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REVISED SUPPLY AGREEMENT
THIS REVISED SUPPLY AGREEMENT (this "Supply Agreement") is dated July 21,
2000 by and among IMX Pharmaceuticals, Inc., a Utah corporation, having a
business office at 2295 Corporate Boulevard, Suite 131, Boca Raton, Florida
33431 ("IMX"), Dri-Kleen, Inc., a Nevada corporation d/b/a Enviro-Tech
International, having a business office at 3930 Ali Baba Lane, Las Vegas, NV
89118 ("ETIC"), and ETI International, Inc., a Nevada corporation, having a
business office at 3930 Ali Baba Lane, Las Vegas, NV 89118 ("ETI").
RECITALS
WHEREAS, ETIC was a direct sales company that marketed and sold its
products, including the Dri Wash `n Guard products (the "Dri Wash Products"),
through independent distributors (the "Distribution Network"). The Dri Wash
Products consist of DRI WASH `N GUARD Waterless Car Wash & Protective Glaze, DRI
WASH `N GUARD for the Home, DRI WASH `N GUARD All Weather Tire Treatment, DRI
WASH `N GUARD OxyGone, and DRI WASH `N GUARD Dust B' Gone.
WHEREAS, pursuant to an agreement executed May 17, 2000, which was revised
on July 19, 2000 (the "Definitive Agreement"), IMX purchased, among other
assets, the Distribution Network and became the exclusive distributor of all
products produced or owned by ETIC and its affiliates, including the Dri Wash
Products, through direct sales channels and all other channels in North America,
including the Caribbean Islands; with the exception of sales to local, state and
federal governments and government agencies.
WHEREAS, IMX and ETIC desire that ETIC be the exclusive supplier of the
proprietary formulae (the "Formulae") used in connection with the manufacture of
the Dri Wash Products and that IMX be the exclusive supplier to ETI of all
products made with the Formulae for resale by ETI, both in accordance with this
Supply Agreement.
WHEREAS, any capitalized terms used herein but not otherwise defined shall
have the meanings ascribed to them in the Definitive Agreement, unless the
context clearly requires otherwise.
AGREEMENT
The parties agree as follows:
ARTICLE 1. TERM
SECTION 1.01. BEGINNING AND END
(a) The Effective Date of this Supply Agreement shall be the Closing Date
of the Definitive Agreement.
(b) The first term of this Supply Agreement shall commence on the
Effective Date and shall continue for a period of 10 years, unless earlier
terminated at the discretion of ETI as a result of
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the failure by IMX to comply with the provisions of Sections 2.01 or 2.02. Any
termination pursuant to this Section may be made only after 20 days notice and a
reasonable opportunity for IMX to cure. Any dispute concerning an alleged breach
shall be determined in accordance with Article IV. While such arbitration is
pending, this Supply Agreement shall remain in full force and effect.
(c) At the end of each term, this Supply Agreement shall be automatically
renewed for an additional 10 year term unless IMX is in material breach of this
Supply Agreement and has been notified of and has not cured or commenced the
cure of such breach in accordance with subsection 1.01(b).
ARTICLE 2. SALES AND HANDLING OF PRODUCTS
SECTION 2.01. MINIMUM DRI-WASH PURCHASE
(a) Notwithstanding anything contained herein to the contrary, each month
IMX shall purchase Formulae in an aggregate amount of at least 5,000 gallons to
be used to manufacture the Dri Wash Products (the "Minimum Dri Wash Purchase")
Formulae purchased by IMX for products to be sold to ETI or ETIC pursuant to
Article 3 shall not be applied toward the Minimum Dri Wash Purchase.
Notwithstanding the forgoing, the Minimum Dri Wash Purchase for July 2000 shall
be the difference between the amount of Formulae purchased by ETIC or ETI during
the month of July 2000, and 5,000 gallons.
