Document:

Exhibit 10.03

    

    SUPPLY AGREEMENT

    

    THIS SUPPLY AGREEMENT (this
“Agreement”), made and effective the 29th day of December, 2009 (the “Effective
Date”), is by and between NUTRITION 21, INC. (hereinafter referred to as
“Nutrition 21”), a New York corporation, having a place of business at 4
Manhattanville Road, Purchase, NY 10577 and NATURE’S PRODUCTS, INC., a Florida
corporation, having a place of business at 1301 Sawgrass Corporate Parkway,
Sunrise, FL 33323.

     

    Nature’s Products, Inc. and its
affiliated entities, including, without limitation, Iceland Health, Inc., a
Florida corporation, are hereinafter collectively referred to as “NPI.”
Nutrition 21 and NPI are each individually sometimes referred to as a “Party”
and collectively as the “Parties.”

     

    Preliminary
Statement

     

    
      	 
      	
              a.

            	
              Nutrition 21 currently sells
      Chromium Picolinate, Chromium Histidinate, Chromium Picolinate-Biotin
      Blend, and Arginine-Silicate-Inositol Blend (the “Ingredients”). Nutrition
      21 also uses the Ingredients in the manufacture of the end-products whose
      SKU’s are listed in Exhibit 1 (the “Listed
  SKUs”).

            

    

     

    
      	 
      	
              b.

            	
              NPI wishes to purchase the
      Ingredients from Nutrition 21 on the terms hereinafter set
      forth.

            

    

     

    In consideration of the foregoing and
the mutual obligations undertaken in this Agreement, and for other
consideration, the value and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

     

    
      	 
      	
              1.

            	
              Sale and Purchase of
      Ingredients.

            

    

     

    
      	 
      	
              a.

            	
              NPI agrees to purchase from N21
      all of NPI’s requirements for the Ingredients, and Nutrition 21 agrees to
      sell NPI all of its requirements for such
    Ingredients.

            

    

     

    
      	 
      	
              b.

            	
              Exhibit 2 sets forth the prices to
      be charged by Nutrition 21 to NPI for Ingredients that are ordered through
      December 31, 2013 for use by NPI in the manufacture of any Listed SKUs
      (“Discounted Prices”).

            

    

     

    
      	 
      	
              c.

            	
              Prices for Ingredients that are
      ordered by NPI for use by NPI from and after January 1, 2014 for use in
      manufacturing any Listed SKUs shall be computed on a most favored nation
      basis for customers who purchase similar volumes of
      Ingredients.

            

    

     

    
      	 
      	
              d.

            	
              From and after the date of this
      Agreement, prices for Ingredients that are ordered for use by NPI for
      manufacturing any product other than a Listed SKU shall be computed on a
      most favored nation basis for customers who purchase similar volumes of
      Ingredients.

            

    

     

    
      	 
      	
              e.

            	
              Payment hereunder shall be due and
      payable no later than thirty (30) days following the date that Nutrition
      21 has issued an invoice.  NPI shall pay all invoices by
      check.  Any amount not paid when due shall bear interest at the
      maximum lawful interest rate from the due date until paid in
      full.

            
	 	 	 
	 	      
              f.

            	      
              All payments hereunder will be
      made in U.S. dollars.

            

    

     

    
      	 
      	
              g.

            	
              If at any time during the term of
      this Agreement, Nutrition 21 is not able or willing to supply any of the
      Ingredients to NPI (called a “Period of Unavailability”), Nutrition 21
      hereby grants to NPI a non-exclusive license during the Period of
      Unavailability to purchase or have manufactured by a third party or to
      manufacture for its own account any such Ingredients for Licensed Uses, as
      such term is defined in a License Agreement of even date
      herewith.  After any Period of Unavailability ends, NPI shall
      again purchase all of its requirements for Ingredients from Nutrition 21.
      If the failure of Nutrition 21 to supply the Ingredients to NPI occurs at
      a time that Nutrition 21 is supplying the Ingredients to third parties or
      offering such Ingredients as available for purchase, Nutrition 21 shall
      indemnify NPI for the additional cost NPI incurs in obtaining the
      Ingredients from an alternate
source.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              2.

            	
              Audit Rights,
      etc.

            

    

     

    
      	 
      	
              a.

            	
              Orders that NPI submits as being
      entitled to Discounted Prices shall be accompanied by such documentation
      as Nutrition 21 reasonably requires to confirm this entitlement. NPI shall
      from time to time give to Nutrition 21 and its representatives access to
      NPI’s books and records to the extent necessary to confirm that prior
      purchases by NPI at Discounted Prices were in fact entitled to Discounted
      Prices.

