EXHIBIT 10.20
EXHIBIT B
TRANSITION AND MANUFACTURING AGREEMENT
THIS AGREEMENT (this "AGREEMENT") is made as of the 10th day of
December 1997, by and between INVERNESS CORPORATION, a New Jersey corporation
("INVERNESS"), and STYLING TECHNOLOGY CORPORATION, a Delaware corporation
("STYLING").
PRELIMINARY STATEMENT
Inverness and Styling entered into the Asset Purchase Agreement (as
such term is and other capitalized terms used herein are defined in section 1),
pursuant to which Inverness and Styling agreed to enter into this Agreement as a
condition to the Closing.
Subject to the terms and conditions of this Agreement, Inverness
desires to (and Styling desires to have Inverness) manufacturer for and sell to
Styling each Product for the Relevant Period and transition the manufacturing of
the Products from the Facility to the facilities of the Off-Shore Manufacturers.
Accordingly, the parties hereby agree as follows:
1. DEFINITIONS.
"ADDITIONAL INVENTORY" means those raw materials, supplies and
subassemblies required for the manufacturing of the Products, but shall not
include any of the Inventory.
"ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as
of October 31, 1997 among Styling, Inverness and Inverness (UK) Limited, a
company limited by shares and registered in England and Wales.
"FACILITY" means the manufacturing facility of Inverness currently
located at 00-00 Xxxxxx Xxxxxx, Xxxx Xxxx, Xxx Xxxxxx.
"INVENTORY" means those raw materials, supplies and subassemblies
required for the manufacturing of the Products that constitute Inventory (as
such term is defined in the Asset Purchase Agreement).
"KNOWN SPA DEFECT" means the defect discovered in certain of units of
the Spa manufactured to date that manifests itself as a cracking of the housing
of the Spa around the hinge area.
"LOOK-BACK PERIOD" means, in respect of any Product, the 90 calendar
day period immediately after the Relevant Period in respect of such Product.
"NEW PERFORMANCE CRITERIA" means, with respect to each Phase I Product
in which a Phase I Product Material Defect exists, the completion (I.E., when
title to such Phase I Product passes at FOB port of initial embarkation (e.g.,
Hong Kong)) of the manufacturing by the corresponding Off-Shore Manufacturer of
a quantity of such Phase I Product equal to the quantity that was so defective,
in conformity with quality control standards and product quality consistent with
the quality control standards and product quality of Inverness prior to the
Closing and correcting such Phase I Product Material Defect.
"NEW RELEVANT PERIOD" means, in respect of any Phase I Product in
which a Phase I Product Material Defect exists, the period commencing on the
date Styling notifies Inverness of the same pursuant to section 2(d)(i) hereof
and ending on the first date on which the Off-Shore Manufacturer for such Phase
I Product meets the New Performance Criteria for such Phase I Product.
"NON-ACCEPTING EMPLOYEE" means those employees of Seller (as defined
in the Asset Purchase) (i) listed in Schedule 5.7 of the Asset Purchase
Agreement to whom Styling offered employment that rejected such offer and (ii)
who remain in the employment of Seller or the entity to whom Seller sells its
"ear piercing" business.
"OFF-SHORE MANUFACTURER" means, in the case of each Phase I Products,
the third-party manufacturer identified in PART A SCHEDULE A corresponding to
such Product, and in the case of the Phase II Products, those third-party
manufactures to be mutually agreed upon by Inverness and Styling for such
product; it being anticipated that each such manufacturer will be located in the
Peoples Republic of China.