SECTION 2.02. PRICE AND PAYMENT
(a) The purchase price per gallon of Formulae to be paid by IMX shall be
equal to the cost for the Formulae under the terms of that certain Product
Supply and Purchase Agreement (the "Existing Agreement") by and among ETIC,
Steven D. and Leticia M. Leis, husband and wife, Advanced Techniques, Inc., a
Minnesota corporation ("ATI"), or any successor agreement, arrangement or
otherwise, with such adjustments as set forth therein. If the Existing Agreement
is not in effect, the purchase price shall be the same as if the Existing
Agreement were in effect, including appropriate cost of living increases, plus
any increases to ETI in material and supply costs.
(b) During the first five Contract Years (the "Royalty Period"), IMX shall
pay ETIC a royalty equal to 20% percent of the purchase price paid for Formulae
(the "Royalty Fee"), except with respect to Formulae to be purchased by IMX for
products to be sold to ETI or ETIC pursuant to Article 3. A Contract Year shall
extend from July 1 to June 30. The Royalty Fee on any amount of Formulae ordered
by IMX shall be paid at the time IMX remits the purchase price for such
Formulae.
(i) In no event shall the amount of the Royalty Fee paid by IMX in
any Contract Year be less than $300,000 (the "Guaranteed Royalty Fee").
Notwithstanding the forgoing, the Guaranteed Royalty Fee for the first
Contract Year shall be $286,000.
(ii) In order to assure an even flow of the Royalty Fee during each
Contract Year, the following shall apply:
a. The minimum monthly Royalty Fee shall be $20,000 (the
"Minimum Monthly Royalty Fee"). Notwithstanding the foregoing, the
Minimum Monthly Royalty Fee for the month of July 2000, shall be
$8,400.
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b. The minimum quarterly Royalty Fee shall be $75,000 (the
"Minimum Quarterly Royalty Fee"). Notwithstanding the forgoing, the
Minimum Quarterly Royalty Fee for the first quarter of the first
Contract Year shall be $61,000.
c. Notwithstanding the forgoing, if the aggregate Royalty Fee
paid during the preceding quarters of any Contract Year exceeds the
aggregate Minimum Quarterly Royalty Fees for those quarters, the
Minimum Quarterly Royalty Fee for that quarter shall be reduced by
the amount of the excess.
d. For purposes of determining the Minimum Monthly Royalty Fee
and the Minimum Quarterly Royalty Fee, any Royalty Fee paid with
respect to the purchase of Formulae shall be attributable to the
calendar month in which the Royalty Fee was paid.
e. Any deficit in any Minimum Monthly Royalty Fee or Minimum
Quarterly Royalty Fee shall be paid within five days of the end of
such month or quarter, respectively. Interest shall accrue on any
delinquent Minimum Monthly Royalty Fee or Minimum Quarterly Royalty
Fee at the annualized rate of 12%.
(c) In the event IMX fails for any reason whatsoever to pay to ETIC any
Guaranteed Royalty Fee, Minimum Monthly Royalty Fee, Minimum Quarterly Royalty
Fee or any other Royalty Fee required under this Supply Agreement, and such
failure remains uncured for a period of 45 days after notice thereof, ETIC may,
in its sole discretion and in addition to any other remedy provided hereunder,
terminate IMX's right to exclusively distribute the Products (as defined in the
Definitive Agreement) in North America, including the Caribbean Islands, as
provided for in the Definitive Agreement. Any dispute concerning an alleged
failure shall be determined in accordance with Article IV. While such
arbitration is pending, IMX's right to exclusively distribute the Products shall
remain in full force and effect.
(d) The purchase price for all orders of Formulae must be paid by IMX, by
cashier's check or wire transfer, not less than five business days in advance of
IMX's requested delivery date.
(e) The Royalty Fee may be paid by cashier's check or wire transfer at the
time the purchase price for the order to which it relates is paid.
(f) ETIC shall deliver the Formulae as reasonably directed by IMX.
