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EXHIBIT 10.2 MANUFACTURING AGREEMENT This
Agreement made this 9th day of July, 2004, by and between Applied
Laboratories. Inc., an Indiana corporation having a principal place of business
at 3240 North Indianapolis Road, Columbus, Indiana 47202 (Applied) and
Matrixx Initiatives, Inc, having a principal place of business at 4742 North
24th Street; Suite #455, Phoenix, AZ 85016. (Customer). WHEREAS, Customer desires to purchase product and Applied desires to
manufacture and sell such product to Customer in accordance with and subject to
the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows: I-DEFINITIONS For purposes of this Agreement, the following definitions shall apply: 1.1 FDA shall mean the United States Food and Drug Administration or any
successor entity thereto. 1.2 cGMP shall mean current Good Manufacturing Practices as defined in
the FDA regulations, 21 CFR Parts 210-211 effective as of the date of
manufacture of a lot of Product. 1.3 Labeling shall mean all labels and other written, printed, or
graphic matter (a) upon the Product or any container and/or wrapper utilized
with the Product or (b) accompanying the Product, including, without
limitation, product inserts, which bear the trademarks or trade dress of
Customer, or other matter designated in the Specifications or on approved
samples submitted by Customer to Applied. 1.4 Product(s) shall mean products listed in attachment C which is
incorporated herein by reference, and which may be amended from time to time by
written agreement of the parties, more particularly described in the
Specifications, in finished form for distribution to the




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consumer, or in bulk packaging for delivery to Customer, or to a third
party at Customers direction, for further processing. 1.5 Specifications means the written specifications for the Product,
containing the manufacturing and testing requirements for the Product, as well
as raw material, packaging component, labeling, and quality assurance
specifications, which are set forth in Attachment A to this agreement which is
incorporated herein by reference, and which may be amended from time to time by
written agreement of the parties. II-PRODUCT MANUFACTURE: TERMS 2.1 Purchase and Sales: Subject to the terms and conditions of this
Agreement, Applied shall manufacture and sell Product to Customer; and Customer
shall purchase such Product from Applied. 2.2 Purchase Orders: Upon receipt of purchase orders from Customer
specifying Product, quantities, and requested delivery date, Applied shall
purchase ingredients meeting Customers Specifications in the amounts necessary
for manufacture of Customers Product (including an allowance of up to 5% for
scrap). Attachment B, which is incorporated herein by reference and which may
be amended from time to time by written agreement of the parties, shall
indicate the responsibilities of Applied for procuring any or all of the
required raw materials. If Customer should decide to cancel any purchase order
or change the Specifications with regard to the Product, Customer shall be
liable for any raw materials purchased, limited to quantities as specified on
the purchase order, by Applied on Customers behalf prior to Applied receiving
written notice of such cancellation or change. In the event of such a
cancellation, Customer shall purchase from Applied, at Applieds actual cost
therefore (including shipping and handling), any such inventory which has been
purchased in accordance with this Section. Customer shall have the right to
verify the quantity of all such inventory. 2.3 Documentation: (a) A Master Batch Record detailing the processes and procedures for
manufacturing the Product in conformance with the Specifications shall be
generated by Applied and shall be reviewed and approved in writing by Applied
and by Customer. Any substantive change to an 2




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approved Master Batch Record will be reviewed and approved in writing by
Applied and by Customer prior to said change being implemented. It is the
responsibility of Customer to ensure that proper regulatory agencies approve
the suggested changes, if necessary. Each batch of Product shall be produced
according to and shall be documented in a Production copy of the Master Batch
Record. Each Production Batch Record shall be assigned a unique batch number.
Any deviation from the specified manufacturing process must be documented in
the Production Batch Record. Applied shall provide Customer with a copy of a
completed Production Batch Record upon request. 2.4 Release Procedure: Applied shall manufacture, package, label, and
test Product in accordance with the written Specifications approved by
Customer: The Product shall be shipped to Customer in the quantities specified
in the purchase order (±10%) after release by Applied if it passes all tests as
specified. 2.5 Delivery: Delivery terms shall be F.O.B., Columbus, Indiana. Applied
shall ship Product in accordance with Customers directions as specified in
purchase orders issued pursuant to Section 2.2. Customer shall be responsible
for all freight and delivery charges, including without limitation insurance
charges, and shall assume all risk of loss of the Product after delivery to the
designated carrier. Applied will not be responsible for environmental
conditions during shipping unless such environmental conditions during shipping
are specified by Customer, in writing, prior to shipment of Product. All
shipping instructions of Customer shall be accompanied by the name and address
of the recipient and the shipping date. 2.6 Rejected Products/Shortages: (a) Notwithstanding any payment made by Customer, Customer shall perform
an incoming inspection of all Product. Within thirty (30) calendar days after
receipt of Product by Customer, Customer shall notify Applied in writing of any
claim relating to: (i) damaged, defective, or nonconforming Product or (ii) any
shortage in quantity of such shipment of Product or (iii) of any breach of
warranties pursuant to Article VII hereof. Any Product not rejected within
such thirty (30) day period shall be deemed accepted and Customer shall be
deemed to have waived its right to revoke acceptance. 3




