CO-BRANDING SUPPLY AGREEMENT
This agreement ("Agreement") is made and entered into as of this 10th
day of February, 2005, ("Effective Date") by and between Source Direct Holdings,
Inc., a Nevada corporation with its principal office located at 2345 N.
Woodruff, Idaho Falls, Idaho 83401 (hereinafter referred to as "Distributor"),
and Fusion Packaging Solutions, Inc., an Idaho corporation, with principal
offices located at 345 Karcher Road, Nampa, Idaho 83687 (hereinafter referred to
as "Seller").
RECITAL
WHEREBY Seller and Distributor currently produce various
products used in connection with the maintenance and upkeep of motorized
vehicles;
WHEREBY Seller and Purchaser hereby desire to enter into an
agreement whereby Seller manufacturers a product which is co-branded and sold to
National Mass Merchandisers;
NOW, THEREFORE, in consideration of the foregoing and the
covenants and conditions set forth below, on the terms and subject to the
conditions set forth herein, Distributor and Seller agree as follows:
1. Supply Relationship.
(a) Seller offers to sell and ship to Distributor certain products for resale
as set forth on Exhibit A, attached hereto and incorporated herein by
reference. The product shall be sold and marketed in connection with
Distributor's products, as set forth on Exhibit B and incorporated herein
by reference (the product on Exhibit A and Exhibit B collectively referred
to herein as "Product"). Distributor hereby agrees that the Products shall
be labeled as mutually agreed upon by Seller and Distributor and Seller
shall be responsible for labeling such Products. Exhibits A and B may be
modified, in writing, by the parties from time to time.
(b) Distributor hereby agrees to market and distribute such Products for sale
only to National Mass Merchandisers ("Customers"). Distributor hereby
agrees that Seller is the exclusive manufacturer of the Product.
(c) Distributor hereby agrees that all orders will be placed pursuant to a
written purchase order delivered by Distributor to Seller by fax, e-mail or
US mail. All orders must be in truck load quantities and all orders must
have a minimum order volume of 835 cases. Seller hereby agrees to use
commercially reasonable efforts to satisfy the volume placed in such
purchase orders; provided, however, a failure on the part of
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Seller to be able to supply all Product ordered does not constitute a
breach hereunder.
(d) Distributor hereby represents and warrants that it has all permits and
licenses necessary to distribute the Product. Distributor further
represents and warrants that it will comply with all federal, state and
local laws and rules in its performance under this Agreement. Distributor
represents and warrants that the Products listed on Exhibit B comply with
all federal, state and local laws and regulations and do not create any
trademark, trade dress, copyright, or patent infringement. Seller
represents and warrants that the Products listed on Exhibit A comply with
all federal, state and local laws and regulations and do not create any
trademark, trade dress, copyright, or patent infringement.
2. Payment. Seller shall provide an invoice to Distributor setting forth all
amounts due to Seller from Distributor. The entire gross invoice amount to
Distributor with respect to Products shall be paid to Seller within 15 days
of Distributor receipt of invoice. Distributor shall pay such invoices by
wire transfer or check.
3. Pricing Terms.
(a) The prices to Distributor for Products shall be those set between
Distributor and Seller and memorialized on Exhibit C. All prices are FOB
plant. After the Term, Seller shall have the right to change price on any
Products based upon its business judgment and market conditions including,
but not limited to, price fluctuations in ingredient or packaging material
costs, availability of raw ingredients or other materials necessary for the
manufacture of the Product, or changes in operating costs. Such changes
shall be effective no less than ninety (90 days) following the delivery of
said written notice of any price change to Distributor.
(b) All charges for delivery and freight shall be paid by Distributor directly
to the carrier. The prices offered or quoted by Seller to Distributor shall
not include any duties, sales, excise, or similar taxes and charges which
are now, or may hereafter be, levied, imposed or charged (whether by
federal, state, municipal or other public authority) with respect to the
sales of the Product hereunder.