            

    

     

    
      	 
      	
              3.

            	
              Uses Subject to Patent
      License.

            

    

     

    
      	 
      	
              a.

            	
              Nutrition 21 owns patents on the
      composition and/or the use of the Ingredients. Concurrently herewith,
      Nutrition 21 is by separate instrument granting patent licenses to use the
      Ingredients in the specific manner set forth in the patent licenses.
      Nothing in this Agreement shall be deemed to enlarge or expand the scope
      of the patent licenses, and NPI shall use the Ingredients only to the
      extent consistent with the Patents and the patent
      licenses.

            

    

     

    
      	 
      	
              4.

            	
              The term of this Agreement shall
      be for the period commencing on the date of this Agreement (the
      “Commencement Date”) and ending on August 21,
  2022.

            
	 	 	 
	 	5.	      
              Orders and
      Forecasts

            

    
    

     

    
      	 
      	
              a.

            	
              Orders.

            

    

     

    
      	 
      	
              i.

            	
              NPI will submit electronic
      purchase orders for the purchase of Ingredients in accordance with the
      lead-time requirements and capacity limits set forth in Section 4.1(b)
      below and Exhibit 2 hereto (each such purchase order, an
      “Order”).

            

    

     

    
      	 
      	
              ii.

            	
              Ingredients purchased in
      connection with any Order will be delivered in accordance with the
      schedule, and subject to the daily capacity and other limitations, set
      forth in Exhibit 2.  Orders received after 4:30 pm shall be
      deemed received by Nutrition 21 as of 8:00 am on the Business Day
      following the day of actual receipt.

            
	 	 	 
	 	      
              iii.

            	      
              Delivery will be effected F.O.B.
      Nutrition 21’s US point of
  shipment.

            

    

     

    
      	 
      	
              iv.

            	
              While Ingredients are in Nutrition
      21’s possession, Nutrition 21 will bear the risk of loss only to the
      extent of the cost of manufacture of any Ingredients actually lost or
      damaged.  Upon transfer of the Ingredients to a common carrier
      at Nutrition 21’s US point of shipment, title and risk of loss with
      respect to the Ingredients shall transfer to
  NPI.

            

    

     

    
      	 
      	
              b.

            	
              Forecasts.

            

    

     

    
      	 
      	
              i.

            	
              NPI will provide quarterly to
      Nutrition 21 forecasted purchases for the next twelve-months and will
      update the forecast quarterly one week prior to the start of each
      succeeding quarter.

            

    

     

    
      	 
      	
              6.

            	
              Nutrition 21 Product Warranty and
      Limitation of Liability.

            

    

     

    
      	 
      	
              a.

            	
              Nutrition 21 warrants that the
      Ingredients supplied by it under this Agreement shall meet Nutrition 21’s
      specifications (“Specifications”).  If any Ingredient supplied
      under this Agreement proves to be a Defective Ingredient and the defect is
      attributable to Nutrition 21, Nutrition 21’s obligation with respect to
      the Defective Ingredient shall be, at NPI’s option, to replace such
      Ingredient or to issue a credit or refund to NPI in the amount of the
      price received by Nutrition 21 from NPI for the Ingredients (plus any
      documented commercially reasonable out-of-pocket freight charges actually
      incurred by NPI in connection with replacing and returning such
      Ingredient).  Nutrition 21 shall have no liability whatsoever
      for any defects unless notified within a commercially reasonable period by
      NPI in writing identifying any such
  defects.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              b.

            	
              “Defective Ingredients” means
      Ingredients that materially differ from agreed to
      Specifications.

            

    

     

    
      	 
      	
              c.

            	
              All claims under this warranty
      must be reported in writing to Nutrition 21 as promptly as practicable
      after discovery.  Nutrition 21 will provide NPI with a return
      materials authorization (RMA) number and shipping instructions within
      three days after receipt of NPI’s report of the claim, and NPI must ship
      the Ingredients claimed to be defective to Nutrition 21 within thirty (30)
      days after NPI’s receipt of the RMA number and shipping
      instructions.

            

    

     

    
      	 
      	
              7.

