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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Mark One)
( X )
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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OR
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11997
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CARRINGTON LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
Texas 75-1435663
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2001 Walnut Hill Lane, Irving, Texas 75038
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(Address of principal executive offices and Zip Code)
214-518-1300
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
8,162,900 shares of Common Stock, $.01 par value were outstanding at July 31,
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1995.
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Carrington Laboratories, Inc., and Subsidiaries
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INDEX
Page Number
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets at June 30,1995 (unaudited)
and November 30, 1994 3-4
Condensed Consolidated Statements
of Operations for the three and
six months ended June 30, 1995
and 1994 (unaudited). 5
Consolidated Statements of Cash
Flows for the three and six months
ended June 30, 1995 and 1994
(unaudited). 6
Notes to Condensed Consolidated
Financial Statements (unaudited) 7-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-16
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matter to a Vote of
Security Holders 17
Item 5. Other Events 18
Item 6. Exhibits and Reports on Form 8-K 19
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Carrington Laboratories, Inc., and Subsidiaries
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Production contract between Carrington Laboratories, Inc.
(Purchaser) and Oregon Freeze Dry, Inc. (Seller) dated
February 13, 1995.
10.2 Trademark License Agreement between Caraloe, Inc. (Licensor)
and Emprise International, Inc. (Licensee) dated March 31,
1995.
10.3 Supply Agreement between Caraloe, Inc. (Seller) and Emprise
International, Inc. (Buyer) dated March 31, 1995.
11.1 Computation of Net Income Per Common and Common
Equivalent Share(1).
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(1) Previously filed
b. Reports on Form 8-K
No report on Form 8-K was filed by the Company during the quarter
ended June 30, 1995.
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Carrington Laboratories, Inc., and Subsidiaries
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARRINGTON LABORATORIES, INC.
(Registrant)
Date August 30, 1995 By /s/ Carlton E. Turner
Carlton E. Turner,
President
Date August 30, 1995 By /s/ Christopher S. Record
Christopher S. Record,
Vice President
(Chief Financial Officer)
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Carrington Laboratories, Inc., and Subsidiaries
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INDEX TO EXHIBITS
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Exhibit
Number Exhibit
10.1 Production contract between Carrington Laboratories, Inc.
(Purchaser) and Oregon Freeze Dry, Inc. (Seller) dated February
13, 1995.
10.2 Trademark License Agreement between Caraloe, Inc. (Licensor) and
Emprise International, Inc. (Licensee) dated March 31, 1995.
10.3 Supply Agreement between Caraloe, Inc. (Seller) and Emprise
International, Inc. (Buyer) dated March 31, 1995.
11.1 Computation of Net Income Per Common and Common Equivalent
Share(1).
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(1) Previously filed
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EXHIBIT 10.1
This production contract made and entered into as of the 13th day of February,
1995 by and between CARRINGTON LABORATORIES, INC., a Texas corporation, with
offices at 2001 Walnut Hill Lane, Irving, Texas, its subsidiaries and successors
(hereinafter referred to as "Purchaser") and OREGON FREEZE DRY, INC., an Oregon
corporation, with offices at 525 25th Avenue SW, Albany, Oregon, its
subsidiaries and successors (hereinafter referred to as "Seller")
WITNESSES THAT
WHEREAS, Purchaser is a producer and marketer of numerous medical devices
and other products; and
WHEREAS, Seller is a producer and marketer of numerous food, drug,
microbial, chemical, and other products prepared chiefly, but not exclusively,
through low-temperature drying processes; and
WHEREAS, Purchaser has developed medical devices for wound care which are
freeze-dried in their final form for topical or oral use, which are subjects of
approved US FDA 510(k) applications or a therapeutical regulatory approval
(including material for clinical trials), and for which Seller has developed
commercial drying processes and packaging, but specifically excluding
diagnostics and cosmetics; and
WHEREAS, the parties hereto now wish to enter into a production contract
subject to the provisions, terms and conditions hereinafter stated,
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NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained herein, Purchaser and Seller
hereby agree as follows:
ARTICLE ONE
DEFINITIONS
For the purpose of this production contract, the following definitions will
apply:
A. "Purchaser" shall mean Carrington Laboratories, Inc., a Texas corporation,
with offices at 2001 Walnut Hill Lane, Irving, Texas.
B. "Seller" shall mean Oregon Freeze Dry, Inc., an Oregon corporation, with
offices at 525 25th Avenue SW, Albany, Oregon.
C. "Product" shall mean medical device(s) for wound care which are freeze-
dried in their final form for topical or oral use, which are subjects of
approved US FDA 510(k) applications or a therapeutical regulatory approval
(including material for clinical trials), but specifically excluding
diagnostics and cosmetics, described in Exhibit A hereto.
D. "Item" shall mean a specific medical device product of the type defined
above, identified by a unique product specification which includes formula,
process, packaging format and materials, and performance requirements.
Prior to production of commercial Product, an Item shall be defined within
Exhibit A by such a product specification.
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E. "Production Contract" shall mean the written contract for the production
and supply of Product between the parties hereto, plus all exhibits and
contract modifications, if any, which may be agreed to by and between the
parties hereto.
F. "Commercial Production" shall mean Product produced for sale with Quality
Assurance release, in accordance with Exhibit A, as mutually agreed-upon
and/or periodically amended.
G. "Minimum Total Commitment" shall mean the minimum amount of Product
Purchaser is required to purchase from Seller during the term of this
Production Contract, expressed in sales dollars.
ARTICLE TWO
EFFECTIVE DATE
The effective date of this contract shall be the date of execution of this
contract by both parties hereto.
ARTICLE THREE
PRODUCT, QUANTITIES, ORDERS, SCHEDULING, RAW MATERIALS
REVISIONS TO, EXPANSION OF, AND DELETIONS FROM, PRODUCT LINE
Subsection A. Product and Quantities
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Subject to the terms and conditions of this Production Contract, Seller
shall sell to Purchaser and Purchaser shall purchase from Seller, Product
produced in
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accordance with agreed-upon Item specifications, up to the limits set forth in
Exhibit E, which are attached hereto and incorporated into this contract.
Exhibit A enumerates Item specifications, that shall be finalized by written
mutual consent of Purchaser and Seller based on the results of scale-up.
Subsection B. Purchase Orders, Shipping Schedule, and Lead Time.
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All shipments will be initiated by a Purchase Order. Product shipment dates
will be specified in the Purchase Order. These dates may not be scheduled prior
to ninety (90) days after the date the Purchase Order is received and
acknowledged in writing by Seller, unless by mutual consent of the parties.
Purchase Orders will be non-cancelable, and all Product included in a Purchase
Order must be shipped and invoiced within six (6) months of the first scheduled
shipping date.
Subsection C. Minimum Purchases.
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From the date Commercial Production first commences, Purchaser is obligated
to accept, subject to the provisions of Article Eleven, and Seller is required
to make available, during each calendar month of the Production Contract,
aggregate shipments of not less than $30,000.
Subsection D. Late or Partial Shipments.
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Late or partial shipments against a shipping date scheduled in a Purchase
Order will incur liquidated damages of 50% of the purchase order price of the
Product not shipped as scheduled, to be credited to Purchaser's account. Seller
shall
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have a two (2) working day grace period (that is, two days after the scheduled
shipping date) in which to complete the actual shipment, before said liquidated
damages apply. In the context of the aforementioned sentence, the actual
shipping date shall be defined as the date on which Product leaves Seller's
dock. Liquidated damages shall not apply to late or partial shipments which: 1)
are arranged in advance with Purchaser by written consent, or 2) arise due to
Force Majeure situations (for example, governmental acts, acts of God, severe
weather, fire, flood, explosions, work stoppages, strikes, force majeure
situations impacting Seller's major subcontractors and suppliers, unavailability
or scarcity of raw materials or ingredients, and acts of the public enemy and
war), or 3) arise due to suspension of production by Purchaser pursuant to
Article Eight, or 4) are rejected by Purchaser pursuant to Article Eleven prior
to shipment, or 5) arise from delays in Purchaser-arranged transportation. These
liquidated damages shall constitute Purchaser's sole remedy for late or partial
shipments, and Seller shall in no way be liable for any indirect, consequential,
or special damages for such shipments, including, but not limited to, loss of
use, loss of business opportunities, loss of profits, and other damages.
Subsection E. Raw Materials: Ingredients, Packaging Materials and Artwork.
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Purchaser will provide Seller with all raw materials (that is, packaging
materials and any required artwork, and ingredients excluding water and
production
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supplies) necessary for the manufacture of Product, in accordance with the
agreed-upon Item specifications outlined in Exhibit A, as mutually agreed-upon
and/or periodically amended, as of the date of the transmittal and
acknowledgement in writing of a Purchase Order which requires said raw materials
for fulfillment. Purchaser will provide the appropriate Quality Assurance
release documentation for all such raw materials it supplies, except packaging.
Seller will provide the appropriate Quality Assurance release documentation for
packaging, and will notify Purchaser promptly of any deviations from
specifications.
