EXHIBIT 10.41
MANUFACTURING AGREEMENT
THIS AGREEMENT made and entered into as of April 30, 1997, by and between
AM Cosmetics Inc., 0000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Seller") and
Xxxxxx Products Company, 00 Xxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000 ("Buyer").
RECITALS
WHEREAS, Buyer desires to purchase from Seller cosmetics products
(hereinafter defined) manufactured by Seller according to Buyer's specifications
for the purpose of resale under Buyer's trade names to retail customers.
WHEREAS, Seller is willing to manufacture and sell to Buyer the Cosmetic
Products on the terms and conditions set forth herein.
THEREFORE, The parties hereto agree as follows:
1. Definitions. The following definitions shall apply for all purposes of
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this Agreement:
(A) "Cosmetics Products" shall mean the products listed on Schedule
A, attached hereto and made a part hereof.
(B) "Manufacturing Specifications" shall mean those manufacturing
specifications established by Buyer and accepted by Seller, more fully set forth
in Schedule B, attached hereto and made a part hereof.
(C) "Price or Prices for the Cosmetics Product" shall be those prices
set forth in Schedule C, attached hereto and made a part hereof, as same may be
amended according to the terms of this Agreement.
(D) "Invoice Date" shall mean the day after the Cosmetics Products
are manufactured and packed in master cartons.
(E) "Proprietary Rights" shall mean all patents, copyrights and trade
secrets owned by Seller that are related to the Cosmetics Products.
2. Term. Unless otherwise terminated or cancelled as provided herein,
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this Agreement shall be for a period of two (2) years from the date hereof.
3. Price and Payment Terms.
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(A) The Price or Prices for the Cosmetics Products, excluding
Cosmetic Products which bear the CUTEX trademark, shall be an amount equal to
the cost per Cosmetics Product
incurred by Seller in manufacturing the Cosmetics Product, including, but not
limited to, material, labor, shipping,
packaging, related overhead, general and administrative costs plus a profit
margin of twenty-five percent (25%).
(B) The Price or Prices referred to in 3(A) above shall not include
the direct costs incurred by Seller of marketing, research and development
("Marketing and R&D Costs") including, but not limited to: (i) specifically
allocated marketing staff; (ii) market research; (iii) photo shoots; (iv)
brochures and print advertising; (v) displays; (vi) promotional events; (vii)
laboratory formulation time; (viii) consultants and (ix) dermatological testing,
all such Marketing and R&D Costs being more fully described in Schedule D,
attached hereto and made a part hereof. All Marketing and R&D Costs shall not
include the twenty-five percent (25%) profit margin referred to in 3(A) above
and shall be paid by Buyer to Seller upon invoice and no later than July 31,
1997. In the event Seller incurs, at Buyer's request, Marketing and R&D Costs
after July 31, 1997, then and in that event, Buyer agrees to pay to Seller such
Marketing and R&D Costs thirty (30) days from the date of Seller's invoice.
(C) The Price or Prices for Cosmetics Products which bear the CUTEX
trademark shall be as set forth in the schedule attached hereto and made a part
hereof as Schedule E.
(B) The Price or Prices for the Cosmetics Product is based upon Buyer
quantities set forth on the production schedule ("Production Schedule") attached
hereto and made a part hereof as Schedule F. Seller reserves the right to
adjust the Price if Buyer decreases the quantities ordered or extends the
Production Schedule.
(C) Payment terms are net thirty (30) days from Invoice Date. Buyer
may take a one percent (1%) discount on any invoice the payment for which is
received by Seller within ten (10) days from Invoice Date.
4. Manufacturing Specifications.
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(A) Seller shall manufacture the Cosmetics Products in strict
accordance with Buyer's specifications, and such revisions, accepted by Seller,
as may be made during the period of this Agreement. The product to be produced
shall be merchantable quality.