SECTION 2.03. PRODUCT LIABILITY INSURANCE REIMBURSEMENT
So long as the Existing Agreement is in effect, or ETIC or ETI continues
to purchase the Formulae from Steven D. or Leticia Leis or their affiliates
(collectively the "Leis Group"), IMX shall reimburse ETIC or ETI the amount that
ETIC or ETI reimburses the Leis Group for product liability insurance coverage
in the amount of $1,000,000. ETIC and ETI shall take every reasonable action to
cause IMX to be named as a co-insured under the policy.
SECTION 2.04. PURCHASE OF FORMULAE BY IMX
In the event ETIC fails to deliver any properly ordered and paid for
Formulae to IMX and such failure remains uncured for a period of 10 business
days, IMX may, at its discretion, declare this
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Supply Agreement in default and may, at its discretion, purchase the Formulae
directly from ATI, so long as ETIC is in default, on whatever terms and
conditions the parties may negotiate; provided, however, that IMX shall have no
right to declare this Supply Agreement in default for non-performance by ETIC
unless IMX is current on all of its payments to ETIC for both the purchase price
of any orders and any Royalty Fee, the Monthly or Quarterly Minimum Royalty
Fees, and Guaranteed Royalty Fee. Any dispute concerning an alleged failure to
deliver any Formulae shall be determined in accordance with Article IV.
Notwithstanding the foregoing and the provisions of Article IV, IMX may not
submit a dispute concerning this Section 2.04 to arbitration unless it has paid
at least 80% of the amount billed.
SECTION 2.05. LICENSE OF CERTAIN RIGHTS
During any term of this Supply Agreement, ETI and ETIC hereby grant to IMX
a license for all domain names, patents, trade names, trademarks, service marks
or other intellectual property used in the operation of the Distribution Network
not otherwise sold or transferred to IMX under the Definitive Agreement.
ARTICLE 3. SALE, PACKAGING AND SHIPMENT OF THE ETIC PRODUCTS
SECTION 3.01. PERMITTED ETIC SALES AND THE PAYMENT THEREFOR
In the event ETIC or ETI sells any products made using the Formulae
outside North America, including the Caribbean Islands, or to any government
bodies or agencies (the "Permitted Sales") as provided in and in accordance with
the Definitive Agreement, it shall purchase all of these products from IMX.
Section 3.02 PURCHASE PRICE; PAYMENT AND SHIPMENT
(a) The purchase price for products purchased by ETIC or ETI from IMX
shall equal the sum of the following:
(i) IMX's purchase price per gallon of Formulae included in the
product; and
(ii) The cost to IMX of the container, cap, label, insert, carton
and shipping materials, including freight-in, included in the product; and
(iii) For containers holding five or more gallons of liquid, 15%
percent of the sum of (i) and (ii); or
(iv) For containers holding less than five gallons of liquid, 25% of
the sum of (i) and (ii).
(b) Payment of the purchase price must be paid by ETIC or ETI, by
cashier's check or wire transfer, not less than five business days in advance of
ETIC's requested delivery date.
(c) Shipping shall be paid by ETIC or ETI and shall be F.O.B. IMX's
facility at Elbow Lake, Minnesota.
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(d) In the event a Royalty Fee has been paid by IMX on the Formulae used
for products purchased by ETIC or ETI, IMX shall receive a credit in the amount
of that Royalty Fee toward payment of the next Royalty Fee payment(s) following
the purchase.
(e) The parties agree that prior to the end of each Contract Year, the
parties shall jointly review the terms set forth in Section 3.02(a) in order to
determine, in good faith, whether such terms should be adjusted to reflect the
changed circumstances of the parties.
Section 3.03 RESERVED
Section 3.04 CONTINUED RESPONSIBILITY FOR MINIMUM PURCHASE
Notwithstanding the foregoing, nothing contained in this Article 3 shall
relieve IMX from purchasing the Minimum Dri-Wash Purchase each month.