Package artwork shall be developed by Purchaser, and shall be provided to
Seller with proper transmittal documentation indicating Quality Assurance
release for the printing of it. Seller will provide to Purchaser the relevant
technical and mechanical requirements to which Purchaser's artwork must conform.
Purchaser shall be responsible for costs associated with:
1. Any changes in packaging or artwork made at Purchaser's request, or
the development of any new packaging or artwork, and/or
2. Changes made to fulfill government regulations or requirements
directly associated with Product produced hereunder.
Subsection F. Revisions to Existing Items
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Should Purchaser determine that it wishes to implement improvements or
modifications to an existing Item, these shall become effective through mutual
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written agreement of Seller and Purchaser and amendment of Exhibit A, and of
Exhibits D (defined in Article Five below) and E, if necessary, to define a
revised product specification, price, and production capacity. Notwithstanding
whether written revisions to an existing product specification are required, no
changes in process parameters, flow or location, shall be made by Seller without
prior written authorization from Purchaser's Director of Quality Assurance.
Purchaser will communicate in writing to Seller any change in raw material
vendors.
Purchaser shall be responsible to reimburse Seller for Seller's (i)
finished product inventory of the Item prepared for open Purchase Orders, and up
to an additional five percent (5%) (in units) of the Purchase Order quantity,
under the superseded technical specification at prices then in effect,
and (ii) product-in-process unique to the superseded technical specification, at
Seller's cost, to fill open Purchase Orders. Seller will destroy in a secure
manner (e.g., deface, incinerate, or similar) any obsolete labeling, and keep
adequate records of same.
Notwithstanding any provision to the contrary herein, Seller and Purchaser
may mutually agree that Seller develop, to Purchaser's requirements, potential
improvements or modifications to existing Items with respect to ingredient(s),
shape or size, or packaging materials or format. Purchaser shall reimburse
Seller's out-of-pocket expenses for such development activities, together with
other reasonable and necessary costs for the use of developmental facilities and
personnel
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for testing and consumer research, as shall be mutually agreed upon by Purchaser
and Seller, and authorized in advance by Purchaser's purchase order.
Subsection G. Expansion of Product Line.
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Should Purchaser determine that it wishes to commercialize additional
products pursuant to the prior paragraph as new Items, each Item shall become a
part of contractual Product through mutual agreement of Seller and Purchaser and
amendment of Exhibits A, D, and E, to define the new Item's specifications,
price, and production capacity, respectively.
Subsection H. Deletions from Product Line
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Purchaser may delete Items from the Product line set forth in Exhibits A
and D, or any amendments thereto, provided that Purchaser shall continue to be
obligated to accept Product prepared under open Purchase Orders, and up to an
additional five percent (5%) (in units) of the Purchase Order quantity, and to
fulfill the Minimum Total Commitment as defined in Article Seven below. Seller
will destroy in a secure manner (e.g., deface, incinerate, or similar) any
obsolete labeling, and keep adequate records of same.
ARTICLE FOUR
MODIFICATIONS TO SELLER'S FACILITIES
Seller shall make such physical changes to its facilities, as
described in Exhibit B, as are necessary to reach and comply with the pertinent
current Good Manufacturing Practices (cGMPs), as described in Exhibit C.
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ARTICLE FIVE
PRICE
Subsection A. Prices.
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As compensation for the Product required under this Production Contract,
Purchaser shall pay to Seller the prices set forth in Exhibit D as amended,
which is attached hereto and incorporated into this contract.
Prices shall be fixed through the first forty-two (42) months of the
Production Contract, and subject to a one-time price increase of up to five
percent (5%), effective after the first forty-two (42) months of the Production
Contract. The relevant price for a given shipment shall be determined by the
price in effect at the date of actual shipment, as actual shipment is defined in
Article Three, Subsection D.
Subsection B. Adjustments for Regulatory Changes.
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Should government regulations cause an increase in Seller's manufacturing
costs for the production of Product hereunder, the parties to this Production
Contract will meet and attempt to develop viable manufacturing and business
strategies to minimize the net cost impact of said regulations on Seller. If
such strategies do not fully offset the costs of said regulation, Seller may
adjust prices to reflect the net impact of said regulation. Seller will provide
appropriate data and analysis to support such price adjustments.
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ARTICLE SIX
TERM AND TERMINATION
Subsection A. Term.
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The term of this Production Contract shall be a period beginning the
effective date of its execution by both parties hereto and automatically ending
sixty-six (66) months thereafter, or as extended by written consent of both
parties.
Subsection B. Termination.
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This production contract may not be canceled or otherwise terminated by
either party except as set forth in this Article.
Subsection C. Termination For Convenience of Purchaser.
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Purchaser shall have the right to unilaterally terminate this Production
Contract subject to its performance of the provisions of this Article Six,
Subsection C. In order to exercise this right to terminate for convenience
Purchaser shall give Seller ninety (90) days written notice of termination for
the convenience of Purchaser, expressly citing this subsection of Article Six,
Subsection C, and shall, within thirty (30) days of termination, pay to Seller
any amount applicable under Article Seven.
Subsection D. Termination for Default.
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In the event of a breach of contract or default of performance by either
party, the party claiming such breach or default shall give written notice of
such breach or default, citing the grounds and providing information supporting
such grounds, to the breaching or defaulting party and the latter shall have
thirty (30) days from receipt within which to cure such breach or default, or,
if cure can not be reasonably completed within such 30-day period, the
defaulting party shall, within such 30-day period begin commercially reasonable
efforts to cure such default and shall timely continue such efforts after such
30-day period until such
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default has been cured, provided however, such period of cure may not exceed
ninety (90) days after the end of the 30-day period.
In the event that the breaching or defaulting party shall refuse or fail to
cure such claimed breach or default, within said thirty (30) days, or such
longer period if the cure can not be reasonably completed within such 30-day
period, but in no event longer than ninety (90) days after the end of the 30-day
period, the party claiming breach or default may terminate this Production
Contract and seek its remedies at law or in equity against the other.
ARTICLE SEVEN
MINIMUM COMMITMENTS AND TAKE OR PAY GUARANTY
Subsection A. Minimum Total Commitment.
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As partial inducement for Seller to enter into this Production Contract,
Purchaser agrees to take delivery of and pay for Product with a cumulative
price, excluding freight-out, of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00) during the term of this Production Contract.
Subsection B. Adjustments to Minimum Total Commitment.
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In the case of significant changes in manufacturing requirements,
particularly (but not exclusively) as they relate to Amendments to Exhibits A
and E, requiring significant increases in the rate of total deliveries and/or in
the number of Items delivered within limited time periods, to accommodate the
manufacture of new Items
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requiring additional equipment or facilities modifications, or to adapt to
substantive changes in the pertinent regulatory environment, the parties to this
Production Contract may adjust the Minimum Total Commitment in writing and by
common consent of both parties, as partial inducement for Seller to make such
changes as may be required to meet these requirements.
Subsection C. Take or Pay Guaranty: Minimum Total Commitment.
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In the event Purchaser takes delivery of and pays for, during the term of
this Production Contract, less than the Minimum Total Commitment specified in
Subsection A of this Article or as amended under the terms of Subsection B of
the Article, or in the event of early termination as provided for in Article
Six, Purchaser agrees to pay Seller for Product not taken in accordance with the
following formula: Purchaser shall be responsible to pay to Seller within 30
days after the expiration of the original term of this Production Contract or
after the date of early termination (whichever is earlier), an amount equal to
Sixty Percent (60%) of the Minimum Total Commitment not taken and paid for by
Purchaser, in addition to payments made for Product previously taken under the
terms of this Production Contract.
In the event Purchaser takes delivery of and pays for, during the term of
this Production Contract, less than the monthly Minimum Purchase specified in
Subsection C of Article Three except arising from suspension of production by
Purchaser pursuant to Article Eight, Purchaser agrees to pay Seller for Product
not
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taken in accordance with the following formula: Purchaser shall be responsible
to pay to Seller within 30 days after the end of the calendar month, an amount
equal to Sixty Percent (60%) of the monthly Minimum Purchase not taken and paid
for by Purchaser, in addition to payments made for Product previously taken
under the terms of this Production Contract.
Subsection D. Take or Pay Guaranty: Security.
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The Take or Pay Guaranty shall be secured within six weeks of the execution
of this Production Contract by a confirmed letter of credit, satisfactory to
Seller, sufficient to secure 60% of the Minimum Total Commitment. The Purchaser
may, upon its initiative and with Seller's prior written concurrence, said
concurrence not to be unreasonably withheld, reduce the amount of said letter of
credit over time to reflect sales of Product against the Minimum Total
Commitment, on a pro rata basis versus the Minimum Total Commitment as amended.
This security shall constitute Seller's sole remedy for failure by Purchaser to
take and pay for the Minimum Total Commitment.
ARTICLE EIGHT
YIELD
Losses of Purchaser-supplied ingredients while on Seller's premises will be
reimbursed to Purchaser at Purchaser's direct cost.