"PERFORMANCE CRITERIA" (i) with respect to each Phase I Product, means
the completion (I.E., when title to such Product passes at FOB port of initial
embarkation (e.g., Hong Kong)) of the manufacturing by the corresponding
Off-Shore Manufacturer of 85 percent of such Phase I Product ordered in
accordance with the corresponding purchase order attached hereto as SCHEDULE B
in conformity with quality control standards and product quality consistent with
the quality control standards and product quality of Inverness prior to the
Closing and (ii) with respect to each Phase II Product, means the completion
(I.E., when title to such Product passes at FOB port of initial embarkation
(e.g., Hong Kong)) of the manufacturing by the corresponding Off-Shore
Manufacturer of 85 percent of the first purchase order of each such Phase II
Product, in conformity with quality control standards and product quality
consistent with the quality control standards and product quality of Inverness
prior to the Closing -- it being agreed that the first purchase order for any
Phase II Product shall contain the quantity of units identified in PART B OF
SCHEDULE A, unless the parties mutually agreed upon a quantity different from
the stated quantity in PART B OF SCHEDULE A. For the avoidance of doubt, the
parties acknowledge and agree that the Spa shall not be deemed to have been
manufactured in conformity with quality control standards and product quality
consistent with the quality control standards and product quality of Inverness
prior to the Closing if in good faith Styling delivers to the Manufacturer a
notice stating that the design modifications made to the Spa to cure the Known
Spa Defect are not in fact satisfactory to cure the Known Spa Defect and the
reasons (described in reasonable detail) for the same.
"PHASE I PRODUCT MATERIAL DEFECT" (a) means in respect of any Phase I
Product, a material manufacturing or material design defect in such Phase I
Product that met the Performance Criteria (i.e., such Phase I Product was
included in the first shipment) discovered during the corresponding Look-Back
Period; provided, that in the case of the Spa, the Known Spa Defect shall also
constitute a Phase I Product Material Defect, to the extent the same manifests
itself in Spas manufactured after the design modifications made to the Spa to
cure the Known Spa Defect are put into effect.
"PHASE I PRODUCTS" means those products identified in PART A OF
SCHEDULE A as Phase I Products.
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"PHASE II PRODUCTS" means those products identified in PART B OF
SCHEDULE A as Phase II Products.
"PRODUCTS" means Phase I Products or Phase II Products
"RELEVANT PERIOD" with respect to any Product means the period
commencing on the date hereof and ending on the first date on which the
Off-Shore Manufacturer for such Product meets the Performance Criteria for such
Product.
"SPA" means the Phase I Product identified in PART A OF SCHEDULE A as
the "Spa."
2. MANUFACTURE OF PRODUCTS.
(a) MANUFACTURE OF PRODUCTS. With respect to each Product, subject to
the other terms and conditions of this Agreement, until the end of the Relevant
Period for such Product, Inverness shall manufacture and sell to Styling, and
Styling shall purchase from Inverness, each such Product. For the avoidance of
doubt, the parties agree that, subject to the terms and conditions of this
Agreement, the manufacturing obligations of Inverness under this Agreement
pertain only to the manufacturing of appliances; and Inverness shall not be
responsible for any other action that may be required to make any Product
salable to a customer, including, without limitation, the "pack-out" or shipping
of any Product.
(b) INVENTORY AND ADDITIONAL INVENTORY. The parties confirm that at
the Closing, Styling shall have purchased all the Inventory. The parties agree
that Inverness shall use such Inventory for the purposes of manufacturing
Product pursuant to section 2(a). In addition, for the purposes of manufacturing
Product pursuant to section 2(a), Styling hereby authorizes Inverness, on behalf
of and for the account of Styling, to purchase and maintain for Styling,
Additional Inventory of those items and in such quantities as Styling shall
direct Inverness in writing from time to time. For the avoidance of doubt, the
parties agree that Inverness shall not be required to use any raw materials,
supplies and subassemblies required for the manufacturing of the Products other
than the Inventory and the Additional Inventory; and therefore the manufacturing
obligations of Inverness hereunder are conditioned upon the satisfaction by
Styling of the obligations of Styling with respect to Additional Inventory set
forth in this section 2(b).