Section 3.05 NEW SUPPLIER OF FORMULAE
Prior to the exercise of that certain option (the "Option") for the
purchase of all of the issued and outstanding shares of stock of ATI pursuant to
that certain Option Agreement among ETIC, Steven D. and Leticia M. Leis and ATI,
if ETIC determines that the Formulae can be purchased by ETIC more economically
from a new supplier than under the Existing Agreement, ETIC will purchase the
Formulae from such new supplier. When evaluating whether purchasing from such
new supplier is more economical, ETIC may consider, without limitation, the
desirability of maintaining good relations with ATI, the Existing Agreement and
the remaining term thereof, the quality and availability of the Formulae to be
provided, the amount of the savings, the needs of IMX to effect cost savings,
the potential new supplier's management, financial position, history of
operations, references, and general reliability, and any other information ETIC
deems reasonably relevant to its determination. The determination as to whether
purchasing Formulae from a new supplier would be more economical shall be in
ETIC's sole and absolute discretion.
ARTICLE 4. DISPUTE RESOLUTION
Section 4.01 DEADLOCK
The parties hereby agree that time is of the essence with respect to this
Supply Agreement and hereby agree further to work together in good faith to
effect its intent. Notwithstanding the foregoing, in the event the parties are
unable to agree on a course of conduct, obligation, responsibility or otherwise
with respect to an issue which would have a material impact on the operations of
ETI, ETIC or IMX, and such dispute remains unresolved for a period of three
business days, a "Deadlock" shall be deemed to exist.
Section 4.02 BINDING ARBITRATION
Within two business days of the occurrence of a Deadlock, the parties
agree to submit the matter to binding arbitration for resolution. Such binding
arbitration shall be conducted by, and in accordance with the rules of, the
American Arbitration Association, Las Vegas, Nevada. The respective presidents
of ETIC and IMX shall have five business days after the matter is submitted to
the American Arbitration Association in which to appoint one arbitrator. A third
arbitrator shall be chosen by the two arbitrators already appointed. In the
event either president does not appoint an
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arbitrator within the time allotted, such officer loses the right and the two
additional arbitrators shall be appointed in accordance with the rules of the
American Arbitration Association and the matter shall be presented to, and a
determination made by, the arbitrators in the most expeditious manner possible.
Section 4.03 FEES AND COSTS FOR DISPUTE RESOLUTION
In the event a Deadlock occurs requiring the parties to submit to binding
arbitration, or any action at law or in equity or other special proceeding is
instituted by either of the parties against the other to enforce this Supply
Agreement, or any rights arising hereunder, or in connection with the subject
matter hereof, the prevailing party shall be entitled to recover all actual
costs of the arbitration or suit, including reasonable attorneys' fees in the
arbitration, at trial and on appeal.
ARTICLE 5. MISCELLANEOUS
Section 5.01. NO COMPETITION WITH ETIC
For so long as ETIC is able to perform under this Supply Agreement, or for
any such longer period that IMX continues to purchase Formulae from ETIC, IMX
shall not engage, directly or indirectly, in the manufacture of the Formulae, or
any formula similar to the Formulae used for the production of the Dri Wash
Products, nor shall IMX take any action, directly or indirectly, that is
intended or has the effect of competing with ETIC with respect to the
manufacture of the Formulae or otherwise undermining ETIC's ability to be IMX's
exclusive supplier of Formulae or to otherwise receive the full value of this
Supply Agreement.
Section 5.02. CONFIDENTIALITY WITH RESPECT TO THE FORMULAE
IMX acknowledges and agrees that it could have access to certain trade
secrets, know-how, proprietary processes and formulae (collectively,
"Proprietary Information"), whether patentable or unpatentable, necessary to
manufacture the Formulae used to make the Dri Wash `n Guard Products. For so
long as ETIC is able to perform under the Revised Supply Agreement, or for any
such longer period that IMX continues to purchase Formulae from ETIC, IMX shall
not disclose, use, permit the use, reverse engineer or take any other action in
contravention of ETIC's right to exclusively manufacture and distribute the
Formulae or otherwise exploit the Proprietary Information.