4. Payment Security. Prior to any placement of a Distributor order by
Distributor, Distributor shall secure an irrevocable letter of credit with
a financial institution, agreed to by Seller in its sole and absolute
discretion, naming Seller as the beneficiary in the aggregate amount of
Seventy-five Thousand Dollars ($75,000) (the "Letter of Credit"). The
Letter of Credit must permit partial and entire withdrawals. Seller shall
have the right to draw on the Letter of Credit for all amounts set forth on
the unpaid invoices which are not paid within the time frame as set forth
in Section 2 hereof. In the event Seller draws on the Letter of Credit,
Seller shall have the option, in its sole and absolute discretion, to
immediately terminate this Agreement and the timeframes set forth herein
shall apply.
5. Deliveries. All shipments of Products will be by common or contract
carrier, and title and risk of loss or damage to Products shall pass to
Distributor upon delivery thereof by Seller to the carrier.
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6. Forecasts and Lead Times. Distributor shall provide to Seller, on a
quarterly basis based upon a calendar year, a rolling sixteen (16) week
forecast of Products to be ordered by Distributor. As long as all orders
comply with the forecasts provided to Seller by Distributor, Seller shall
make Products ordered by Distributor available, F.O.B. plant within four
(4) to Six (6) weeks after Seller's acknowledgment of a purchase order.
7. Term. The term of this Agreement shall be for one (1) year commencing on
the Effective Date ("Effective Date") and shall automatically renew for
subsequent terms thereafter unless terminated as provided below.
8. Ride to the Wall. The parties hereby agree that five percent (5%) of the
gross sales proceeds (less any taxes paid) from the product "Pig Spit"
shall be contributed to the non-profit corporation, Ride to the Wall, Inc.
(the "Ride to the Wall Donation"). Distributor shall report to Seller on a
calendar quarterly basis the amount of the gross sales proceeds (less any
taxes paid) and the amount of the Ride to the Wall Donation for that
quarter. Seller shall then pay the Ride to the Wall Donation to Ride To The
Wall, Inc. and shall then add the Ride to the Wall Donation to the
subsequent invoice. Failure on Distributor's part to pay the Ride to the
Wall Donation shall be a breach of this Agreement. Any tax benefits or
liabilities as a result of such contribution shall be borne by the Seller
and Seller shall have no liability to Distributor for any tax consequences.
Seller hereby in no way represent or warrants that any tax benefits or
liabilities are available to Distributor as a result of such contribution
and Distributor shall consult its tax consultants regarding the same.
Distributor hereby in no way represent or warrants that any tax benefits or
liabilities are available to Seller as a result of such contribution and
Seller shall consult its tax consultants regarding the same
9. Termination. Either party may terminate this Agreement, in whole or as to
any particular Product, at any time under one of the following options in
which event the terms of this Section 9 shall apply:
(a) without cause upon ninety (90) days' advance written notice to the other
party;
(b) immediately if the other party is or shall: (i) be or become insolvent or
unable to pay its debts as they mature within the meaning of the United
States Bankruptcy Code or any successor statute; or (ii) make an assignment
for the benefit of its creditors; or (iii) file or have filed against it,
voluntarily or involuntarily, a petition under the United States Bankruptcy
Code or any successor statute unless such petition is stayed or discharged
within ninety (90) days; or (iv) have a receiver appointed with respect to
all or substantially all of its assets;
(c) except as set forth in Section 4 hereof, upon thirty (30) days notice if
the other party fails to fulfill any material obligation on its part to be
performed under this Agreement, or is determined to be in breach of its
representations and warranties in this Agreement in any material respect,
provided the breaching party has not cured the breach within the thirty
(30) days to the sole, reasonable satisfaction of the non-breaching party;
provided, however, that there shall not be a default within the meaning of
this Section 8 if the breaching party promptly commences to cure such
breach within such thirty (30) day period and thereafter diligently pursues
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such cure to completion; provided further, however, that the period of cure
shall in no event exceed sixty (60) days.
In the event of Termination, notice to the other party shall be sent
via first class mail and certified mail to the address listed on page 1. If
to Distributor: send notices to the attention of Deren Z. Smith and if to
Seller: send to the attention of Andrew B. Haroian. Notice shall be deemed
received four (4) calendar days after deposit into first class mail.
