Exhibit
10.1


 


CONSULTING
AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


C.            The Company desires to retain the services of
Consultant and Consultant desires to provide consulting services to the
Company, upon the terms and subject to the conditions set forth in this
Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the premises and the mutual promises set forth in this
Agreement, the Company and Consultant hereby agree as follows:


 


1.                                       Retention as Consultant; Consultant Services.


 


a.             Subject to the terms and conditions contained
in this Agreement, the Company hereby engages Consultant and Consultant hereby
agrees to perform consulting services for the Company during the Term (as
defined 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 services
will focus on improving sales and profitability from growth initiatives for the
Business (e.g., new products and product lines, positioning/repositioning
existing products and product lines, etc.) consistent with the Company’s
development imperatives.


 


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


 


c.             Consultant will analyze and assess the
Business for growth potential and identify growth initiatives and development
ideas (collectively, “Development Concepts”) for presentation and discussion
with the Chairman, Chief Executive Officer and appropriate executive
management.  The summary of each
Development Concept will include any potential Royalty Products that could result
from the Development Concept and whether such Royalty Products would be
Existing Royalty Products or New Royalty Products (as described in Section 2).


 


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


 

















 


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


 


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


 


f.              Consultant will have direct responsibility
for the design, development, implementation and execution of the Development
Projects.  Consultant’s responsibilities
for a Development Project will include, among other matters, overseeing and managing
design and development plans, marketing and sales plans (including pricing,
volumes, promotional activity, account and class of trade focus, etc.), budget
and financial analysis, implementation strategies, and execution
follow-up.  Consultant will recommend
and 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 Chief
Executive Officer, Consultant may hire appropriate outside resources to work on
the Development Projects.


 


g.             Consultant agrees to devote its best and most
diligent efforts, including the requisite business time and resources, to the
performance of its duties under this Agreement.  Consultant may perform consulting services outside of the
Company’s offices, but will generally maintain a weekly presence in the
Company’s offices.  Consultant will be
available to attend meetings and report on its activities at reasonable times
upon reasonable request.  General
direction and oversight will be provided to Consultant by, and Consultant will
report to, the Company’s Chief Executive Officer.


 


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


 


i.              The Company understands and recognizes that
Consultant provides consulting services on various food, beverage, nutrition
and other products and that the Consultant may engage in other activities as an
employee of or consultant to other parties; provided, however, that without the
written consent of the Company, Consultant agrees that during the Term of this
Agreement, neither Consultant nor Mr. David Gustin will provide consulting or
employment 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) a
Development Concept, Approved Development Project or Development Project or
(ii) other product categories or businesses specifically agreed to by the
parties in writing.


 


2.                                       Compensation.


 


a.             The Company will pay Consultant $350,000 per
twelve-month period (the “Annual Consultant Fee”), to be paid on a quarterly
basis within 45 days following the end of each of the Company’s fiscal quarters
during the Term.  To the extent any
royalties are due to Consultant during the twelve-month period immediately
following the Effective Date or during any subsequent annual period, up to
$175,000 of the Annual Consultant Fee will be credited towards such royalty
payments during the corresponding annual period.


 


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


 


c.             The measurement period for paying royalties
on Royalty Products (the “Royalty Period”) will be five years, with each
twelve-month period being referred to as a “Royalty Year” and the first
twelve-month period being referred to as “Royalty Year 1,” the second
twelve-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 to
third party customers for sale.


 


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


 


e.             If any Approved Development Concept
identified, developed and brought forward by Consultant is converted into a
Development Project within three years of the Development Concept Approval
Date, then the royalty provisions shall apply to the Royalty Products set forth
in the initial Approved Development Concept (even if the consulting agreement
has terminated and Consultant no longer has a consulting relationship with the
Company).


 


f.              For each Existing Royalty Product, Consultant
and the Company will add to the Royalty Product List a Base Sales Amount for
each Roayalty Year (e.g., Royalty Year 1 Base Sales Amount, Royalty Year 2 Base
Sales Amount, etc.).  The Base Sales
Amount for any Royalty Year will be equal to actual Net Sales (as defined in
Exhibit A) for such Existing Royalty Product for the twelve months immediately
preceding the commencement of that Royalty Year.  For each Existing Royalty Product, the Company will pay
Consultant compensation in the amount of two percent (2%) of the increase in
Net Sales for the applicable Royalty Year over the Base Sales Amount for that
Royalty Year.


 


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


 


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


 


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


 


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


 


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


 


i.              The Company will reimburse Consultant for
reasonable direct and incidental expenses properly incurred in performing its
consulting services pursuant to the Agreement (e.g., travel and related
expenses, packaging expenses, etc.) and consistent with the Company’s usual
reimbursement policies and procedures. 
All other expenses must be pre-approved by the Company (e.g., the hiring
of design experts, utilization of third party packaging resources, etc.).