(B) If Buyer desires to make changes in the Manufacturing
Specifications, and/or any of the material or services covered herein during the
period of this Agreement, it shall be Buyer's privilege to do so, and any
increase or decrease in price shall be only the mutually agreed upon increased
or decreased cost of material and/or labor involved in furnishing materials or
services under the revised standards and specifications, plus 25% Flat. Seller
agrees to make every reasonable effort to comply with Buyer's revised standards
and
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specifications. Each revision or change is considered accepted by Seller if an
exception to it is not received by Buyer within 30 days after Buyer mails it, or
by the xxxx Xxxxxx makes shipment against Buyer's purchase order for the
Cosmetics Products involved, whichever occurs sooner. If no exceptions
are received, Seller is responsible for adherence to the new standards or
specifications. If Seller is unable to provide services in accordance with the
new standards established by the Buyer at the time needed by Buyer, and at a
price acceptable to both parties, Buyer shall have the option of terminating its
obligations under the Agreement for the item involved. In the event Buyer shall
terminate its obligations, Buyer shall pay to Seller all costs incurred by
Seller for the Cosmetics Products involved, including cost of materials, labor,
packaging, related
overhead, general and administrative costs.
5. Environmental and Health Matters.
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(A) Seller warrants that all goods comply in all respects with
applicable requirements of the Toxic Substances Control Act and regulations
thereunder. Seller agrees to hold Buyer harmless from all damages and liability
resulting from any breach of this warranty.
(B) Seller assumes sole responsibility for taking all health and
safety precautions and complying with all environmental requirements, including
compliance with all applicable local, state, and federal laws and/or
regulations, in processing material under this agreement. Seller agrees to
indemnify and hold harmless Buyer for all losses, or damage to property or
action by any regulatory agency arising out of, or in any way associated with,
the installation and/or operation of any formulation, packaging or support
equipment (including equipment owned by Seller, Buyer, or third parties) and/or
the production, processing or handling of the material processed hereunder and
the handling of raw materials used in the process, and/or the handling storage,
treatment or disposal of any waste or by-product (including but not limited to
air emissions and waste-water discharges) generated by the Seller in processing
material hereunder, including without limitation, injuries to Seller's employees
involved in these operations caused or contributed to by the negligence of those
employees or other employees. Seller expressly acknowledges that it will
indemnify Buyer for personal injury claims of Seller's employees where Seller is
responsible to those employees for worker's compensation.
6. Cosmetic Product Discontinuance. Should Buyer, by reason of product
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reformulation, market changes, process change or similar reason, deem it
necessary to reduce or discontinue purchases of one or more of the Cosmetics
Products, Buyer shall have the right to reduce or discontinue Seller's shipments
hereunder provided that any such reduction or discontinuance is in the same
proportion as applied by Buyer to other suppliers, if
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any, supplying the Cosmetics Products to Buyer, and provided further, that Buyer
has given Seller not less than thirty (30) days notice of such reduction or
discontinuance. Provided, also that Buyer shall be responsible for reimbursing
Seller for all costs and expenses including raw material, components cost, work
in progress and finished goods, for such reduced or discontinued shipments.
Once Seller has received reimbursement for all such costs and expenses, then
Buyer shall be entitled to receive from Seller, F.O.B. Seller's manufacturing
facility, the discontinued Cosmetic Product.
7. Production Schedule.
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(A) To enable Buyer to maintain inventory control, Seller agrees that
it will not manufacture or ship Cosmetics Product in the absence of the
Production Schedule which Buyer is required to provide to Seller.
(B) Seller shall hold raw materials and packaging in its warehouse
prior to scheduled production for a period of time to assure quality acceptance
as well as meet production needs, such period of time not to exceed sixty (60)
days except on long lead-time items.
8. Inspection and Security. Seller will permit Buyer's representatives
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access to any of Seller's facilities having to do with the fulfilling of Buyer's
(facilities) requirements at any time. Should security requirements of other
customers of Seller create conflict with this right, Buyer shall be so informed
and compatible scheduling arranged. Seller agrees to take any reasonable
security precautions requested by Buyer including, but not limited to,
prohibiting visitors in the area during production runs of Buyer's Products.
