CO-BRANDING SUPPLY AGREEMENT

 

                          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   pl