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(b) Upon receipt of notice of rejection of Product, Applied will
investigate such alleged nonconformity, and (i) if Applied agrees such Product
is non-conforming as a result of an act or omission of Applied, deliver to
Customer a corrective action plan within 10 (ten) business days after receipt
of Customers notice of non-conformity, or such additional time as is reasonably
required if such investigation or plan requires data from sources other than
Customer or Applied, or (ii) if Applied disagrees with Customers determination
that the Product is non-conforming as a result of the action (or inaction) of
Applied, Applied shall so notify Customer in writing. (c) In the event of a conflict between the test results of Applied and the
test results of Customer with respect to any rejected Product, which Applied
and Customer are unable to resolve, a sample of such Product shall be submitted
by Applied to an independent laboratory, reasonably acceptable to both parties,
for testing against the Specifications. The test results obtained by such
laboratory shall be final and controlling. The fees and expenses of such
laboratory testing shall be borne entirely by the party against whom such
laboratorys findings are made. (d) In the event of rejection, shortage or breach, at Customers election
Applied shall replace the rejected Product or permit Customer to purchase only
acceptable units of Product at the quoted price (unless a conflict exists
between the test results of Customer and the test results of Applied with
respect to the rejected Product, in which case Subsection (c), above, shall be
applicable). Customer shall not be required to pay for rejected product or
shortages unless and until such Product is replaced by Applied. Applied shall
be responsible to reimburse Customer for all Customers reasonable costs
incurred for ingredients supplied by Customer that are used in any rejected
Product. Applied shall make arrangements with Customer for the return or
destruction of any rejected Product. The costs for such return shipping and
destruction are to be paid by Applied. 2.7 Price: (a) Applied shall charge Customer and Customer shall pay a price for the
Products as set forth in Attachment C which is incorporated herein by
reference. Customer agrees that the 4




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product prices are predicated upon agreed aggregate minimum annual
requirements set forth in attachment C. (b) Payment for all Product purchased hereunder shall be net thirty (30)
days from date of invoice which shall issue upon shipment of a lot of Product
from Applied. Any payment due under this Agreement, for which there is no
dispute by Customer, not received within thirty (30) days of any invoice shall
bear interest at two percent (2%) per month. (c) In the event the Specifications for the Product are changed upon the
request of Customer and with the agreement of Applied, an appropriate change
agreed to by the parties shall be made in the cost for such Product and such
changes shall be set forth in the Attachments which shall list a mutually
agreed upon effective date for such price change. 2.8 Price Negotiation: Applied and Customer shall negotiate in good faith
to determine the price for the Product for each year after the last year of the
Agreement. Such negotiations shall commence prior to the anniversary date and
shall be concluded not less than fifteen (15) days prior to the anniversary
date. Any agreement as to price by the parties shall not act to waive either
partys right to nonrenewal as set forth in Section 4.1. 2.9 Professional Services: At Customers written request and upon terms
and conditions agreed upon by both parties, Applieds pharmaceutical scientists
and regulatory personnel may perform and/or advise Customer with respect to
development studies, formulation, packaging, stability, and manufacturing
process development and validation in connection with Product (Professional
Services). However, in no event will Applied be responsible for supplying
Customer with Professional Services pursuant to this Agreement except as
specifically set forth in a written amendment or separate agreement signed by
both parties. 2.10 Non-Compete:During the Non-Competition Period (as defined below)
Applied hereby agrees that it will not and will not permit any of its
affiliates to, directly or indirectly, Compete (as defined below) with Customer
anywhere in the United States of America. The Non-Competition Period means the period commencing with the
execution of this Agreement and continuing through July 9, 2007. Upon
termination of this Agreement by 5




