MANUFACTURING AND FORMULATION AGREEMENT
AGREEMENT made as of this 3rd day of October, 2000, between
KMG-BERNUTH, INC., a Delaware corporation, having its principal office in
Houston, Texas, (hereinafter referred to as "KMG") and GB BIOSCIENCES
CORPORATION, a Delaware corporation, having its principal office in
Wilmington, Delaware, (hereinafter referred to as "GB").
RECITALS
WHEREAS, GB manufactures and/or sells and markets a
monosodium/-disodium methanearsonic acid based pesticide products line
(commonly referred to as MSMA and DSMA products) in the United States and
certain other countries (the "Arsonates Line");
WHEREAS, GB and KMG and KMG's parent, KMG CHEMICALS, INC., a Texas
corporation, have entered into that certain Asset Sale Agreement dated the
date hereof by ("Asset Sale Agreement") which GB shall sell and KMG shall
purchase the Arsonates Line of GB on the terms and conditions set forth
therein; and
WHEREAS, a condition of the purchase of the Arsonates Line by KMG is
that GB manufacture and formulate certain MSMA products for sale to KMG for an
interim period on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of mutual covenants and agreements
herein contained, the parties agree as follows:
ARTICLE I
MANUFACTURE OF TECHNICAL AND FORMULATED PRODUCTS
1.1 GB shall manufacture active ingredient (monomethanearsonic acid)
in accordance with the specifications set forth in SCHEDULE 1 ("Technical
Product") and formulate Technical Product into the end-use products
("Formulated Products") described on and in accordance with the specifications
set forth in SCHEDULE 2, and KMG shall purchase such Technical Product and
Formulated Products, for the price and on the other terms and conditions set
forth in this Agreement (Technical Product and Formulated Products are
sometimes referred to collectively as "MSMA products"). Subject to the
provisions of the Asset Sale Agreement, if requested by KMG, during the Term
GB shall cause KMG to be a subregistrant under pesticide registrations
pertaining to MSMA products held by GB or its affiliates.
1.2 GB shall manufacture and formulate MSMA products at its
production facility ("Plant") located at 0000 Xxxxx Xxxx, Xxxxxxx, Xxxxx for
KMG, and KMG shall purchase MSMA products from GB, until (i) GB shall have
manufactured and formulated [omitted subject to a request for confidential
treatment], subject to a 2% upward variance to facilitate batch production,
of MSMA products (as determined from the Inventory Report, hereinafter
defined and/or other reports generated by GB to reasonably verify such
inventory amounts, and including Existing Inventory), or (ii) the expiration
of thirty (30) days after receipt of written notice from KMG to GB that GB
should cease manufacturing and formulating MSMA products or (iii) February 15,
2001, whichever is earliest ("Plant Shutdown"). GB agrees that it will use all
commercially reasonable efforts to manufacture and formulate MSMA products at
the Plant that, when combined with all Existing Inventory (hereinafter
defined) shall be sufficient to satisfy clause (i) of the immediately
preceding sentence prior to Plant Shutdown.
1.3 Prior to Plant Shutdown, but subject to the storage limitations
for Technical Product set forth in Section 4.1, GB agrees to allocate its
production of MSMA products among Technical Product and particular Formulated
Products in the manner that KMG may reasonably request after consultation with
GB. Notwithstanding the foregoing, it is the parties expectation that 25% of
the MSMA products (including Existing Inventory) produced by GB and purchased
by KMG hereunder shall be Technical Product and 75% of the MSMA products
(including Existing Inventory) produced by GB and purchased by KMG hereunder
shall be Formulated Products. If this ratio increases or decreases by more
than 10%, the parties shall meet in good faith to discuss an equitable
adjustment to the price paid for MSMA products hereunder. It is agreed that
the MSMA products manufactured and formulated hereunder shall constitute the
entire output of the Plant during the Term (hereinafter defined) of this
Agreement and GB shall not manufacture, formulate or package MSMA products
during the Term for any other person or entity and GB and its affiliates shall
not sell MSMA products after the date hereof. Any MSMA products manufactured
or formulated by GB prior to the date hereof and unsold by GB at the date
hereof (the "Existing Inventory") shall be purchased by KMG on the terms and
conditions of this Agreement, except for existing inventory of DMSA and Ansar
8100 held by GB at Closing, which the parties agree GB can sell until
depleted. GB shall not be restricted in any way under this Agreement from
manufacturing, formulating or packaging products other than MSMA products.
