Supply Agreement - Basic Vegetable Products LP and Natrol Inc.
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") is entered into as of February
27, 1998 (the "Effective Date") by and between BASIC VEGETABLE PRODUCTS,
L.P., a Delaware limited partnership ("Seller"), and NATROL, INC., a Delaware
corporation ("Buyer").
RECITALS
WHEREAS, the parties hereto, among others, have entered into an Asset
Purchase Agreement of even date herewith (the "Asset Purchase Agreement")
pursuant to which Seller will sell, and Buyer will purchase, the assets and
business of PURE-GAR, L.P., a Delaware limited partnership ("Pure-Gar");
WHEREAS, the parties hereto have entered into a Research and Development
Agreement (the "R & D Agreement") pursuant to which Seller will develop new
and improved products for sale to Buyer; and
WHEREAS, the parties hereto desire to enter into a long-term agreement
pursuant to which Seller will sell, and Buyer will purchase, certain
vegetable, fruit, herbal and botanical products for use in the business of
Pure-Gar and other businesses of Buyer;
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. PURCHASE AND SALE OF PRODUCTS.
(a) Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, Seller will sell, and Buyer will purchase, Products
in the quantities and at the prices set forth herein.
(b) Products. "Products" shall mean any of the following:
(i) "Schedule 1 Products," which shall consist of all products
currently produced by Seller and currently sold to Pure-Gar, as set forth on
Schedule 1;
(ii) "Schedule 2 Products," which shall consist of all vegetable and
herbal products produced by Seller from time to time but not currently sold
to Pure-Gar; and
(iii) "New Products" developed by Seller pursuant to the terms of the
R & D Agreement.
(c) Product Specifications. Products supplied pursuant to this Agreement
shall comply
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
with certain product specifications that are unique to each Product (the
applicable "Product Specifications"). With respect to Schedule 1 Products,
the Product Specifications shall be as set forth on Schedule 1. With respect
to any Schedule 2 Product, the Product Specifications shall be as issued by
Seller from time to time. With respect to New Products, the Product
Specifications shall be as designated in the New Product Notice delivered
pursuant to Section 3(c) of this Agreement.
2. PRICES.
(a) Prices for Schedule 1 Products and Schedule 2 Products. Subject to
paragraph (b) below, prices for Schedule 1 Products initially shall be set at
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX, as disclosed to Buyer and as set forth on Schedule 2(a) attached
hereto; prices for Schedule 2 Products initially shall be set at XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX relating to
such Schedule 2 Products; and prices for New Products shall be set by Buyer
and Seller XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Thereafter,
such prices shall be subject to increases in an amount XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX with
respect to Products supplied pursuant to this Agreement; provided, however,
that Seller shall not effect a price increase for any Product more frequently
than XXXXXXXXXXXXXXXXXXXXXXXX, and in the manner provided for herein. In the
event of any such change in price, Seller shall deliver to Buyer a written
notice (a "Price Notice") specifying the Products affected and the new price,
no later than December 1 preceding the calendar year in which the new price
is to take effect. New prices shall take effect ninety (90) days after Buyer
has received a Price Notice with respect to such new prices. Each Price
Notice shall include a written explanation of each price increase with such
explanation to include reasonable detail with respect to each Cost category
set forth below, which contributed to such increase. The XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX shall be calculated by XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
(i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(ii) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(iii) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(iv) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(v) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(vi) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(vii) XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(b) Premium Pricing. Notwithstanding paragraph (a) above,
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
if Buyer submits a Purchase Commitment containing Volume Targets with respect
to a Schedule 1 Product or Schedule 2 Product derived from garlic that is
derived from high-allicin garlic (minimum allicin yield of XXXXXX parts per
million ("ppm")), or organically grown, that constitutes a Premium Product
Order pursuant to Section 4(b) hereof, then the price with respect to such
Product shall be the price determined under paragraph (a), increased by XXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Such provision shall apply only to the
amount
<PAGE>
of Product to be supplied by Seller in excess of the applicable Volume Target
for such Product.
3. REQUIREMENTS.
(a) Schedule 1 Products. Buyer shall be obligated to purchase from Seller
its requirements of Schedule 1 Products for use in all bulk and branded
products sold by Buyer, whether through Pure-Gar or otherwise. Seller shall
be obligated to supply to Buyer Schedule 1 Products in the amount of such
requirements, subject to certain requirements relating to advance notice and
maximum production capabilities, as set forth in Section 4.
(b) Schedule 2 Products. In the event that Buyer shall require any
Schedule 2 Product for any of its operations, whether of Pure-Gar or
otherwise, Buyer shall submit to Seller a notice setting forth its
requirements with respect to volume (a "Requirements Notice"), and Seller
shall have the right to competitively bid to supply to Buyer Buyer's
requirements of such products pursuant to the terms of this Agreement. Upon
acceptance by Buyer of such bid, such Schedule 2 Product shall thereafter
become a Schedule 1 Product under this Agreement.
(c) New Products. Upon the development of a New Product, Seller shall
deliver a notice (the "New Product Notice") to Buyer, describing the New
Product, its product specifications, and its estimated price to Buyer
pursuant to the terms of this Agreement, together with such supporting
information and data as to its use as Seller may have available to it. Buyer
shall have ninety (90) days to evaluate such New Product and to place an
order for such amounts of such New Product as the parties hereto shall
mutually agree. If an order is placed within such period and accepted by
Seller, such New Product shall thereafter become a Schedule 1 Product under
this Agreement.
(d) Other Products. In the event that Buyer shall require any vegetable,
fruit, herbal or botanical products not constituting Schedule 1 Products,
Schedule 2 Products or New Products, for any of its operations, whether of
Pure-Gar or otherwise, Buyer shall submit to Seller a notice setting forth
its requirements with respect to product specifications and volume, and
Seller shall have the right to competitively bid to supply Buyer with some or
all of Buyer's requirements of such products pursuant to terms to be mutually
agreed upon outside the scope of this Agreement.