9. Seller Independent Contractor. Seller shall manufacture the Cosmetics
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Products hereunder as an independent contractor. Seller assumes sole
responsibility for the direction and control of its employees involved in
performing the services and such employees shall for all purposes remain
employees of Seller.
10. Confidential Information. All proprietary experimental, technical,
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manufacturing and/or other information disclosed by either to the other pursuant
to this Agreement or its extension(s) are considered as being highly
confidential in nature. The parties agree to take all reasonable precautions to
prevent disclosure to third parties. Both parties shall hold in confidence any
technical or business information concerning the other each may learn, observe,
or otherwise obtain. These restrictions upon disclosure shall cease to apply as
to any specific portion of said information which is or becomes available to the
public generally, not due to the fault of either party, or upon receipt of the
written authorization to make such disclosure.
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11. Shipping and Packaging.
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(A) Seller shall select the mode of shipment of the Cosmetics
Products and the cost thereof shall be Seller's then current area destination
charge.
(B) If Buyer desires a different mode of shipment, Buyer shall advise
Seller thereof, and Buyer shall pay to Seller, in addition to the Price, all
costs of such requested mode of shipment in excess of Seller's then current area
destination charge.
(C) The Cosmetics Products shall be packaged according to
specifications established by Seller and approved in writing by Buyer. Buyer
may require Seller to modify Seller's packaging specifications during the Term
of this Agreement. Any such requested modification which causes increased costs
to Seller shall give Seller the right to modify the Price accordingly.
(D) The Cosmetics Products shall be delivered F.O.B. Seller's
manufacturing facility and Buyer assumes all risk of loss therefor.
12. Material Costs.
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(A) If at any time during the period of this Agreement Buyer can
purchase material of like quality at a price which will result in a delivered
cost to Buyer that is lower than the delivered cost of the material purchased
hereunder, Buyer may notify Seller of such delivered cost and Seller shall have
an opportunity of pricing material hereunder on such a basis as to result in the
same delivered cost to Buyer. If Seller fails to do so or cannot legally do so,
Buyer may purchase from the supplier of the lower delivered cost material, and
any purchase so made shall be held to apply on this Agreement, and the
obligation of Buyer and Seller shall be reduced accordingly.
(B) In the event non-availability of raw materials being obtained by
Seller, causes Seller to reduce shipments to Buyer, Seller agrees to give Buyer
the option to provide such raw materials to Seller at a price not to exceed
market price. If Buyer provides such raw materials to Seller at such price,
Seller will increase deliveries of commodity to Buyer by the amount produced
with the raw materials supplied by Buyer up to the quantity specified in the
Agreement.
13. Discounts. On all invoices subject to discount for prompt payment,
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the discount period shall be calculated from the Invoice Date as received in
Buyer's office or the date of delivery of material or performance of service
ordered herein, whichever is later.
14. Force Majeure. Fire, flood, strikes, lock-out, epidemic, accident,
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shortage of customarily used transportation
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equipment (or suitable substitute), or other causes beyond the reasonable
control of the parties, which prevent Seller from delivering or Buyer from
receiving and/or using the commodity(s) covered by this Agreement, shall operate
to reduce or suspend deliveries during the period required to remove such cause.
In the event of reduced deliveries by Seller under the provisions of this
paragraph, Seller shall allocate its available supply of commodity component raw
materials, and related manufacturing facilities among purchasers and seller's
division, departments and affiliates on such basis that Buyer's percentage
reduction will not be greater than the overall percentage reduction in total
quantity of commodity, component raw materials, and related manufacturing
facilities Seller has available for supply. Any deliveries suspended under this
paragraph shall be cancelled without liability, and the Agreement quantity shall
be reduced by the quantities so omitted.
