacturer and GRC shall mutually agree in
writing upon appropriate procedures and policies to ensure that each
Product is in all respects up to the reasonable standards approved by
GRC, including, without limitation, manufacture of the Product in
accordance with the Specifications described herein as to the packaging
designs, containers, dimensions, materials, and other specifications
approved, in writing, by GRC and Manufacturer. Manufacturer shall bear
full responsibility for product testing for standards and for quality
control to ensure the Products are exactly in conformance with GRC's
specifications.
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3.2 Quality Control. Manufacturer shall itself maintain, and shall
ensure that the "Approved Subcontractors" (as defined in Section 3.3
below) and any and all raw material suppliers maintain, a quality
control program designed to reasonably assure compliance with the
Specifications. Manufacturer is responsible for ensuring, and further
represents, warrants and covenants, that all Product is and shall be
manufactured, stored, packaged, handled and shipped in compliance with
applicable federal, state and municipal laws, rules, regulations,
standards and orders, including, without limitation, the applicable
laws of the United States and China, including applicable labor laws
and the Applicable Laws. Without limiting the generality of the
foregoing, to the extent Manufacturer exports materials out of the
United States to be used in the manufacturing of the Products,
Manufacturer shall be responsible for ensuring such exports comply with
all applicable export laws, including, without limitation, the United
States Export Administration Regulations. Manufacturer shall regularly
visit and inspect the facilities of the Approved Subcontractors, if
any, to assure compliance with this Agreement.
3.3 Subcontractors. The Product will be manufactured by
Manufacturer or its wholly owned and controlled subsidiaries and those
subcontractors pre-approved by GRC (the "Approved Subcontractors"). GRC
provides conditional approval of Zhejiang Hengtai Machinery
Manufacturing Company Limited as an Approved Subcontractor; provided,
however, that GRC shall have the immediate right to revoke this
conditional approval following its audit and inspection of such
facility (it being acknowledged hereunder that GRC has not audited or
inspected the Zhejiang Hengtai Machinery Manufacturing Company as of
the execution of this Agreement) Manufacturer may not use any
subcontractor without first obtaining the written consent of GRC, which
consent shall not be unreasonably withheld. Manufacturer shall
terminate the services of any Approved Subcontractor upon GRC's prior
written notice that such subcontractor is not performing as required
under this Agreement (i.e., the Approved Subcontractor is not providing
quality products or services, etc.) unless the Approved Subcontractor
cures, to GRC's satisfaction, any material deficiency noted by GRC
within thirty (30) days of GRC's written notice to Manufacturer.
3.4 Inspection. GRC or its designee may from time to time inspect
Manufacturer's facilities (both domestic and international) upon five
(5) days prior notice and make recommendations concerning the
manufacture, material, workmanship, testing, and quality control for
the Product. Manufacturer shall give GRC or its designee reasonable
access to Manufacturer's facilities for these purposes. Such inspection
shall be based on a statistically significant sample of the Product
with a reasonable rate of rejection. GRC shall pay for the inspection.
However, in the event Manufacturer's facility or the Product materially
fails such inspection (or reasonable tests requested by GRC or its
designee), Manufacturer shall bear the reasonable expense of such
inspection and replacing Product proven or likely to be defective based
on the inspection. In addition, GRC shall have the right to request
specific tests to be performed by Manufacturer during the course of the
manufacture of the Product. Upon GRC `s request, Manufacturer shall
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send samples of the Product produced by Manufacturer to GRC or any
location designated by GRC.
3.5 Records. Manufacturer shall maintain an up-to-date file of
specifications for the Product supplied to GRC, including, but not
limited to, performance standards, dimensional information, and
material/physical specifications. Manufacturer may, at its option,
inspect all or randomly selected Product units prior to each shipment
in order to ensure their compliance with GRC specifications and
instructions and purchase order. Manufacturer shall have responsibility
for ensuring that the Product units are properly packed to reduce
potential damage caused by shipping.
3.6 Delays. Manufacturer will inform GRC immediately of any
occurrence, which will or is expected to result in any delay in ship
date or quantity as specified on the Purchase Order. Manufacturer shall
also notify GRC of all corrective action being taken to minimize the
effect of such occurrence.