From the compounding step forward, the initial standard manufacturing yield
for a given Item will be set based upon the average yield of the three lots for
process validation. Initial yields will subsequently be revised after
cumulative production reaches ten lots, becoming the average yield of these ten
lots.
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Seller will report to Purchaser, on a timely basis, the yields achieved
against the then-current standard. Should yields fall below ninety percent (90%)
of standard, Purchaser may, after consultation with Seller, require that
production be suspended until an appropriate course of action is developed by
Seller in consultation with Purchaser to bring yields above ninety percent (90%)
of standard.
ARTICLE NINE
PRODUCT EXCLUSIVITY
Seller will not produce medical devices for wound care which are freeze-
dried in their final form for topical or oral use, which are subjects of
approved US FDA 510(k) applications or a therapeutical regulatory approval
(including material for clinical trials), but specifically excluding diagnostics
and cosmetics, for or on behalf of any entity other than Purchaser during the
initial term of this Production Contract, or during such shorter period if this
Production Contract is terminated prior to the expiration of the initial term
hereof.
Seller shall be the exclusive supplier of medical devices for wound care
which are freeze-dried in their final form for topical or oral use, which are
subjects of approved US FDA 510(k) applications or a therapeutical regulatory
approval (including material for clinical trials), but specifically excluding
diagnostics and cosmetics, to Purchaser, its subsidiaries and successors, during
the initial term of
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this Production Contract, subject only to Seller's production availability given
ordinary and reasonable lead times and appropriate business commitments.
These mutual obligations of exclusivity shall pertain to product produced
for sale in the US domestic market. Seller shall have right of first offer to
provide manufacturing services for Purchaser for product produced for sale in
foreign markets.
ARTICLE TEN
QUALITY CONTROL
Seller will maintain methods, facilities and controls in conformance with
current Good Manufacturing Practices (cGMPs) as set forth in 21 CFR 820 and 21
CFR 211, as applicable. Seller shall permit Purchaser, or its designee, to
inspect and photocopy ingredient and product analyses and batch records prepared
in accordance with the technical specifications ("Technical Specifications"),
standard operating procedures ("Standard Operating Procedures"), and other
pertinent documentation in force at the time of production, and to perform
manufacturing audits of Seller's facilities.
ARTICLE ELEVEN
PRODUCT REJECTION AND RECALLS
Any given lot of Product may be rejected 1) for failure to meet the
specifications outlined in Exhibit A, or 2) by failing to have batch or quality
records
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complete, or 3) due to evidence of cGMP violations which would prevent the lot
from being sold in the market, even though all specifications outlined in
Exhibit A, as mutually agreed-upon and/or periodically amended, were met. Under
these circumstances, Seller will replace the referenced lot(s) and Purchaser
will pay only for the replacement lot(s).
Purchaser shall notify Seller, in writing, of a potential lot rejection
within ten (10) days after receipt of the lot in question, and provide a final
decision within thirty (30) days. Should Seller not agree with the results of
the tests or the criteria to reject the lot for cGMP violations, Seller at its
discretion will conduct tests at its premises or witness the repetition of tests
at Purchaser's laboratory, and in the case of alleged cGMP violations, Seller
will present to Purchaser sufficient proof that said cGMP violations did not in
fact occur.
In the event of disagreement between Purchaser and Seller regarding
rejection of a given lot, an independent laboratory selected with consensus
between Purchaser and Seller will be given samples of the lot(s) in question,
together with standard operating procedures for testing agreed-upon by Purchaser
and Seller, and will perform testing which will then be considered the reference
to resolve the disagreement. In the event that the disagreement arises from
alleged cGMP violations, an independent consultant, who is an expert in the
pharmaceutical cGMP field will be selected with consensus between Purchaser and
Seller, and given the relevant lot records and any other production or quality
evidence necessary for
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evaluation of the given cGMP issue, and his/her opinion will then be mutually
accepted as the resolution of the disagreement.
At Purchaser's option, Purchaser may implement (i) any recall or withdrawal
required by Purchaser in connection with Product which has been rejected by
Purchaser under this Article, and (ii) any recall ordered by federal, state, or
local governmental authorities. Such recall or withdrawal shall be at Seller's
sole cost and expense if due to an act or omission of Seller; Seller shall
assume a pro-rata portion of such cost and expense if the recall or withdrawal
is in part due to an act or omission of Seller; Purchaser shall indemnify and
hold Seller harmless from any costs related to any withdrawal or recall that is
wholly due to an act or omission of Purchaser. Seller shall cooperate with
Purchaser in implementing any recall or withdrawal of Product. Purchaser shall
promptly notify Seller of any recall or withdrawal of Product.
Notwithstanding anything to the contrary contained in the preceding
paragraph of this section, Seller's liability to Purchaser hereunder for the
cost and expense of (i) physically picking up recalled and withdrawn Product and
(ii) advertising such recall or withdrawal to consumers shall not exceed
$1,000,000.00 for each recall or withdrawal. Seller shall, however, remain
responsible for all other costs and expenses of the recall or withdrawal to the
extent set forth in the preceding paragraph of this section, including but not
limited to the cost of rejected Product and freight and disposition costs.
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ARTICLE TWELVE
SHIPMENT
Seller will deliver product FOB Origin to locations designated by Purchaser
by Seller's customary surface transportation mode, unless Purchaser specifies
other transportation arrangements. Title shall pass from Seller to Purchaser at
the time of shipment.
ARTICLE THIRTEEN
PAYMENT
Payment terms are net thirty (30) days from the date of actual shipment.
ARTICLE FOURTEEN
CROSS NON-DISCLOSURE AGREEMENT
During the term of this Production Contract, each party hereto shall
disclose to the other certain information which may be proprietary to the
disclosing party. Each party hereto agrees to keep in confidence and prevent the
disclosure of such proprietary information received hereunder to persons or
corporations outside the parties' corporations, affiliates or subsidiaries. Each
party shall protect and safeguard the proprietary information of the other in
the same manner as it protects and safeguards its own proprietary information.
These obligations of confidentiality shall continue for five years beyond the
term of this agreement and any extensions.
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ARTICLE FIFTEEN
INDEMNIFICATION
Purchaser shall indemnify and save Seller harmless from any expense, cost,
loss, damage or liability arising from consumer claims or administrative actions
by federal, state, or local government agencies, including but not limited to
legal costs, except to the extent Seller failed to meet the requirements of the
product specifications then in force and, in cases where such requirements were
not met, failed to receive a waiver in writing from an authorized representative
of Purchaser to ship the Product in question to Purchaser or otherwise release
it to commerce. In any event, Seller's total liability arising from consumer
claims or manufacturing defects of any kind, shall be limited to $1,000,000.00
(each occurrence) and $3,000,000.00 (aggregate).
Purchaser shall indemnify and save Seller harmless from any expense, cost,
loss, damage or liability (including attorney's fees) for infringement or
alleged infringement of any patent(s) with respect to Product furnished or
otherwise provided by Seller under this Production Contract.
ARTICLE SIXTEEN
INSURANCE
During the term of this agreement, Seller and Purchaser shall maintain
product liability insurance of not less than $1,000,000.00 (each occurrence) and
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$3,000,000.00 (aggregate) and shall provide certificate(s) of such insurance to
the other party.
ARTICLE SEVENTEEN
MISCELLANEOUS PROVISIONS
Subsection A. Entire Agreement: Modification.
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This written Production Contract, which incorporates the preamble recitals,
definitions, and exhibits hereto, constitutes and represents the entire
agreement by and between the parties hereto and supersedes all prior and
contemporaneous agreements, representations and negotiations, whether oral or
written, with respect to the subject matter of this agreement, including the
confidential disclosure agreement dated August 29, 1994 and fully executed
August 30, 1994, and the Letter of Agreement dated December 16, 1994 and fully
executed December 30, 1994, except that confidential information previously
disclosed shall remain confidential in accordance with the terms of Article
Fourteen of this Agreement. No modification of this agreement shall be binding
unless made in writing and executed by both parties hereto. Any and all
contract modifications hereto shall be sequentially numbered beginning with
Modification Number One to the Production Contract.
Subsection B. Non-Assignability.
- ------------- ------------------
The rights and obligations of this contract may not be assigned by either
party without the prior written consent of the other of them. This contract,
however, shall
20
<PAGE>
inure to the benefit of the parties hereto their respective permitted successors
and/or permitted assigns.
Subsection C. Governing Law; Unenforceability.
- ------------- --------------------------------
This Production Contract is subject to and shall be construed and
interpreted in accordance with, and governed by, the law of the State of Oregon.
In the event that any provision, term, or condition of this production contract
is determined to be unenforceable, invalid or illegal as a matter of law only
that term, condition or provision shall be deemed stricken and the balance of
the terms, conditions, and provisions of this Production Contract shall be in
full force and effect.
Subsection D. Force Majeure.