(c) PURCHASE ORDERS; SUPPLY OF PRODUCT. Styling may order such
quantities of each Product as it may from time to time desire during the
Relevant Period by sending to Inverness a written purchase order specifying the
Product to be purchased, the quantity of such Product and the delivery date
therefor; PROVIDED, THAT, Inverness shall have the right to reject any such
purchase order within three business days of receipt of the same if (i) the
quantities of Product ordered on any purchase order (together with any
previously delivered purchase orders) exceed the quantity limitations for such
Product set forth in SCHEDULE C for the corresponding period and (ii) the period
commencing on the date the purchase order is received by Inverness and ending on
the delivery date specified thereon is a "lead time" inconsistent with the
pre-Closing historical lead time required by Inverness for the manufacturing of
such Product after taking into account the quantity of the Product and other
Products so ordered. Thereafter, Inverness shall deliver to Styling all Products
ordered by Styling in the quantity and on or before the delivery date specified
by Styling in its written purchase order therefor. Inverness shall deliver all
Products to Styling at the Facility.
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(d) LOOK-BACK PERIOD.
(i) In the event that during the Look-Back Period in respect of
any Phase I Product Styling notifies Inverness that there exists (and in fact
there exists) a Phase I Product Material Defect in such Phase I Product, then
Inverness shall resume the manufacturing of such Phase I Product for Styling
pursuant to the terms and conditions of this Agreement until the expiration of
the New Relevant Period.
(ii) In the event that during the Look-Back Period in respect of
any Phase II Product Styling requires additional manufacturing for such Phase II
Product, then Inverness shall provide the same upon terms and conditions
mutually acceptable to the parties.
3. PRICES AND PAYMENT FOR PRODUCT.
(a) PURCHASE PRICE FOR PRODUCT. The purchase price for each of the
Phase I Products shall be the prices specified in EXHIBIT 1 TO SCHEDULE A less
the cost of Inventory or Additional Inventory provided by Styling included in
such Product; it being acknowledged and agreed that the allocation of overhead
relative to such Product shall be mutually acceptable to the parties. The
purchase price for each of the Phase II Products shall be the prices specified
in EXHIBIT 2 TO SCHEDULE A less the actual cost of Inventory or Additional
Inventory provided by Styling included in such Product; it being acknowledged
and agreed that the allocation of overhead relative to such Product shall be
mutually acceptable to the parties. Anything to the contrary in this Agreement
notwithstanding, the parties acknowledge and agree that the purchase price for
each Product is intended to be the same purchase price for such Product quoted
by the corresponding Off-Shore Manufacturer of such Product; therefore if such
Off-Shore Manufacturer increases or decreases the purchase price for such
Product in accordance with the manufacturing agreement between such Off-Shore
Manufacturer and Styling (as assignee of Inverness) or as may be otherwise
approved by Styling and Inverness, the purchase price for such Product under
this Agreement shall correspondingly increase or decrease. All prices are F.O.B.
the Facility and are exclusive of all costs and expenses for transportation,
shipping, packaging, insurance charges and all applicable federal, state and
local taxes (if any).
(b) PAYMENTS FOR PRODUCT. Manufacturer shall invoice Styling for all
amounts payable hereunder for Products purchased by Styling upon delivery of the
same to Styling pursuant to section 2(c). Styling agrees to pay to Inverness all
amounts due hereunder immediately upon receipt of such invoice. In addition to
the amounts required by Styling to pay to Inverness pursuant to the immediately
preceding sentence, immediately upon completion of the longest Relevant Period
in respect of the Phase II Products (the "TRANSITION PERIOD PAYMENT DATE"),
Styling shall pay to Inverness by wire transfer in immediately available funds,
to the account or accounts designated by Inverness an amount to be determined in
accordance with SCHEDULE D (the "TRANSITION PERIOD PAYMENT"). The parties agree
that the Transition Period Payment shall constitute additional Purchase Price
(as defined in and for the purposes of the Asset Purchase Agreement). In the
event Styling fails to pay Inverness within one calendar week after the
Transition Period Payment Date or its receipt of any invoice for Product, as the
case may be, Styling agrees to pay interest on the same at a rate equal to the
prime rate (as published in the WALL STREET JOURNAL) as at the date of the
invoice plus 3 percent for the period commencing on the date of such invoice and
ending on the date Inverness receives payment in full. All payments shall be
made in U.S. Dollars.