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Customer prior to July
9th, 2007, the Non-Competition Period shall expire
at the earlier of (i) one year after the date of such early termination of the
Agreement by Customer or (ii) July 9th, 2007, but such a reduction in the
length of the Non-Competition Period shall occur only if Applied has not
breached the Agreement prior to the termination of the Agreement by Customer. The term Non-Compete means that Applied and its affiliates will not
manufacture, produce, sell, or assist in the manufacture, production, or sale
of products (regardless of package format) similar to and competitive with the
gel-based and liquid-based cold-remedy products containing zinc and/or zinc
compounds as active ingredient(s) produced for Customer that are listed on
(Attachment C) and manufactured by Applied, as such list will be expanded as
additional products are produced in the future for Customer by Applied. Customer agrees to waive non-compete in the event that customer purchases
less than 75% of the total volume of products listed in attachment C from
Applied; provided, however, that such a waiver of the non-compete shall not be
construed as a grant to Applied of any license to use any intellectual property
of Customer relating to the Products or otherwise. Calculation method and
limitations are as follows:  (a)
    
    Calculation:  [Applied %] = [(VA)/ (VA + VB)] x 100%  Where:
    
    VA = Total sellable units of product covered in non-compete
and produced by Applied.VB = Total sellable units of product covered in
non-compete and produced by others.Note: For bulk solutions covered by 2.10, volumes are
calculated as total equivalent sellable units produced by
the bulk solution.Note: Volume is considered on an average per product, per
calendar year, such that VA and VB for a given calendar
year are calculated in retrospect after all annual
production is complete. 6




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(b)
    
    Should Applied lack sufficient capacity to supply 75% of
products covered in this non-compete, Customer shall have the right
to procure the difference elsewhere, and the non-compete shall
remain in effect, regardless of percentage of products produced by
applied. III-TRADEMARKS 3.1 Trademarks: During the term of this Agreement, Customer shall sell
the Product purchased from Applied pursuant to this Agreement under its own
trademarks and trade dress. Applied acknowledges that such trademarks, trade
dress, and any other designations of the Product labels and packages are the
sole property of Customer, and that Applieds labeling of the Product under
Customers trademarks and trade dress shall not be construed as granting any
right in such trademarks or trade dress to Applied. IV-TERM AND TERMINATION 4.1 Term: Agreement will commence on July 9th, 2004 and unless terminated
earlier in accordance with this Article IV shall continue until July 9th, 2007
(3 years). Thereafter, this Agreement shall be renewed in its entirety for one
year terms unless either party notifies the other in writing of nonrenewal at
least thirty (30) days prior to the termination date, except as provided in
Section 4.2(v). 4.2 Termination: This Agreement can be terminated by either party upon
thirty (30) days written notice to the other party in the event of any of the
following: (i) if any provision herein is breached, unless such breach is
corrected within the thirty (30) day notice period; (ii) if either party
becomes insolvent or bankrupt, is unable to satisfy obligations as they become
due, or enters into any arrangement with its creditors or enters into
liquidation; (iii) Customer determines in its sole discretion that it will no
longer market the Products; (iv) if conditions constituting force majeure as
defined in Article VII exist for a period in excess of ninety (90) days in any
six-month period; or, (v) if there is a failure to reach agreement as to price
as per section 2.6 and with thirty (30) days notice. 4.3 Failure to Supply: In event that Applied fails to supply the total
quantity (within 10% as stated in a purchase order) of Product ordered by
Customer in accordance in Section 2.2 7




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within thirty (30) days of the due date as stated in the P.O., Customer
shall have the right to terminate this Agreement, unless such failure is
excused pursuant to Section 7.5, or for which a dispute may arise which is
ultimately resolved in favor of Applied as per Section 2.6, or which is delayed
primarily due to the action or inaction of Customer including, but not limited
to; (i) failure to supply customer-supplied components according to the lead
times as stated in Attachment B, (ii) failure to review and approve any batch
documentation, specifications, test methods or test results in a timely manner.
P.O. due dates shall conform to the lead times as stated within Attachment B
and such lead times shall commence upon confirmation of receipt of a particular
P.O. by Applied to Customer. 4.4 Nonwaiver: Failure to terminate under any of the foregoing grounds or
to exercise any right or remedy hereunder shall not constitute a waiver of the
right to terminate on that or other grounds or to exercise such other right or
remedy in the future. 4.5 Survival: Termination, expiration, cancellation or abandonment of
this Agreement, through any means and for any reason shall not relieve either
party of its obligations incurred prior to termination or extinguish any
obligation or right expressly provided in this Agreement to survive the
termination of this Agreement. Sections headed Non-Compete, Term and
Termination, Warranties, Product Recalls, Confidentiality, and Indemnification
shall survive the termination or cancellation of this Agreement for any reason. 4.6 Payment on Termination: In the event of the termination or
cancellation of this Agreement, except for termination in the event of breach
of contract by Applied, Customer shall reimburse Applied for: (a) all raw materials ordered by customer for reason set forth in section
4.2 (iii) prior to termination and not cancelable at no cost to Applied, (b)
all work-in-process commenced by Applied, (c) all finished goods produced by
Applied, and (d) all reasonable out of pocket expenses and losses incurred by
Applied because of the termination. Following expiration or termination,
Applied shall ship such materials to Customer at Customers cost and per
Customers instructions. Payment for all expenses described in Section 4.6
shall be net thirty (30) days from the invoice date. 8