Upon termination of this Agreement for any reason, all prices shall
remain at the same level they were when notice was provided through the
date of termination. In the event this Agreement is terminated in whole or
as to any particular Product without cause, Distributor shall order through
a wholesaler, or directly from Seller, the existing supply of packed,
labeled and cased salable Products up to a 90 day supply. For greater
clarity, Distributor agrees to purchase at least an average of ninety (90)
day supply of Product calculated by summing the Products purchased by
Distributor during the immediately preceding four (4) fiscal quarters and
dividing that sum by four (4). In the event of a termination pursuant to
Section 4 hereof, Seller shall have the right, in order to protect its
trademark and trade dress to satisfy all orders placed by Customers to
Distributor and recover all payments from the Customers paid therefore. In
the event Customers already paid such payment to the Distributor, Seller
shall have the right to draw the amount paid by the Customers for the
Product under the Letter of Credit.
10. Indemnification.
a. Distributor Indemnification. Distributor agrees to indemnify, defend and
hold Seller, its affiliates, directors, associates, agents, and
representatives harmless from and against any and all claims, demands,
liabilities, damages, losses, costs and expenses, including, without
limitation, costs and expenses of investigation and settlement and
attorneys' fees and expenses (collectively, "Claims"), to the extent such
Claims are alleged to arise from: (i) any act or omission by Distributor,
or its agents and/or brokers, relating to or affecting the condition,
quality or character of any Product; (ii) the formulation of any Product
done at the direction of Distributor violating any patent, trade secret or
other proprietary right of any third party; (iii) trademark, copyright,
trade dress or patent infringement on any trademark, copyright, trade dress
or patent licensed to Seller by Distributor under this Agreement, (iv) a
defect in the formulation of any Product done at the direction of the
Distributor causing illness, personal injury or death; (v) the formulation
of any Product by Distributor violating any applicable federal or state
food and drug or consumer safety law; or (vi) Distributor's performance
under this Agreement or a breach by Distributor of any of its
representations, warranties, covenants or obligations under this Agreement.
Seller shall have the right to actively participate in the defense of any
Claim including, selection of counsel, formulation of strategy, and
approval of any settlement reached. This provision shall survive
termination of this Agreement.
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b. Seller Indemnification. Seller agrees to indemnify, defend and hold
Distributor, its affiliates, directors, associates, agents, and
representatives harmless from and against any and all claims (as defined
above), to the extent such Claims are alleged to arise from: (i) any act or
omission by Seller, or its agents and/or brokers, relating to or affecting
the condition, quality or character of any Product; (ii) the formulation of
any Product done at the direction of Seller violating any patent, trade
secret or other proprietary right of any third party; (iii) trademark,
copyright, trade dress or patent infringement on any trademark, copyright,
trade dress or patent licensed to Distributor by Seller under this
Agreement, (iv) a defect in the formulation of any Product done at the
direction of the Seller causing illness, personal injury or death; (v) the
formulation of any Product by Seller violating any applicable federal or
state food and drug or consumer safety law; or (vi) Seller's performance
under this Agreement or a breach by Seller of any of its representations,
warranties, covenants or obligations under this Agreement. Distributor
shall have the right to actively participate in the defense of any Claim
including, selection of counsel, formulation of strategy, and approval of
any settlement reached. This provision shall survive termination of this
Agreement.
11. Insurance. Distributor shall maintain (and shall cause each of its agents,
independent contractors and subcontractors performing any services
hereunder to maintain) at all times at its sole cost and expense at least
the following insurance covering its obligations under this Agreement:
a. Commercial Liability Insurance. Commercial General Liability including but
not limited to (i) injury to person, (ii) damage to property, (iii)
contractual liability coverage, (iv) personal and advertising injury
liability (v) products liability coverage including a broad form vendor's
endorsement (additional insured-vendor), in an amount not less than Five
Million Dollars ($5,000,000) for each occurrence listing Seller as an
additional insured.
b. Worker's Compensation and Business Automobile Liability Insurance.
Distributor shall maintain or cause each of its agents, independent
contractors and subcontractors performing any services hereunder to
maintain Worker's Compensation at statutory limits and Employer's Liability
at limits not less than One Million Dollars ($1,000,000) and Business
Automobile Liability for owned, hired, and non-owned vehicles in an amount
not less than Two Million Dollars ($2,000,000) for each accident listing
Seller as an additional insured.