4. QUANTITIES AND PRODUCTION SCHEDULING.
(a) Annual Purchase Commitment. For each calendar year or partial calendar
year during the Term of this Agreement (a "Contract Year") beginning with
1999, Buyer shall submit to Seller a purchase commitment (the "Purchase
Commitment") specifying the volume of each Product contemplated to be supplied
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
pursuant to the Supply Agreement during the following year (the "Volume
Targets"). The Purchase Commitment with respect to each Contract Year shall
be submitted prior to August 31 of the preceding year; provided, however,
that within 30 days of receipt by Buyer of a Price Notice with respect to
Products, Buyer shall have the right to deliver a notice to Seller reducing
Buyer's Purchase Commitment for such Products. Such Volume Targets with
respect to all Products shall not be less than XXXXXXXXXXXXXXXXXXXXXXX pounds
of garlic nor more than XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX pounds
of garlic. With respect to Contract Year 1998, Volume Targets shall be as set
forth on Schedule 4A attached hereto.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(b) Obligations of the Parties Regarding Volume Targets. During each
Contract Year, with respect to each Product for which there is a Volume
Target:
(i) Buyer shall purchase from Seller, and Seller shall sell to Buyer,
at least XXX of the applicable Volume Target for such Product;
(ii) Buyer shall have the right to purchase from Seller, and Seller
shall sell to Buyer if ordered, up to XXXX of the applicable Volume Target
for such Product; and
(iii) if Buyer shall give Seller reasonable notice that its
requirements for such Product shall exceed XXXX of the applicable Volume
Target, Seller shall exercise commercially reasonable efforts to make such
amount available to Buyer for purchase; provided, however, that in the event
Seller is unable to fulfill Buyer's requirements for such Product within 30
days, Buyer shall have the right to purchase such unfulfilled amount of such
Product from other sources.
Notwithstanding the foregoing, if Buyer submits a Purchase Commitment
containing Volume Targets that (A) with respect to high-allicin Schedule 1
Products (minimum allicin yield of XXXXX ppm), exceed XXX of the sum of all
Volume Targets for Schedule 1 Products derived from garlic; (B) with respect
to ultrahigh-allicin Schedule 1 Products (minimum allicin yield of XXXXX
ppm), exceed XXX of the sum of all Volume Targets for Schedule 1 Products
derived from garlic; or (C) with respect to Schedule 1 Products derived from
organic garlic, exceed the volume of such Products supplied to Pure-Gar by
Seller during calendar year 1997 as set forth on Schedule 4B attached hereto
(individually and collectively, "Premium Product Orders"), then Seller shall
be obligated to exercise only commercially reasonable efforts to make such
amounts available to Buyer for purchase; provided, however, that in the event
Seller is unable to commit to fulfill Buyer's requirements for such Product
within 30 days, Buyer shall have the right to purchase such unfulfilled
amount of such Product from other sources.
Buyer shall pay such premium on such amount of Product in excess of the
Volume Targets which are based on the Products which can be normally produced
using Seller's current processes.
(c) Forecasts. Buyer shall provide Seller with advance forecasts of its
volume requirements with respect to each Product, as follows:
(i) on an annual basis, for each Contract Year, concurrently with the
submission of the Purchase Commitment with respect to the immediately prior
Contract Year; and
(ii) on a monthly basis, for the subsequent 90-day period or portion
of such period within the Term.
Forecasts made pursuant to this paragraph shall not be binding upon either
party.
5. EXCLUSIVITY AND NON-COMPETE.
(a) Exclusivity. Except as otherwise provided herein, Seller shall
exclusively supply
<PAGE>
the Schedule 1 Products to Buyer in Buyer's Marketing Channels as defined on
Schedule 5 attached hereto. During the Term, neither Seller nor any affiliate
of Seller shall sell Schedule 1 Products (including Schedule 2 Products which
have become Schedule 1 Products pursuant to Section 3(b) of this Agreement
and New Products which have become Schedule 1 Products pursuant to Section
3(c) of this Agreement) to purchasers other than Buyer that market such
Products in Buyer's Marketing Channels; provided, however, that with respect
to Schedule 2 Products which have become Schedule 1 Products, Seller shall
have the right to continue to make sales to purchasers with whom Seller has
continuing supply relationships that exist at the time Seller first supplies
such Product to Buyer pursuant to this Agreement.
Notwithstanding the foregoing, Seller and any affiliate of Seller shall be
free at all times to sell any Product to its industrial ingredients customers
and shall be free at all times to sell all Schedule 1 Products, Schedule 2
Products and New Products to purchasers that do not market such Products in
Buyer's Marketing Channels.
(b) Resale Restriction. At the request of Buyer, Seller shall use
reasonable efforts to enforce the restriction in Section 5(a) against any of
Seller's customers that resell Products obtained from Seller into any of
Buyer's Marketing Channels.
(c) Non-Compete. The Seller hereby agrees as follows:
(i) During the Term of this Agreement as set forth in Section 6 below
but without giving effect to any earlier termination other than a termination
by reason of the breach or insolvency of Buyer (the "Noncompete Period"),
Seller will not, without the express written consent of Buyer, directly or
indirectly, anywhere in the United States or any of its territories, engage
in any activity which is exclusively reserved to Natrol under Schedule 5
hereto.
(ii) It is specifically understood and agreed that any breach of the
provisions of this Section 5(c) by Seller will result in irreparable injury
to the Buyer and its subsidiaries and affiliates that the remedy at law alone
will be an inadequate remedy for such breach and that, in addition to any
other remedy it may have, the Buyer and its subsidiaries and affiliates shall
be entitled to enforce the specific performance of this Section 5(c) by
Seller through both temporary and permanent injunctive relief without the
necessity of proving actual damages or the posting of any bond, but without
limitation of their right to damages, and any and all other remedies
available to them, it being understood that injunctive relief is in addition
to, and not in lieu of, such other remedies. In the event that any covenant
contained in this Section 5(c) shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it shall be interpreted to extend
only over the maximum period of time for which it may be enforceable and/or
over the maximum geographical area as to which it may be enforceable and/or
to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action. The existence of
any claim or cause of action which Seller may have against the Buyer or any
of its subsidiaries or affiliates shall not constitute a defense or bar to
the enforcement of any of the provisions of this Section 5(c).