3.7 Recalls or Seizures.
If any of the Product is the subject of a seizure by any
governmental agency or in the event any governmental agency requests or
suggests that any of the Products be recalled or withdrawn and GRC and
Manufacturer agree, or in the event GRC and Manufacturer shall deem
that such a recall is necessary or advisable, in each case as a result
of a Product failing to comply with the Product Specifications,
Applicable Laws (unless such violation of Applicable Laws is caused by
the Specifications) or any other provision of this Agreement, GRC will
be solely responsible for executing such recall at Manufacturer's
expense. Without limiting the generality of the foregoing, Manufacturer
shall indemnify and reimburse GRC for the following:
a. All costs and expenses of notifying the trade
and/or consumers of said recall or withdrawal to the
level acceptable to the regulatory agency;
b. All freight charges actually incurred by GRC, or
paid by GRC to its distributors, for retrieval of the
Products; and
c. All service charges or other monies actually and
reasonably paid by GRC to its GRCs in line with
normal practices in connection with the retrieval of
the Products; and
d. All costs and reasonable counsel fees incurred by
GRC in connection with such seizure, resale or market
withdrawal in the event the recall is necessitated
due to failure to perform in compliance with the
terms of this Agreement.
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4. Prices; Payment.
4.1 Price. GRC shall pay Manufacturer for the Product at the
prices set forth on the attached Exhibit "A" (the "Price").
4.2 Adjustment in Price.
4.2.1 Price Increase. During the first four (4) months of this
Agreement, except as a result of the expiration of the
discount on the first 20,000 units as set forth on Exhibit
"A". Manufacturer shall not have the right to increase the per
unit price charged by Manufacturer for the Product .
Thereafter, Manufacturer shall have the right to increase the
Price if its actual, third party costs increase that results
in increased production costs; provided, however, that in no
event shall the Product prices increase by more than the sum
of (a) any increase in Manufacturer's actual out-of-pocket
cost of materials, including materials purchased from third
party Approved Subcontractors, and (b) any increase in
Manufacturer's labor costs, less any reductions in costs
Manufacturer may have generated by such date (e.g., economies
of scale, lower material costs, lower labor costs, etc.). If
there is a change in material third party costs of raw
materials, production, labor or purchasing (as applicable)
incurred by Manufacturer in connection with the fulfillment of
the purchase orders hereunder by more than ten percent (10%)
even after such other reductions, then the price for the
applicable Product shall be subject to renegotiation in order
to provide Manufacturer with a reasonable profit margin
thereon (and no greater than the profit margin Manufacturer
received prior to the out-of-pocket increases). As a condition
to causing any price increase, Manufacturer shall give GRC at
least thirty (30) days prior written notice of any such
increases, along with the written justification thereof (i.e.,
evidence of increase in third party costs) and provide GRC
with a detailed schedule of Manufacturer's new pricing.
Subject to the terms herein, any increase in Price shall be
effective upon thirty (30) days written notice to GRC of such
change. Such change shall apply to any new orders made after
the effective date of the change. Any orders which were placed
for immediate delivery for quantities consistent with the 180
Day Forecast but remain unfilled in whole or in part at the
effective time of such change shall be delivered at the old
price. In addition to its rights to terminate this Agreement
as provided hereunder, GRC shall have the right to terminate
this Agreement upon sixty (60) days prior written notice if
Manufacturer makes a price change to the Product with which
GRC disagrees and/or renders it uneconomical for GRC to
continue to purchase the Product from Manufacturer.
4.2.2 Duty to Minimize Price Increases. Manufacturer will use
good faith efforts to minimize any Price increases by seeking
low cost suppliers, with due regard to quality and
reliability, and will cooperate with GRC in investigating and,
upon mutual agreement, utilizing any suppliers identified by
GRC.
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4.3 Payment Terms. Payment for Product delivered hereunder shall
be made by GRC, by wire transfer of immediately available funds, for
the quantity of Products accepted by GRC as provided in Section 2.4.
The payment will be made as soon as practicable after GRC is deemed to
have accepted the Product, but in any event prior to the time the
shipment docks at it spot of destination. Any amounts not paid when due
shall bear interest at the rate of 1.5% per month or the highest rate
allowed by law.
5. Development, Licensing and Ownership.
5.1 Product and Product Marks. As between Manufacturer and GRC,
GRC shall own all right, title and interest in and to the Product. GRC
shall sell the Product under its own trademarks, service marks, symbols
or trade names, if any ("GRC Marks"). Solely in connection with the
performance of this Agreement, GRC grants Manufacturer the right to
reproduce and print on the Product the GRC Marks as are designated by
GRC. Manufacturer agrees that it will not use the GRC Marks in
advertising or promotional materials or place the GRC Marks on goods or
otherwise without prior written consent of GRC. Manufacturer agrees
that it shall not sell or distribute, or assist any party other than
GRC to sell or distribute, in any manner whatsoever any goods marked or
designated with the GRC Marks, or any derivation thereof, except to
GRC, without obtaining GRC's prior written consent. In addition,
Manufacturer agrees that (i) both during and after the expiration or
termination of this Agreement, it shall not sell or distribute, or
assist any party to sell or distribute, in any manner whatsoever, the
Product (except to GRC as contemplated hereunder) and, (ii) during the
Term and for a period of six (6) months thereafter, , it shall not sell
or distribute, or assist any party to sell or distribute, in any manner
whatsoever any goods which are a "knock off" of the Product (i.e. goods
which are substantially identical to the Product in form, appearance
and/or function) regardless of where such products may be distributed
or sold, without GRC's prior written consent, which consent may not be
unreasonably withheld. If Manufacturer sells, distributes or assists
any party to sell or distribute, in any manner whatsoever, the Product
and/or a "knock off" product in violation of this Section, then GRC
shall have (in addition to any of its other legal or equitable rights
and remedies) the right to (i) terminate its exclusivity and minimum
purchase obligations upon written notice to Manufacturer or (ii)
terminate this Agreement in accordance with Section 6.2.