15. Regulatory Compliance.
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(A) Whether this Agreement refers to manufacturing items or to work,
Seller warrants and agrees that it has complied, and will comply, with (1) Fair
Labor Standards Act, as amended, and (2) Social Security and Workmen's
Compensation Laws, as amended, if work is done on Buyer's premises, and (3) all
other applicable laws, codes, regulations, rules and orders. Each invoice must
bear the following certification: "Materials or work covered by this invoice
were produced in conformity with the Fair Labor Standards Act as amended."
Seller agrees to indemnify Buyer and save Buyer harmless if Seller fails to
comply with the foregoing, and in the event of such failure Buyer may, in
addition, cancel this Agreement.
(B) If this Agreement relates to the purchase of any food, drug,
cosmetic, or device or substance the intended use of which results or may
reasonably be expected to result, directly or indirectly, in its becoming a
component or otherwise affecting the characteristics of any food (including any
substance intended for use in producing, manufacturing, packing, processing,
preparing, treating, packaging, transporting, or holding food), Seller hereby
guarantees that the article comprising each shipment or other delivery now of
hereafter made by Seller to Buyer, as of the date of such shipment or delivery,
is not adulterated or misbranded within the meaning of the Federal Food, Drug
and Cosmetic Act, as amended, or within the meaning of applicable State laws or
Municipal ordinances in which the definitions of adulteration and misbranding
are substantially the same as those contained in the above Act, and not an
article which may not, under the provisions of Section 404 or 505 of the Act, be
introduced into interstate commerce; and that if any such article is a coal-tar
color or contains coal-tar color, that said color was manufactured by Seller,
and is from a batch certified in accordance with the applicable regulations
promulgated under the Federal Food, Drug and Cosmetic Act, as amended, or that
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Seller has in its possession a guarantee to the same effect from the
manufacturer of said color.
(C) Seller guarantees that it will operate its facilities in
compliance with voluntary requirements (if any) of the Food & Drug
Administration for registration, record-keeping and other applicable
requirements. If at any time during the period of this Agreement or its
extension(s) approval is withdrawn by the Food & Drug Administration, Buyer may
at its option, after giving Seller reasonable time to correct those deficiencies
which prevent registration, terminate this agreement without obligation.
(D) Some of the material or services covered by this Agreement is to
be used on a contract with the Federal Government to which the provisions of
Section 202 of Executive Order 11246, Section 402 of The Vietnam Era Veterans
Readjustment Assistance Act of 1974, and Section 503 of the Rehabilitation Act
of 1973 apply, and consequently, the aforementioned sections are incorporated
herein by specific reference. Regulations under the Executive Order, The
Vietnam Era Veterans Readjustment Act and The Rehabilitation Act may require
Seller to develop an Affirmative Action Compliance Program and file an Employee
Information Report EEO-1 or other reports as prescribed.
(E) Seller guarantees that it will operate in strict compliance with
the applicable section of Good Manufacturing Practices (GMP) as detailed in
Title 21, Code of Federal Regulations, part 110, current Good Manufacturing
Practices in Manufacturing, Packaging or holding Human Food, and any revision to
Good Manufacturing Practices that are issued in the future. Buyer may, at its
option, terminate this Agreement without obligation, if Seller fails to operate
in accordance with such GMPs or fails to correct said deficiencies promptly.
(F) Seller guarantees that it will operate its facilities in
compliance with requirements of the Environmental Protection Agency for
registration, record-keeping and other applicable requirements. If, at any time
during the period of this Agreement or its extension(s), approval is withdrawn
by the Environmental Protection Agency, Buyer may, at its option, terminate this
Agreement without obligation.
(G) Seller guarantees that it will operate its facilities in
compliance with all federal, state and local hazardous waste regulations
including, but not limited to the Resource Conservation and Recovery Act and all
Environmental Protection Agency requirements referred to in paragraph 15(F),
above. Seller agrees to notify Buyer promptly of any and all spills and/or
terminate this Agreement without obligation, if Seller fails to correct said
deficiencies promptly.