Section 5.03. NO CHANGE IN FORMULAE
For the term of this Supply Agreement, and any renewal terms, and in the
event the Option is exercised by ETIC, ETIC shall not change the Formulae
without the prior consent of IMX, which such consent shall not be unreasonably
withheld. IMX acknowledges and understands that the Formulae constitutes
"proprietary information" and as such the ingredients and/or formulations
thereof shall not be disclosed to IMX; however, ETI shall inform IMX of the
consequences of any changes to the Formulae that would be material in connection
with IMX's evaluation of such changes and its determination of whether to
consent. ETIC shall use its reasonable best efforts to ensure that Steven D. and
Leticia M. Leis and ATI do not make any changes to the Formulae except in
accordance with this Section 5.01.
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Section 5.04. CONTINUATION OF ENVIRO-TECH INTERNATIONAL
Following the Closing, IMX shall continue to operate the Distribution
Network and sell the Products under the name "IMX-ETI Life Partners" or
"Enviro-Tech International."
Section 5.05. ENTIRE AGREEMENT; AMENDMENTS
This Supply Agreement along with the Definitive Agreement embodies the
entire understanding of the parties. No amendment or modification of this Supply
Agreement may be made except in writing, signed by the parties hereto.
Section 5.06. EXPENSES
Each party hereto shall pay its own expenses incidental to the preparation
of this Supply Agreement, and the consummation of the transactions contemplated
hereby unless expressly provided herein.
Section 5.07. HEADINGS
The headings in this Supply Agreement are intended solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Supply Agreement.
Section 5.08. NOTICES
All notices, requests, demands, approvals, consents, waivers or other
communications hereunder shall be in writing and shall be deemed duly given if
delivered to or mailed by registered or certified mail, postage prepaid or by
nationally recognized overnight express delivery service as follows:
If to IMX to: IMX Pharmaceuticals, Inc.
2295 Corporate Blvd., Ste 131
Boca Raton, Florida 33431
Attn: William A. Forster
If to ETIC or ETI to: Dri-Kleen, Inc d/b/a Enviro-Tech International and
ETI International, Inc.
Attn: President
P.O. Box 98867
Las Vegas, Nevada 89193-8867
~ or ~
3930 Ali Baba Lane
Las Vegas, Nevada 89118
Either party may change its notice address by giving notice to the other
pursuant to this Section 5.05.
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Section 5.09. GOVERNING LAW; JURISDICTION
This Supply Agreement and the legal relations among the parties hereto
shall be governed by and construed in accordance with the substantive law of the
State of Nevada without regard to conflict of law principles. The parties
consent to the jurisdiction of the courts of the State of Nevada or the U.S.
District Court for the District of Nevada as if all parts of this Supply
Agreement were negotiated and effectuated there.
Section 5.10. BENEFICIARIES
This Supply Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and legal representatives.
Nothing in this Supply Agreement, express or implied, is intended to confer on
any other person other than the parties hereto or their respective successors
and legal representatives, any rights, remedies, obligations or liabilities
under or by reason of this Supply Agreement.
Section 5.11. COUNTERPARTS
This Supply Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. Its execution shall be effective when
copies of signed signature pages are exchanged by facsimile between the parties.
Section 5.12. SEVERANCE
If any section, subsection or provision of this Supply Agreement, or the
application of such section, subsection, or provision, is held invalid, the
remainder of this Supply Agreement and the application of such section,
subsection or provision to persons or circumstances other than those to which it
is held invalid shall not be affected thereby.
Section 5.13. SURVIVAL OF REPRESENTATIONS
All representations and covenants contained in this Supply Agreement shall
survive its termination.