<PAGE>
(iii) The restrictions set forth in this Section 5(c) have been
specifically negotiated by sophisticated commercial parties; are integrally
related to the exclusivity arrangements contemplated hereby, are reasonable
and necessary in time, scope, and geographic area (as Seller has conducted
the Pur-Gar business throughout the United States, including without
limitation all counties of California); are integral and essential to the
sale and purchase of the assets and business of Pure-Gar pursuant to the
Asset Purchase Agreement (the "Pure-Gar Business"); constitute a material
inducement to the Buyer to enter into the Asset Purchase Agreement in
consideration of the payment of the substantial consideration specified
therein for the assets conveyed thereunder, and of the payments made pursuant
to this Agreement, in addition to the exclusivity granted in Section 5(a)
hereof, so that Buyer might realize the value of its purchase of the Pure-Gar
Business.
6. TERM AND TERMINATION.
(a) Term. The term of this Agreement (the "Term") will begin on the
Effective Date and expire on August 31, 2005; provided, however, that the
Term will be extended automatically for successive one-year periods
thereafter unless either party gives notice during the month of August in any
year of its intent not to renew this Agreement at least two (2) years in
advance, in which case this Agreement shall terminate upon the end of such
two-year period.
(b) Termination. Notwithstanding anything contained herein to the
contrary, either party shall have the right, in addition and without
prejudice to any other rights or remedies, to immediately terminate this
Agreement by giving notice to the other party (which notice shall specify the
reason for the termination and the effective date of such termination), upon
or after the occurrence of any of the following events:
(i) the other party commits any material breach of the terms hereof
that, in the case of a breach capable of remedy, has not been remedied within
sixty (60) days of the receipt by the party in default of notice specifying
the breach and requiring its remedy; provided, however, that in the case of a
failure by Buyer to pay for Products and such failure is not being contested
by Buyer in good faith, then Buyer shall have fifteen (15) days from its
receipt of written notice from Seller of such failure to pay to cure such
failure. From and after the date of such failure to cure, Seller will have no
obligation to accept any order for Products hereunder unless all amounts owed
by Seller hereunder have been paid and the order is accompanied by full
payment of the purchase price of the Products covered thereby.
(ii) the entry of an "Order for Relief" naming the other party as a
"Debtor" under Title 11 of the United States Code or upon the entry of a
decree or order by a court having competent jurisdiction in respect to any
petition filed or action respecting a party directly involved in a
reorganization, arrangement, creditors' composition, readjustment,
liquidation, dissolution, bankruptcy or similar relief under any other
present or future United States or other statute, law or regulation, whether
or not resulting in the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official, and the
continuation of any such decree or order is unstayed and in effect for a
period of thirty consecutive days; or
(iii) the making by the other party of an assignment for the benefit of
creditors,
<PAGE>
or the admission by such party in writing of its inability to pay its debts
generally as they become due or the taking of action by a party in
furtherance of any such action.
(c) Effect of Termination. Termination or expiration of this Agreement
will not affect any other rights of the parties which may have accrued up to
the date of such termination or expiration and, in addition, neither party
will be relieved of any obligation for any sums due to the other party, and
with respect to Section 5(c), Seller will not be relieved of any obligations
thereunder, unless termination is by reason of the breach by or insolvency of
Buyer.
7. TAXES.
(a) Payment by Buyer. Prices provided for in Section 2 are exclusive of
all applicable federal, state or local sales, use, property, value added,
excise or similar taxes that may be levied upon Seller as a result of sale or
delivery of any Product sold under this Agreement. All such taxes will be
assumed and paid by Buyer. If a resale certificate or other such document of
exemption is required in order to exempt the sale of Products from any such
taxes, Buyer will furnish Seller with such a certificate or document prior to
delivery by Seller.
(b) Reimbursement of Seller. In the event that Seller is required to pay
or at the request of Buyer pays any such taxes, Buyer agrees to reimburse
Seller therefor upon being appropriately invoiced for the same in the exact
amount paid by Buyer.
8. PAYMENT.
Payment to Seller for Products shall be due within thirty (30) days of the
date of Seller's invoice for such Products.
9. SHIPMENT; PACKAGING; TITLE; RISK OF LOSS.
(a) Shipment. Buyer shall purchase all Products F.O.B. Seller's plant. At
Buyer's request, Seller will arrange for shipping of Products by a
Buyer-approved carrier. Buyer agrees to reimburse Seller for all prepaid
freight charges.
(b) Shipment to Buyer's Customers. At Buyer's request, Seller will arrange
for shipping of Products directly to Buyer's customers, subject to Seller's
policies regarding minimum order quantities.
(c) Packaging. Seller shall package and deliver each Product in bulk
containers that are standard for such Product.
(d) Title and Risk of Loss. Title and risk of loss for Products shall
transfer to Buyer at the earlier of delivery to the F.O.B. point or to a
Buyer-approved carrier; provided, however, that in the event any Products are
rejected as non-conforming in accordance with Section 10, title and risk of
loss shall transfer to Seller upon delivery of such Products to Seller's
plant until conforming
<PAGE>
Products are delivered by Seller to the F.O.B. point or to a Buyer-approved
carrier.
10. NON-CONFORMING PRODUCT.
Buyer may reject any shipment of a Product that is not in conformity with
the Product Specifications for such Product within ninety (90) days of
delivery. If Buyer does not reject any shipment within such period by
delivering notice of its rejection to Seller, including a description of the
basis therefor, such shipment will be deemed to have been accepted by Buyer.