5.2 Patent Applications. Simultaneously with the execution of this
Agreement by Manufacturer, Manufacturer shall deliver to GRC
assignments of the Patent Applications reflecting that all Patent
Applications relating to the Product and filed by or on behalf of
Xxxxxxx Xx'x nominee or Manufacturer shall be fully assigned to
CroftCo. The form and content of said Assignments shall be pre-approved
by GRC. Neither Manufacturer nor Xxxxxxx Xx'x nominee makes any
representation or warranty that patents will be issued pursuant to the
Patent Applications. The parties acknowledge and agree that the
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successful, complete and timely transfer and assignment of the Patent
Applications as described herein is a condition precedent to this
Agreement
5.3 Capacity; Inventory.
5.3.1 Production. Manufacturer hereby represents that it has,
or can obtain through Approved Subcontractors, the ability to
manufacture the Product in quantities of up to two hundred
thousand (200,000) individual Product units per month (the
"Forecasted Maximum Monthly Volume"). Manufacturer further
agrees that in the event Manufacturer is unable to meet the
forecasted Maximum Monthly Volume when required by GRC as
reflected in the 180 Day Forecasts and Annual Forecasts, then
Manufacturer shall immediately notify GRC in writing of same
so that GRC may, if desired, secure additional manufacturing
assistance from third parties.
5.3.2 Repurchase Responsibility. GRC may change the
Specifications for the Packaging (if any) with at least thirty
(30) days prior notice to Manufacturer. GRC may change the
Specifications for the Product with at least thirty (30) days
prior notice to Manufacturer; provided that if such change in
Specifications will increase Manufacturer's costs (including
costs of raw materials, manufacturing or quality control) the
change will not be effective until the parties mutually agree
to appropriate adjustments to the purchase price of the
Product. Manufacturer shall promptly implement the requested
change(s) to the Specifications and GRC shall (i) reimburse
Manufacturer, within thirty (30) days of the date of invoice,
for the cost of any packaging materials or finished Product in
inventory that is rendered obsolete because of the change(s);
and (ii) pay any pre-approved increase in the cost of
production of the Product due to the change(s). In no event
shall GRC be responsible for purchasing any raw material,
components or other supplies which Manufacturer can use in the
ordinary course of its business or other products sold to
other companies.
5.3.3 Packaging Materials and Artwork. If Manufacturer is
responsible for the development of any Packaging, Manufacturer
shall maintain sufficient inventory of Packaging, as
applicable, to ensure continuity of service in accordance with
the GRC 180 Day Forecast. GRC shall have all rights and title
to art, plates, negatives or designs prepared for GRC by
Manufacturer or its printer, lithographer, or bag, box, or
carton manufacturer/vendor, and all artwork shall become the
possession of GRC upon notice of termination of this Agreement
by either party. GRC shall pay the Manufacturer for the cost
of preparing these materials, subject to GRC's prior written
approval of such costs. The designs, including texts, color
and sizes of Packaging shall be determined by GRC. The fee
payable by GRC for Manufacturer supplied artwork, if any, will
be mutually agreed upon based on Product usage commitments to
be determined by both parties.
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5.4 Right to Bid on Similar Machines. If during the Term hereof
GRC proposes to offer , via a United States based direct response
television campaign, a "stand alone" Pilates exercise machine similar
in form and function to the Product but which is not a Subsequent
Generation Product (a "Similar Machine"), GRC will so notify
Manufacturer and give Manufacturer the right to make a proposal to
manufacture the Similar Machine ("Bid Opportunity"), and Manufacturer
shall have fifteen (15) business days from the later of GRC's notice or
GRC supplying Manufacturer with requested information reasonably
necessary for it to make a proposal in which to respond to the Bid
Opportunity (and a failure to so respond shall be deemed to be
Manufacturer's notification to GRC that it does not intend to bid on
such proposal), provided, however, that (i) Manufacturer's right to
receive a Bid Opportunity shall be contingent upon Manufacturer's
execution of a Non-Disclosure Agreement, (ii) GRC shall have no
obligation to present a Bid Opportunity to Manufacturer if (a)
Manufacturer is in breach of this Agreement, (b) GRC is lawfully
precluded from seeking Manufacturer's bid by a Similar Machine's Rights
Holder or other interested party and/or (c) Manufacturer's manufacture
or supply of the proposed product would violate the rights of any third
party, as determined by GRC in its sole discretion. In addition,
notwithstanding anything hereinto the contrary, GRC shall not be deemed
in breach of this Agreement if it inadvertently fails to notify
Manufacturer of a Bid Opportunity.