1.4 All costs and expenses necessary for the manufacturing and
formulation of Technical Product and Formulated Products under this Agreement,
including but not limited to the cost of raw materials, supplies and
utilities, shall be borne by GB, provided, however, KMG shall purchase from GB
(Ex Works the Plant, Incoterms 2000) at GB's actual cost all arsenic trioxide
on hand at Plant Shutdown that has not been
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used to manufacture and formulate MSMA products hereunder ("Raw Materials").
At its option, KMG may also purchase from GB any Packaging Materials (as
hereinafter defined) used for Packaging MSMA and remaining at Plant Shutdown
at GB's actual cost. GB's invoice for the Raw Materials and Packaging
Materials purchased by KMG shall include reasonable evidence of its actual
cost and shall be payable net 30 days.
1.5 After Plant Shutdown, GB shall thereafter have no obligation to
manufacture Technical Product or Formulated Products for KMG.
1.6 Title and risk of loss of or damage to Technical Product shall
pass to KMG on December 31, 2000, Plant Shutdown or delivery of Technical
Product to a carrier for shipment per instructions from KMG, whichever is
earlier. Title and risk of loss of or damage to Formulated Products shall pass
to KMG upon delivery of Formulated Products, packaged for shipment, to one or
more off-site storage location selected by the parties.
ARTICLE II
PAYMENT
2.1 For MSMA products, including Existing Inventory, manufactured and
formulated by GB and sold to KMG hereunder, KMG shall pay GB a fee of
[omitted subject to a request for confidential treatment] ("Tolling Fee"),
payable as set forth in Section 2.3.
2.2 The Tolling Fee shall be payable as follows: Each month GB shall
invoice and KMG shall pay to GB the Tolling Fee (i) for each gallon of
Formulated Product (including Existing Inventory of Formulated Product) placed
into the agreed off-site storage facilities by GB in the preceding month and
(ii) prior to Plant Shutdown, for each gallon of Technical Product (including
Existing Inventory of Technical Product) delivered in the preceding month by
GB for shipment per shipping instructions from KMG. The monthly Inventory
Report (hereinafter defined) shall be used for the preparation of such monthly
invoices. Upon Plant Shutdown, KMG shall pay GB the Tolling Fee for each
gallon of Technical Product manufactured by GB hereunder (excluding Technical
Product formulated into Formulated Product and Technical Product delivered for
shipment prior to Plant Shutdown).
2.3 On or before five (5) business days after the end of each month
during the Term, GB shall produce a report or accounting ("Inventory Report")
of Formulated Product placed into the off-site storage area and of Technical
Product as to which title and risk of loss has passed to KMG. In the
preparation of the Inventory Report, GB shall be responsible for reporting on
the amount of Formulated Product placed into the off-site storage area and of
Technical Product as to which title and risk of loss has
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passed to KMG. Each Inventory Report shall set forth the quantity of MSMA
products (including Existing Inventory) manufactured and formulated under this
Agreement during the preceding month and in the aggregate and be in such form
as the parties may reasonably agree.
2.4 Notwithstanding anything to the contrary in this Article II, KMG
shall take delivery of and pay for all Existing Inventory, MSMA products, Raw
Materials (and Packaging Materials, if applicable) manufactured for or
supplied to KMG hereunder no later than June 30, 2001.
2.5 The Tolling Fee payable under this Article II is exclusive of all
sales taxes, duties, or other similar fees or charges related to the sale of
the MSMA products; to the extent GB is subject to any such taxes, fees or
charges, KMG shall reimburse GB.
ARTICLE III
PACKAGING AND SHIPPING
3.1 GB shall package, label, xxxx, and handle (such activities
generally collectively referred to herein as "Packaging") the Formulated
Products in accordance with the specifications in SCHEDULE 2 hereto. GB, at
its sole cost and expense, shall supply all raw materials, containers,
cartons, strapping and other packaging materials ("Packaging Materials")
required to formulate and package the Formulated Products. Copies of material
safety data sheets for the MSMA products, including applicable raw materials,
and a list of packaging components are attached hereto as SCHEDULE 3 (the
"Packaging Components").