This insurance shall be issued by companies licensed to do business in
the state(s) where services are rendered. Upon execution of this Agreement
and PRIOR to commencement of this Agreement, Distributor shall provide to
Seller a Certificate of Insurance which shall indicate all insurance
coverage required by the provisions herein and that Seller will be provided
with thirty (30) days' written notice prior to substantial modification or
cancellation of such policy. Such Certificate of Insurance shall be updated
annually and shall be sent to: Andrew B. Haroian.
Failure by Distributor to require and verify and monitor its
co-packers (if approved), agents, independent contractors and
subcontractors compliance with the insurance requirements will be
considered a breach of this Agreement.
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12. Intellectual Property. It is understood and agreed by and between the
parties hereto that Distributor shall have a revocable right for the Term
to use the label, design, trademark, and trade name used on the Products
listed on Exhibit A and that Seller shall have a right to use for the Term
the label, design, trademark, and trade name used on the Products listed on
Exhibit B, including but not limited to the right to use Distributor's
label, design, trademark, and trade name used on the Products listed on
Exhibit B to satisfy any and all unsatisfied orders by Customer in the
event this Agreement is terminated and any orders are outstanding or
unsatisfied. However, the parties hereby agree that in the event this
Agreement is terminated, Seller shall own all label, design, trademark, and
trade name used on the Product listed on Exhibit A, and except as expressly
set forth herein, Distributor shall own all label, design, trademark, and
trade names used in the Products listed on Exhibit B. All art, plates,
negatives or designs prepared for the Product shall be the property of
Seller and shall remain Seller's property upon notice of termination of
this Agreement by either party. It is expressly agreed and understood that
these items are inherent in the cost of doing business, and Seller shall
not reimburse Distributor for these items.
13. Supplies. Seller reserves the right to purchase and sell, as necessary to
fulfill existing purchase orders, all packaging supplies for its Products,
labels, cartons, boxes, or bags. These supplies are the property of Seller.
No Products, trademarks, titles or prepacked labeled merchandise of Seller
may be sold, salvaged, exported, or used by Distributor without written
consent of Seller.
14. Amendments and Conflicting Terms. Provisions of this Agreement may be
modified, amended or waived only by a written document specifically
identifying this Agreement and signed by an authorized representative of
each party. Without limitation, to the extent the terms and conditions or
spirit of this Agreement conflict with the terms and conditions on any
purchase order, shipping order form, bill of lading, receipt or the like,
the terms and conditions of this Agreement shall be controlling.
15. Assignment. This Agreement is binding upon the parties hereto, their
successors and assigns. Notwithstanding anything to the contrary, in the
event of sale, dissolution, acquisition, or merger of Distributor, Seller
shall be notified pursuant to Section 9 within thirty (30) days and may, at
its sole option, elect to terminate this Agreement. This Agreement may not
be otherwise assigned without the prior written consent of Distributor or
Seller as the case may require.
16. Attorneys' Fees. In the event of any claim, dispute, or legal proceeding
arising out of or relating to this Agreement, the party prevailing in such
dispute shall be entitled to recover all reasonable fees and expenses
(including, without limitation, costs of investigation, reasonable
attorneys' fees and litigation expenses) incurred in connection therewith.
17. Authorized Representatives. The undersigned represent that they are
authorized to execute this Agreement on behalf of the parties named herein.
18. Confidentiality. Seller and Distributor agree that in the course of dealing
between the parties, each party may acquire Confidential Information. Each
party shall take all commercially reasonable affirmative steps to prevent
disclosure of the other party's Confidential Information and maintain all
Confidential Information, whether obtained either directly or incidentally
and regardless of its form, confidential and safe from accidental or
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purposeful disclosure to any third party. Each party will disclose the
other party's Confidential Information only to those of its employees,
agents, attorneys, consultants, representatives, brokers, subcontractors,
or independent contractors ("Agents") shall be responsible and liable for
any unauthorized disclosure by its Agents. Each party shall make all
reasonable efforts (including the design and implementation or use of an
existing procedure for handling Confidential Information) to safeguard the
other party's Confidential Information from disclosure to unauthorized
individuals and for as long as the information disclosed remains
Confidential Information. For the purpose of this Contract, "Confidential
Information" shall mean the terms and provisions of the Agreement and all
information received by either party or either party's Agent (i) that is
not generally known in the industry in which the other party is or may
become engaged, or (ii) which is marked "confidential" and/or "proprietary"
about the other party's processes, services and products, including,
without limitation, information relating to research, development,
inventions, manufacturing process, accounting, engineering, marketing,
merchandising and selling, as well as customers and potential customers.