(H) In the event Seller shall be unable to pay its bills as they
become due in the ordinary course, or if a trustee
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or receiver of any of its property shall be appointed, or if Seller shall take
any assignment for the benefit of creditors, or if a petition in bankruptcy
shall be filed by or against Seller, or if Seller shall liquidate its business
for any reason, Buyer shall have the right to terminate this Agreement
immediately without further obligation. Seller will make available for Buyer's
removal any such raw materials, finished product, or other of Buyer's property
then under Seller's control. Seller further agrees not to encumber such
materials, finished product or other property, as through security liens or
pledges, in any way. Buyer's right to remove such material shall have priority
over all other claimants.
(I) In recognition of the confidentiality obligation Seller has
assumed hereunder, Seller agrees not to assign or transfer its rights and
obligations hereunder without the express written consent of the Buyer. If for
any reason Seller decides to sell or transfer the manufacturing operation used
in fulfillment of this Agreement, it will provide Buyer with at least ninety
(90) days advance written notice of its intent to transfer or sell such
operation and will extend to Buyer an option exercisable within ninety (90) days
after the date of such notice to sublease the portions of the facility used in
performance of this Agreement and to lease any and all equipment for the purpose
of conducting the manufacturing operation by or on behalf of Buyer. It is
understood that this option does not in any way limit the other rights and
obligations of the parties set forth in this Agreement. Buyer reserves the
right to reduce or discontinue purchases under this Agreement, or terminate this
Agreement, without obligation if any company which markets products in
competition with Buyer obtains whole or part corporate ownership of Seller.
(J) Seller agrees to comply with all applicable federal, state and
local environmental laws, ordinances, codes, rules, regulations, and permits and
to handle all raw materials, off specification product, excess or scrap
materials, waste, finished products in an environmentally safe manner so as to
prevent any contamination of the structure, soil or ground water, in, on, or
adjacent to the Seller's facility or plant at which Seller performs the work
which is the subject of this Agreement.
(K) Seller agrees to indemnify Buyer, its parent, affiliates,
subsidiaries, successors, assigns and their respective directors, officers,
shareholders and employees (indemnitees) and save and hold each of them harmless
from all liabilities, losses, claims, demands, assessments,
fines, costs or expenses (including, without limitation, reasonable attorneys'
and consultants' fees and expenses of every kind, nature, or description)
arising under Common Law or any
environmental law (including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, The Resource
Conservation and Recovery Act, and similar
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federal, state or local laws) resulting from, arising out of or relating to any
conditions or activities at or involving any facility or plant at which Seller
performs the work which is the subject of this Agreement.
16. Termination/Cancellation.
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(A) Seller may terminate/cancel this Agreement if:
1. Buyer fails to pay Seller the Price;
2. Buyer is in default of any provision of this Agreement and
such default is not cured within twenty (20) days after
Seller gives written notice thereof.
(B) If this Agreement is terminated/cancelled, Seller may:
1. Declare all amounts owed to Seller to be immediately due and
payable;
2. Require Buyer to pay for all raw materials, works in process
and finished goods ordered and manufactured as of the date
of termination; and
3. Cease performance of all Seller's obligations without
liability to Buyer.
(C) The foregoing rights and remedies of Seller shall be cumulative
and in addition to all other rights and remedies available to Seller in law and
in equity.
(D) In the event Seller breaches any of the material terms of this
Agreement or its extension(s), Buyer shall have the option to terminate this
Agreement without further obligation, if Buyer immediately notifies in writing
Seller of the breach and allows Seller to cure said breach within twenty (20)
days of such notice. If said breach is not remedied within such period, Buyer
shall then have the right to terminate this Agreement immediately without
further obligation to Seller. However, upon termination of this Agreement by
Buyer pursuant to any of the terms and provision hereof, Buyer shall still be
obligated to pay for all goods, materials, products and services ordered by
Buyer and manufactured, purchased, delivered and/or performed by Seller as of
the date of termination. Seller will make available for Buyer's removal any
such raw materials, finished product, or other of Buyer's property then under
Seller's control.
