**Exhibit10.1**

 

**CONSULTINGAGREEMENT**

 

THIS CONSULTING AGREEMENT(this “Agreement”) is entered into as of February          , 2004 (the “Effective Date”) between Weider NutritionGroup, Inc., a Utah corporation (the “Company”), and Gustin Foods, LLC, a Californialimited liability company (“Consultant”).

 

**RECITALS**

 

A.            The Company is in the business of developing,manufacturing, marketing and selling branded and private label dietarysupplements and nutrition products, including joint care products containing glucosamineand/or chondroitin and other related products.

 

B.            Consultant has experience and expertise indeveloping, marketing and selling branded nutrition and food products.

 

C.            The Company desires to retain the services ofConsultant and Consultant desires to provide consulting services to theCompany, upon the terms and subject to the conditions set forth in thisAgreement.

 

**AGREEMENT**

 

NOW, THEREFORE, inconsideration of the premises and the mutual promises set forth in thisAgreement, the Company and Consultant hereby agree as follows:

 

1.                                       Retention as Consultant; Consultant Services.

 

a.             Subject to the terms and conditions containedin this Agreement, the Company hereby engages Consultant and Consultant herebyagrees to perform consulting services for the Company during the Term (asdefined herein) of this Agreement relating to the Company’s development,marketing and selling of products under the Company’s Schiff Specialty Unit(the “Business”).  The consulting serviceswill focus on improving sales and profitability from growth initiatives for theBusiness (e.g., new products and product lines, positioning/repositioningexisting products and product lines, etc.) consistent with the Company’sdevelopment imperatives.

 

b.             Consultant is and shall be an independentcontractor which, subject to the terms hereof, shall have sole control of themanner and means of performing its obligations under this Agreement.  The Consultant shall not have, nor shall theConsultant claim, suggest or imply that the Consultant has, any right, power orauthority to enter into any contract or obligation on behalf of, or bindingupon, the Company or any of its representatives, unless such right, power orauthority is expressly granted to Consultant by the Company in writing.  The Consultant shall not represent himselfas having any employment position with the Company.

 

c.             Consultant will analyze and assess theBusiness for growth potential and identify growth initiatives and developmentideas (collectively, “Development Concepts”) for presentation and discussionwith the Chairman, Chief Executive Officer and appropriate executivemanagement.  The summary of eachDevelopment Concept will include any potential Royalty Products that could resultfrom the Development Concept and whether such Royalty Products would beExisting Royalty Products or New Royalty Products (as described in Section 2).

 

d.             Those Development Concepts which aredetermined by the Company and Consultant to be viable options for the Companyto pursue (the “Approved Development Concepts”) will be

 

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listed and summarized in the Approved Development Concept List.  The summary for each Approved DevelopmentConcept will include the date of approval (the “Development Concept ApprovalDate”), description of the Approved Development Concept, any potential RoyaltyProducts that could result from the Approved Development Concept and whethersuch Royalty Products would be Existing Royalty Products or New RoyaltyProducts.

 

e.             The Company and Consultant will review theApproved Development Concepts to determine which Approved Development Conceptsthe Company will pursue.  Those ApprovedDevelopment Concepts to be pursued by the Company (the “Development Projects”)will be summarized in writing and listed in the Development ProjectSummary.  To the extent a DevelopmentProject includes a Royalty Product, the Royalty Product will be added to thewritten Royalty Product list at that time, either as an Existing RoyaltyProduct or a New Royalty Product.

 

f.              Consultant will have direct responsibilityfor the design, development, implementation and execution of the DevelopmentProjects.  Consultant’s responsibilitiesfor a Development Project will include, among other matters, overseeing and managingdesign and development plans, marketing and sales plans (including pricing,volumes, promotional activity, account and class of trade focus, etc.), budgetand financial analysis, implementation strategies, and executionfollow-up.  Consultant will recommendand oversee marketing resources to work on the Development Projects (e.g.market research, advertising agencies, design agencies, packaging, etc.).  Subject to the approval of the ChiefExecutive Officer, Consultant may hire appropriate outside resources to work onthe Development Projects.

 

g.             Consultant agrees to devote its best and mostdiligent efforts, including the requisite business time and resources, to theperformance of its duties under this Agreement.  Consultant may perform consulting services outside of theCompany’s offices, but will generally maintain a weekly presence in theCompany’s offices.  Consultant will beavailable to attend meetings and report on its activities at reasonable timesupon reasonable request.  Generaldirection and oversight will be provided to Consultant by, and Consultant willreport to, the Company’s Chief Executive Officer.

 

h.             In conjunction with the execution of thisAgreement, Mr. David Gustin, a principal of Consultant, will resign from theCompany’s Board of Directors.  Mr.Gustin agrees to be available to attend future meetings of the Board ofDirectors as an observer as may be requested by the Company’s Chairman.