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4. OTHER AGREEMENTS RELATING TO TRANSITION.
(a) INFORMATION SYSTEMS. For the period commencing on the date hereof
and ending March 2, 1998 (or such other date mutually agreed upon by the
parties), Inverness will provide to Styling information system services
substantially the same of those currently in place at Inverness -- it being
understood and agreed that (i) immediately after the date hereof, as
expeditiously as possible, Styling shall make all reasonable efforts to cease
using such information system services and (ii) on mutually acceptable terms,
Styling shall reimburse Manufacturer (or the person or entity providing such
services) for the administrative costs for personnel associated with providing
such services.
(b) COOPERATION. During the Term, Inverness shall use reasonable
efforts to (and cause Xxxxxx X. Xxxx and, to the extent available, Xxx Xxxxxxx
and any Non-Accepting Employee to use reasonable efforts to) (i) transition the
manufacturing of the Products to the facilities of the Off-Shore Manufacturers
and (ii) cooperate with Styling in the transitioning of the back-office
operations of the Business (as defined in the Asset Purchase Agreement) to
Styling. For the purposes of the foregoing, during the Term, Styling shall make
available to Inverness and its representatives for inspection at all reasonable
times all the employees, books, records and other documents of Styling
responsible for or pertaining to the Off-Shore Manufacturers, the Products and
matters concerning the Performance Criteria and New Performance Criteria, and
allow Inverness and its representatives the right to make whatever copies of
such materials they require. Without the consent of Inverness, which consent
shall not be unreasonably withheld, delayed or conditioned, Styling shall not
take any action for the purpose of causing a delay or postponement of any
Relevant Period for any Product.
(c) SPECIAL PROVISIONS REGARDING POT WAXERS. After the completion of
the Relevant Period in respect of Phase I Product identified in Schedule A as
the "Pot Waxer" (the "POT WAXER"), anything in this Agreement to the contrary
notwithstanding, (i) Manufacturer agrees to manufacture and sell to Styling and,
Styling agrees to purchase from Manufacturer, that number of units of Pot Waxers
(but no more than 1,250 such units) that can be manufactured from the Inventory
and the Additional Inventory on order as at November 26, 1997 (the "REMAINING
FAIRLAWN POT WAXERS"), and (ii) the parties agree that (A) the purchase price
for 50 percent of the Remaining Fairlawn Pot Waxer units shall be the price for
Pot Waxers specified in EXHIBIT 1 TO SCHEDULE A less the cost of such Inventory
or such Additional Inventory provided by Styling in such Pot Waxers and (B) the
purchase price for the other 50 percent of the Remaining Fairlawn Pot Waxer
units shall be the aggregate amount of actual costs and expenses incurred by
Manufacturer to manufacturer such Pot Waxers for Styling under this Agreement
(as evidenced by corresponding bills of material and bills of labor).
(d) SPECIAL PROVISIONS REGARDING PRODUCTS OTHER THAN POT WAXERS.
Anything in this Agreement to the contrary notwithstanding, pursuant to the
November Letter Agreement, (i) after the completion the Relevant Period in
respect of any Product (other than the Pot Waxer), Manufacturer agrees to
manufacturer and sell to Styling, and Styling agrees to purchase from
Manufacturer, that number of units of such Product that can be then manufactured
by Manufacturer from the then existing Inventory and Additional Inventory on
hand and (ii) the parties agree that the purchase price for each such Product
described in section 4(d)(i) shall be the aggregate amount of actual costs and
expenses incurred by Manufacturer to manufacturer such Product for Styling under
this Agreement (as evidenced by corresponding bills of material and bills of
labor).