            	
              Force
    Majeure

            

    

     

    
      	 	 a.	      
              Neither Party shall be liable for
      any failure of or delay in performance of its obligations under this
      Agreement to the extent such failure or delay is due to circumstances
      beyond its control, including acts of God, acts of a public enemy, fires,
      floods, wars, civil disturbances, sabotage, terrorism, accidents,
      insurrections, blockades, embargoes, storms, explosions, damage to its
      plants, labor disputes (whether or not the employees’ demands are
      reasonable and within the Party’s power to satisfy), acts of any
      governmental body (whether civil or military, foreign or domestic), all
      perils of the seas and other waters, failure or delay of third parties or
      governmental bodies from whom either Party is obtaining or must obtain
      rights of way, easements, franchises, permits, machinery, materials,
      equipment, transportation, independent contracting, or supplies to grant
      or deliver the same, or inability to obtain labor, materials, equipment,
      or transportation (collectively referred to herein as “Force Majeure
      Event”).

            
	 	 	 
	 
      	
              b.

            	
              Each Party shall provide written
      notice to the other within thirty (30) days after a Force Majeure Event
      which has resulted in such Party’s failure of or delay in performance of
      its obligations under this
Agreement.

            

    

     

    
      	 
      	
              c.

            	
              Each Party shall use its
      reasonable efforts (without being obligated to incur any additional
      expenses) to minimize the duration and consequences of any failure of or
      delay in performance resulting from a Force Majeure
      Event.

            

    

     

    
      	 
      	
              8.

            	
              Use of
      Trademarks.  Except as provided herein or in Asset Purchase
      Agreements among Nutrition 21, NPI and other parties, NPI shall not use
      any trademark (including Nutrition 21’s logo) owned and or controlled by
      Nutrition 21.

            
	 	 	 
	 	      
              9.

            	      
              Miscellaneous

            

    

     

    
      	 
      	
              a.

            	
              Notices.  All notices
      and other communications which may be required or are desired to be given
      hereunder shall be in
writing.

            

    

     

    
      	 
      	
              b.

            	
              No Waivers of Rights,
      Etc.  No failure or delay on the part of any Party in exercising
      any right, power or privilege hereunder shall operate as a waiver thereof,
      nor shall any single or partial exercise thereof preclude any other or
      further exercise thereof or the exercise of any other right, power or
      privilege.

            
	 	 	 
	 	      
              c.

            	      
              Amendments.  Any
      provision of this Agreement may be amended or waived if, but only if, such
      amendment or waiver is in writing and is signed by Nutrition 21 and
      NPI.

            
	 	 	 
	 	      
              d.

            	      
              Assignments and
      Successors.

            

    

     

    
      	 
      	
              i.

            	
              Nutrition 21 may assign this
      Agreement or any of its rights or delegate any of its obligations
      hereunder to an affiliate or to any person or entity who is acquiring all
      or substantially all of its assets or with whom Nutrition 21 may merge or
      enter into other business combination. Nutrition 21 shall not have the
      right to assign or sublicense any of its rights or to delegate any of its
      obligations hereunder to any other person or entity without the consent of
      NPI, which consent shall not be unreasonably withheld or
      delayed.

            

    

     

    
      	 
      	
              ii.

            	
              The foregoing in no way shall
      limit Nutrition 21’s right to subcontract any of its obligations
      hereunder.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              iii.

            	
              NPI shall not have the right to
      assign or sublicense any of its rights or to delegate any of its
      obligations hereunder to any other person or Person without the consent of
      Nutrition 21.

            

    

     

    
      	 
      	
              e.

            	
              No Third-Party
      Beneficiaries.  This Agreement does not create, and shall not be
      construed as creating, any rights enforceable by any person not a party to
      this Agreement.

            

    

     

    
      	 
      	
              f.

            	
              No Joint Venture.  The
      Parties hereto are independent contractors.  The Parties hereto
      are not partners, joint venturers, or agents of one another and nothing in
      this Agreement or in the performance thereof shall be construed to place
      them in the relationship of partners or joint venturers or to make one an
      agent of the other.  Neither Party hereto shall have the power
      to obligate or to bind the other in any manner or for any
      purpose.

            

    

     

    
      	 
      	
              g.

            	
              Entire Agreement.  This
      Agreement constitutes the entire agreement among the Parties hereto with
      respect to the subject matter hereof and supersedes all prior agreements
      and undertakings, both written and oral, relating to the subject matter
      hereof.

            

    

     

    
      	 
      	
              h.

            	
              Governing Law.  This
      Agreement shall be governed by, and construed in accordance with, the laws
      of the State of Florida without regard to conflict of law
      principles.

            

    

     

    
      	 
      	
              i.