 

i.              The Company understands and recognizes thatConsultant provides consulting services on various food, beverage, nutritionand other products and that the Consultant may engage in other activities as anemployee of or consultant to other parties; provided, however, that without thewritten consent of the Company, Consultant agrees that during the Term of thisAgreement, neither Consultant nor Mr. David Gustin will provide consulting oremployment services to (a) a Listed Company (as defined in Exhibit A), nor (b)to any other third party involving any area that competes with (i) aDevelopment Concept, Approved Development Project or Development Project or(ii) other product categories or businesses specifically agreed to by theparties in writing.

 

2.                                       Compensation.

 

a.             The Company will pay Consultant $350,000 pertwelve-month period (the “Annual Consultant Fee”), to be paid on a quarterlybasis within 45 days following the end of each of the Company’s fiscal quartersduring the Term.  To the extent anyroyalties are due to Consultant during the twelve-month period immediatelyfollowing the Effective Date or during any subsequent annual period, up to$175,000 of the Annual Consultant Fee will be credited towards such royaltypayments during the corresponding annual period.

 

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b.             The Consultant and the Company will maintaina written Royalty Product List, which will contain two categories of products:“Existing Royalty Products” and “New Royalty Products” (collectively referredto as “Royalty Products”).  RoyaltyProducts can be defined as a group of products or products under a particularproduct or brand name.

 

c.             The measurement period for paying royaltieson Royalty Products (the “Royalty Period”) will be five years, with eachtwelve-month period being referred to as a “Royalty Year” and the firsttwelve-month period being referred to as “Royalty Year 1,” the secondtwelve-month period being referred to as “Royalty Year 2,” etc.  The Royalty Period (and thus Royalty Year 1)will commence with the month in which a Royalty Product is first shipped tothird party customers for sale.

 

d.             For any royalty compensation to be paid toConsultant, the Contribution Margin (as defined in Exhibit A) for a RoyaltyProduct at the time of any royalty calculation must be at least equal to anaverage of the Contribution Margin Percentage (as defined in Exhibit A)measured over the last twelve months (or such shorter time as available duringRoyalty Year 1).

 

e.             If any Approved Development Conceptidentified, developed and brought forward by Consultant is converted into aDevelopment Project within three years of the Development Concept ApprovalDate, then the royalty provisions shall apply to the Royalty Products set forthin the initial Approved Development Concept (even if the consulting agreementhas terminated and Consultant no longer has a consulting relationship with theCompany).

 

f.              For each Existing Royalty Product, Consultantand the Company will add to the Royalty Product List a Base Sales Amount foreach Roayalty Year (e.g., Royalty Year 1 Base Sales Amount, Royalty Year 2 BaseSales Amount, etc.).  The Base SalesAmount for any Royalty Year will be equal to actual Net Sales (as defined inExhibit A) for such Existing Royalty Product for the twelve months immediatelypreceding the commencement of that Royalty Year.  For each Existing Royalty Product, the Company will payConsultant compensation in the amount of two percent (2%) of the increase inNet Sales for the applicable Royalty Year over the Base Sales Amount for thatRoyalty Year.

 

*Example:*               If Net Sales for an Existing Royalty Productin Royalty Year 1 are $35 million and the related Royalty Year 1 Base SalesAmount is $30 million, Consultant’s compensation relating to that ExistingRoyalty Product for Royalty Year 1 will accrue in the amount of $100,000 (2% x$5 million).  If Net Sales for thatExisting Royalty Product in Royalty Year 2 are $45 million and the relatedRoyalty Year 2 Base Sales Amount is $35 million, Consultant’s compensationrelating to that Existing Royalty Product for Royalty Year 2 will accrue in theamount of $200,000 (2% x $10 million).

 

g.             For each New Royalty Product, the Companywill pay Consultant compensation in the amount of three percent (3%) of the NetSales for that New Royalty Product for each Royalty Year during the RoyaltyPeriod; provided, however, that no royalty amounts will be due Consultant for aRoyalty Year if Net Sales of that New Royalty Product for a particular RoyaltyYear are less than $10 million.

 

*Example:*               If Net Sales for a New Royalty Product inRoyalty Year 1 are $6 million, no royalty amounts are due Consultant for thatNew Royalty Product.

 

*Example:*               If Net Sales for a New Royalty Product inRoyalty Year 1 are $12 million, Consultant’s compensation relating to that NewRoyalty Product for Royalty Year 1 will accrue in the amount of $360,000 (3% x$12 million).  If Net Sales for that NewRoyalty Product in Royalty Year 2 are $15 million, Consultant’s compensationrelating to that New Royalty Product for Royalty Year 2 will accrue in theamount of $450,000 (3% x $15 million).

 

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h.             Net royalties due Consultant during a givenfiscal quarter will be paid within 45 days following the end of such quarter.