3.2 From time to time KMG shall submit shipping instructions to GB
for quantities of Technical Product. All quantities shall be for immediate
shipment unless otherwise provided in the shipping instructions. GB shall at
its cost and expense remove Technical Products from storage at the Plant and
load them on the carrier in accordance with the shipping instructions. GB
shall at its cost and expense transport all Formulated Product to the agreed
off-site storage facilities selected by the parties. KMG shall be responsible
for removing any Formulated Products from storage at such off-site facilities
and shall pay any and all costs associated with loading and shipping such
Formulated Products from the storage facilities.
ARTICLE IV
STORAGE OF MSMA PRODUCTS
4.1 GB shall store Technical Product in bulk form in its dedicated
storage tank to the maximum of GB's dedicated storage tankage, but not
exceeding 150,000
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gallons. GB shall store Formulated Products at off-site storage facilities
selected by the parties.
4.2 All costs and expenses of storage of MSMA products at the Plant
shall be borne by GB and KMG shall not be charged any rent, stocking, handling
or other similar fee in connection therewith. All costs and expenses of
storage at off-site facilities of MSMA products, including warehouse in/out
charges, shall be borne by KMG or reimbursed by KMG to GB.
ARTICLE V
MSMA PRODUCTS LOSS AVOIDANCE
5.1 GB shall undertake reasonable efforts to minimize any loss, theft
of or damage to KMG's Technical Product and Formulated Products while in GB's
possession or control.
5.2 GB agrees to notify KMG within ten (10) business days upon its
becoming aware of any loss, theft or damage to MSMA products.
ARTICLE VI
WASTE ISSUES
6.1 GB will dispose of all waste resulting from the activities
hereunder. At KMG's request, GB shall provide KMG with copies of any manifests
or other documentation relating to such waste disposal.
ARTICLE VII
QUALITY CONTROL, SAMPLING AND REPORTING
7.1 KMG shall have the right to enter GB's Plant with prior notice to
GB during regular business hours for the purpose of observing the manufacture
of Technical Product, the formulating of Formulated Products, the packaging of
Formulated Products, conducting inventories, inspecting the quality of the
Technical Product and the Formulated Products and its packaging, and/or
obtaining samples of the materials being furnished.
7.2 For each lot of Technical Product and Formulated Product
prepared, GB shall perform quality assurance pursuant to GB's Product Manuals,
a copy of which have been provided to KMG. Copies of each quality assurance
report shall be provided to KMG.
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7.3 Any and all costs and expenses incurred by or for the account of
GB outside of the Plant in performing the sampling and analysis pursuant to
this Article VII shall be invoiced directly to KMG or reimbursed by KMG on
request.
7.4 For samples sent to KMG, all samples shall be properly packaged
and shipped to a storage destination of KMG's choice.
ARTICLE VIII
WARRANTIES AND LIMITATION OF DAMAGES
8.1 GB warrants that all Technical Product will comply with the
specifications on SCHEDULE 1 when delivered to KMG. EXCEPT AS PROVIDED IN THE
FOREGOING SENTENCE, GB MAKES NO WARRANTY, EXPRESS OR IMPLIED WITH REGARD TO
THE TECHNICAL PRODUCTS OR GB'S SERVICES HEREUNDER, AND ANY IMPLIED WARRANTY OF
SUITABILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IS HEREBY
DISCLAIMED.
8.2 GB warrants its formulation and packaging of all Formulated
Products hereunder shall comply with the specifications therefor set forth in
SCHEDULE 2. EXCEPT AS PROVIDED IN THE FOREGOING SENTENCE, GB MAKES NO
WARRANTY, EXPRESS OR IMPLIED WITH REGARD TO THE FORMULATED PRODUCTS OR GB'S
SERVICES HEREUNDER, AND ANY IMPLIED WARRANTY OF SUITABILITY OR MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE IS HEREBY DISCLAIMED.