Upon receiving any such notice of rejection, Seller shall have the option to
either:
(a) refund payments made by Buyer, plus all transportation costs paid by
Buyer; or
(b) require Buyer to return the non-conforming Products, freight collect,
to Buyer's plant and promptly replace such Products with conforming Products.
The party shipping Products pursuant to this Section 10 will bear the entire
risk of loss while a shipment is in transit.
11. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
(a) Authorization; Binding Obligation. Each party represents and warrants
to the other that it is and will be free to enter into, and to fully perform,
this Agreement and that no agreement or understanding with any other person,
firm or corporation exists or will exist which would interfere with its
obligations hereunder. Each party represents and warrants to the other that
this Agreement is a legal, valid and binding obligation of such party,
enforceable against it in accordance with the terms of this Agreement.
(b) Product Specifications. Seller represents and warrants to Buyer that
all Products sold to Buyer pursuant to this Agreement shall be manufactured
and processed in accordance with, and such Products shall comply with,
applicable Product Specifications.
12. EXCUSABLE DELAY.
(a) Force Majeure. Neither party hereto shall be liable for
nonperformance for reasons of force majeure (all such causes being "Force
Majeure Causes") including, but not limited to:
(i) acts of God, acts of a public enemy, acts of the Governments of
any state or political subdivision or any department or regulatory agency
thereof or entity created thereby, quotas, embargoes, acts of any person
engaged in subversive activity or sabotage, fires, floods, explosions, or
other catastrophes, epidemics, or quarantine restrictions, strikes or other
labor stoppages, slowdowns or disputes, voluntary or involuntary compliance
with any valid or invalid law, or regulation of any governmental agency or
authority, lack of transportation facilities, or any other cause beyond the
control of the parties; or
(ii) a failure or shortage in whole or part in the crop or raw
material grown by
<PAGE>
Sellers' contractors from which the Products are produced; provided, however,
that in the case of a raw materials shortage, Seller shall allocate to Buyer
no less than its pro-rata share of the available materials, except as may be
required by any agreement to which Seller is a party as of the date of this
Agreement.
The settlement of strikes or other labor stoppages shall be entirely within
the discretion of such party claiming nonperformance and such party shall not
be required to settle strikes or other labor stoppages by acceding to the
demands of the workforce when such course is inadvisable in the discretion of
such party.
(b) Notice and Cure. In the event of nonperformance due to a Force
Majeure Cause, such party claiming nonperformance shall immediately notify
the other party and make reasonable efforts to cure such Force Majeure Cause
and resume performance at the earliest possible date; provided, further, that
during the pendency of any Force Majeure Cause, the party not claiming
nonperformance shall have the right to sell or purchase, as that case may be,
the Products or substitute Products in any manner.
13. CONFIDENTIALITY.
(a) Confidential Information. Except as provided herein, each party will
treat as confidential and proprietary and not disclose to any unauthorized
third party any Confidential Information of the other party, unless such
information:
(i) was already in the possession of or otherwise available to the
receiving party at the time such information was received under this
Agreement;
(ii) is published or otherwise becomes generally available to the
public through no fault of the receiving party; or
(iii) is lawfully made available to the receiving party without
restriction by any person or entity which is not bound by, and does not
impose, an obligation of confidentiality with respect to such information.
"Confidential Information" means all materials, specifications, trade
secrets, marketing and other strategic information and other information and
know-how, including without limitation, proprietary information and materials
(whether or not patentable) regarding a party's technology, products,
business, information or objectives. Confidential Information shall not
include the terms of this Agreement.
(b) Restrictions on Use and Disclosure. Except as provided herein,
neither party will:
(i) use any Confidential Information for any purpose other than in
connection with the performance of its obligations under this Agreement, the
Asset Purchase Agreement, the R & D Agreement, the Royalty Agreement or any
related agreement between the parties; or
<PAGE>
(ii) disclose, reveal or otherwise make Confidential Information
(other than its own) available to any third party without the prior written
consent of the other party, unless such disclosure is required by operation
of applicable law and, to the extent practicable, made under an agreement of
confidentiality with the governmental authority requiring such disclosure.
(c) Precautions. Both parties will take such reasonable and prudent steps
and precautionary measures as may be required to ensure compliance with this
Section 13 by such of their employees, officers, agents, representatives,
affiliates and other persons as are given access to such Confidential
Information.
(d) Survival. The obligations of the parties in this Section 13 will
survive until five (5) years after the termination of this Agreement.
14. INDEMNIFICATION.
Each party shall indemnify, defend and hold the other party, its
employees and agents harmless from and against any and all liabilities,
damages, injuries, claims, suits, judgments, causes of action and expenses
(including attorneys' fees, court costs and out-of-pocket expenses),
including without limitation claims brought by third parties seeking to
recover for personal injury or property damage on any theory of product
liabilities directly suffered or incurred by such other party as a result of
(i) any breach of any representation or warranty made by such first party
hereunder, or (ii) any act or deed, whether by way of tort or contract,
committed or omitted by such first party, its employees or agents in the
performance of this Agreement, except for acts or deeds committed or omitted
by such first party in reliance on representations and warranties made to
such first party by such other party under this Agreement.
15. GENERAL.
(a) Limitation of Liability. IN NO EVENT WILL ANY PARTY HERETO BE LIABLE
UNDER ANY PROVISION OF THIS AGREEMENT FOR ANY INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES INCURRED BY THE OTHER PARTY OR ANY THIRD PARTY,
WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY.
(b) Governing Law. This Agreement is made in accordance with and will be
governed and construed under the laws of the State of Delaware, excluding
conflict of law principles that would cause the law of another jurisdiction
to apply, as applied to agreements executed and performed entirely in
Delaware by Delaware residents.