The restrictions herein shall not apply with respect to Confidential
Information which (i) is already available to the public; (ii) becomes
available to the public through no fault of the receiving party, its
employees or associates; (iii) is already known to the receiving party as
shown by written records in the receiving party's possession at the time
that the Confidential Information was received, provided that the source of
such information was not bound by a confidentiality agreement with another
party; or (iv) the receiving party is required to disclose by a
governmental or judicial entity, provided that the receiving party notifies
the disclosing party of the pending disclosure prior to such disclosure.
This section shall survive the termination of this Agreement.
19. Counterparts and Imaging. This Agreement may be executed in counterparts,
each of which shall be deemed original, but all of which taken together
shall constitute one and the same instrument.
20. Embargo or Bans. Seller shall not be liable for product or packaging not
delivered to Distributor as a result of any government embargo, ban,
prohibition or condemnation.
21. Force Majeure. Neither party shall be deemed to be in default of its
obligations hereunder (other than the obligation to make payments) to the
extent any delay in its performance is caused by or is the result of
factors beyond its reasonable control, including, without limitation, fire,
explosion, accident, riot, flood, drought, storm, earthquake, lightning,
frost, civil commotion, sabotage, vandalism, smoke, hail, embargo, act of
God or of a public enemy, other casualty, strike or lockout, (collectively,
an event of "Force Majeure"). Upon the occurrence of an event of Force
Majeure that prevents Seller from supplying any Product to Distributor or
otherwise perform its obligations hereunder (including making required
payments) under the terms hereof, and without limiting Distributor other
rights hereunder to use alternative sellers. Without limiting any rights a
party may otherwise have hereunder to terminate this Agreement, if either
party is unable to perform its obligations under this Agreement for at
least thirty (30) consecutive days due to an event of Force Majeure, either
party may terminate this Agreement by delivery of a written notice to such
affect to the other party. In the event of any such termination of
obligations hereunder due to an event of Force Majeure, neither party shall
be liable for any damages to the other party resulting solely from such
non-delivery or termination.
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22. Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws, and not the laws of conflicts or choice of
laws, of the State of Idaho.
23. Headings. The titles or section headings of the various provisions of this
Agreement are intended solely for convenience and ease of reference and
shall not in any manner amplify, limit, modify or otherwise be used in, the
interpretation of any such provisions.
24. Modifications and Amendments. Except as otherwise provided herein,
provisions of this Agreement may be modified, amended or waived only by a
written document specifically identifying this Agreement and signed by an
executive officer of each of the parties. Without limitation, to the extent
the terms and conditions or spirit of this Agreement conflict with the
terms and conditions on any purchase order, shipping order form, bill of
lading, receipt or the like, the terms and conditions of this Agreement
shall be controlling.
25. No Waiver. The failure of either party at any time to require performance
by the other party of any provision of this Agreement shall not affect the
right of such party to require performance of that provision, and any
waiver by any party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right under
this Agreement.
26. Severability. Any provision of this Agreement that is determined by a court
of competent jurisdiction to be invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction only, be ineffective to the
extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction
or rendering that or any other provision of this Agreement invalid, illegal
or unenforceable in any other jurisdiction.
27. Survival. All covenants, conditions, warranties, uncompleted obligations
and indemnifications contained in this Agreement which may involve
performance subsequent to any termination of this Agreement, or which
cannot be ascertained or fully performed until after termination of this
Agreement shall survive. 28. Entire Agreement. This Agreement, including
without limitation the referenced Exhibits, constitute the entire agreement
between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
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SOURCE DIRECT HOLDINGS, INC. FUSION PACKAGING SOLUTIONS, INC.
BY: /s/ Deren Z. Smith
Name: Deren Z. Smith
Title: President BY: /s/
Name: Andrew B. Haroian
Title: President
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