8.3 Notwithstanding any other provision of this Agreement, in the
event either party is liable to the other for any matter relating to this
Agreement, whether arising in contract, equity or tort (including without
limitation any claim for negligence), and in addition to any other limitation
of liability or remedy set forth in this Agreement, the amount of damages
recoverable by either party shall not include any amount for ANY INDIRECT OR
CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, LOST INCOME OR LOST SAVINGS.
ARTICLE IX
INDEPENDENT CONTRACTOR
9.1 In the performance of this Agreement, GB is engaged as an
independent business as an independent contractor, and nothing herein shall be
construed to the contrary. GB shall act as an independent contractor for KMG
in performing hereunder, and shall furnish all labor, supervision, machinery
and equipment necessary for its performance hereunder and shall obtain and
maintain all building and other permits and licenses required by public
authorities in connection therewith. Neither party reserves
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any right to exercise any control over any of the other party's employees, who
shall be entirely under the control and direction of such party. Nothing in
this Agreement shall make either party the partner, agent, or representative
of the other party.
ARTICLE X
GENERAL INDEMNITY AGREEMENT
10.1 GB shall assume full responsibility for and shall defend,
indemnify and hold harmless KMG, its directors, officers, employees, agents
and direct and indirect affiliates, from and against any and all losses,
claims, obligations, liens, encumbrances, liabilities, penalties, causes of
actions, damages, costs and expenses, (including, without limitation, orders,
judgments, fines, amounts paid in settlement and reasonable attorneys' fees
and expenses), whether the foregoing are based in contract, tort, strict
liability, breach of warranty, the sole or concurrent negligence of GB or any
person whose negligence, duties, actions or liabilities may be attributed or
imputed to GB, or any other legal theory, for personal injury to or death of
persons (including employees of GB or KMG), damage to (including loss of use
of) or destruction of any property, or damage or harm to, contamination of or
adverse effect on human beings or the environment, proximately caused by (i)
the failure of any of the Technical Product or Formulated Product manufactured
or formulated by GB hereunder to meet the specifications therefor set forth in
Schedule 1 and Schedule 2, respectively; (ii) any grossly negligent act or
omission hereunder of GB, its officers, employees, agents or contractors; or
(iii) any violation of any law or regulation by GB, its officers, employees,
agents or contractors.
10.2 KMG shall assume full responsibility for and shall defend,
indemnify and hold harmless GB, its directors, officers, employees and agents
and direct and indirect affiliates, from and against any and all loss or
claims, obligations, liens, encumbrances, liabilities, penalties, causes or
action, damages, costs and expenses (including without limitation, orders,
judgments, fines, amounts paid in settlement and reasonable attorneys' fees
and expenses), whether the foregoing are based in contract, tort, strict
liability, breach of warranty, the sole or concurrent negligence of KMG or any
person whose negligence, duties, actions or liabilities may be attributed or
imputed to KMG, or any other legal theory, for personal injury to or death of
persons (including employees of KMG or GB), and/or damage to (including loss
of use of) or destruction of any property or, damage or harm to, or
contamination of or adverse effect on human beings or the environment,
proximately caused by (i) any grossly negligent act or omission hereunder of
KMG, its officers, employees, agents or contractors; (iii) any violation of
any law or regulation by KMG, its officers, employees, agents or contractors.
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10.3 The obligations of Section 10.1 and 10.2 shall continue beyond
the termination of any other portion of this Agreement.
ARTICLE XI
COMPLIANCE WITH LAWS
GB and KMG each shall comply with all laws, rules and regulations of
governmental authorities regarding or in connection with the performance of
its obligations hereunder.
ARTICLE XII
CONFIDENTIAL INFORMATION
That certain Confidentiality Agreement dated February 3, 2000 between
GB Biosciences and Purchaser shall remain in force and effect in accordance
with its terms notwithstanding any termination of this Agreement.
ARTICLE XIII
FORCE MAJEURE
13.1 Subject to Section 13.2 neither party shall be subject to any
liability for delay in performance, or nonperformance, as a result of fire,
flood, natural catastrophe, strike, riot, act of government authority or
compliance with government request, act of God, or other contingencies and
circumstances beyond its reasonable control interfering with the production,
supply or transportation of the materials covered by this Agreement (including
any raw materials and energy sources) or used in connection therewith. Each
party shall give the other party prompt written notice of any occurrence of an
event of force majeure, the nature thereof, and the extent to which the
affected party will be unable to fully perform its obligations hereunder. Each
party further agrees to use all reasonable efforts to correct the condition as
quickly as possible. If such period of force majeure continues for a period of
thirty (30) days, the party not experiencing the event of force majeure may
terminate this Agreement by giving the other party at least ten (10) days
prior written notice thereof.