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V-CERTIFICATES OF ANALYSIS AND MANUFACTURING COMPLIANCE 5.1 Certificates of Analysis: Applied shall test or cause to be tested
each lot of Product purchased pursuant to this Agreement as per the
Specifications. For each lot of Product tested, each test shall set forth the
items tested, specifications, and test results in a certificate of analysis
which Applied shall send or cause to be sent to Customer. Customer is entitled
to rely on such certificates for all purposes of this Agreement. 5.2 Certificates of Manufacturing Compliance: Applied shall provide or
cause to be provided, if requested, a certificate of manufacturing compliance
or manufacturing lot record which will certify that the lot of Product was
manufactured in accordance with the Specifications and applicable current Good
Manufacturing Practice regulations (cGMPs) promulgated by the FDA, as the same
may be amended from time to time. 5.3 Compliance Audit: Except with respect to information and operations
which constitute Applied trade secrets, Customer, upon prior written notice and
during normal business hours, shall have the right to inspect Applied batch
records and the portions of Applieds facility used for the manufacture of
Products once annually unless otherwise mutually agreed upon. If Customer
chooses to audit Applied more than one time in a calendar year, Customer agrees
to reimburse Applied for Applieds reasonable expenses incurred in hosting the
audit. All audited data will be treated as Confidential Information of
Applied. Applied shall advise Customer immediately if an authorized agent of
the FDA or other governmental agency visits any of Applieds manufacturing
facilities concerning any Product. Applied shall furnish to Customer the
report by such agency of such visit as it may apply to any Product within two
(2) business days of Applieds receipt of such report. 5.4 Annual Quality Review: Customer shall be responsible for evaluating,
at least annually, the quality standards of the Product to determine the need
for changes in the Product Specifications, manufacturing processes, and/or
controlled documents. Applied shall provide Customer with access to all
appropriate batch records for each batch of the Product. Customer shall supply
Applied a copy of the examination results and recommendations, if any. 9




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5.5 Distribution Records: Applied shall maintain distribution records
which contain all of the appropriate information as specified in the cGMP
regulations. 5.6 Regulatory Compliance: Applied is responsible for cGMP compliance
with all Federal, State and local laws and regulations (Regulations) as they
apply to Applieds facility and as long as the Products meet the
Specifications, Applied shall have no responsibilities for compliance with
Regulations as they relate specifically to formulae, labeling or marketing.
Customer assumes responsibility for all contact with the FDA and other
regulatory bodies, pertaining specifically to Product; provided, however,
Applied shall provide to Customer all such information as Customer requires in
connection with such contacts with the FDA and other regulatory bodies and
Applied agrees to otherwise fully cooperate with Customer in connection with
such matters. VI-PRODUCT RECALLS 6.1 Product Recalls: In the event (a) any government authority issues a
directive or order that a Product manufactured or supplied by Applied hereunder
be recalled; or (b) a court of competent jurisdiction orders such a recall; or
(c) Customer, or (d) Applied, reasonably determines that any such Product
should be recalled, the parties shall take all appropriate corrective actions
to best preserve the Products good will and reputation. If a recall is due to
(a) or (b), the party primarily responsible for the cause of the recall shall
assume responsibility for all such costs and expenses and shall reimburse the
other party for any costs and expenses incurred by such party. If a recall is
due to (c) or (d), the party calling for the recall shall initially bear the
expenses of the recall until primary responsibility for the cause of the recall
is determined, at which time the party primarily responsible for the cause of
the recall shall assume responsibility for all such costs and expenses and
shall reimburse the other party for all costs and expenses incurred by such
party. If recalled due to nonconformance with the FDAs current Good
Manufacturing Practices, failure to meet the Specifications, or if such recall
is otherwise due to the actions or negligence of Applied, Applied shall be
considered the party primarily responsible in which case Applied shall be
responsible for all expenses of recall and shall hold Customer, its employees
and representatives harmless. Otherwise, Customer shall be responsible 10