(e) SPECIAL PROVISIONS REGARDING KNOWN SPA DEFECT. During the Relevant
Period in respect of the Spa and for the one calendar year thereafter, if any
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Spa is returned to Styling because of Known Spa Defect, (i) during such Relevant
Period in respect of the Spa, Manufacturer shall replace such Spa with the Known
Defect, at its own cost and expense and (ii) during such one year period,
Manufacturer shall pay to Styling an amount equal to the price for Spas paid by
Styling for each Spa unit from its Off-Shore Manufacturer for the same.
5. TERM AND TERMINATION.
(a) TERM. The term of this Agreement (the "TERM") shall commence on
the date hereof and shall end on the earliest to occur of (i) the one-year
anniversary of the date hereof, (ii) the last day of the longest Relevant
Period, (iii) the last day of the longest New Relevant Period (if any) and (iv)
the termination of this Agreement pursuant to section 5(b).
(b) TERMINATION. Either party may terminate this Agreement upon the
occurrence of a material default by the other party and the failure of the
defaulting party to cure such default within 30 calendar days after its receipt
from the non-defaulting of a notice stating in reasonable detail the nature of
the material default. In addition, Styling shall have the right to terminate
this Agreement for any reason, with or without cause, upon 30 days' prior
written notice thereof to Inverness.
6. WARRANTY
(a) WARRANTIES. Inverness warrants to Styling that all Products
manufactured by Inverness and sold to Styling hereunder shall (i) conform to the
specifications for each Product that exist as at the Closing and (ii) be free of
all defects in materials and workmanship, based upon the quality control
standards and product quality of Inverness prior to the Closing. OTHER THAN AS
SET FORTH IN THIS SECTION 6(a), INVERNESS MAKES NO WARRANTY OF ANY KIND, EXPRESS
OR IMPLIED, AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR OTHERWISE ARE HEREBY EXPRESSLY DISCLAIMED BY INVERNESS AND
EXCLUDED HEREUNDER.
(b) PRODUCT DEFECTS. In the event that any Product fails at any time
to conform to Inverness' warranties set forth in section 6(a), Styling shall
promptly notify Inverness of the non-conformity, and Inverness shall have a
reasonable opportunity to investigate and verify such non-conformity. If any
Product is in fact non-conforming, at Styling's option, upon written notice to
Inverness, Inverness shall either (i) replace such Products at Inverness'
expense within 45 calendar days or (ii) credit against (A) future purchases made
by Styling or (B) the Transition Period Payment (as defined in the Asset
Purchase Agreement) the full amount of the purchase price for such defective
Products. Anything in this section 6 to the contrary notwithstanding, Inverness
shall not be responsible for any Product returned to Styling from a customer of
Styling for any reason other than the non-conformity of such Product at the time
Inverness delivered such Product to Styling pursuant to the terms and conditions
of this Agreement.
(c) LIMITATIONS ON LIABILITY. UNDER NO CIRCUMSTANCES SHALL INVERNESS
BE LIABLE TO STYLING OR ANY OTHER PERSON OR ENTITY FOR ANY LOSS OF PROFITS OR
SPECIAL, CONSEQUENTIAL OR INDIRECT DAMAGES OF ANY KIND WHATSOEVER, EVEN IF
STYLING HAS BEEN ADVISED AS TO THE POSSIBILITY OF SUCH DAMAGES.
7. FORCE MAJEURE. Neither party shall be liable for failure or delay in
performing any of its obligations hereunder if such failure or delay is
occasioned by compliance with any governmental regulation, request or order, or
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by circumstances beyond the reasonable control of the party so failing or
delaying, including, without limitation, Acts of God, war, insurrection, fire,
flood, accident, labor strikes, organized work stoppage or organized slowdown,
or inability to obtain raw materials, supplies, power or equipment necessary to
enable such party to perform its obligations hereunder. Each party shall (i)
promptly notify the other party in writing of any such event of force majeure,
the expected duration thereof and its anticipated effect on the ability of such
party to perform its obligations hereunder, and (ii) make reasonable efforts to
remedy any such event of force majeure.
