EXHIBIT 10.32
* Confidential Treatment has been
requested for portions
of this exhibit.
The copy filed herewith omits the
information subject to the confidentiality
request. Omissions are designated as *.
A complete version of
this exhibit
has been filed separately with the
Securities and Exchange Commission.
SUPPLY AGREEMENT
This
Supply Agreement ("Supply Agreement") is effective as of
December
1, 2004 and is between CARALOE,
INC., a Texas
corporation ("CARALOE") with
its principal place of business located at 2001 Walnut Hill Lane, Irving
Texas 75038, MANNATECH,
INC. a Texas corporation
("MANNATECH") with
its
principal place of business located at 600 S. Royal Lane, Suite 200,
Coppell, Texas 75019 and NATURAL
ALTERNATIVES INTERNATIONAL, INC. a Delaware
corporation ("NAI") with
its principal place
of business
located at
1185
Linda Vista Drive, San Marcos,
California.
CARALOE, MANNATECH AND NAI are
hereinafter referred to as
"Parties".
W I T N E S S E T H
WHEREAS,
CARALOE desires to sell to MANNATECH and MANNATECH desires
to
purchase from CARALOE, a bulk aloe vera mucilaginous polysaccharide
(hereinafter referred to under the
product name of
"Manapol[R] powder")
in
quantities, at the price and upon
the terms and conditions set forth herein;
and
WHEREAS,
contemporaneously
with the execution of this Agreement,
CARALOE and MANNATECH are entering into a Trademark License Agreement of
even date herewith (the "License
Agreement") pursuant to which, among other
things, CARALOE is granting to
MANNATECH a license to
use the product
name
Manapol[R] in connection with the
labeling, advertising and sale of products
manufactured by or for MANNATECH
that contain
Manapol[R] powder; as one of
the ingredients in products
manufactured by or for MANNATECH also containing
other ingredients and substances
(the "Manufactured Products"); and
WHEREAS,
MANNATECH and NAI are
parties to that
certain
Manufacturing
Agreement dated April 22, 1998
(the "Manufacturing Agreement"), pursuant to
which NAI has agreed to
manufacture, produce and bulk package for MANNATECH
the nutritional products described
in the Manufacturing Agreement; and
WHEREAS,
the Parties
desire to memorialize in this Agreement the
arrangement among the Parties pursuant to which NAI shall purchase
Manapol[R] powder directly from
CARALOE at the prices set forth herein for
the exclusive purpose of manufacturing the Manufactured Products for
MANNATECH;
NOW,
THEREFORE, in consideration of the premises and mutual
covenants
and agreements contained herein,
the Parties hereto agree as follows:
1. Term.
----
The term
of this Supply Agreement shall be for a period of twelve
(12)
months
from December 1, 2004 to November 30, 2005 (the "Term")
unless
further
extended or sooner terminated as provided herein (such term, as
extended
herein called, the "Term"). The Term (including each
one-year
extension
of the Term) shall be extended automatically for an
additional
one (1) year period,
provided that, at
least thirty
(30)
days prior
to the end of the Term, MANNATECH and CARALOE mutually agree
in writing
on the quantity and price of Manapol[R] powder to be sold by
CARALOE
and purchased by
MANNATECH hereunder
during such
additional
one-year
period. At least
sixty (60) days prior
to the end of the
Term,
CARALOE and MANNATECH shall commence good faith negotiations
to
determine
and agree upon such
quantity and price for
such additional
one-year
period. If
MANNATECH and CARALOE
are unable to so agree
on
such
quantity and price, this Supply Agreement shall terminate
effective
at the end of the
then-current Term. Nothing contained
in
this
Paragraph 1 shall be deemed to (i) obligate MANNATECH and
CARALOE
to agree
upon such quantity and price, (ii) obligate a party to
negotiate
with the other party
regarding such
quantity and price
is
such other
part is then in breach
of or in default under
this Supply
Agreement
or the License Agreement or (iii) limit the rights of
MANNATECH
and CARALOE under Paragraph 12 hereof. This Supply Agreement
shall
terminate automatically upon the expiration or termination of
the
License
Agreement.
2. Sale and Purchase.
-----------------
2.1
Subject to
the terms and conditions of this Supply Agreement,
CARALOE shall sell to MANNATECH and MANNATECH shall purchase
from
CARALOE, not less
than 250 kilograms of Manapol[R] per month
during the Term.