 

i.              The Company will reimburse Consultant forreasonable direct and incidental expenses properly incurred in performing itsconsulting services pursuant to the Agreement (e.g., travel and relatedexpenses, packaging expenses, etc.) and consistent with the Company’s usualreimbursement policies and procedures. All other expenses must be pre-approved by the Company (e.g., the hiringof design experts, utilization of third party packaging resources, etc.).

 

j.              Consultant shall pay, when and as due, anyand all taxes as a result of the Consultant’s receipt of the remunerationdescribed in this Agreement, including estimated taxes, and provide its ownbenefits and insurance.

 

3.                                       Term and Termination.

 

a.             Unless otherwise terminated or extended inaccordance herewith, the term of this Agreement (the “Term”) shall commence onthe Effective Date and shall expire two years from the date thereof.  The Term may be extended for one additionalyear by the written mutual agreement of both parties.

 

b.             Either party may terminate this Agreementwithout cause and for any reason whatsoever upon 90 days’ written notice to theother party.

 

4.                                       Confidential and Proprietary Information.

 

a.             Except as otherwise required by Consultant’sduties for the Company, Consultant shall maintain in strict confidence andshall not directly, indirectly or otherwise, use, publish, disclose or disseminate,or use for Consultant’s benefit or the benefit of any person, firm, corporationor entity, any Confidential Information of or relating to the Company or itsaffiliates (or which the Company or its affiliates has a right to use).  For purposes of this Agreement,“Confidential Information” shall mean all confidential and proprietaryinformation of the Company and its parents, subsidiaries and affiliates,whether in oral, written or graphical form or obtained by observation orotherwise, whether or not legended or otherwise identified as confidential orproprietary information, and whether or not discovered or developed byConsultant or known or obtained by Consultant as a consequence of Consultant’sperformance of services with the Company. Confidential Information shall include, without limitation, allscientific, technical, process, method or commercial data, information orknow-how, customer lists, pricing data, sources of supply and related supplierand vendor information, purchasing, operating or other cost data, manufacturingmethods, quality control information, regulatory information, financial data,trade secrets, formulas, product development information and plans, Inventions,intellectual property, samples and all information regarding pricing, businessplans, expansion or acquisition plans, product lines, methods of businessoperation and the general business operations and financial informationregarding the Company. As used in this Agreement, the term “Inventions” meansdesigns, trademarks, discoveries, developments, formulae, processes,manufacturing techniques, trade secrets, inventions, improvements, ideas orcopyrightable works, including, without limitation, all rights to obtain,register, perfect and enforce these proprietary interests.

 

b.             Consultant agrees and acknowledges that (i)all Confidential Information and Inventions are owned by the Company or itsaffiliates and no rights in the Confidential Information or Inventions havebeen or will be granted to otherwise acquired by Consultant, and (ii) by thisAgreement Consultant hereby assigns to the Company or its designee, all of itsright, title and interest in and to any and all Inventions, original works ofauthorship, concepts, improvements, trademarks, trade names or trade secrets,whether or not patentable or registrable under trademark, copyright or similarlaws, which it solely or jointly conceives, develops, authors or reduces topractice, or causes to be conceived, developed, authored or reduced to practiceduring the period of any consulting services with the Company.

 

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c.             All documents and material pertaining to theCompany or the consulting services made by the Consultant or that come into thepossession of the Consultant during the term of this Agreement are and shallremain the property of the Company. Upon expiration of this Agreement, or upon earlier request of theCompany, the Consultant shall deliver to the Company all such documents andmaterials in the Consultant’s possession or control, in addition to all formsof Confidential Information, and the Consultant shall not allow a third partyto take any of the foregoing.

 

5.                                       Acquisition Matters.

 

a.             Consultant may present potential acquisitioncandidates (each, an “Acquisition Target”) to the Company for review.  If the Company does not enter intodiscussions with the Acquisition Target or its representatives (including itsattorneys, accountants, bankers or other agents) within 90 days, Consultantwill have the right to pursue the Acquisition Target itself or present theAcquisition Target to other parties.

 

b.             Notwithstanding anything in this Agreement tothe contrary, Excluded Companies (as defined in Exhibit A) will not beconsidered an Acquisition Target at any time and no Fees (as defined below)pursuant to this Agreement will apply to any transaction between the Companyand any Excluded Company.

 

c.             If the Company and an Acquisition Targetconsummate a Transaction (as defined in Exhibit A) within one year of the datethe Acquisition Target is presented to the Company by Consultant, then theCompany will pay Consultant a finder’s fee (the “Fee”) in the amount of onepercent (1%) of the Value of the Transaction (as defined in Exhibit A);provided, however, that no Fees will be due and owing to Consultant if theCompany has held discussions or negotiations with the Target Company regardingacquisition, merger, consolidation, tender offer or similar transactions withinthe twelve months prior to the date the Acquisition Target is presented to theCompany by Consultant.  If, inconnection with the evaluation of a Transaction, the Company and Consultantagree to an Approved Development Concept regarding the business of the AcquisitionTarget, the royalty provisions regarding Existing Royalty Products will applyto that Development Project.