(c) Assignment. This Agreement is not assignable or transferable by
either party in whole or in part except with the written consent of the other
party, which consent shall not be unreasonably withheld; provided, however,
that Seller may assign its interest to a purchaser of its garlic processing
business or garlic processing plant, without consent; and provided further,
that the Buyer may assign its interest to a purchase of its business (whether
by sale of assets, capital stock,
<PAGE>
merger or otherwise) without consent. In the case of any permitted assignment
or transfer of or under this Agreement, this Agreement or the relevant
provisions thereof, will be binding upon, and inure to the benefit of, the
successors, executors, heirs, representatives, administrators and assigns of
the parties hereto.
(d) Notices. All notices and other communications required or permitted
to be given under this Agreement will be in writing and will be effective
when delivered personally, or one (1) business day after being transmitted by
facsimile, or two (2) business days after being sent by commercial overnight
carrier, or five (5) business days after being mailed if sent by registered
or certified mail, postage prepaid, and addressed to the party at its address
set forth below, unless by such notice a different person, address or number
has been designated for giving notice hereunder:
If to Seller, to:
Basic Vegetable Products, L.P.
324 Campus Lane, Suite C
Suisun, CA 94585
Attn: Chief Financial Officer
Facsimile Number: (707) 864-4501
with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
Attention: Susan Cooper Philpot
Facsimile Number: (415) 951-3699
If to Buyer, to:
Natrol, Inc.
21411 Prairie Street
Chatsworth, CA 91311
Attention: President
Facsimile Number: (***) ***-****
with a copy to:
Goodwin Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109
Attention: William V. Buccella
Facsimile Number: (617) 523-1231
<PAGE>
(e) Relationship of Parties. The parties hereto agree that under this
Agreement, Seller will operate as an independent contractor and not as an
agent or employee of Buyer. Except as described in Section 10 above with
respect to shipping arrangements, Seller has no express or implied
authorization to incur any obligation or in any manner otherwise make any
commitments on behalf of Buyer. In no way will Seller be liable to Buyer, its
employees or third parties for any losses, injury, damages or the like
occasioned by Seller's activities in connection with this Agreement, except
as expressly provided herein.
(f) Amendment and Waiver. This Agreement may be amended only with the
written approval of both parties. Any of the provisions of this Agreement may
be waived, generally or in a specific instance, with the written approval of
the party giving such waiver. The failure of either party to enforce the
provisions of this Agreement will not be deemed a waiver of such provisions
or of the right of such party thereafter to enforce such provisions or any
other provision.
(g) Severability. In the event that any provision of this Agreement will
be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity will not
render this Agreement unenforceable or invalid as a whole, and, in such
event, such provision will be changed and interpreted so as to best
accomplish the objectives of such unenforceable or invalid provision within
the limits of applicable law or applicable court decision.
(h) Remedies. Except as expressly provided in this Agreement, the right
and remedies provided in this Agreement will be cumulative and not exclusive
of any other right and remedies provided by law or otherwise.
(i) Section Headings. The section headings appearing in this Agreement
are inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or extent of such section or in any way affect
such section.
(j) Counterparts. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
(k) Arbitration. Except with respect to matters as to which injunctive
relief is being sought, any dispute arising out of or relating to this
Agreement that has not been settled within thirty (30) days by good faith
negotiation between the parties to this Agreement shall be submitted to
J.A.M.S./Endispute for final and binding arbitration on an expedited basis
pursuant to its arbitration rules and regulations. Any such arbitration shall
be conducted in San Francisco, California. Such proceedings shall be
administered by the J.A.M.S./Endispute arbitrator(s) and shall be guided by
the following agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of such arbitration;
(ii) no other discovery;
<PAGE>
(iii) hearings before the arbitrator(s) shall consist of a summary
presentation by each side of not more than three (3) hours; such hearings to
take place on one or two days at a maximum; and
(iv) decision to be rendered by the arbitrator(s) not more than ten
(10) days following such hearings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above set forth.
BASIC VEGETABLE PRODUCTS, L.P. NATROL, INC.
By: BVP, Inc. By: /s/ Elliott Balbert
-----------------------
Its: General Partner
Name: Elliott Balbert
--------------------
By: /s/ D.L. Wittchow
-----------------------------
Title: President
--------------------
Name: D.L. Wittchow
-----------------------------------
Title: President and CEO
----------------------------------
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
Product Description Pure-Gar Resource Code
------------------- ----------------------
<S> <C>
A-0 Garlic Powder 408710
A-1500 Garlic Powder 409701
A-1500 Garlic, Granular 409741
A-1500 Organic Garlic Powder 409711
A-1500 Organic Garlic, Granular 409761
A8000 Garlic Powder 409706
A10,000 Garlic Powder 409707
A13,000 Garlic Powder 409708
Nutraceutical Tomato Powder 476120
Nutraceutical Broccoli Powder 416910
Nutraceutical Spinach Powder 472070
Organic Parsley Powder 455030
Organic Spinach Powder 472600
</TABLE>
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-0
CERTIFICATION OF GUARANTEE
Test Product Code: Item# 08710 Lot# K P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Alliin: XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines XXXXXX ppm minimum C-18 HPLC
Moisture: XXXX A 2.2
Granulation: XXXX mesh, none A 6.0
XXXX mesh, XXX minimum
XXXX mesh, XXX maximum
** Total Sulfur: XXXX ppm minimum Leco Analyzer
<CAPTION>
MICROBIOLOGICAL METHOD
----------------- -------
<S> <C> <C>
Total Plate Count: XXXXXXX/g maximum M 1.0
Mold: XXXXX/g maximum M 2.0
Coliforms: XX/g maximum M 4.0
</TABLE>
----------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or
reference regarding listing can be used in advertisement without the written
approval of Basic Vegetable Products. This analysis represents the typical
standard of identity for this product as supplied to Pure-Gar.