            	
              Consent to
      Jurisdiction.  Nutrition 21 and NPI hereby irrevocably submit to
      the jurisdiction of any court of the State of Florida sitting in Broward
      County and any Federal court sitting in Broward County, Florida in respect
      of any suit brought by Nutrition 21, and sitting in Westchester County New
      York in respect of any suit brought by NPI or its affiliates, and any
      appellate court from any thereof in any action or proceeding arising out
      of or relating to this Agreement, and Nutrition 21 and NPI hereby
      irrevocably agree that all claims in respect of such action or proceeding
      may be heard and determined in such
  court.

            

    

     

    
      	 
      	
              j.

            	
              Counterparts.  This
      Agreement may be executed in counterparts, and by the different Parties
      hereto in separate counterparts, each of which when executed shall be
      deemed to be an original but all of which taken together shall constitute
      one and the same agreement.

            

    

     

    IN WITNESS WHEREOF, the Parties hereto
have duly caused the execution of this Agreement by their duly authorized
officers, as of the day and year first above written.

     

    
      	
              NUTRITION 21,
      INC.

            
	 
      	 
      
	
              By:      

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            
	 
      	 
      
	
              NATURE’S PRODUCTS,
      INC.

            
	 
      	 
      
	
              By:
            

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit 1 Listed
SKU’s

    

    
      	
              Item Num

            	 
      	
              Description

            
	
              10601769731333

            	 
      	
              IH Appetite Control
      (12/Case)

            
	
              050428858431

            	 
      	
              CVS  100ct  200mcg  (24/Case)

            
	
              050428095829

            	 
      	
              CVS  100ct  400mcg  (24/Case)

            
	
              050428095836

            	 
      	
              CVS  250ct  200mcg  (24/Case)

            
	
              10041520871388

            	 
      	
              CareOne
      (Ahold)  60ct  500mcg  (24/Case)

            
	
              10041520871371

            	 
      	
              CareOne (Ahold)
      300ct  200mcg  (24/Case)

            
	
              10601769736253

            	 
      	
              Club: Chromax AMF
      90ct  (12/Case)

            
	
              10601769734266

            	 
      	
              Club: Chromax Ultra
      250ct  (12/Case)

            
	
              10601769995902

            	 
      	
              DE
      Diachrome  60ct  (12/Case)

            
	
              10601769737403

            	 
      	
              DE Diachrome 30ct
      (12/Case)

            
	
              10601769737502

            	 
      	
              DE NTG - Tea 10ct sticks
      (12/Case)

            
	
              10601769737205

            	 
      	
              DE NTG Multi Vitamin -
      Citrus  (12/Case)

            
	
              10041163438368

            	 
      	
              Equaline Chromium 200mcg 100ct
      (24/Case)

            
	
              10041163438375

            	 
      	
              Equaline Chromium 400mcg 100ct
      (24/Case)

            
	
              10601769736154

            	 
      	
              IH Advanced MF 45ct
      (12/Case)

            
	
              10601769731326

            	 
      	
              IH Chromax 1000mcg
      250ct  (12/Case)

            
	
              20601769731323

            	 
      	
              IH Chromax 1000mcg 250ct Sams
      Display

            
	
              10601769734068

            	 
      	
              IH Chromax Extra Strength 75ct
      (12/Case)

            
	
              10601769734167

            	 
      	
              IH Chromax Ultra Strength 60ct
      (12/Case)

            
	
              10601769996015

            	 
      	
              International
      Diachrome  60ct  (12/Case)

            
	
              10011822009314

            	 
      	
              Pharmassure 1000mcg CP
      100ct  (24/Case)

            
	
              10011822375419

            	 
      	
              Rite
      Aid  100ct  400mcg  (24/Case)

            
	
              10011822880531

            	 
      	
              Rite
      Aid  300ct  200mcg  (24/Case)

            
	
              10048107049314

            	 
      	
              Rite Aid Pharmass 100ct 200mcg
      (24/Case)

            
	
              10011822375402

            	 
      	
              Rite Aid Pharmass 100ct 400mcg
      (24/Case)

            
	
              10311917099078

            	 
      	
              Walgreen CP FN 200mg 100ct
      (24/Case)

            
	
              10311917099092

            	 
      	
              Walgreen CP FN 200mg 250ct
      (24/Case)

            
	
              10311917099085

            	 
      	
              Walgreen CP FN 400mg 100ct
      (24/Case)

            
	
              10311917101696

            	 
      	
              Walgreen FN Advanced JR 120ct
      (24/Case)