- ------------- --------------
A delay in performance of this Production Contract by either party shall be
excused only when such delay in performance is caused by an act beyond the
reasonable control of such party, for example, governmental acts, acts of God,
severe weather, fire, flood, explosions, work stoppages, strikes, force majeure
situations impacting major subcontractors and suppliers, unavailability or
scarcity of raw materials or ingredients, and acts of the public enemy and war.
The foregoing provision shall not release either party from using its reasonable
best efforts to avoid or diligently remove such circumstances. If performance
is excused under this provision, the excused party shall resume performance with
utmost dispatch as soon as such circumstances are removed. In order for such
excusable delay to be
21
<PAGE>
recognized, the requesting party shall promptly give written notice, thereof, to
the other party together with evidence and support of such claim for excusable
delay.
Subsection E. Compliance By Parties With Law.
- ------------- -------------------------------
Both parties hereto agree to comply with all applicable federal, state and
local laws.
Subsection F. Order of Precedence.
- ------------- --------------------
In the event of an inconsistency or ambiguity in this contract, unless
otherwise provided herein, such inconsistency or ambiguity shall be resolved by
giving precedence in the following order: the main body of the Production
Contract as modified, Exhibits C, B, A, E, and D, as amended.
22
<PAGE>
IN WITNESS WHEREOF
The undersigned parties have duly executed this agreement on the date first
written above.
CARRINGTON LABORATORIES, INC. OREGON FREEZE DRY, INC.
By: /s/ Carlton Turner By: /s/ Larry Von Deylen
Name: Carlton Turner Name: Larry Von Deylen
Title: Chief Operating Officer Title: Vice President of
Marketing
Date: February 13, 1995 Date: February 13, 1995
23
<PAGE>
EXHIBIT A
PRODUCT SPECIFICATION/1/
ITEM: Carrasyn D(TM) Oral Wound Dressing Patches Rev.2
(2/13/95)
FORMING FILM: Klockner PA 160-02
Available from Klockner (DMF 3764)
Consists of:
160 RX Aclar/7.5 mil PVC wh.op.
NON-FORMING FILM/2/: Glenroy DMF#330005
Available from Glenroy (DMF 1991)
Consists of:
26# CIS paper
10#/RPE laminate
48 gauge PET
10#/RPE laminate
0.001" Aluminum foil
3.5#/R H.S.C.
CARTONS/2/: James River 14 point SBS RTC 2-color & acrylic
coating
RTE carton 1.75" x 0.968" x 3.50"
Reverse tuck with locking tabs
PHYSICAL ATTRIBUTES OF CARRASYN D(TM) PADS
THICKNESS: 5.5 mm +/- 5%
WIDTH: 15.0 mm to 15.8 mm at top
13.8 mm to 14.5 mm at bottom
PH: 6.0-7.5 when resuspended in 0.2% D.I. water
solution
WATER CONTENT: Not more than 10%
RESIDUE ON IGNITION: Not more than 3%
24
<PAGE>
MICROBIOLOGICAL: Less than 100 cfu/ml. Free of E. coli, Ps.
aeruginosa, S. aureus, and Salmonella sp.
SEAL STRENGTH: At least 2 lbs/inch, as measured by the 90
degree angle method at 10 inches per minute
PACKAGING
TYPE: Form and fill; seal and die-cut after
lyophilization
PACKAGING SIZE/2/: See enclosed files from Sepha Products
(Attachments 1 and 2)
Conical wells 16.1 mm at top, 14.5 mm at bottom,
7.5 mm deep, perforated at axis
UNITS PER CARTON/2/: 3 sheets of 2x4 patches (44.3 mm x 89 mm)
Lot number printed or embossed on carton
CARTONS PER CASE/2/: 12
LOT DEFINITION
The basis of a Production Lot shall be one freeze-drying chamber load.
YIELD
All Production Lots shall require full reconciliation of materials usage.
/1/ To be mutually agreed-upon prior to beginning Commercial Production.
/2/ Camera-ready label copy to be supplied by Purchaser.
25
<PAGE>
EXHIBIT B
Modifications to Oregon Freeze Dry facilities prior to Commercial Production, to
fully conform to the requirements of Exhibit C:
1) Build an enclosed shipping and receiving dock.
2) Build or install an employee gowning area.
3) Build a dehumidified, 98% ASHRAE filtered packaging room.
4) Purchase and install plate freezing capacity or a mutually agreed-
upon equivalent.
5) Install air handling for plant, to meet 98% ASHRAE criteria.
6) Purchase/lease and install a USP-certified water system with one (1)
gallon per minute capacity.
7) Install a lockable storage area for the quarantine of raw materials and
holding of finished goods.
26
<PAGE>
EXHIBIT C
Required cGMP upgrades of Oregon Freeze Dry facilities prior to beginning
Commercial Production, to produce Carrasyn D(TM):
1) Provide a proper air filtration system to the production and product
transportation areas in order to maintain adequate environmental control.
2) Provide a system capable of producing USP-quality water for use in
compounding and rinsing equipment and parts in direct contact with the
product.
3) Provide an area, environmentally controlled and conditioned, for blister
forming, filling, final sealing, and packaging of Carrasyn D(TM).
4) Provide new areas necessary for the production of Carrasyn D(TM), i.e.,
freezing, product transportation, gowning, and packaging, with a
configuration that will provide adequate flow of people, materials, and
product, in accordance with cGMP principles.
5) Provide the necessary isolation of the internal areas of the plant from the
outside, i.e., delivery dock and washing.
6) Provide all areas with surfaces, i.e., floors, walls, and ceiling that
can be adequately cleaned, to meet cGMP conditions that will ensure
product protection for quality and consistency.
27
<PAGE>
EXHIBIT D
Carrasyn D(TM) Rev.2 (2/13/95) $10.24/case
(Full pallets)
28
<PAGE>
EXHIBIT E
CARRASYN D(TM) REV.2 (2/13/95)
- ------------------------------
INITIAL PRODUCTION CAPACITY
5,000 cases/month
Timing: upon completion of facility modifications,
equipment installation, and scale-up
SHORT-TERM PRODUCTION POTENTIAL
10,000 cases/month
Timing: three to six (3-6) months after initial production begins
Theoretical; will require confirmation of process throughput
estimates and WIP stability by actual production experience.
INTERMEDIATE-TERM PRODUCTION POTENTIAL
16,000 cases/month
Timing: six to nine (6-9) months after initial production begins
Theoretical; will require confirmation of process throughput
estimates and WIP stability by actual production experience.
Additional equipment and/or commitments may be required.
LONG-TERM PRODUCTION POTENTIAL
25,000-50,000 cases/month
Timing: nine (9) to fourteen (14) months from commitment to proceed.
Theoretical; high-speed packaging equipment will need to be defined.
Will require significant incremental business commitments.
29
<PAGE>
EXHIBIT 10.2
TRADEMARK LICENSE AGREEMENT
---------------------------
THIS TRADEMARK LICENSE AGREEMENT ("Agreement"), effective as of March 31,
1995, is made by and between CARALOE, INC. ("Licensor"), a Texas corporation,
having its principal place of business at 2001 Walnut Hill Lane, Irving, Texas
75038, and EMPRISE INTERNATIONAL, INC. ("Licensee"), a Texas corporation, having
its principal place of business at 2010 North Highway 360, Grand Prairie, Texas
75050.
W I T N E S S E T H:
-------------------
WHEREAS, simultaneously with the execution of this Agreement, Licensor and
Licensee are entering into an exclusive Supply Agreement of even date herewith
(the "Supply Agreement") for the sale by Licensor and purchase by Licensee of
bulk aloe vera mucilaginous polysaccharide (hereinafter referred to under the
product name of "MANAPOL(TM)") to be used in products manufactured by Licensee
also containing other substances (the "Manufactured Products");
WHEREAS, Carrington Laboratories, Inc., a Texas corporation ("Carrington"),
claims the ownership of the trademark MANAPOL(TM) (the "Mark") and has granted
to Licensor a license to use the Mark and to license others to use it on an
exclusive and/or a non-exclusive basis;
WHEREAS, Licensee is desirous of obtaining from Licensor, and Licensor is
willing to grant to Licensee, a license to use the product name MANAPOL(TM) (the
"Mark") in connection with the advertising and sale of the Manufactured Products
subject to the terms, conditions and restrictions set forth herein; and
WHEREAS, Licensor and Licensee are mutually desirous of insuring the
consistent quality of all products sold in connection with the Mark;
NOW, THEREFORE, in consideration of premises, the mutual covenants,
promises and agreement set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant, promise and agree as follows:
ARTICLE 1
LICENSE
-------
1.1 TERMS AND CONDITIONS. Licensor hereby grants to Licensee the non-
--------------------
transferable right and license to use the Mark in connection with the labeling,
advertising and sale of Manufactured Products manufactured and sold by Licensee
during the term of this Agreement. During the term of this Agreement, Licensee
shall have (a) the exclusive right to use the Mark in connection with
Manufactured Products containing MANAPOL(TM) that are intended for sale to the
ultimate consumer in the United States, Canada and Mexico, and (b) the non-
exclusive right to use the Mark in connection with Manufactured Products
containing MANAPOL(TM) that are intended for sale to the ultimate consumer in
places other than the United States, Canada and Mexico.