17. Defects.
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(A) In the event of any failure or defect in product produced
hereunder resulting from Seller's failure to comply with
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the terms of this Agreement, including but not limited to Buyer's specification,
Seller agrees (if Buyer so requests) to rework and/or scrap any defective
product, or authorize Buyer to do so, and Seller shall, at Buyer's total cost
(including filling, raw materials, packaging materials and freight) thereof
including, to the extent undertaken by Buyer at Seller's request, the cost of
inspecting, sorting, reworking and scrapping. In addition, Seller shall be
responsible for claims by third parties against Buyer for loss or damage based
on personal injury or destruction of property due to defects in the product due
to failure to comply with specifications. Seller shall be responsible for the
defense, settlement of other final disposition of such claims and agrees to hold
Buyer harmless from any expenses or liability arising out of such claims.
(B) Since Buyer's name or trademark may be identified, Buyer may at
its option and expense retain counsel to assume full responsibility for the
defense settlement or other final disposition of such claims and to look to
Seller for contribution to such defense, settlement, or other disposition, or
retain counsel to participate in the investigation and handling of such claims.
18. Proprietary Rights Indemnity. Buyer acknowledges that Seller is the
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owner of all Proprietary Rights related to the Cosmetics Products and agrees to
make no claims thereto. By acceptance of this Agreement and in consideration
thereof, Seller warrants and agrees that it will defend any suit that may arise
against Buyer or any subsidiary or affiliated company thereof, for alleged
infringement of any proprietary rights relating to Cosmetics Products, and that
Seller will indemnify and save harmless Buyer and any subsidiary or affiliated
company thereof, against any fees which may be incurred by the assertion of any
proprietary rights by other persons. Buyer agrees to hold Seller harmless with
respect to liability for infringement of a design patent by reason of making or
furnishing to Buyer hereunder, any article or articles the ornamental appearance
of which was specified by Buyer and not offered by Seller as an option. This
clause shall be considered inapplicable to agreements covering basic raw
materials and basis structural materials which are unpatented and unpatentable.
19. Entire Agreement Modification. This Agreement represents the full,
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entire and integrated agreement of the parties with respect to the subject
matter hereof and supersedes any and all prior agreements or understandings.
This Agreement may not be modified, amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the parties hereto.
20. Survival of Representations, Warranties and Agreements. All of the
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representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement shall
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survive the execution, acknowledgement, sealing and delivery of this Agreement.
21. Assignability. This Agreement shall not be assignable by either party
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hereto without the prior written consent of the other party hereto.
22. Binding Effect; Benefit. This Agreement shall inure to the benefit of
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and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any other person or entity any rights, remedies, obligations or
liabilities.
23. Arbitration. Any disputes arising out of or relating to this
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Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the commercial Arbitration Rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
24. Headings. The Section headings contained in this Agreement are for
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convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
25. Governing Law. This Agreement shall be construed and performed in
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accordance with and governed by, the laws of the State of New York.
26. Invalidity of Sections. If any provision of this Agreement is held to
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be invalid or unenforceable, the remaining provisions shall not be affected, but
shall continue in full force and effect.
27. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
Xxxxxx Products Company
"Buyer"
Attest:
By: /s/ X. Xxxxxxx Stonehouse By: /s/ Xxxxx X. Xxxxx
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Name: X. Xxxxxxx Stonehouse Name: Xxxxx X. Xxxxx
Title: Vice President Title: President and C.O.O.
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AM Cosmetics, Inc.
"Seller"
Attest:
By: /s/ X.X. Xxxxx By: /s/ Xx. Xxxxx Xxxxx
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Name: X. X. Xxxxx Name: Xx. Xxxxx Xxxxx
Title: Ass't Secretary Title: Chairman and C.E.O.
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