6. Term and Termination.
6.1 Term. The Term of this Agreement shall commence upon its
execution and shall continue until the Product is no longer being sold
in quantity, provided however that (i) GRC shall have the sole right to
terminate this Agreement upon prior written notice to Manufacturer, if
GRC determines, in its sole good faith discretion, that it is no longer
economically feasible to continue to market, sell and distribute the
Product, (ii) Manufacturer shall have the sole right to terminate this
Agreement upon giving GRC at least six (6) months prior written notice
to GRC, if Manufacturer determines, in its sole good faith discretion,
that it is no longer economically feasible to continue to manufacture
the Product, and (iii) this Agreement is subject to termination at any
time in accordance with the terms of this Agreement
6.2 Termination. Either party may terminate this Agreement on
thirty (30) days prior written notice to the other party based on a
material breach of this Agreement by the non-terminating party, unless
such breach is cured within such thirty (30) day period or, in the
event of a non-monetary breach which cannot reasonably be cured within
thirty days, that the breaching party commences within such thirty day
period steps calculated to cure the breach as soon as practicable and
the cure is completed within forty-five (45) days. In the event of
termination of this Agreement due to Manufacturer's breach or by
Manufacturer pursuant to Section 6.1(ii), (a) GRC shall have the right,
but not the obligation, to purchase for at the price determined below
all or any part of the supply of work in progress ("WIP"), packed,
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labeled or on hand Product if such right is exercised within ten days
after termination, and (b) Manufacturer shall use good faith efforts to
assist GRC, as reasonably necessary, to transition the manufacture of
the Product by a third party as selected by GRC. In no event shall GRC
be responsible for purchasing any raw material, components or other
supplies that Manufacturer can use in the ordinary course of its
business or other products sold to other companies. The price for any
items sold will be (i) for finished Products, the price provided
herein, (ii) for all other items, Manufacturer's actual third party
cost plus a xxxx-up of ten percent (10%).
6.3 Rights Upon Expiration or Termination.
6.3.1 Purchase Orders. In the event of expiration of this
Agreement, Manufacturer will comply with all outstanding
Purchase Orders for delivery within 60 days after expiration.
In the event of termination of this Agreement by GRC, GRC will
have the right to cancel any outstanding Purchase Orders or to
require Manufacturer to finish such Purchase Orders; provided,
that in the event of a termination by GRC pursuant to Section
6.1(i) prior to GRC's purchase of the Minimum Quantity, GRC
shall be required to purchase all Products which are subject
to any outstanding Purchase Orders as of the date of
termination.
6.3.2 Inventory. In the event of expiration or termination of
this Agreement, GRC will have the right, but not the
obligation, to purchase any Products in inventory that
Manufacturer has in its possession. GRC shall have the right,
but not the obligation, to purchase Manufacturer's inventory
of the Products by giving notice to Manufacturer within twenty
(20) days after the effective date of the expiration or
termination. In the event of termination by GRC pursuant to
Section 6.1(i) prior to GRC's purchase of the Minimum
Quantity, GRC shall be required to purchase from Manufacturer
packed, labeled and on-hand Product which are the subject of
an outstanding purchase order as of the date of termination by
GRC. The purchase price for the finished manufactured Product
shall be the price as provided herein plus actual freight,
handling charges, customs duties and taxes if paid by
Manufacturer on the shipment to GRC's possession and in sound
condition.