            
	
              10311917107193

            	 
      	
              Walgreen FN CP 1000mcg 100ct
      (24/Case)

            
	
              10311917101689

            	 
      	
              Walgreen FN Chol Relief 120ct
      (24/Case)

            
	
              10311917107209

            	 
      	
              Walgreen FN Dia Health MV 30ct
      (24/Case)

            
	
              10681131928622

            	 
      	
              Walmart  CP
      100ct  800mcg  (24/Case)

            
	
              10681131312681

            	
                

            	
              Walmart 100ct
      1000mcg  (24/Case)

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit 2 Prices, etc. for Listed
SKUs

    

    Chromium
Picolinate  [**confidential material is omitted and is filed
separately with the Securities and Exchange Commission**]

    

    Chromium
Histidinate  [**confidential material is omitted and is filed
separately with the Securities and Exchange Commission**]

    

    Chromium Picolinate-Biotin
Blend  [**confidential material is omitted and is filed separately
with the Securities and Exchange Commission**]

    

    Arginine-Silicate-Inositol
Blend  [**confidential material is omitted and is filed separately
with the Securities and Exchange Commission**]

    

    Lead-time
Requirements

    

    Chromium Picolinate - 10 working
days

    Chromium Histidinate - 20 working
days

    Chromium Picolinate-Biotin blend - 20
working days

    Arginine Silicate Inositol blend - 20
working days

    

    Capacity Limits

    

    Not Applicable

    

    Allowed Time Between Order and
Shipping

    

    For materials in stock - five business
daysAMENDMENT
TO EMPLOYMENT AGREEMENT

    

    THIS
AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made effective as of
January 1, 2010 (the “Effective Date”) by and between Anthony Piscitelli,
(“Piscitelli” or the “Executive”) and American Defense Systems, Inc. (“ADSI” or
the “Company”).

    

    WHEREAS,
ADSI and Piscitelli have previously entered into an employment agreement dated
January 1, 2007  ( the “Original Employment Agreement”);
and

    

    WHEREAS,
ADSI and Piscitelli desire to amend the Original Employment Agreement between
the parties.

    

    NOW
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, ADSI
and Piscitelli hereby agree as follows:

    

    1.           Section
3.1 of the Original Employment Agreement (Base Salary) is hereby amended
to provide that Executive’s Base Salary will be reduced for 2010 by 10% from the
2009 Base Salary.  The Company will review Executive’s Base Salary
after the completion of the Company’s Second Fiscal Quarter (Q-2) of 2010 to
determine if Executive’s Base Salary for 2010 can be increased to restore it in
whole or in part to its 2009 level.  Executive’s Base Salary will be
restored fully to at least his 2009 Base Salary amount for year 2011 and
thereafter.

     

    2.           Section
5.4 (Termination by the Company
Without Cause) and as referenced in Section 5.6 (Termination by Executive for Good
Reason), of the Original Employment Agreement is hereby amended to
reflect that so long as the Base Salary reduction contemplated by Section 1
hereof is in effect any salary continuation as set forth in Section 5.4(b) of
the Original Employment Agreement shall be at the unreduced amount (i.e., the
2009 Base Salary prior to the reduction set forth in this Amendment to said
Section 3.1).  Additionally, Sections 5.4 (Termination by the Company Without
Cause) and 5.6 (Termination by Executive for Good
Reason) as set forth in Schedule A to the Original Employment Agreement
are hereby amended to provide that in the event of a termination without Cause
by the Company or a termination for Good Reason by Executive, the amount of the
reduction to Executive’s Base Salary for 2010 will be added to the lump sum
payment set forth in subsection (a) of Sections 5.4 and 5.6 of Schedule
A.

     

    3.           Except
as amended hereby, all of the terms of the Original Employment Agreement shall
remain and continue in full force and effect and are hereby confirmed in all
respects, and all references after the date hereof to the Original Employment
Agreement shall be deemed to refer to the Original Employment Agreement as
amended hereby.

     

    [The
Remainder of this Page Intentionally Left Blank]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Amendment effective as of the
date set forth above.

    

    
      
        	
                American
      Defense Systems, Inc.

              
	 
      	 
      
	
                By:

              	
                /s/ Gary Sidorsky

              
	
                Name:

              	
                Gary Sidorsky

              
	
                Title:

              	
                CFO

              
	 
      	 
      
	
                Anthony
      Piscitelli

              
	 
      
	
                /s/ Anthony
  Piscitelli

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