1.2 LICENSE COTERMINOUS WITH SUPPLY AGREEMENT. The license granted by
-----------------------------------------
this Agreement shall run coterminously with the Supply Agreement, and any
actions or events which shall operate to extend or terminate the Supply
Agreement shall automatically extend or terminate this Agreement simultaneously.
1.3 SUBLICENSES. Licensee shall not have the right without written
-----------
permission from Licensor to grant sublicenses with respect to the license
granted herein; however, Licensee may engage a third party or parties to make
and affix labels for the Manufactured Products in compliance with Articles 2,3,
and 4 hereof, and/or to distribute and sell the Manufactured Products in
compliance with the terms and conditions of this Agreement. Licensee shall be
expressly obligated to ensure full compliance with all terms and conditions of
this Agreement.
<PAGE>
ARTICLE 2
CERTAIN OBLIGATIONS OF LICENSEE
-------------------------------
2.1 REPRESENTATIONS BY LICENSEE. Licensee shall not represent in any
---------------------------
manner that it owns any right, title or interest in or to the Mark. Licensee
acknowledges that its use of the Mark shall inure to the benefit of Licensor and
shall not create in Licensee's favor any right, title or interest in or to the
Mark.
2.2 DISCONTINUATION OF USE OF MARK. Upon the expiration or termination of
------------------------------
this Agreement, Licensee will cease and desist from all use of the Mark in any
manner and will not adopt or use, without Licensor's prior written consent, any
word or mark which is confusingly or deceptively similar to the Mark, except
that Licensee may continue to use the Mark under the terms and conditions of
this Agreement in connection with any remaining supplies of MANAPOL(TM)
purchased by Licensee from Licensor until such supplies are exhausted.
2.3 STANDARDS. All products on which the Mark is used by Licensee shall
---------
be of consistent quality and shall meet or exceed all standards set by Licensor,
in Licensor's sole discretion, from time to time. Licensee shall have thirty
(30) days from the receipt of written notice of any change in the standards to
comply with any new requirements.
2.4 FDA COMPLIANCE OF PRODUCTS. All products on which the Mark is used by
--------------------------
Licensee shall be manufactured, packaged, labeled, advertised, marketed and sold
in compliance with (i) the Federal Food, Drug and Cosmetic Act and the rules and
regulations promulgated thereunder, as amended from time to time, and (ii) all
other applicable laws, rules and regulations.
2.5 INSPECTION. Licensor reserves the right to inspect Licensee's
----------
products bearing the Mark and Licensee's manufacturing facilities at all
reasonable times to insure Licensee's compliance with this Agreement.
2.6 USE OF TRADEMARK. Licensee shall not use the Mark except as
----------------
specifically set forth herein. Without limiting the generality of the preceding
sentence, Licensee shall not use the Mark in connection with the sale or
advertising of any products other than the Manufactured Products.
2.7 TRADEMARK REGISTRATION. At Licensor's request and expense and, except
----------------------
as otherwise provided herein at Licensor's sole discretion and option, Licensee
shall take whatever action is reasonably necessary to assist Carrington or its
assigns in registering the Mark with the U.S. Patent and Trademark Office
("USPTO") and/or in perfecting, protecting or enforcing Carrington's and
Licensor's rights in and to the Mark. Licensee understands that Carrington or
its assigns may rely solely on Licensee's use of the Mark to obtain or maintain
registration with the USPTO.
ARTICLE 3
MANUFACTURING AND SALE
----------------------
3.1 MANUFACTURING FACILITIES. All manufacturing of the Manufactured
------------------------
Products shall be done in the Licensee's facilities or contract facilities that
Licensee confirms meets all terms of this Agreement, including without
limitation Sections 2.3 and 2.4.
3.2 COMBINATION WITH OTHER PRODUCTS. Licensee shall not combine
-------------------------------
MANAPOL(TM) with any product or substance in any manner which would violate any
laws, rules or regulations of any state, federal or other governmental body.
Licensee shall not combine MANAPOL(TM) with any other substance in a
Manufactured Product that is to be advertised or sold for use or consumption by
humans or animals if the approval of the U.S. Food and Drug Administration (the
"FDA") or the U.S. Department of Agriculture ("USDA") for such use or
consumption is required and has not been obtained.
- 2 -
<PAGE>
3.3 COMPLIANCE BY THIRD PARTIES. Licensee shall take all steps reasonably
---------------------------
necessary to ensure that its distributors and any other parties to whom it sells
any of the Manufactured Products for resale do not relabel, repackage,
advertise, sell or attempt to sell MANAPOL(TM) or any of the Manufactured
Products in a manner that would violate this Agreement if done by Licensee.
3.4 MANAPOL(TM) CONTENT. The amount of MANAPOL(TM) to be contained in
-------------------
each Manufactured Product shall be determined by mutual written agreement of
Licensor and Licensee. The parties shall meet once each calendar quarter to
determine and agree upon the MANAPOL(TM) content for existing and proposed
Manufactured Products.
ARTICLE 4
LABELS AND ADVERTISING
----------------------
4.1 FDA COMPLIANCE OF LABELS AND ADVERTISING. All labels and advertising
----------------------------------------
relating to the Manufactured Products offered in connection with the Mark must
strictly comply with all applicable rules and regulations of the FDA and all
other applicable laws, rules and regulations, including but not limited to FDA
requirements relating to product ingredients. Information regarding the
ingredients of MANAPOL(TM) shall be furnished to Licensee by Licensor from time
to time.
4.2 MANDATORY REQUIREMENTS. Licensee shall cause all labels, packaging,
----------------------
advertising and promotional materials used by it in advertising, marketing and
selling any product manufactured by or on behalf of Licensee that contains
MANAPOL(TM) to contain (i) the Mark, (ii) a statement setting forth the
concentration of MANAPOL(TM) contained in such product, and (iii) the following
legend:
MANAPOL(TM) is a trademark of Carrington Laboratories, Inc.
4.3 CLAIMS BY LICENSEE. Licensee hereby agrees not to make, or permit any
------------------
of its employees, agents or distributors to make, any claims of any properties
or results relating to MANAPOL(TM) or any Manufactured Product, unless such
claims have received written approval from the FDA.
4.4 FDA OR USDA APPROVAL OF CLAIMS. If Licensee desires to seek FDA or
------------------------------
USDA approval as to any specific claims with respect to MANAPOL(TM) or any
Manufactured Product, Licensee hereby agrees to (i) notify Licensor of the
claims and the application prior to filing and (ii) to keep Licensor informed as
to the progress of the application, including but not limited to sending
Licensor copies of all communications or notices to or from the FDA or USDA, as
applicable.
4.5 RIGHT TO APPROVE LABELS, ETC. If Licensor so requests, Licensee shall
----------------------------
not use any label, advertisement or marketing material that contains the Mark
unless such label, advertisement or marketing material has first been submitted
to and approved by Licensor. Licensor shall not unreasonably withhold its
approval of any such label, advertisement or marketing material.
ARTICLE 5
RIGHT OF FIRST REFUSAL
----------------------
5.1 RIGHT OF FIRST REFUSAL. If, during the period of ninety (90) days
----------------------
immediately following the effective date of this Agreement, Licensor receives an
offer from a third party to purchase quantities of MANAPOL(TM) and obtain an
exclusive license to use the Mark in connection with a product or products
containing MANAPOL(TM) that are intended for sale to the ultimate consumer in
places other than the United States, Canada and Mexico, and such offer is
acceptable to Licensor, Licensor shall give prompt written notice to Licensee
setting forth the terms of such offer. If, within fifteen
- 3 -
<PAGE>
(15) days after Licensee's receipt of such notice, Licensee notifies Licensor in
writing that Licensee is willing to enter into an agreement or agreements with
Licensor on the terms set forth in the third party's offer, Licensor and
Licensee shall enter into an agreement or agreements embodying the terms of such
offer and such other terms as Licensor and Licensee shall mutually agree upon;
provided, however, that Licensor shall not be obligated to enter into any such
agreement or agreements with Licensee if Licensee is in default under the terms
of this Agreement or the Supply Agreement.
ARTICLE 6
NEGATION OF WARRANTIES, DISCLAIMER AND INDEMNITY
------------------------------------------------
6.1 NEGATION OF WARRANTIES, ETC. Nothing in this Agreement shall be
----------------------------
construed or interpreted as:
(a) a warranty or representation by Licensor that any product made, used,
sold or otherwise disposed of under the license granted in this Agreement is or
will be free of infringement or the like of the rights of third parties; or
(b) an obligation by Licensor to bring or prosecute actions or suits
against third parties for infringement or the like of the Mark or of any
registration that may subsequently be granted for such Mark; or
(c) granting by implication, estoppel or otherwise any licenses or rights
other than those expressly granted hereunder.