------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-1500
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09701 Lot # P.O. #
Analytical Test Results: B/L #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield XXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield XXXXX ppm minimum C-18 HPLC
*Alliin XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines XXXXXX ppm minimum C-18 HPLC
Moisture XXXX maximum A 2.2
Granulation XXX mesh, none A 6.0
XXX mesh, XX maximum
XXX mesh, XXX maximum
**Total sulfur XXXXX ppm minimum Leco Analyzer
MICROBIOLOGICAL
----------------
Total Plate Count XXXXXXX/g maximum M 1.0
Mold XXXXX/g maximum M 2.0
Coliform XX/g maximum M 4.0
E. coli less than XX/g M 4.0
Salmonella Negative/XX grams M 15.0
</TABLE>
-----------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Granular A-1500
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09741 Lot # P.O. #
Analytical Test Results: B/L #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield XXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield XXXXX ppm minimum C-18 HPLC
*Alliin XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines XXXXXX ppm minimum C-18 HPLC
** Total Sulfur XXXXX ppm minimum Leco Analyzer
Moisture XXXX maximum A 2.2
Granulation XXX mesh, XX maximum A 6.0
XXXX mesh, XXX maximum
MICROBIOLOGICAL
----------------
Total Plate Count XXXXXXX/g maximum M 1.0
Mold XXXXX/g maximum M 2.0
Coliform XX/g maximum M 4.0
E. coli less than XX/g M 4.0
Salmonella Negative/XX grams M 15.0
</TABLE>
------------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-1500, Organic
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09711 Lot # P.O. #
Analytical Test Results: B/L #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield XXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield XXXXX ppm minimum C-18 HPLC
*Alliin XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines XXXXXX ppm minimum C-18 HPLC
Moisture XXXX maximum A 2.2
Granulation XXX mesh, none A 6.0
XXX mesh, XX maximum
XXX mesh, XXX maximum
** Total Sulfur XXXXX ppm minimum Leco Analyzer
MICROBIOLOGICAL
-----------------
Aerobic Plate Count: XXXXXXX/g maximum M 1.0
Mold: XXXXX/g maximum M 2.0
Coliform: XX/g maximum M 4.0
E. coli less than XX/g M 4.0
Salmonella Negative/XX grams M 15.0
</TABLE>
------------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
ORGANIC CERTIFICATION
This product has been organically grown in accordance with the standards
established by the California Certified Organics Farmers and the provisions of
the California Organic Food Act of 1990.
Certificate Number: ft045 Date Issued: 2/19/93
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Organic Granulated Garlic A-1500
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09761 Lot # P.O. #
Analytical Test Results: B/L #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield XXXXX ppm minimum C-18 HPLC
Moisture XXXX maximum A 2.2
Granulation XXX mesh, XX maximum A 6.0
XXX mesh, XXX maximum
XXXX mesh, XXX maximum
MICROBIOLOGICAL
----------------
Total Plate Count XXXXXX/g maximum M 1.0
Mold XXXXX/g maximum M 2.0
Coliform XX/g maximum M 4.0
E. coli less than XX/g M 4.0
Salmonella Negative/XX grams M 15.0
</TABLE>
-----------
* Determined using a C-18 HPLC column
ORGANIC CERTIFICATION
This product has been organically grown in accordance with the standards
established by the California Certified Organics Farmers and the provisions of
the California Organic Food Act of 1990.
Certificate Number: ft045 Date Issued: 2/19/93
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-8000
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09706 Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield: XXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield: XXXXX ppm minimum C-18 HPLC
*Alliin: XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines: XXXXX ppm minimum C-18 HPLC
Moisture: XXXX maximum A 2.2
Granulation: XXX mesh, none A 6.0
XXX mesh, XX maximum
XXX mesh, XXX maximum
** Total Sulfur: XXXXX ppm minimum Leco Analyzer
MICROBIOLOGICAL
---------------
Total Plate Count: XXXXXXX/g maximum M 1.0
Mold: XXXXX/g maximum M 2.0
Coliform: XX/g maximum M 4.0
E. coli: less than XX/g M 4.0
Salmonella Negative/XX grams M 15.0
</TABLE>
----------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-10,000
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09707 Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield: XXXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield: XXXXXX ppm minimum C-18 HPLC
*Alliin: XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines: XXXXX ppm minimum C-18 HPLC
Moisture: XXXX maximum A 2.2
Granulation: XXX mesh, none A 6.0
XXX mesh, XX maximum
XXX mesh, XXX maximum
** Total Sulfur: XXXXX ppm minimum Leco Analyzer
MICROBIOLOGICAL
-----------------
Total Plate Count: XXXXXXX/g maximum M 1.0
Mold: XXXXX/g maximum M 2.0
Coliform: XX/g maximum M 4.0
E. coli: less than XX/g M 4.0
Salmonella Negative/XXg M 15.0
</TABLE>
-----------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Garlic Powder A-13,000
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 09708 Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
*Allicin yield XXXXXX ppm minimum C-18 HPLC
*Total Thiosulfinates yield XXXXXX ppm minimum C-18 HPLC
*Alliin XXXXXX ppm minimum C-18 HPLC
*Gamma-glutamylcysteines XXXXX ppm minimum C-18 HPLC