CARALOE agrees
that MANNATECH may
increase or
decrease its monthly
orders, incrementally,
in amounts
not to
exceed 200 Kg difference from the prior month's order, subject
to
sixty (60) days prior
written notice to
CARALOE. In the
event
that MANNATECH reasonably anticipates that it shall require more
than 200 Kg more Manapol[R] than its prior monthly order,
CARALOE
will exert
its best reasonable effort to deliver but will
guarantee delivery if
MANNATECH gives CARALOE at least 180 days
prior written notice thereof.
2.2
MANNATECH and NAI
agree that all Manapol[R] powder purchased by it
hereunder shall be
used only as an
additive in human or
animal
health food products
(in capsule, powder
tablet or liquid
form)
manufactured by or for MANNATECH that are intended for sale to
the
ultimate consumer in the United States or any other of
MANNATECH'S
countries of operation in which it conducts business and
subject
to compliance with
MANNATECH'S
obligations
under the License
Agreement, including
without limitation
MANNATECH'S
obligations
under Article III thereof.
2.3
Beginning on
the date hereof, unless otherwise specified by
MANNATECH, NAI agrees
to purchase directly from CARALOE all
quantities of Manapol[R] powder that it requires to manufacture
Manufactured Products
for MANNATECH under the terms of the
Manufacturing Agreement. CARALOE agrees that all purchases
by NAI
pursuant to this Supply Agreement shall be credited on a monthly
basis against any
minimum purchase requirements by MANNATECH as
set forth in this Supply Agreement.
2.4
All sales of
Manapol[R] powder, whether to MANNATECH or NAI, shall
be subject to payment
terms of 1% -
10 days, net 30 days. The
cash discount
of 1% is allowed on invoices paid within 10
days
of date of invoice.
Where cash discount for prompt payment is not
taken, the net total amount of invoice is due 30 days from date
of
invoice.
3. Forecast.
--------
Subject to
paragraph 2.1, for
each calendar quarter
during the Term,
MANNATECH
and NAI shall agree upon a non-binding, good faith
forecast
of the
minimum and
target aggregate
quantities of
Manapol[R]
which
shall be
provided to CARALOE on
a quarterly basis
commencing on
the
date
hereof
4. Pricing.
-------
*
5. Orders; Deliveries.
------------------
MANNATECH
or NAI shall each instruct CARALOE from time to time during
the
Term, by placing a purchase order with CARALOE reasonably in
advance of
the date it desires Manapol[R] powder to be delivered to
it
hereunder,
as to (a) the quantities of Manapol[R] powder to be
delivered
(b) the specific date of delivery, (c) the specific location
of
delivery and
(d) the particular carrier or particular type of
carrier
for such delivery. In
no event shall CARALOE be required
to
deliver to
NAI and/or MANNATECH in any three-month period a quantity of
Manapol[R]
powder in excess of 125% of the maximum delivery requirement
for such
period set forth in
the non-binding Forecast for such period
accepted
by CARALOE.
The quantities of Manapol[R] powder ordered
pursuant
to this Supply Agreement from time to time shall be spaced
in
a
reasonable manner,
and MANNATECH or NAI shall each order such
quantities
in accordance with the
Forecast. Deliveries
of Manapol[R]
powder
shall be made by
CARALOE under normal
trade conditions in
the
usual and
customary manner being
utilized by CARALOE at
the time and
locations
of the particular delivery. The Manapol[R] powder delivered
hereunder
shall be packaged in five (5) kilogram containers. All
deliveries
of Manapol[R] powder
hereunder shall
be made by CARALOE
F.O.B. at
the facilities of CARALOE or its affiliates located in
Irving,
Texas.
6. Exclusivity.
-----------
6.1
NAI agrees that
any purchases of
Manapol[R] powder from
CARALOE
pursuant to the terms
of this Supply Agreement shall be used
exclusively in
connection with the
production of
products for
MANNATECH pursuant to
the terms of the
Manufacturing
Agreement.
Without limitation, NAI agrees that it shall not sell Manapol[R]
powder purchased pursuant to the terms of this Supply Agreement
in
bulk or otherwise,
or use any purchases of Manapol[R] powder
purchased pursuant to
the terms of this Supply Agreement in
connection with the production of products on behalf of any
other
party other than MANNATECH.
6.2
CARALOE and MANNATECH
agree that the Supply and License Agreements
shall be exclusive to
the extent that
CARALOE may
not sell or
distribute Manapol[R]
in bulk or wholesale form for sale or
otherwise, to anyone
whom MANNATECH
has by written notice to
CARALOE identified as
(and who is), an
Independent Associate
of
MANNATECH ("Associate"), or whom CARALOE knows or should have
known to be an Associate of Mannatech. For the purposes of this
Agreement, an Associate is an individual or business entity
which
has been assigned a MANNATECH account number, is bound by
MANNATECH'S Associate
Agreement and
the terms and conditions
related thereto,
and which has placed
at least one order for
MANNATECH products during the prior twelve (12) month period.