8. RELATIONSHIP OF PARTIES. It is understood and agreed that this Agreement
does not create any relationship of association, partnership or joint venture
between the parties, nor create any implied licenses, nor constitute either
party as the agent or legal representative of the other for any purpose
whatsoever; and the relationship of Styling and Inverness for all purposes shall
be one of independent contractor. Neither party shall have any right or
authority to create any obligation or responsibility, express or implied, on
behalf or in the name or the other, or to bind the other in any manner
whatsoever.
9. CONFLICTING TERMS. In the event of a conflict between the terms and
conditions of this Agreement and the terms or conditions contained in any
notice, shipment, specifications, purchase order, sales order, acknowledgement
or other document that may be used in connection with the transactions
contemplated by this Agreement, the terms and conditions of this Agreement shall
supersede and govern, unless expressly waived in accordance with section 11.
10. GOVERNING LAW. This Agreement and the relationship between the parties
created hereunder shall be governed by and construed in accordance with the laws
of the State of New Jersey, without reference to choice of law doctrine.
11. SCHEDULE C. In the event that the Relevant Period for any product has not
expired on March 31, 1998, then prior to April 30, 1998, Manufacturer shall
delivery to Styling a revised Schedule C to extend such Schedule until September
30, 1998 in respect of all such Product; it being agreed that such Schedule
shall be prepared applying substantially the same methodology used by
Manufacturer in the preparation of Schedule C attached hereto. In the event that
the Relevant Period for any Product has not expired on August 30, 1998, Schedule
C shall be similarly revised.
12. MISCELLANEOUS. All notices, consents and other communications required or
which may be given under this Agreement furnished in accordance with Section
11.3 of the Asset Purchase Agreement. This Agreement may not be amended or
modified, nor may any right or remedy of any party be waived, unless the same is
in writing and signed by such party or a duly authorized representative of such
party. The terms of this Agreement shall not be amended or modified by the
pre-printed terms of any purchase order or acknowledgment, which shall be
considered solely for the convenience of the party issuing such purchase order
or acknowledgment, regardless of whether the other party may have signed or
accepted the same. The waiver by any party of the breach of any term or
provision hereof by any other party will not be construed as a waiver of any
other or subsequent breach. No failure or delay by any party in exercising any
of its rights or remedies hereunder will operate as a waiver thereof, nor will
any single or partial exercise of any such right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies of the parties provided in this Agreement are cumulative and
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not exclusive of any rights or remedies provided by law, in equity or otherwise.
Without limiting the generality of the foregoing, each party acknowledges that
the other may have no adequate remedy at law if it violates any of the terms of
this Agreement. Accordingly, each party shall have the right, in addition to any
other rights and remedies it may have, to obtain in any court of competent
jurisdiction injunctive relief to restrain any breach or threatened breach
hereof or otherwise to specifically enforce any of the provisions of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, successors and
permitted assigns. Neither party may assign, or otherwise transfer any of its
rights, duties or obligations under this Agreement without the prior written
consent of the other party; any such assignment or transfer being void and of no
force and effect. This Agreement (including the Schedules hereto and together
with the Asset Purchase Agreement) constitutes the entire agreement between the
parties and supersedes all prior proposals, communications, representations and
agreements, whether oral or written, with respect to the subject matter hereof.
Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions hereof in any other
jurisdiction. This Agreement may be signed in any number of counterparts, each
of which shall be deemed an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. The headings used in this
Agreement are for convenience of reference only and shall not affect the meaning
or construction of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective names by their duly authorized officers as of
the date first above written.
STYLING TECHNOLOGY CORPORATION
By: /s/ Xxx X. Xxxxxxx
-----------------------------
Name: Xxx X. Xxxxxxx
Title: Chairman of the Board and
Chief Executive Officer
INVERNESS CORPORATION
By: /s/ Xxxxxx X. Xxxx
-----------------------------
Name: Xxxxxx X. Xxxx
Title: President and C.E.O.