**Total Sulfur XXXXX ppm minimum Leco Analyzer
Moisture XXXX maximum A 2.2
Granulation XXX mesh, XX maximum A 6.0
XXX mesh, XX maximum
XXX mesh, XXX maximum
MICROBIOLOGICAL
----------------
Total Plate Count: XXXXXXX/g maximum M 1.0
Mold: XXXXX/g maximum M 2.0
Coliform: XX/g maximum M 4.0
E. coli: less than XX/g M 4.0
Salmonella Negative/XXg M 15.0
</TABLE>
------------
* Determined using a C-18 HPLC column
** Determined using a Leco Sulfur Analyzer
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Nutraceutical Tomato Powder
CERTIFICATION OF GUARANTEE
Test Product Code: Resource # 76120 Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Total Lycopene XXXXX ppm minimum HPLC
Vitamin C XX mg/XXXg minimum AOAC 984.26
Moisture XXXX maximum A 2.2
Granulation XXX mesh, XXX minimum A 6.0
MICROBIOLOGICAL
------------------
Total Plate Count XXXXXXX/g maximum M 1.0
Yeast/Mold XXX/g maximum M 2.0
Coliform XXX/g maximum M 4.0
E. coli less than XX/g M 4.0
Salmonella Negative/XXg M 15.0
S. aureus XX/g M 14.0
</TABLE>
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Nutraceutical Broccoli Powder 16910
Test Product Code: Resource # 16910, Lot # K P.O. #
Manufacture Date: Expiration Date:
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Sulforaphane Yield XXXXX ppm minimum HPLC
Total Glucosinolates XXXXX ppm minimum *
Vitamin C XXX mg/XXXg minimum AOAC 984.26
Beta-carotene XXXXX I.U./XXXg minimum HPLC
Total sulfur XXXXX ppm minimum Leco SC432DR
Analyzer
Moisture: XXXX maximum A 2.2
Granulation: XXX mesh, XXX minimum A 6.0
MICROBIOLOGICAL METHOD
--------------- ------
Total Plate Count: XXXXXXX/g maximum M 1.0
Yeast/Mold: XXX/g maximum M 2.0
Coliforms: XXX/g maximum M 4.0
E. coli: less than XX/g M 4.0
Salmonella: Negative/XXg M 15.0
S. aureus: less than XX/g M 14.0
</TABLE>
----------
* Measured by Small Scale Method for the Determination of Total
Glucosinolates; modified method published by Heaney and Fenwick (Methods of
Enzymatic Analysis, H.C. Bergmeyer ed., Vering Chemie, Deerfield Beach, FL,
pp. 208-214, 1984)
Basic Vegetable Products certifies the attributes listed. No claims or reference
regarding listing can be used in advertisement without the written approval of
Basic Vegetable Products. This analysis represents the typical standard of
identity for this product as supplied to Pure-Gar.
------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Nutraceutical Spinach Powder
CERTIFICATION OF GUARANTEE
Test Product Code: Resource #72070, Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Lutein XXX ppm minimum HPLC
Beta-carotene XXXXXX I.U./100g minimum HPLC
Folate X mg/XXXg minimum (2)
Calcium XXX mg/XXXg minimum AOAC 975.03
Iron XX mg/XXXg minimum AOAC 975.03
Moisture XXXX maximum A 2.2
Granulation XXX mesh, XX maximum A 6.0
<CAPTION>
MICROBIOLOGICAL METHOD
--------------- -------
<S> <C> <C>
Total Plate Count XXXXXXX/g maximum M 1.0
Yeast/Mold XXX/g maximum M 2.0
Coliforms XXX/g maximum M 2.0
E. coli less than XX/g M 4.0
Salmonella Negative/XXg M 15.0
S. aureus XX/g M 14.0
</TABLE>
----------
(2) Methods of Analysis for Infant Formula (1985); Infant Formula Council.
Basic Vegetable Products certifies the attributes listed. No claims or
reference regarding listing can be used in advertisement without the written
approval of Basic Vegetable Products. This analysis represents the typical
standard of identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Organic Parsley Powder
CERTIFICATION OF GUARANTEE
Test Product Code: Resource #55030, Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Moisture XXXX maximum A2.2
MICROBIOLOGICAL METHOD
--------------- ------
Total Plate Count XXXXXX/g maximum M 1.0
Yeast/Mold XXX/g maximum M 2.0
Coliforms XX/g maximum M 2.0
E. coli Negative M 4.0
Salmonella Negative M 15.0
</TABLE>
ORGANIC CERTIFICATION
This product has been organically grown in accordance with the standards
established by the California Certified Organic Farmers and the provisions of
the California Organic Act of 1990.
Certificate Number: ft045
Date Issued: 02/19/93
Basic Vegetable Products certifies the attributes listed. No claims or
reference regarding listing can be used in advertisement without the written
approval of Basic Vegetable Products. This analysis represents the typical
standard of identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
P U R E - G A R
A SUBSIDIARY OF BASIC VEGETABLE PRODUCTS
January 15, 1998
Client: Pure-Gar
Product: Organic Spinach Powder
CERTIFICATION OF GUARANTEE
Test Product Code: Resource #72600, Lot # P.O. #
Analytical Test Results: Order #
<TABLE>
<CAPTION>
ATTRIBUTES METHOD
---------- ------
<S> <C> <C>
Moisture XXXX A2.2
MICROBIOLOGICAL METHOD
--------------- ------
Total Plate Count XXXXXX/g maximum M 1.0
Yeast/Mold XXX/g maximum M 2.0
Coliforms XX/g maximum M 2.0
E. coli Negative M 4.0
Salmonella Negative M 15.0
</TABLE>
ORGANIC CERTIFICATION
This product has been organically grown in accordance with the standards
established by the California Certified Organic Farmers and the provisions of
the California Organic Act of 1990.
Certificate Number: ft045
Date Issued: 02/19/93
Basic Vegetable Products certifies the attributes listed. No claims or
reference regarding listing can be used in advertisement without the written
approval of Basic Vegetable Products. This analysis represents the typical
standard of identity for this product as supplied to Pure-Gar.