 

6.             Entire Agreement.  TheAgreement constitutes the entire agreement of the parties and supersedes allprior agreements, promises, representations and understandings.

 

7.             Equitable and Non-Exclusive Remedies. Consultant agrees that money damages would not be a sufficient remedyfor any breach of Section 4 of this Agreement and that the Company shall beentitled to seek specific performance and immediate injunctive or equitablerelief as a remedy for any such breach and agrees to waive any requirement forthe security or posting of any bond in connection with such remedy.  Such remedy shall not be deemed to be theexclusive remedy for breach of this Agreement, but shall be in addition to allother remedies available at law or in equity.

 

8.             Choice of Law. This Agreement shall be governed by and construed and enforced inaccordance with the laws of the State of Utah, excluding any conflict of lawsprinciples or any other provision or interpretation of such laws that wouldcall for, or permit, the application of the laws of any other state orjurisdiction, and any dispute arising from this Agreement and the remediesavailable shall be determined solely in accordance with such internal laws.

 

9.             Severability.  Anyprovision of this Agreement that is prohibited or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective to the extent ofsuch prohibition or enforceability without invalidating the remainingprovisions of this Agreement, and any such prohibition or unenforceability inany jurisdiction shall not invalidate or render unenforceable such provision inany other jurisdiction.

 

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10.           Amendment and Waiver. This Agreement may be amended, modified, superseded, cancelled, renewed,extended or waived only by a written instrument executed by the parties to thisAgreement or, in the case of a waiver by the party waiving compliance.  No waiver by any party of the breach of anyterm or provision contained in this Agreement, whether by conduct or otherwise,in any one or more instances shall be deemed to be, or construed as, a furtheror continuing waiver of any such breach, or a waiver of the breach of any otherterm or covenant contained in this agreement.

 

11.           Notices.  All notices, requests orconsent required or permitted under this Agreement shall be in writing andshall be given to the other party by personal delivery, overnight air courieror facsimile transmission, sent to such party’s address or telecopy number asis set forth below such party’s signature hereto.  Each such notice, request or consent shall be deemed effectiveupon receipt.

 

12.           Attorneys’ Fees.  Inthe event that either party seeks to enforce its right under this Agreement,the prevailing party shall be entitled to recover reasonable fees (includingattorneys’ fees), costs and other expenses incurred in connection therewith,including the fees, costs and expenses of appeals.

 

13.           Headings.  The headings of the sectionsof this Agreement have been inserted for convenience and reference only and donot constitute a part of this Agreement.

 

14.           Survival.  Sections 4, and 7 through 12shall survive the termination of this Agreement.

 

15.           Arbitration.  Consultant and the Companyhereby agree that any suit, dispute, claim, demand, controversy or cause ofaction arising from or related to this Agreement shall be submitted for bindingarbitration under the rules of the American Arbitration Association then in effect,except for such matters addressed in Section 7 above, for which the Company mayseek injunctive relief and any or all other remedies applicable at law or inequity in any court of appropriate jurisdiction.  Unless the parties specifically agree otherwise in each instance,the arbitration proceedings shall take place in Salt Lake City, Utah.  Judgment on such award may be entered in anycourt of appropriate jurisdiction, or application may be made to that court fora judicial acceptance of the award and an order of enforcement, as the partyseeking to enforce that award may elect.

 

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IN WITNESS WHEREOF, theparties hereto have duly executed this Agreement as of the date first abovewritten.

 

 
| THE  COMPANY: |                                             |
|---------------|--------------------------------------------------|
|          |                                             |
|          |                                             |
|          | By:                                              | /s/Bruce  J. Wood |   |
|          |                                             |
|          | Its:  President and Chief Executive Officer |
|          |                                             |
|          | Address  for Notices:                            |
|          |                                             |
|          | 2002  South 5070 West                            |
|          | Salt  Lake City, Utah 84104                      |
|          | Attention:  General Counsel                      |
|          | Facsimile:  (801) 975-1924                       |
|          |                                             |
|          |                                             |
| CONSULTANT:   |                                             |
|          |                                             |
|          | By:                                              | David  J. Gustin |   |
|          |                                             |
|          | Its:  Principal                             |
|          |                                             |
|          | Address  for Notices:                            |
|          |                                             |
|          |                                             |   |
|          |                                             |   |
|          |                                             |   |
|          | Facsimile:                                       |   |   |
|               |                                                  |  |  |  |  |  |  |

 

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