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for all expenses of recall and shall hold Applied, its employees and
representatives harmless for this action. For the purpose of this Agreement, the expenses of recall shall include,
without limitation, the expenses of notification of Customers, the expenses of
return and/or destruction of the recalled product, any necessary product rework
expense, any legal expenses incurred and other reasonable expenses incurred as
a result of the above mentioned action. 6.2 Consumer Complaints: Complaint files, as required by the cGMP
regulations, shall be maintained by Customer. Any complaints received by
Applied shall be forwarded to Customer, Customer shall make these complaint
files available to Applied in the event they are required during an FDA
inspection. Customer shall be responsible for the review of complaints to
determine the need for an investigation, or the need to report to the FDA as
required by the cGMP regulations. Customer shall notify Applied within five
(5) business days upon Customer having received a manufacturing-related
complaint which requires investigation. Applied shall promptly conduct an
investigation for each manufacturing-related complaint and shall report
findings and follow-up of each investigation to Customer. Applied shall
cooperate with Customer in the resolution of all complaints of consumers with
regard to the Product. In the event of a confirmed complaint relating to
safety issues with regard to use of any Product by consumers, the Customer
shall determine whether such information must be reported to the FDA and shall
take responsibility for making such a report. 6.3 Returns: Unless otherwise stated in this Agreement or in a separate
agreement signed by both parties, returned Product shall be the responsibility
of Customer. VII-WARRANTIES 7.1 Conformity with Specifications: Applied warrants only that Products
sold and delivered pursuant to this Agreement are prepared and tested in
accordance with the Specifications and the cGMPs and will conform to the
Specifications when delivered. 7.2 Product Life: Applied warrants that the Product will be manufactured
in accordance with all Specifications, but unless otherwise stated in this
Agreement, or in a separate agreement signed by both parties, the shelf life
(expiration dating) of the Product, supported by 11




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appropriate stability data, will be provided to Applied by Customer and
Applied makes no warranty regarding shelf life. 7.3 Extent of Warranty: THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU
OF AND SHALL SUPERSEDE ALL OTHER WARRANTIES OF ANY KIND, WHETHER WRITTEN, ORAL,
OR IMPLIED. EXCEPT AS PROVIDED IN PARAGRAPHS 7.1 AND 7.2 ABOVE, APPLIED DOES
NOT MAKE ANY WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE
PRODUCT SUPPLIED BY IT PURSUANT TO THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR OF NONINFRINGEMENT. No representative of Applied may change any of the
foregoing warranties except by a written agreement signed by both parties, and
Customer accepts the Products subject to all terms hereof. 7.4 Waiver of Claims: In connection with providing Professional Services,
Applied represents only that it will use reasonable care in providing such
information as it relates to development studies, formulation, primary
packaging and manufacturing process development. Applied makes no
representation or warranty, and Customer waives all claims against Applied, its
agents or employees, arising out of or in connection with any claims relating
to the stability, efficacy, safety, or toxicity of Product developed,
formulated, packaged or manufactured in accordance with the Professional
Services provided by Applied, except to the extent Applied is negligent in
providing such Professional Services. 7.5 Force Majeure: Failure of either party to perform its obligations
under this Agreement (except the obligation to make payments) shall not subject
such party to any liability to the other if such failure is caused by acts,
such as but not limited to, acts of God, fire, explosion, flood, drought, war,
riot, sabotage, embargo, strikes or other labor trouble, or compliance with any
order or regulation of any government entity acting with color of right, or by
any cause beyond the reasonable control of the affected party, whether or not
foreseeable, provided that written notice of such event is promptly given to
the other party. 12




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VIII-CONFIDENTIALITY 8.1 This Agreement, by reference, incorporates the Confidentiality
Agreement signed by Customer and Applied on November 8, 2002, and is made a
part hereof as though fully set forth herein. 8.2 Each party hereto shall not disclose any confidential information
received by it pursuant to this Agreement without the prior written consent of
the other. This obligation shall not apply to: (a) information which is known to the receiving party at the time of
disclosure of information which is independently developed by the receiving
party and documented by written records; (b) information disclosed to the receiving party by a third party who is
not prohibited from making such disclosure; (c) information which becomes patented, published or otherwise part of the
public domain or information from a third person obtaining such information as
a matter of right. 8.3 Any invention made, conceived or reduced to practice by Applied in
connection with the performance of the obligations under this Agreement, during
the term of this Agreement or thereafter, whether derived from Applied or
Customer, shall be considered confidential information and, to the extent it
relates to any of the Products, shall be the exclusive property of Customer,
except for any such invention involving the manufacturing processes involved in
manufacturing any of the Products, which shall be the exclusive property of
Applied. Either party, in its sole discretion, may file for patent protection
on its respective inventions as set forth above in its own name, and the other
party, upon request, shall promptly sign and deliver any and all documents or
information necessary for the securing of such invention in any country as
determined by the respective owner of the invention. 8.4 The parties agree that the existence and contents of this Agreement
(including any attachments and schedules) shall not be disclosed to any third
party without the prior written consent of the other party, except that in
furtherance of this Agreement, and only to the extent 13