6.3.3 No Further Rights. In the event of expiration or
termination of this Agreement, Manufacturer shall have no
further rights to use, manufacture, distribute or sell the
Product or any of the intellectual property relating to the
same except as provided herein. In the event of a termination
of this Agreement by GRC pursuant to Section 6.1(i) prior to
GRC's purchase of the Minimum Quantity, GRC shall not have the
Product manufactured by third parties within six months after
the date of such termination (the "Tail Period"); provided
that during the Tail Period GRC may order from Manufacturer,
and Manufacturer shall have the right to produce, additional
Product to fill lingering demand during the Tail Period. The
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terms of the sale of Product during the Tail Period shall be
the same as sales during the Term of the Agreement except (i)
the price of Product shall be the last price charged prior to
termination, as adjusted to reflect (a) any increase in
Manufacturer's actual out-of-pocket cost of materials,
including materials purchased from third party Approved
Subcontractors, and (b) any increase in Manufacturer's labor
costs, and (ii) lead times may increase; provided that
Manufacturer shall use good faith efforts to keep the lead
times as consistent as practicable with lead times during the
Term. Manufacturer will notify GRC of any increase in price or
lead times prior to accepting any purchase order during the
Tail Period. If GRC proposes, within twelve (12) months
following the end of the Tail Period to thereafter resume the
manufacture of the Product, GRC will so notify Manufacturer
and give Manufacturer the right of first offer to make a
proposal to resume the manufacture of the Product on terms
similar to those described herein. If GRC and Manufacturer do
not agree on the terms of an agreement to manufacture the
Product within twenty (20) days after GRC's notice, GRC may
seek third parties to manufacture the Product.
6.3.4 Survival. The following terms will survive the
expiration or termination of this Agreement: Sections 5.1, 6,
7, 9, 10 and 14.4. Upon expiration or termination of this
Agreement for any reason whatsoever, (i) all amounts then
properly owed by GRC to Manufacturer shall become immediately
due and payable and (ii) except as specifically provided in
this Section 6, all rights and obligations of the parties
shall terminate (including, without limitation, any minimum
purchase obligations of GRC).
7. Warranty; Remedies for Failure to Conform.
7.1 Warranty. Manufacturer warrants and represents that (a) it
shall manufacture and package the Product in compliance with the
Specifications and as required by all Applicable Laws, (b) all Product
sold by it hereunder shall conform with the Product samples that have
been mutually agreed to by GRC and Manufacturer, (c) the Product will
be free from defects in materials and workmanship utilized by
Manufacturer in manufacturing the Product and, (d) the Product shall
conform in all material respects to the Specifications, including
without limitation with the size and color, specified by GRC.
7.2 Remedy. Without limiting any other rights of GRC hereunder, in
the event that GRC determines that any Product delivered to it
hereunder does not conform with such warranty, it shall request an RMA
number from Manufacturer and upon receipt of such number shall return
to Manufacturer a reasonable number of randomly selected samples
thereof for review and analysis by Manufacturer. If Manufacturer
confirms that the Product is defective, Manufacturer shall, subject to
its rights described below, issue GRC a credit memo for replacement
Product or, at its option, replace such defective Product as promptly
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as possible. In either such event, GRC shall, at Manufacturer's option,
either destroy all such defective Product and so certify in writing to
Manufacturer or return all such defective Product to Manufacturer at
Manufacturer's expense. If after analyzing any Products alleged by GRC
to be nonconforming, Manufacturer disagrees with GRC's determination
with respect thereto, GRC shall submit such samples to an independent
Control Lab approved by both Parties, which shall make its own
determination as to whether or not such Product conforms with the
Specifications, which determination shall be final and binding upon the
parties. If the Control Lab agrees with GRC's determination that the
Product is defective, then Manufacturer shall pay the cost of the
Control Lab.
8. Compliance with Regulations.
8.1 Facility Inspections. If a designated representative of the
United States, its territories, the District of Columbia, or other
regulatory agency chooses to inspect any manufacturing facility used by
Manufacturer in the performance of its obligations under this
Agreement, Manufacturer shall provide GRC with written notice of the
requested inspection.
8.2 Regulatory Reports. Each party shall promptly furnish the
other with copies of reports or other information relating to the
Product prepared by it, or on its behalf, to be filed with any
governmental authorities or received from any governmental authorities.
Any and all issues concerning the distribution or advertising/promotion
of the Product shall be addressed and resolved by GRC. Any and all
issues raised with respect to the manufacturing of the Product shall be
resolved by Manufacturer.
9. Representations and Warranties.
9.1 Both Parties. Each Party warrants to the other that: (i) it is
an entity duly organized, valid, existing and in good standing under
the laws of the state, province or country of its incorporation or
establishment and has the corporate or equivalent power to own its
assets and properties and to carry on its business as now being
conducted; (ii) its obligations hereunder shall be performed in full
compliance with the Applicable Laws; (iii) it will cooperate with the
other, as necessary, to remain in full compliance with the Applicable
Laws; (iv) the execution, delivery and performance of this Agreement
have been duly authorized, do not violate its certificate of
incorporation, by-laws or similar governing instruments or Applicable
Law and do not, and with the passage of time will not, materially
conflict with or constitute a breach under any other agreement,
judgment or instrument to which it is a party or by which it is bound;
(v) its employment and labor practices comply in all respects to
Applicable Law in the jurisdiction in which such labor is performed;
and (vi) this Agreement is the legal, valid and binding obligation of
such party, enforceable in accordance with its terms.