6.2 DISCLAIMER. LICENSOR MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES
----------
OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY, FITNESS AND FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO
RESPONSIBILITIES WHATSOEVER WITH RESPECT TO THE USE, SALE OR OTHER DISPOSITION
BY LICENSEE OR ITS CUSTOMERS, VENDEES OR OTHER TRANSFEREES, WITH RESPECT TO THE
MARK OR ANY PRODUCTS MADE OR SOLD BY LICENSEE.
6.3 LIABILITY OF LICENSEE FOR PRODUCTS. Licensee shall assume all
----------------------------------
financial and other obligations for the products made and sold by it under this
Agreement and Licensor shall not incur any liability or responsibility to
Licensee or to third parties arising out of or connected in any manner with
Licensee's products made or sold pursuant to this Agreement. In no event shall
Licensor be liable for lost profits, special damages, consequential damages or
contingent liabilities arising out of or connected in any manner with this
Agreement or the products made or sold by Licensee under this Agreement.
6.4 INDEMNITY OF LICENSOR. Licensee agrees to defend, indemnify and hold
---------------------
Licensor, its officers, directors, employees and agents, harmless against all
claims, liabilities, demands, damages, expenses or losses arising out of or
connected with (a) the use by Licensee of the Mark or (b) any use, sale or other
disposition of Licensee's products by Licensee or by any other party.
6.5 NEGATION OF TRADEMARK WARRANTY. Licensee acknowledges that Licensor
------------------------------
makes no warranty, express or implied, with respect to its ownership of any
rights relating to the Mark.
ARTICLE 7
TERM AND TERMINATION
--------------------
7.1 TERM. Unless terminated earlier as provided for herein, this
----
Agreement shall remain in full force and effect for a five (5)-year period
ending at midnight on March 31, 2000. This Agreement may be extended or renewed
- 4 -
<PAGE>
as provided in Section 1.2, or otherwise by the written agreement of the
parties.
7.2 BREACH OF AGREEMENT. Except as provided otherwise in Section 7.3, if
-------------------
either party breaches any material provision of this Agreement and fails to cure
the breach within thirty (30) days after receipt of written notice from the
nonbreaching party specifying the breach, then the nonbreaching party may
terminate this Agreement upon written notice to the breaching party, which right
of termination shall be in addition to, and not in lieu of, all other rights and
remedies the nonbreaching party may have against the breaching party under this
Agreement, at law or in equity. Failure by Licensor to give notice of
termination with respect to any such failure shall not be deemed a waiver of its
right at a later date to give such notice if such failure continues or again
occurs, or if another failure occurs. A breach by either party of a material
provision of the Supply Agreement shall be deemed a breach by such party of a
material provision of this Agreement.
7.3 IMMEDIATE TERMINATION. Licensor may immediately terminate this
---------------------
Agreement, upon written notice to Licensee, upon the occurrence of any one or
more of the following events: (i) Licensee breaches any provision of Articles
2, 3, or 4; (ii) Licensee fails to purchase and/or to pay for the quantities of
MANAPOL(TM) that it is obligated to purchase and pay for under the Supply
Agreement in accordance with the terms thereof; (iii) Licensee voluntarily seeks
protection under any federal or state bankruptcy or insolvency laws; (iv) a
petition for bankruptcy or the appointment of a receiver is filed against
Licensee and is not dismissed within thirty (30) days thereafter; (v) Licensee
makes any assignment for the benefit of its creditors; or (vi) Licensee ceases
doing business.
7.4 SURVIVAL OF PROVISIONS. In the event of termination, cancellation
----------------------
or expiration of this Agreement for any reason, Sections 2.2, 6.1, 6.2, 6.3,
6.4, 6.5 and 8.1 hereof shall survive such termination, cancellation or
expiration and remain in full force and effect.
ARTICLE 8
MISCELLANEOUS
-------------
8.1 EQUITABLE RELIEF. A breach or default by Licensee of any of the
----------------
provisions of Articles 2, 3 and 4 hereof shall cause Licensor to suffer
irreparable harm and, in such event, Licensor shall be entitled, as a matter of
right, to a restraining order and other injunctive relief from any court of
competent jurisdiction, restraining any further violation thereof by Licensee,
its officers, agents, servants, employees and those persons in active concert or
participation with them. The right to a restraining order or other injunctive
relief shall be supplemental to any other right or remedy Licensor may have,
including, without limitation, the recovery of damages for the breach or default
of any of the terms of this Agreement.
8.2 AMENDMENT. This Agreement may be changed, modified, or amended only
---------
by an instrument in writing duly executed by each of the parties hereto.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the full and complete
----------------
agreement of the parties hereto and supersedes any and all prior understandings,
whether written or oral, with respect to the subject matter hereof, including
the Trademark License Agreement between the parties dated May 16, 1994.
8.4 NO WAIVER. The failure of either party to insist upon strict
---------
performance of any obligation hereunder by the other party, irrespective of the
length of time for which such failure continues, shall not be a waiver of its
right to demand strict compliance in the future. No consent or waiver, express
or implied, by either party to or of any breach or default in the performance of
any obligation hereunder by the other party shall constitute a consent or waiver
to or of any other breach or default in the performance of the same or any other
obligation hereunder.
8.5 NOTICES. All notices required or permitted to be made or given
-------
pursuant to this Agreement shall be in writing and shall be considered as
properly given or made when personally delivered or when duly deposited in the
mails,
- 5 -
<PAGE>
first class mail, postage prepaid, or when transmitted by prepaid telegram, and
addressed to the applicable address first above written or to such other address
as the addressee shall have theretofore specified in a written notice to the
notifying party.
8.6 ASSIGNMENT. This Agreement or any of the rights or obligations
----------
created herein may be assigned, in whole or in part, by Licensor. However, this
Agreement is personal to Licensee, and Licensee may not assign this Agreement or
any of its rights, duties or obligations under this Agreement to any third party
without Licensor's prior written consent, and any attempted assignment by
Licensee not in accordance with this Section 8.6 shall be void.
8.7 RELATIONSHIP OF PARTIES. Nothing contained herein shall be construed
-----------------------
to create or constitute any employment, agency, partnership or joint
venture arrangement by and between the parties, and neither of them has the
power or authority, express or implied, to obligate or bind the other in any
manner whatsoever.
8.8 REMEDIES CUMULATIVE. Unless otherwise expressly provided herein, the
-------------------
rights and remedies hereunder are in addition to, and not in limitation of,
any other rights and remedies, at law or in equity, and the exercise or one
right or remedy will not be deemed a waiver of any other right or remedy.
8.9 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties and their respective
successors and assigns, provided, however, that the foregoing shall not be
-------- -------
deemed to expand or otherwise affect the limitations on assignment and
delegation set forth in Section 8.6 hereof, and except as otherwise expressly
provided in this Agreement, no other person or business entity is intended to or
shall have any right or interest under this Agreement.
8.10 GOVERNING LAW. This Agreement shall be governed by and interpreted,
-------------
construed and enforced in accordance with the laws of the State of
Texas, excluding, however, any conflicts of law rules that would require the
application of the laws of any other state or country.
8.11 HEADINGS. The headings used in this Agreement are for convenience of
--------
reference only and shall not be used to interpret this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which will
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
CARALOE, INC.
By: /s/ Chris Record
Name: Chris Record
Title: Chief Financial Officer
EMPRISE INTERNATIONAL, INC.
By: /s/ William C. Fioretti
Name: William C. Fioretti
Title: Chief Executive Officer
- 6 -
<PAGE>
EXHIBIT 10.3
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") effective as of March 31, 1995, is
by and between CARALOE, INC., a Texas corporation ("Seller"), and EMPRISE
INTERNATIONAL, INC., a Texas corporation ("Buyer"),
WITNESSETH:
----------
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, bulk aloe vera mucilaginous polysaccharide (hereinafter referred to
under the product name of "MANAPOL(TM)") in the quantities, at the price, and
upon the terms and conditions hereinafter set forth; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Buyer are entering into a Trademark License Agreement of even date herewith (the
"License Agreement") pursuant to which, among other things, Seller is granting
to Buyer a license to use the product name MANAPOL(TM) in connection with the
labeling, advertising and sale of products manufactured by or for Buyer that
contain MANAPOL(TM);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Term. The term of this Agreement shall commence on April 1, 1995, and
----
shall end at midnight on March 31, 2000, unless sooner terminated as provided
herein (the "Term"). This Agreement shall terminate automatically upon the
expiration or termination of the License Agreement.