For
purposes of this
paragraph 6.2, the
words "bulk
or wholesale"
shall refer only
to a sale of one (1) kilogram or more of
Manapol[R] raw material.
6.3
CARALOE agrees to
discontinue making
bulk or wholesale
sales or
distributions of Manapol[R] raw material to any Associate
within
thirty (30) days after
receipt of written
notice from
MANNATECH
identifying such Associate.
7. Quality.
-------
CARALOE
warrants to MANNATECH and NAI that all Manapol[R] powder
sold
by CARALOE
pursuant to this Supply Agreement will conform to the
quality
specifications set forth in Exhibit A to this Supply Agreement.
EXCEPT AS
PROVIDED IN THIS
PARAGRAPH 7,
THERE ARE NO WARRANTIES OR
REPRESENTATIONS OF ANY
KIND, EXPRESS OR
IMPLIED, INCLUDING
BUT NOT
LIMITED TO
WARRANTIES OF
MERCHANTABILITY, FITNESS, AND FITNESS FOR A
PARTICULAR
PURPOSE, MADE WITH
RESPECT TO THE
MANAPOL[R] POWDER TO
BE
SOLD
HEREUNDER, AND
NONE SHALL BE IMPLIED BY LAW. THE FOREGOING
NOTWITHSTANDING, CARALOE DOES REPRESENT THAT THE MANAPOL[R] POWDER
DOES
MEET THE
SPECIFICATIONS
OUTLINED ON EXHIBIT A
AND THAT IT IS A
FOOD
SUPPLEMENT UNDER
THE FOOD & DRUG ADMINISTRATION'S RULES
AND
REGULATIONS.
8. Insurance.
---------
CARALOE
shall maintain comprehensive insurance coverage during the term
of this
Supply Agreement, and
any extensions
thereof, with not
less
than the
same coverage, endorsements, limits and notice of cancellation
as shown
in the insurance
certificate attached
hereto as Exhibit
B.
CARALOE
shall, within thirty (30) days after this Supply Agreement
is
executed
by all Parties, provide MANNATECH and NAI with a copy of its
insurance
certificate naming
MANNATECH and NAI as an additional
insured
and listing the coverage, endorsements, limits, and notice
of
cancellation provisions. CARALOE will not cancel or materially
alter
such
policy without providing at least thirty (30) days prior
written
notice to
all named insured.
Failure by CARALOE to maintain insurance
coverage
according to
this article
10 shall constitute a material
breach of
this Supply Agreement.
It is understood and agreed that the
furnishing
of such insurance
certificate will not
relieve CARALOE of
its other
respective obligations under this Supply Agreement.
9. Confidential
Information.
------------------------
9.1
CARALOE recognizes and acknowledges that MANNATECH'S trade
name(s), trademarks,
copyrights,
patents, marketing plans,
identity of and
related information
regarding its Associates,
product formulations and other proprietary product information
and
any information relating to the management/operations of
MANNATECH
are valuable assets
belonging to MANNATECH
and as such are
the
sole property
and may constitute trade secrets of MANNATECH.
Prior to and during
the performance
of the Supply and License
Agreements, CARALOE may have or had access to certain
confidential
information pertaining to MANNATECH. CARALOE specifically agrees
CARALOE will not at any time, during or after the performance
of
the Supply and License Agreements, in any manner, either
directly
or indirectly, use,
divulge, disclose, or communicate to any
person, firm or corporation, any confidential information of
any
kind, nature, or description concerning any matters
affecting or
relating to
the business of MANNATECH (hereinafter referred
to
as "MANNATECH Confidential Information"). MANNATECH Confidential
Information includes but is not limited to: MANNATECH genealogies
(being the information
held by MANNATECH
or by any current or
former Associate of MANNATECH related to its Associates
including
without limitation its relationship with each of its Associates,
the Associate's name, upline and downline, charts, data
reports,
proprietary product
information which may
from time-to-time
be
made known
to CARALOE, the names or practices of any of
MANNATECH'S customers or Associates; MANNATECH'S marketing
methods
and related data; the names of MANNATECH'S vendors or
suppliers;
costs of materials;
costs of its products
generally, the
prices
MANNATECH obtains or has obtained or at which it sells or has
sold
its products or services; manufacturing and sales costs; lists
or
other
written records used
in MANNATECH's business; compensation
paid to its Associates, details of training methods, new
products
or new uses for old
products, merchandising or sales techniques,
contracts and licenses, business systems, computer programs, or
any other confidential
information of, about,
or concerning the
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