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9.2 Manufacturer. Manufacturer warrants and represents: (i) it
will not and has not knowingly infringed any copyright, patent, trade
secret or other property right of any party in the performance of the
services required by this Agreement; (ii) it will obtain from
Manufacturer's employees and subcontractors, if any, any necessary
assignment, license, and release of all, if any, interests in the
Product; (iii) there is no suit, action, arbitration, or legal,
administrative or other proceeding or governmental or
quasi-governmental investigation pending or, to the best knowledge of
Manufacturer, threatened against or affecting the Product; (iv)
Manufacturer's actions in manufacturing the Product will not cause the
Product to be in violation of consumer product safety laws or the
requirements of other Applicable Laws, and (v) that to Manufacturer's
knowledge, the design and specifications of the Product will be safe to
the buyers thereof.
9.3 GRC. GRC warrants and represents: (i) it will not and has not
knowingly infringed any copyright, patent, trade secret or other
property right of any party in the provision of the design and
specifications or the sale of the Product; (ii) there is no suit,
action, arbitration, or legal, administrative or other proceeding or
governmental or quasi-governmental investigation pending or, to the
best knowledge of Manufacturer, threatened against or affecting the
Product; (iv) the design and specifications of the Product, to the
extent provided by GRC, will conform to all consumer product safety
laws and meet the requirements of all other Applicable Laws.
10. Indemnification and Insurance.
10.1 Manufacturer Indemnity. Manufacturer will defend GRC and its
Affiliates and its and their employees, directors, officers and agents
against any third party allegations, demands, suits, investigations,
causes of action, proceedings or other claims ("Third Party Claims")
which are based on, and indemnify and hold harmless such persons and
entities from all damages, liabilities, judgments, costs and expenses
(including attorneys' fees and court costs) and other such losses
("Losses") to the arising in connection with such Third Party Claims to
the extent based on, any of the following: (i) any claim that the
Product, including the Product Packaging, is defective, including
without limitation, illness, personal injury or death caused by the
Product or any other product liability claim related to the Product,
except to the extent directly caused by the specifications and design
not provided by Manufacturer, (ii) any negligent act or omission by
Manufacturer or an Approved Subcontractor, including, without
limitation, those relating to or affecting the condition, quality or
character of the Product; (iii) any failure of Product to conform with
the applicable Specifications; (iv) any failure of Manufacturer or an
Approved Subcontractor to comply with any Applicable Law; or (v) any
other breach of Manufacturer's obligations under this Agreement,
including, without limitation, any representations or warranties of
Manufacturer.
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10.2 GRC Indemnity. GRC will defend Manufacturer and its Affiliates
and Approved Subcontractors and its and their employees, directors,
officers and agents against any Third Party Claims which are based on,
and indemnify and hold harmless such persons and entities from all
Losses to the arising in connection with such Third Party Claims and to
the extent based on, any of the following: (i) any negligent act or
omission by GRC relating to GRC's design and specifications for the
Product, if any; (ii) any failure of GRC to comply with any Applicable
Law; (iii) any other breach of GRC's obligations under this Agreement,
including any representations or warranties of GRC; (iv) the Product
infringing upon any intellectual property rights of a third party,
including, without limitation, patent, copyright, trade secret,
trademark, etc.; or (v) allegation of illness, personal injury or death
caused by the Product or any other product liability claim related to
the Product which directly results from the design or Specifications
provided by GRC.
10.3 Indemnification Procedures. The Party entitled to
indemnification under this Section 10 (the "Indemnified Party") will
provide the Party obligated to provide indemnification under this
Section 10 (the "Indemnifying Party") with prompt notice of any Third
Party Claim for which its seeks indemnification, provided that the
failure to do so will not excuse the Indemnifying Party of its
obligations under this Section 10 except to the extent prejudiced by
such failure or delay. The Indemnifying Party will defend any such
Third Party Claim and have the sole right to control the defense and
settlement of the Third Party Claim, provided that the Indemnified
Party may not, without the Indemnified Party's consent, enter into any
settlement, which admits guilt, liability or culpability on the part of
the Indemnified Party. The Indemnified Party will provide reasonable
cooperation to the Indemnifying Party in defending any Third Party
Claim.
10.4 Insurance. During the Term of this Agreement and for a period
of three (3) years thereafter, Manufacturer agrees to maintain a
product liability insurance policy with an insurance carrier with
respect to any Product sold by it hereunder with at least t two million
dollars ($2,000,000) per occurrence and at least three million dollars
($3,000,000) in the aggregate. Such policy shall name GRC as an
additional insured (not just as a "Vendor") Manufacturer shall pay all
premiums relating to such policy. Manufacturer shall provide GRC with a
certificate of insurance, which provides that GRC, as the additional
insured, shall be notified, in writing, by the insurance carrier of
change in the policy (including any termination), not less than thirty
(30) days prior to the effective date of such change (including
termination).