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which is reasonably necessary for this purpose, its existence or contents
may be disclosed to the following who shall also be made subject to the
restrictions upon disclosure stated herein to the extent possible; (i) any
controlling companies of the parties, (ii) any companies controlled by the
parties, (iii) governmental regulatory agencies, including, but not limited to,
environmental protection authorities, (iv) contract laboratories, and (v)
suppliers of raw materials or components. This obligation of confidentiality
shall not apply to required SEC disclosures. 8.5 Upon termination of this Agreement for whatever reason, each party
shall return to the other, or destroy all originals, copies, and derivative
forms of disclosed or developed information relating to the purpose of this
Agreement; except that one copy of such information may be retained by the
receiving party as required by regulatory law for future reference or for
archival purposes. These obligations of confidentiality shall survive the
termination of this Agreement and shall continue for a term of ten (10) years
after the date of expiration or termination of the Agreement. IX-INDEMNIFICATION 9.1 Indemnification by Applied: Applied will indemnify and hold Customer
and any parent, subsidiary, or affiliate company or corporation, and their
officers, directors, shareholders, agents, and the employees and insurers of
any of them and/or their successors and assigns thereto (collectively the
Affiliates), free and harmless against any and all liability, damages,
losses, costs or expenses (Liability) resulting from any third party claims
made or Suits brought against Customer to the extent such Liability arises from
any act or omission of Applied regarding: (i) the manufacture, storage,
handling, use, or misuse of any Product prior to delivery to Customer including
Applieds negligence or willful misconduct in the manufacture of the Product
hereunder; (ii) Applieds compliance or non-compliance with any applicable
Federal or State laws or regulations; or (iii) Applieds failure to perform, in
whole or in part, any of its obligations hereunder, including Applieds breach
of any warranty set forth in Article VII hereof. 9.2 Indemnification by Customer: Customer will indemnify and hold
Applied (and any parent, subsidiary, or affiliate company or corporation, and
their officers, directors, shareholders, agents, and the employees and insurers
of any of them and for their successors and assigns thereto (collectively the
Affiliates),harmless against any and all liability, damages, 14




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losses, costs or expenses (Liability) resulting from any third party
claims made or suits brought against Applied to the extent such Liability
arises from any act or omission of Customer regarding; (i) the promotion,
storage, handling, distribution. use, misuse or sale of any Product (including,
without limiting the generality of the foregoing, any claims, express, implied
or statutory, made as to the efficacy or safety thereof) after delivery of the
Product to Customer; (ii) any Product labeling or packaging not attributable to
Applieds negligence; (iii) Customers compliance or non-compliance with any
applicable Federal or State laws or regulations; (iv) any failure of Customer
to perform, in whole or in part, any of its obligations hereunder, or (v)
Customers manufacture or handling of the bulk drug substance (where
applicable), unless caused by the acts or omissions of Applied. 9.3 Conditions of Indemnification: Promptly upon receipt of notice of any
claim, demand or assessment or the commencement of any suit, action or
proceeding with respect to which indemnity may be sought pursuant to this
Agreement, the party seeking to be indemnified or held harmless (the
Indemnitee) shall notify in writing, if possible, within sufficient time to
respond to such claim or answer or otherwise plead in such action, the party
from whom indemnification is sought (the Indemnitor). In case any claim,
demand or assessment shall be asserted, or suit, action or proceeding commenced
against the Indemnitee, the Indemnitor shall be entitled, at the Indemnitors
expense, to participate therein, and, to the extent that it may wish, to assume
the defense, conduct or settlement thereof, at its own expense, with counsel
satisfactory to the Indemnitee, whose consent to the selection of counsel shall
not be unreasonably withheld or delayed, provided that the Indemnitor confirms
to the Indemnitee that it is a claim to which its rights of indemnification
apply. The Indemnitor shall have the right to settle or compromise monetary
claims; however, as to any other claim, the Indemnitor shall first obtain the
prior written consent from the Indemnitee, which consent shall be exercised in
the sole discretion of the Indemnitee. After notice from the Indemnitor to the
Indemnitee of Indemnitors intent so to assume the defense, conduct, settlement
or compromise of such action, the Indemnitor shall not be liable to the
Indemnitee for any legal or other expenses (including, without limitation,
settlement costs) subsequently incurred by the Indemnitee in connection with
the defense, conduct or settlement of such action while the Indemnitor is
diligently defending, conducting, settling or compromising such action. Each
party shall cooperate fully with the other party in the defense of all such
claims or suits. 15