Section 5.14. INDEMNIFICATION
(a) ETIC and ETI shall indemnify and hold IMX, its officers, directors,
employees, and agents (each a "Seller Indemnified Entity") harmless from and
against, and reimburse a Seller Indemnified Entity with respect to, any and all
loss, damage, liability, cost and expense, including reasonable attorneys' fees
and costs incurred by the Seller Indemnified Entity by reason of, or arising out
of (i) the material breach of any representation made by ETIC or ETI in this
Supply Agreement; (ii) ETIC's or ETI's failure to perform any action required by
this Supply Agreement or reasonably directed by IMX pursuant hereto; and (iii)
claims arising from any actual or asserted product liability claim relating to
the Dri Wash Products sold in the Distribution Network on or before the Closing
Date.
(b) IMX shall indemnify and hold ETIC and ETI, their officers, directors,
employees and agents (each a "Purchaser Indemnified Party") harmless from and
against, and reimburse a Purchaser Indemnified Party with respect to, any and
all loss, damage, liability, cost and expense, including reasonable attorneys'
fees and costs, incurred by the Purchaser
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Indemnified Party by reason of or arising out of (i) breach of any
representation or covenant made by IMX in this Supply Agreement; (ii) the
failure by IMX to perform any action required by this Supply Agreement including
the failure to purchase or pay for the Minimum Dri Wash Purchase; (iii) claims
arising from any actual or asserted products liability claim not related to the
Formulae or Products sold in the Distribution Network prior to Closing; and (iv)
claims arising from members of the Distribution Network arising from activities
of IMX.
(c) If a claim for which indemnification may be sought against the other
party is asserted the party entitled to indemnification hereunder shall advise
the other to that effect and shall thereafter permit the other to participate at
such party's sole expense in the negotiation and settlement of that claim and to
join in or assume the defense of any legal action arising therefrom with counsel
selected by them and reasonably satisfactory to the other party. Either party
may implead the other in any action that is subject to indemnity.
Section 5.15. CONSENT OF ATI
Seller shall take every reasonable action to obtain the consent of
Advanced Techniques, Inc. and Steven D. and Leticia M. Leis with respect to
the provisions of this Supply Agreement that pertain to them.
Section 5.16. INTERPRETATION
The use of words "it" or "its," in reference to any party hereto shall be
construed to be a proper reference even though a party may be a partnership, an
individual or two or more individuals. The term "person" includes individuals;
corporations, partnerships, associations, or other legal entities; and
governments, governmental subdivisions, agencies, or instrumentalities. Words of
one gender shall be deemed to include the other, or both, or neither. A
provision of this Supply Agreement that requires a party to perform an action
shall be construed as requiring the party to perform the action or to cause such
action to be performed. A provision of this Supply Agreement that prohibits a
party from performing an action shall be construed as prohibiting such party
from performing such action or permitting others to perform such action.
Wherever the term "including" is used herein, the same shall be deemed to read
"including, but not limited to." The singular shall be deemed to include the
plural, and the plural shall be deemed to include the singular. The agreements
contained in this Supply Agreement shall not be construed as independent
covenants. "Any" shall be deemed to read "any and all" whenever applicable.
"Anytime" shall be deemed to read "anytime and from time to time" whenever
applicable. The conjunction "and" shall include the conjunction "or" whenever
applicable. The conjunction "or" shall include the conjunction "and" whenever
applicable.
(The balance of this page has been intentionally left blank)
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In order to indicate their intention to be bound, the parties hereto have
caused this Supply Agreement to be duly executed as of the date first above
written.
IMX PHARMACEUTICALS, INC.
By: /s/
-------------------------------------------
Bill Forster, Chairman & CEO
DRI-KLEEN, INC. d/b/a ENVIRO-TECH INTERNATIONAL
By: /s/
-------------------------------------------
Rodney C. Yanke, Chairman & CEO
ETI INTERNATIONAL, INC.
By: /s/
-------------------------------------------
Rodney C. Yanke, Chairman & CEO
H:\1798\13170\dRevised Supply Agmt v-12.Final.doc
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