11. Intellectual Property. GRC hereby grants to Manufacturer a
non-exclusive, royalty-free license to its Intellectual Property solely to the
extent necessary for Manufacturer to perform its obligations hereunder. Such
rights may be sublicensed to Approved Contractors upon prior written notice to
GRC solely for to the extent necessary and for the purpose of performing
Manufacturer's obligations under this Agreement. GRC shall retain all right,
title and interest in GRC's Intellectual Property, including, without
limitation, any and all product formulas and Product Specifications. Except as
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set forth in this section and in Section 5.2, each Party hereby acknowledges and
agrees that it does not have and shall not acquire, any interest in any other
party's Intellectual Property trademarks, trade names and/or trade dress unless
otherwise expressly agreed to in a writing executed by both Parties. For
purposes of this Agreement, "Intellectual Property" means all intellectual
property rights recognized under any jurisdiction, including, without
limitation, patents, copyrights, trademarks and trade secrets.
12. No Conflict. Manufacturer and GRC acknowledge that they have not
previously entered into any contractual arrangement, which would conflict with
the rights granted, or the services to be provided by Manufacturer or GRC
hereunder.
13. Force Majeure. Each shall be excused for any failure or delay in
performance hereunder, in whole or in part, to the extent caused by events
beyond its reasonable control, such as fire, embargo, strikes (other than
strikes of a party or its contractors), wars, acts of God, and acts of
terrorism, provided, however, that a Party will not be excused from any failure
or delay to the extent it could have been avoided by the use or reasonable
precautions or to the extent such party can perform by using commercially
reasonable efforts.
14. Miscellaneous.
14.1 Amendment. This Agreement may be amended, modified or
supplemented only by a writing signed by the party or parties sought to
be bound thereby.
14.2 Entirety. This Agreement and the Exhibits hereto constitute
the entire agreement of Manufacturer and GRC with respect to the
subject matter hereof, and supersede all prior or contemporaneous
agreements or understandings of Manufacturer and GRC with respect to
such subject matter.
14.3 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provisions shall be fully
severable and this Agreement shall be construed and enforced as if such
legal, invalid or unenforceable provision never comprised a part
hereof, and the remaining provisions hereof shall remain in full force
and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.
14.4 Confidentiality. Each party will treat the terms and
conditions of this Agreement and any other proprietary business and
technical information disclosed by the other party in connection with
the execution of this Agreement (collectively the "Confidential
Information") as confidential, will disclose such Confidential
Information only (i) as is required to comply with a party's
obligations under the securities laws, (ii) as otherwise required by
law, provided that the party desiring to disclose Confidential
Information shall provide the other party with prompt written notice of
the alleged legal requirement to disclose in order that party owning
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the Confidential Information may take appropriate legal action to
prevent such disclosure, or (iii) to those employees and contractors of
each party who have a need to know in order to accomplish the business
activities specified herein and who themselves agree not to disclose it
to any third parties. These obligations shall not extent to any portion
of the Confidential Information that: (a) is known to the receiving
party as documented by its written records at the time of disclosure,
(b) is or becomes public or generally available to the public through
publication or otherwise but through no fault of the receiving party;
or (c) is received from a third party having a bona-fide right to
disclose the information and not having any confidential obligation,
direct or indirect, to the party owning the Confidential Information.
14.5 Captions. The captions of this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
14.6 Notices. Any notice or communication required or permitted to
be delivered hereunder shall be in writing addressed to the party to be
notified, and shall be delivered by depositing it with a nationally
recognized overnight delivery service or in the United States mail,
postage prepaid, and either registered or certified with return receipt
requested, or by confirmed facsimile to the fax numbers indicated
below, and shall be deemed to be effective upon receipt for overnighted
or faxed notice and or three (3) days after being sent for mailed
notice. For this purpose, the addresses of the parties shall be:
GRC: Xxxxx-Xxxxxx Corporation
00-000 Xxxxxxxx Xxxxxx, #000
Xxxx Xxxxxx, XX 00000
Attn: Ben Van xx Xxxx
Fax: 760/000-0000
Manufacturer: CirTran Corporation
0000 Xxxxx 0000 Xxxx
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Fax: 000-000-0000
14.7 Applicable Law. This Agreement and rights and obligations of
the parties hereto shall be governed, construed and enforced in
accordance with the laws of the State of California. Any controversy
between Manufacturer and GRC arising out of or relating to this
Agreement or the breach thereof, shall be settled by binding
arbitration, in accordance with the rules then obtaining of the
American Arbitration Association or other mutually agreeable ADR
services, and any such arbitration shall be held in Los Angeles,
California; provided, however, that if the dispute between the parties
relates to a claim by GRC that the exclusivity provisions pursuant to
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Section 2.1 should be waived due to Cirtran's failure to perform as
required hereunder, such dispute shall be submitted directly to Xxxx
Xxxxxxxxx for resolution, and Xxxx Xxxxxxxxx'x decision shall be (i)
delivered within ten (10) days of submission and (ii) binding on the
parties Both parties consent and agree to the jurisdiction and venue
for such arbitration, and waive any and all challenges on the basis of
jurisdiction, venue and/or forum non conveniens.