2. Sale and Purchase.
-----------------
(a) Subject to the terms and conditions of this Agreement, Seller shall
sell to Buyer, and Buyer shall purchase from Seller, during each year of the
Term, not less than the quantity of MANAPOL(TM) specified for such year below:
Year Quantity
---- --------
From April 1, 1995 to March 31, 1996 Not less than 225 kilograms per month
From April 1, 1996 to March 31, 1997 Not less than 225 kilograms per month
From April 1, 1997 to March 31, 1998 Not less than 270 kilograms per month
From April 1, 1998 to March 31, 1999 Not less than 324 kilograms per month
From April 1, 1999 to March 31, 2000 Not less than 388 kilograms per month
(b) Buyer agrees that all MANAPOL(TM) purchased by it hereunder or under
the Supply Agreement between the parties dated May 16, 1994 (the "Prior Supply
Agreement") shall be used only as an additive in human health food products, new
products to include skin care, cosmetics, health care products, those mutually
agreed upon by the parties, and all those currently being sold by Buyer; and
manufactured by or for Buyer that are intended for sale to
<PAGE>
the ultimate consumer in the United States or elsewhere, subject to compliance
with Buyer's obligations under the License Agreement, including without
limitation Buyer's obligations under Article III thereof. All food products
manufactured by or for Buyer that contain MANAPOL(TM) purchased by Buyer from
Seller (under this Agreement or the Prior Supply Agreement) are herein called
"Buyer Products".
(c) During the Term, Buyer shall have the exclusive right to purchase
MANAPOL(TM) from Seller or its affiliates for use as an additive in human health
food products that are intended for sale to the ultimate consumer in the United
States, Canada and Mexico.
3. Quality. Seller warrants to Buyer that all MANAPOL(TM) sold by Seller
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pursuant to this Agreement will conform to the quality specifications set forth
in Exhibit A to this Agreement. EXCEPT AS PROVIDED IN THIS PARAGRAPH 3, 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(TM) TO BE SOLD HEREUNDER,
AND NONE SHALL BE IMPLIED BY LAW.
4. Deliveries. Buyer shall instruct Seller from time to time during the
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Term, by placing a purchase order with Seller reasonably in advance of the date
Buyer desires MANAPOL(TM) to be delivered to it hereunder, (i) as to the
quantities of MANAPOL(TM) to be delivered to Buyer, (ii) as to the specific date
of delivery, (iii) as to the specific location of delivery and (iv) as to the
carrier or particular type of carrier for such delivery. During the Term, Buyer
shall provide Seller (a) on an annual basis prior to the beginning of each year
of the Term a nonbinding forecast of Buyer's minimum and maximum aggregate
delivery requirements for MANAPOL(TM) for such year (provided that such forecast
for the initial year of the Term shall be provided to Seller by April 15, 1995),
and (b) on a quarterly basis at least 30 days prior to the end of each three-
month period of the Term a forecast acceptable to Seller (which shall be binding
on Buyer) of Buyer's minimum and maximum delivery requirements for MANAPOL(TM)
for each month of the next three-month period (provided that such forecast for
the initial three-month period of the Term ending on June 30, 1995, shall be
provided to Seller by April 15, 1995). The quantities of MANAPOL(TM) ordered by
Buyer pursuant to this Agreement from time to time shall be spaced in a
reasonable manner, and Buyer shall order such quantities in accordance with
Buyer's binding forecasts. In no event shall Seller be required to deliver to
Buyer in any three-month period a quantity of MANAPOL(TM) in excess of 125% of
the maximum delivery requirement for such period set forth in the binding
forecast for such period accepted by Seller. Deliveries of MANAPOL(TM) shall be
made by Seller under normal trade conditions in the usual and customary manner
being utilized by Seller at the time and location of the particular delivery.
The MANAPOL(TM) delivered to Buyer hereunder shall be packaged in 3 kilogram or
10 kilogram containers. All deliveries of MANAPOL(TM) to Buyer hereunder shall
be made by Seller F.O.B. at the facilities of Seller or its affiliates located
in Dallas or Irving, Texas.
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<PAGE>
5. Purchase Price.
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(a) All MANAPOL(TM) to be purchased by Buyer under this Agreement shall be
purchased by it, during the first two years of the Term, at a price of $1,200
per kilogram and, during the last three years of the Term, at the price per
kilogram agreed upon by the parties for such three-year period pursuant to the
provisions of Paragraph 5(b) hereof. Buyer shall bear all freight, insurance
and similar costs, and all sales taxes, with respect to such purchases. The
purchase price of MANAPOL(TM), together with all related freight, insurance and
similar costs, and sales taxes, shall be paid by Buyer to Seller within 30 days
after the date of invoice.
(b) Not later than February 1, 1997, Seller and Buyer shall commence good
faith negotiations to determine and agree upon the price of MANAPOL(TM) to be
purchased by Buyer hereunder during the last three years of the Term. If the
parties are unable to so agree on such price by March 15, 1997, this Agreement
shall terminate effective at midnight on March 31, 1997. Nothing contained in
this Paragraph 5(b) shall be deemed to (i) obligate the parties to agree upon
such price, (ii) obligate a party to negotiate with the other party regarding
such price if such other party is then in breach of or in default under this
Agreement or the License Agreement or (iii) limit the rights of the parties
under Paragraph 9 hereof.
6. Royalties.
---------
(a) As additional consideration for the rights granted to Buyer pursuant to
Paragraph 2 hereof, Buyer shall pay to Seller a royalty in an amount equal to
three percent (3%) of the net sales price of all Buyer Products sold by or on
behalf of Buyer or its affiliated companies or their respective distributors on
or after April 1, 1995 that receive "Bonus Volume" as that term is defined in
schedule 1 attached hereto and made a part hereof. Generally, however, the term
"Bonus Volume" shall mean the dollar amount assigned by Buyer to Buyer Products
for the purpose of paying commissions or bonuses to its distributors. It shall
be presumed that all products listed on schedule 1 shall remain thereon unless
both parties mutually agree to their deletion and it shall be further presumed
that all new products shall be added to the schedule unless the parties agree
that they should not. Generally, sales aides, brochures, and travel related
programs are presumed not to be included. Sales Kits will be excluded except
that product listed on schedule 1 will be given a mutually agreed upon
discounted value and a royalty shall be paid on these product inclusions into a
sales kit;
(b) Buyer hereby agrees that payment of royalties to Seller pursuant to
Paragraph 6(a) shall be made with respect to each calendar quarter, and shall be
made within 30 days following the end of each calendar quarter, with respect to
all Buyer Products sold during such calendar quarter. Payment of royalties
shall be accompanied by a report of Buyer to Seller setting forth in reasonable
detail the calculation of such royalties and containing such other information
as Seller may reasonably request in connection with such calculation. Buyer
agrees that it will at all times keep complete, separate and accurate books of
account with respect to the sale of Buyer Products in sufficient detail to
permit the accurate preparation of such reports and to enable Seller to
ascertain the royalties accruing and payable hereunder. Buyer further agrees
3
<PAGE>
to permit Seller and its authorized representatives to have access to such books
of account during ordinary business hours for the purpose of verifying the
accuracy of Buyer's reports.
(c) The Buyer shall buy the 225 kilograms per month. Buyer shall provide
Seller with the total usage on a monthly basis. When the monthly use of
MANAPOL(TM) exceeds 225 kilograms per month Buyer shall pay Seller a 3% royalty
on all product sales.
7. Confidentiality. In the performance of Seller's obligations pursuant
---------------
to this Agreement or the License Agreement, Buyer may acquire from Seller or its
affiliates technical, commercial, operating or other proprietary information
relative to the business or operations of Seller or its affiliates (the
"Confidential Information"). Buyer shall maintain the confidentiality, and take
all necessary precautions to safeguard the secrecy, of any and all Confidential
Information it may acquire from Seller or its affiliates. Buyer shall not use
any of such Confidential Information for its own benefit or for the benefit of
anyone else. Buyer shall not publicly disclose the existence of this Agreement
or the terms hereof without the prior written consent of Seller.
8. Force Majeure. Seller shall not have any liability hereunder if it
-------------
shall be prevented from performing any of its obligations hereunder by reason of
any factor beyond its 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 the public
enemy, other casualty, strike or lockout, or interference, prohibition or
restriction imposed by any government or any officer or agent thereof ("Force
Majeure"), and Seller's obligations, so far as may be necessary, shall be
suspended during the period of such Force Majeure and shall be cancelled in
respect of such quantities of MANAPOL(TM) as would have been sold hereunder but
for such suspension. Seller shall give to Buyer prompt notice of any such Force
Majeure, the date of commencement thereof and its probable duration and shall
give a further notice in like manner upon the termination thereof. Each party
hereto shall endeavor with due diligence to resume compliance with its
obligations hereunder at the earliest date and shall do all that it reasonably
can to overcome or mitigate the effects of any such Force Majeure upon its
obligations under this Agreement.