--------------------------
C.O.G. Administrator
P.O. Box 98813 Tacoma, WA 98498 253-582-6421 FAX: 253-582-6734
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
BASIC VEGETABLE PRODUCTS, LP
Transfer Pricing for Sale to PureGar
<TABLE>
<CAPTION>
DESCRIPTION 1996 TRANSFER PRICE 1997 TRANSFER PRICE**
------------ ------------------- ---------------------
<S> <C> <C>
GARLIC A500 ORG SEL PWD XXXXX XXXXX
GARLIC A-0 PWD 200#DM PG XXXXX XXXXX
GARLIC A-0 PWD 50#BX PG XXXXX XXXXX
GARLIC A1500 PWD 600K TT XXXXX XXXXX
GARLIC A1500 PWD 250#DM PG XXXXX XXXXX
GARLIC A1500 PWD 50#BX PG XXXXX XXXXX
GARLIC A7000 PWD 250#DM PG XXXXX XXXXX
GARLIC A8000 PWD 250#DM PG XXXXX XXXXX
GARLIC A8000 PWD 50#BX PG XXXXX XXXXX
GARLIC A10000 PWD 250#DM PG XXXXX XXXXX
GARLIC A10000 PWD 50#BX PG XXXXX XXXXX
GARLIC A13000 PWD 250#DM PG XXXXX XXXXX
GARLIC A13000 PWD 50#BX PG XXXXX XXXXX
GARLIC A1500 ORG PWD 50#BX PG XXXXX XXXXX
GARLIC ORG A1500 PWD 50#BX PG XXXXX XXXXX
GARLIC A1500 GRLD 60BK TT XXXXX XXXXX
"OBS" GAR A1500 GRL 200#DM XXXXX XXXXX
GAR ORG A1500 GRLD 200#DM XXXXX XXXXX
GARLIC A1500 PWD -80 250#DM XXXXX XXXXX
BROC PWD -60NU 50# HSBX XXXXX XXXXX
CARROT PWD -60 NUTRA 50#BX XXXXX XXXXX
PARSLEY PWD -60 NS 50#BX XXXXX XXXXX
SPINACH PWD -60 NUTRA NS XXXXX XXXXX
TOM-CB ORG NU PWD -35 40#DM XXXXX XXXXX
</TABLE>
-----------
** Contract transfer price to remain same as 1997 for existing products. Any new
products will include XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
<PAGE>
Schedule 5
Date: February 27, 1998
Given that that it is extremely difficult to legally define the channels
of distribution to which Natrol is being granted "Exclusivity", we feel a
mutually signed memorandum of understanding would be helpful in documenting
the spirit of the Supply Agreement.
As a supplier of raw material to numerous trade classes, Natrol expects
to have the right to sell any product that BVP manufactures during the term
of the Supply Agreement. Our primary interest is nutraceutical grade garlic,
our secondary interest is BVP's Schedule II Products, and our third interest
is any New Products developed or supplied by BVP.
Natrol clearly understands that BVP's customer base consists of
industrial clients such as Lipton, C.W. Post, Taco Bell, General Mills, and
that B.V.P. retains the rights to sell product to these customers.
Natrol's business, post the Pure-Gar acquisition, consists of selling
branded vitamins and supplements through various channels of distribution as
well as the sale of bulk material to manufacturers/processors of
nutraceutical products.
Natrol's primary channels of distribution include but are not limited to,
multi-level marketers, catalog sales companies, retailers and wholesalers who
sell to retailers, manufacturers of pills in encapsulated, soft-gel and
compressed pill form. Natrol anticipates expanding its channels of
distribution to infomercials, international, department stores and any and
all channels through which dietary supplements can be sold. Through the
acquisition of Pure-Gar we are also selling to a limited number of brokers
who re-sell to our primary channels of distribution. Natrol currently sells
product that is intended to eventually be sold as vitamins, nutraceutical &
herbal supplements or functional foods.
We believe that BVP and Natrol agree that Natrol should have exclusively
within these primary channels of distribution where the intent of the Natrol
is to produce a vitamin, a nutraceutial or herbal supplement of functional
food. We believe it is the definite intent of the supply agreement to give
Natrol exclusive rights to sell bulk materials and or pills in their various
forms to any company that is manufacturing or packaging pills in their
various forms for sale as vitamins or nutraceutical herbs and supplements.
Unfortunately, as with any supply agreement, there are gray areas of
crossover that cannot be defined precisely.
One area of crossover would be if one of BVPs existing industrial
customers, let us say, Kellogg decided to enter the traditional vitamin and
supplement business. For purposes of
<PAGE>
illustration only, it would be Natrol's expectation that if Kellogg decided to
produce a Garlic Pill, BVP would inform Kellogg that it had to purchase its raw
material from the Natrol. However, it is clearly understood by Natrol that if
Kellogg decided to add Garlic or another BVP nutraceutical product to Total
Cereal, BVP would maintain all rights to sell directly to Kellogg.
Natrol sees the biggest area of potential confusion to be functional
foods yet to be developed by BVP.
Again, for purposes of illustration, let us say that BVP develops powder
or some other raw material mix (liquid, paste, etc.) to make a functional
food "power bar".
It is clear that Natrol would have the rights to sell this mix to
marketers within its channels of distribution. This would include companies
like Pharmavite, Rexall Sundown, Herbalife, Avon, Walmart, Walgreen, etc. who
sell to wholesalers, retailers, or customers.
However, it is also clear that BVP would sell the same mix to its
existing and developing customer base. Natrol understands that Lipton,
Campbell Soup or General Mills could decide to manufacture a power bar in
direct competition to Natrol and sell this power bar to Walmart, Walgreen,
and other retailers that are part of their individual distribution networks.
The key element that has to be acknowledged as part of the spirit of this
agreement is that BVP would not sell this mix directly to Rexall sundown,
Pharmavite, Walgreen's, Herbalife, etc., i.e., customers who now and in the
future are part of Natrol's primary distribution channels.
Natrol believes that in acknowledging this memorandum, both BVP and
Natrol are further acknowledging an understanding of the nuances of the
differentiation within the examples outlined above.
As good business people, we will operate in good faith within the
guidelines of this letter. Should there be any honest disagreement in the
future, the parties will use there best efforts to resolve potential issues
informally but if necessary the parties will let an independent arbitrator
resolve the issue using the scope of this memorandum for guidance.