14.8 Facsimile; Counterparts. The parties agree that signature by
facsimile shall hereby be deemed an original signature, and fully
binding upon the parties hereto. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, GRC and Manufacturer have executed this Agreement as
of the date first set forth above.
XXXXX-XXXXXX CORPORATION,
a Delaware corporation
By: /s/
--------------------------
Name:
--------------------------
Its:
--------------------------
CIRTRAN CORPORATION
a Nevada corporation
By: /s/ Xxxxx Xxxxxxxx
--------------------------
Name: Xxxxx Xxxxxxxx
Its: President
I, Xxxxxxx Xx, have read the Agreement dated April 21, 2005 by and between
Xxxxx-Xxxxxx Corporation and Cirtran Corporation and hereby agree to take all
actions necessary to cause the transfer of the Patent Applications as set forth
in Paragraph 5.2 of the Agreement.
XXXXXXX XX, an individual
By: /s/ XXXXXXX XX
--------------------------
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---------------------------------------------------------------------------------------------
Proposed Sales Price Proposed Sales Price
PL.1001 First 20,000 Units Balance of Blanket
Quantity FOB China Order FOB China
PCS @USD/PC @USD/PC
---------------------------------------------------------------------------------------------
Supreme Pilates Machine in Shipper Box 1 PCS USD $ XXXXXX USD $ XXXXX
3 PCS DVD XXXXXX USD $ XXXXX
Printed Inserts+ XXXXXX USD $ XXXXX
---------------------------------------------------------------------------------------------
$ XXXXXX $ XXXXX
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
PL.1000 Quantity Proposed Sales Price Proposed Sales Price
First 20,000 Units Balance of Blanket
FOB China Order FOB China
PCS @USD/PC @USD/PC
---------------------------------------------------------------------------------------------
Supreme Pilates Machine in Shipper Box 1 PCS USD $ XXXXX USD $ XXXXX
3 PCS VIDEO TAPES Not included USD $ XXXXX
Printed Inserts+ USD Not included USD $ XXXXX
---------------------------------------------------------------------------------------------
$ XXXXX $ XXXXX
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Spare Parts Quantity Customer Unit Price Customer Ext Price
FOB China FOB China
PCS @USD/PC @USD/PC
---------------------------------------------------------------------------------------------
Leatherette Covering for Long Spring 2 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Leatherette Covering for Short Spring 2 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Soft Grip Handles 2 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Wooden Sculpting Bar 1 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Back Cushion 1 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Neck Cushion 1 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Fastening Knobs 2 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Cap Nuts 2 PCS USD XXXXX USD XXXXX
-------- -------------------- --------------------
Nylon Safety Strap 1 PCS USD XXXXX USD XXXXX
---------------------------------------------------------------------------------------------
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+Printed materials consist of the following:
Supreme Pilates Eating Guide
Supreme Pilates Xxxxx Xxxxx Welcome Letter
Supreme Pilates Testimonial Letter
Supreme Pilates Success Tracker
Supreme Pilates Owner's Manual
Supreme Slimming Fifteen Cards and Clip-On Ring.
TOOLING:
Cost of Tooling: Manufacturer has all necessary tools available.
WARRANTY/QUALITY CONTROL:
Agreed QC standards: To be Mutually Agreed Upon In Writing Prior to
commencement of manufacturing
Agreed Warranty: Manufacturing Defects
Agreed Warranty Term: 90 days parts and 1 year frame
PRODUCT LEAD TIME: Manufacturer to use good faith efforts to ship product within
thirty (30) days of purchase order, but in no event later than forty-five (45)
days from date of purchase order.
OB Point: Ningbo Harbor, China
Weekly Capacity of XXXXXX units for repeat orders only.
CERTIFICATION:
UL: N/A
GS/TUV: ll
CE:
ISTA:
Flame Code: Yes
Factory Rating: Factory Ratings
Classification: Product to be classified as fitness equipment.
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EXHIBIT "B"
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