9. Rights Upon Default.
-------------------
(a) Seller's Rights Upon Default. If Buyer (i) fails to purchase the
----------------------------
quantities of MANAPOL(TM) specified for purchase by Buyer hereunder, (ii) fails
to make a payment hereunder when due or (iii) otherwise breaches any term of
this Agreement, and such failure or breach is not cured to Seller's reasonable
satisfaction within 5 days (in the case of a failure to make a payment) or 30
days (in any other case) after receipt of notice thereof by Buyer, or if Buyer
fails to perform or observe any covenant or condition on its part to be
performed or observed under the License Agreement when required to be performed
or observed, and such failure continues after the applicable grace period, if
any, specified in the License Agreement, Seller may refuse to make further
deliveries hereunder and may terminate this Agreement upon notice to Buyer and,
in addition, shall have such other rights and remedies, including the right to
recover damages, as are available to Seller under applicable law or otherwise.
If Buyer
4
<PAGE>
becomes bankrupt or insolvent, or if a petition in bankruptcy is filed by or
against it, or if a receiver is appointed for it or its properties, Seller may
refuse to make further deliveries hereunder and may terminate this Agreement
upon notice to Buyer, without prejudice to any rights of Seller existing
hereunder or under applicable law or otherwise. Any subsequent shipment of
MANAPOL(TM) by Seller after a failure by Buyer to make any payment hereunder, or
after any other default by Buyer hereunder, shall not constitute a waiver of any
rights of Seller arising out of such prior default; nor shall Seller's failure
to insist upon strict performance of any provision of this Agreement be deemed a
waiver by Seller of any of its rights or remedies hereunder or under applicable
law or a waiver by Seller of any subsequent default by Buyer in the performance
of or compliance with any of the terms of this Agreement.
(b) Buyer's Rights Upon Default. If Seller fails in any material respect
---------------------------
to perform its obligations hereunder, and such failure is not cured to Buyer's
reasonable satisfaction within 30 days after receipt of notice thereof by
Seller, Buyer shall have the right to refuse to accept further deliveries
hereunder and to terminate this Agreement upon notice to Seller and, in
addition, shall have such other rights and remedies, including the right to
recover damages, as are available to Buyer under applicable law or otherwise.
Any subsequent acceptance of delivery of MANAPOL(TM) by Buyer after any default
by Seller under this Agreement shall not constitute a waiver of any rights of
Buyer arising out of such prior default; nor shall Buyer's failure to insist
upon strict performance of any provision of this Agreement be deemed a waiver by
Buyer of any of its rights or remedies hereunder or under applicable law or a
waiver by Buyer of any subsequent default by Seller in the performance of or
compliance with any of the terms of this Agreement.
10. Disclaimer and Indemnity. Buyer shall assume all financial and other
------------------------
obligations for Buyer Products, and Seller shall not incur any liability or
responsibility to Buyer or to third parties arising out of or connected in any
manner with Buyer Products. In no event shall Seller be liable for lost
profits, special damages, consequential damages or contingent liabilities
arising out of or connected in any manner with this Agreement or Buyer Products.
Buyer shall defend, indemnify and hold harmless Seller and its affiliates, and
their respective officers, directors, employees and agents, from and against all
claims, liabilities, demands, damages, expenses and losses (including reasonable
attorneys' fees and expenses) arising out of or connected with (i) any
manufacture, use, sale or other disposition of Buyer Products, or any other
products of Buyer, by Buyer or any other party and (ii) any breach by Buyer of
any of its obligations under this Agreement or the License Agreement.
11. Equitable Relief. A breach by Buyer of the provisions of Paragraph
----------------
2(b) shall cause Seller to suffer irreparable harm and, in such event, Seller
shall be entitled, as a matter of right, to a restraining order and other
injunctive relief from any court of competent jurisdiction, restraining any
further violation thereof by Buyer, its officers, agents, servants, employees
and those persons in active concert or participation with them. The right to a
restraining order or other injunctive relief shall be supplemental to any other
right or remedy Seller may have, including, without limitation, the recovery of
damages for the breach of such provisions or of any other provisions of this
Agreement.
5
<PAGE>
12. Survival. The expiration or termination of the Term shall not impair
--------
the rights or obligations of either party hereto which shall have accrued
hereunder prior to such expiration or termination. The provisions of Paragraphs
2(b), 6, 7, 9, 10 and 11 hereof, and the rights and obligations of the parties
thereunder, shall survive the expiration or termination of the Term.
13. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Texas.
14. Succession. Neither party hereto may assign or otherwise transfer
----------
this Agreement or any of its rights or obligations hereunder (including, without
limitation, by merger or consolidation) without the prior written consent of the
other party; provided, however, that Seller may assign any of its rights or
obligations hereunder to any affiliate of Seller. Subject to the immediately
preceding sentence, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
15. Entire Agreement. This Agreement and the License Agreement constitute
----------------
the entire agreement between the parties hereto relating to the matters covered
hereby and supersede any and all prior understandings, whether written or oral,
with respect to such matters, including the Prior Supply Agreement. The terms
of this Agreement shall prevail over any inconsistent terms contained in any
purchase order issued by Buyer and acknowledgment or acceptance thereof issued
by Seller. No modification, waiver or discharge of this Agreement or any of its
terms shall be binding unless in writing and signed by the party against which
the modification, waiver or discharge is sought to be enforced. This Agreement
is separate from and, except for the License Agreement, unrelated to any other
agreement between the parties hereto and has been entered into for separate and
independent consideration, the sufficiency of which is hereby acknowledged by
the parties.
16. Notices. All notices and other communications with respect to this
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Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally or when duly deposited in the mails, first class mail,
postage prepaid, to the address set forth below, or such other address hereafter
specified in like manner by one party to the other:
If to Seller: Caraloe, Inc.
2001 Walnut Hill Lane
Irving, Texas 75038
Attention: President
If to Buyer: Emprise International, Inc.
2010 North Highway 360
Grand Prairie, Texas 75050
Attention: President
17. Interpretation. In the event that any provision of this Agreement is
--------------
illegal, invalid or unenforceable as written but may be rendered legal, valid
and enforceable by limitation thereof, then such provision shall be deemed to be
legal, valid and enforceable to the
6
<PAGE>
maximum extent permitted by applicable law. The illegality, invalidity or
unenforceability in its entirety of any provision hereof will not affect the
legality, validity or enforceability of the remaining provisions of this
Agreement.
18. No Inconsistent Actions. Each party hereto agrees that it will not
-----------------------
voluntarily undertake any action or course of action inconsistent with the
provisions or intent of this Agreement and, subject to the provisions of
Paragraph 8 hereof, will promptly do all acts and take all measures as may be
appropriate to comply with the terms, conditions and provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
CARALOE, INC.
By: /s/ Chris Record
Name: Chris Record
Title: Chief Financial Officer
EMPRISE INTERNATIONAL, INC.
By: /s/ William C. Fioretti
Name: William C. Fioretti
Title: Chief Executive Officer
7
<PAGE>
EXHIBIT A
SUPPLY AGREEMENT
TECHNICAL BULLETIN - FORMULATING WITH MANAPOL/TM/
(ALOE VERA MUCILAGINOUS POLYSACCHARIDE)
Manapol is a purified extract from the aloe vera plant with a certified
concentration of aloe vera mucilaginous polysaccharides. It is virtually free of
the undesirable anthraquinones, barbaloin and aloe-emodin, and contains the
natural pulp found in the inner gel of the aloe leaf. Manapol is a white, free
flowing powder that is suitable for use alone or as a food additive in
nutritional supplements: powders, beverages, capsules and tablets.
The following is helpful information to assist in using Manapol in product
formulations:
Solubility: Manapol will dissolve slowly into aqueous solutions up to a
concentration of 0.5%. It can take up to two hours to reach
complete dissolution under high agitation. The resulting
colorless to pale yellow solution is opalescent (hazy). Other
aloe products that form transparent solutions and solubilize
rapidly lack these high molecular weight mucilaginous
polysaccharides.
Density: The bulk density of Manapol is approximately 0.1 gram per
cubic centimeter. Because the product is a fine, fluffy
powder, dust collection equipment is recommended where large
amounts of Manapol are being used in processing.
Handling: Manapol is hygroscopic, absorbing moisture rapidly from the
surrounding environment. Except during use, it is best to
keep the containers tightly sealed at all times.
Storage: Store in a dry cool place in tightly sealed containers. Be
certain that only water impermeable containers are used.
Stability: The shelf life of Manapol is indefinite as long as it is not
exposed to moisture.
Standard
Concentration: Manapol should be used at a concentration of 30 mg per fluid
ounce in beverages. The same level that is typically found in
fresh inner leaf gel from aloe vera. Capsules and tablets
should be formulated with 30 mg Manapol each.
Manapol Specifications:
Test Specification Reference
- ---- ------------- ---------
Appearance Free flowing amorphous powder SOP #2001
Color White to off white SOP #2046
Aloe Mucilaginous See HLC profile SOP #2338
Polysaccharide
Content
Moisture Not more than 10% SOP #2003
Residue on ignition Not more than 20% SOP #2003
Microbiological Average aerobic plate count SOP #2074
not to exceed 500 efu/mi in
a 0.1% solution. No gram
negative organisms of obligate
anaerobes. No S. aureus,
May 19, 1994 -------------------------------
William C. Fioretti, CEO
Empriso International, Inc.