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9.4 Patent Indemnity: Customer warrants that distribution and sale of any
Product or bulk drug substance (where applicable) by Customer will not infringe
any patent or other proprietary rights and that Customer will indemnify, defend
and hold Applied and its Affiliates free and harmless from any damage,
judgment, liability, loss, cost or expense, including legal expenses, arising
from claims that the distribution or sale of the Product or bulk drug substance
infringe patent or other proprietary rights of a third party. Applied warrants
that the use of all manufacturing processes utilized in connection with the
manufacture of any Product by Applied for Customer will not infringe any patent
or other proprietary rights and that Applied will indemnify, defend, and hold
Customer and its Affiliates free and harmless from any damage, judgment,
liability, loss, cost, or expense, including legal expenses, arising from
claims that the manufacturing processes utilized by Applied infringe patent or
proprietary rights of a third party. 9.5 Insurance by Applied: Applied shall procure and maintain, during the
term of this Agreement and for a period of one year beyond the expiration date
of any Product manufactured for Customer by Applied pursuant to this Agreement,
Commercial General Liability Insurance, including without limitation,
Contractual Liability coverage (the Applied Insurance) in an amount not less
than $5,000,000.00 in the aggregate, and $1,000,000.00 per occurrence.
Customer shall be named as an additional insured on the Applied Insurance and
Applied promptly shall deliver a certificate of Applied Insurance to Customer
evidencing such coverage. If Applied fails to furnish such certificates, or if
at any time during the term of this Agreement Customer is notified of the
cancellation or lapse of the Applied Insurance, and Applied fails to rectify
the same within ten (10) calendar days after notice from Customer, in addition
to all other remedies available to Customer hereunder, Customer, at its option,
may obtain the Applied Insurance and Applied shall promptly reimburse Customer
for the cost of the same. Failure of Customer to demand such certificate or
other evidence of full compliance with these insurance requirements shall not
be construed as a waiver of Applieds obligation to maintain such insurance.
Any deductible and/or self insured retention, as applicable, are the sole
responsibility of Applied. 9.6 Insurance by Customer: Customer shall procure and maintain, during
the term of this Agreement and for a period one year beyond the expiration date
of any Product manufactured for Customer by Applied pursuant to this Agreement,
Commercial General 16




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Liability Insurance, including without limitation, Product Liability and
Contractual Liability coverage (the Customer Insurance) in an amount not less
than $5,000,000.00 in the aggregate, and $1,000,000.00 per occurrence. Applied
shall be named as an additional insured on the Customer Insurance and Customer
promptly shall delivery a certificate of Customer Insurance to Applied
evidencing such coverage. If Customer fails to furnish such certificate, or if
at any time during the term of this Agreement Applied is notified of the
cancellation or lapse of the Customer Insurance, and Customer fails to rectify
the same within ten (10) calendar days after notice from Applied, in addition
to all other remedies available to Applied hereunder, Applied, at its option,
may obtain the Customer Insurance and Customer promptly shall reimburse Applied
for the cost of the same. Failure of Applied to demand such certificate or
other evidence of full compliance with these insurance requirements shall not
be construed as a waiver of Customers obligation to maintain such insurance.
Any deductible and/or self insured retention, as applicable, are the sole
responsibility of Customer. X-GENERAL PROVISIONS 10.1 Notices: Any notices permitted or required by this Agreement, except
forecasts and orders, may be sent by facsimile with the original document being
sent by certified (or registered) mail, return receipt requested, or overnight
delivery, and shall be effective when received (or refused) via facsimile or
mail or overnight if faxed and sent and addressed as follows (or to such other
facsimile number or address as may be designated by a party in writing): If to Customer: Michael Shaw, Director of Operations
Matrixx Initiatives, Inc.
4742 N. 24th Street
Suite 455
Phoenix, AZ 85016 17