 


j.              Consultant shall pay, when and as due, any
and all taxes as a result of the Consultant’s receipt of the remuneration
described in this Agreement, including estimated taxes, and provide its own
benefits and insurance.


 


3.                                       Term and Termination.


 


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


 


b.             Either party may terminate this Agreement
without cause and for any reason whatsoever upon 90 days’ written notice to the
other party.


 


4.                                       Confidential and Proprietary Information.


 


a.             Except as otherwise required by Consultant’s
duties for the Company, Consultant shall maintain in strict confidence and
shall not directly, indirectly or otherwise, use, publish, disclose or disseminate,
or use for Consultant’s benefit or the benefit of any person, firm, corporation
or entity, any Confidential Information of or relating to the Company or its
affiliates (or which the Company or its affiliates has a right to use).  For purposes of this Agreement,
“Confidential Information” shall mean all confidential and proprietary
information of the Company and its parents, subsidiaries and affiliates,
whether in oral, written or graphical form or obtained by observation or
otherwise, whether or not legended or otherwise identified as confidential or
proprietary information, and whether or not discovered or developed by
Consultant or known or obtained by Consultant as a consequence of Consultant’s
performance of services with the Company. 
Confidential Information shall include, without limitation, all
scientific, technical, process, method or commercial data, information or
know-how, customer lists, pricing data, sources of supply and related supplier
and vendor information, purchasing, operating or other cost data, manufacturing
methods, quality control information, regulatory information, financial data,
trade secrets, formulas, product development information and plans, Inventions,
intellectual property, samples and all information regarding pricing, business
plans, expansion or acquisition plans, product lines, methods of business
operation and the general business operations and financial information
regarding the Company. As used in this Agreement, the term “Inventions” means
designs, trademarks, discoveries, developments, formulae, processes,
manufacturing techniques, trade secrets, inventions, improvements, ideas or
copyrightable 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 its
affiliates and no rights in the Confidential Information or Inventions have
been or will be granted to otherwise acquired by Consultant, and (ii) by this
Agreement Consultant hereby assigns to the Company or its designee, all of its
right, title and interest in and to any and all Inventions, original works of
authorship, concepts, improvements, trademarks, trade names or trade secrets,
whether or not patentable or registrable under trademark, copyright or similar
laws, which it solely or jointly conceives, develops, authors or reduces to
practice, or causes to be conceived, developed, authored or reduced to practice
during the period of any consulting services with the Company.


 


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


 


5.                                       Acquisition Matters.


 


a.             Consultant may present potential acquisition
candidates (each, an “Acquisition Target”) to the Company for review.  If the Company does not enter into
discussions with the Acquisition Target or its representatives (including its
attorneys, accountants, bankers or other agents) within 90 days, Consultant
will have the right to pursue the Acquisition Target itself or present the
Acquisition Target to other parties.


 


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


 


c.             If the Company and an Acquisition Target
consummate a Transaction (as defined in Exhibit A) within one year of the date
the Acquisition Target is presented to the Company by Consultant, then the
Company will pay Consultant a finder’s fee (the “Fee”) in the amount of one
percent (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 the
Company has held discussions or negotiations with the Target Company regarding
acquisition, merger, consolidation, tender offer or similar transactions within
the twelve months prior to the date the Acquisition Target is presented to the
Company by Consultant.  If, in
connection with the evaluation of a Transaction, the Company and Consultant
agree to an Approved Development Concept regarding the business of the Acquisition
Target, the royalty provisions regarding Existing Royalty Products will apply
to that Development Project.


 


6.             Entire Agreement.  The
Agreement constitutes the entire agreement of the parties and supersedes all
prior agreements, promises, representations and understandings.


 


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


 


8.             Choice of Law. 
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Utah, excluding any conflict of laws
principles or any other provision or interpretation of such laws that would
call for, or permit, the application of the laws of any other state or
jurisdiction, and any dispute arising from this Agreement and the remedies
available shall be determined solely in accordance with such internal laws.


 


9.             Severability.  Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining
provisions of this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any 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 this
Agreement or, in the case of a waiver by the party waiving compliance.  No waiver by any party of the breach of any
term 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 further
or continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this agreement.


 


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


 


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


 


13.           Headings.  The headings of the sections
of this Agreement have been inserted for convenience and reference only and do
not constitute a part of this Agreement.


 


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


 


15.           Arbitration.  Consultant and the Company
hereby agree that any suit, dispute, claim, demand, controversy or cause of
action arising from or related to this Agreement shall be submitted for binding
arbitration under the rules of the American Arbitration Association then in effect,
except for such matters addressed in Section 7 above, for which the Company may
seek injunctive relief and any or all other remedies applicable at law or in
equity 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 any
court of appropriate jurisdiction, or application may be made to that court for
a judicial acceptance of the award and an order of enforcement, as the party
seeking to enforce that award may elect.


 


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IN WITNESS WHEREOF, the
parties hereto have duly executed this Agreement as of the date first above
written.


 


 


	
  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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