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If to Applied: Anthony Moravec, CEO
Applied Laboratories, Inc.
P.O. Box 448
Columbus, IN 47202-0448 10.2 Dispute Resolution: (a) The parties agree to affect all reasonable efforts to resolve any and
all disputes between them in connection with this Agreement in an amicable
manner. (b) The parties agree that any dispute that arises in connection with this
Agreement and which cannot be amicably resolved by the parties shall be
resolved by binding arbitration in the manner described below. (c) If a party intends to begin arbitration to resolve a dispute, such
party shall provide written notice to the ether party informing the other party
of such intention and the issues to be resolved. Within ten (10) business days
after its receipt of such notice, the other party may, by written notice to the
party initiating arbitration, add additional issues to be resolved. Within
twenty (20) business days following the receipt of the original arbitration
notice (Notice Date) a neutral shall be selected by the American Arbitration
Association (AAA), 441 Vine St., Suite 3308, Carew Tower, Cincinnati, OH 45202.
The neutral shall be a single individual who shall preside in resolution of
any disputes between the parties. The neutral selected shall not be an
employee, director or shareholder of either party or of an Affiliate. (d) Each party shall have ten (10) business days from the date the neutral
is selected to object in good faith to the selection of that person. If either
party makes such an objection, the American Arbitration Association shall, as
soon as possible thereafter, select another neutral under the same conditions
set forth above. This second selection shall be final. (e) (i) No later than twenty (20) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the
parties. (ii) At least five (5) days prior to the hearing, each party must submit
to the neutral and serve on the other party a proposed ruling on each issue to
be resolved. Such writing 18




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shall be limited to presenting the proposed ruling, shall contain no
argument on or analysis of the facts or issues, and shall be limited to not
more than fifty (50) pages. (iii) Each party shall be entitled to no more than five (5) hours of
hearing to present testimony or documentary evidence. The testimony of both
parties shall be presented during the same calendar day. Such time limitation
shall include any direct, cross or rebuttal testimony, but such time limitation
shall only be charged against the party conducting such direct, cross or
rebuttal testimony. it shall be the responsibility of the neutral to determine
whether the parties have had the five (5) hours to which each is entitled. (iv) Each party shall have the right to be represented by counsel. The
neutral shall have discretion with regard to the admissibility of any evidence. (v) The neutral shall rule on each disputed issue within ten (10) days
following the completion of the testimony of both parties. Such ruling shall
adopt in its entirety the proposed ruling of one of the parties on each
disputed issue. (vi) Binding Arbitration shall take place at a location agreed by the
parties or, if the parties are unable to agree, then as designated by the
neutral. All costs incurred for a hearing room shall be shared equally between
the parties. (vii) The neutral shall be paid a reasonable fee plus expenses, which fees
and expenses shall be shared equally by the parties. 10.3 Entire Agreement: Amendment: The parties hereto acknowledge that
this document sets forth the entire agreement and understanding of the parties
and supersedes all prior written and oral agreements or understandings with
respect to the subject matter hereof. No modification of any of the terms of
this Agreement, or any amendments thereto, shall be deemed to be valid unless
in writing and signed by an authorized agent or representative of the party
against whom enforcement is sought. No course of dealing or usage of trade
shall be used to modify the terms and conditions herein. 10.4 Cumulative Remedies and Waiver: The rights and remedies herein
granted to the parties are cumulative and the exercise thereof shall be without
prejudice to the enforcement of 19




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any other right or remedy authorized by law or this Agreement. None of
the provisions of this Agreement shall be considered waived by any party hereto
unless such waiver is agreed to, in writing, by authorized agents of both
parties. The failure of a party to insist upon strict conformance to any of
the terms and conditions hereof, or failure or delay to exercise any rights
provided herein or by law shall not be deemed a waiver of any rights of any
party hereto. 10.5 Assignment: This Agreement shall be binding upon and inure to the
benefit of the successors or permitted assigns of each of the parties, and may
not be assigned or transferred by either party without the prior written
consent of the other. 10.6 Governing Law: This Agreement is being delivered and executed in the
State of Indiana. Any action brought regarding the validity, construction and
enforcement of this Agreement, shall be governed by and construed under the
laws of the State of Indiana, U.S.A., without regard to its conflicts of law
principles. 10.7 Severability: In the event that any term or provision of this
Agreement shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, or otherwise be unenforceable, such provision
shall be ineffective to the extent of such violation without invalidating any
other provision hereof. 10.8 Headings, Interpretation: The headings used in this Agreement are
for convenience only and are not a part of this Agreement. 10.9 Attachments: All Attachments referenced herein are hereby made a
part of this Agreement. 10.10 Counterparts: This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement. 10.11 Independent Parties: This Agreement shall not be deemed to create
any partnership, joint venture, or agency relationship between the parties.
Each party shall act hereunder as an independent contractor. 20




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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer as of the day and year first
above written. ACCEPTED BY:
    
    
    
    ACCEPTED BY:Matrixx Initiatives, Inc.
    
    
    
    Applied Laboratories, Inc.By:
    
    
    
    
    
    By:William Hemelt
    
    
    
    
    
    Anthony MoravecExecutive Vice President/CFO
    
    
    
    
    
    CEODate:
    
    
    
    
    
    Date:
 21