13.2 Notwithstanding Section 13.1, neither party shall be excused for
delay in performance, or nonperformance, by reason of events of force majeure
for more than fifteen (15) days in any calendar year. Upon the termination of
force majeure events, the party not claiming an excuse by reason of such force
majeure events may, at its option, either (i) cancel quantities from this
Agreement not shipped due to the force majeure events without affecting the
balance of this Agreement, or (ii) extend this Agreement one day for each day
that performance is suspended due to force majeure events.
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ARTICLE XIV
TERM AND TERMINATION
14.1 Unless otherwise terminated as provided herein, the term
("Term") of this Agreement shall begin on the date of this Agreement and shall
end on June 30, 2001.
14.2 Notwithstanding Section 13.1, this Agreement may be terminated
(a) by either party at any time on the other party's breach of the material
terms of this Agreement by giving the breaching party at least sixty (60)
days' prior written notice thereof, provided that such breach is not cured to
the non-breaching party's reasonable satisfaction within such sixty (60) day
notice period; (b) by the mutual written agreement of the parties; or (c) by
either party in the event that the other party becomes insolvent, or generally
unable to pay its debts as they become due or shall become the subject of a
bankruptcy, conservatorship, receivership or similar proceeding, or shall make
a general assignment for the benefit of its creditors.
14.3 In the event of any termination hereof, KMG shall pay GB for any
raw materials or Packaging Components purchased for KMG prior to the date of
termination which cannot be returned to the vendor or immediately used by GB
for other products handled by GB, as well as for any other costs incurred by
GB with regard to the preparing for or undertaking any services hereunder.
ARTICLE XV
ASSIGNMENT
15.1 Neither party may assign its rights or delegate its performance
hereunder, whether by operation of law or otherwise, without the prior written
consent of the other party, which consent shall not be unreasonably withheld;
and any attempted assignment or delegation or transfer without such consent
shall be void. Notwithstanding the foregoing, or any other provision of this
Agreement, KMG acknowledges that the parent company of GB has announced plans
to merge with the agrochemicals business of Novartis AG to form Syngenta AG.
The parties acknowledge that if, following completion of Syngenta transaction,
the Syngenta group internally reorganizes, then this Agreement may be assigned
by GB to a reorganized affiliate with notice to, but without the prior written
consent of, KMG.
ARTICLE XVI
NOTICES
16.1 All notices hereunder shall be given in writing by certified or
registered mail, with postage prepaid, addressed to each of the parties hereto
as its address set
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forth below, or at such other address as may be specified in writing by such
party. Any notice thus given shall be deemed effective on the date of mailing:
If to GB:
GB Biosciences Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn.: Plant Manager
Fax: 000-000-0000
Phone: 000-000-0000
If to KMG:
KMG-Bernuth, Inc.
00000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
Fax: 000-000-0000
Phone: 000-000-0000
ARTICLE XVII
CHOICE OF LAW
17.1 This Agreement shall be governed by and interpreted under the
laws of the State of Delaware, without regard to its principles of conflict of
law.
ARTICLE XVIII
DISPUTE RESOLUTION
18.1 If any dispute arises in connection with this Agreement, the
parties agree to discuss such dispute in good faith and attempt to resolve it
without recourse to the formal dispute resolution mechanism provided in
Section 18.2.
18.2 After discussions provided in Section 18.1, either party may
provide written notice to the other party that a dispute has arisen to be
resolved through the mechanism set forth in this Section 18.2. Upon issuance
and receipt of such notice, GB and KMG, acting through GB's designated
representative and KMG's designated representative respectively, in good faith
shall strive to resolve any such noticed dispute; those representatives may
agree to retain jointly an independent mediator to assist in resolving the
dispute. If, however, such representatives of GB and KMG fail for any reason
to resolve the dispute within ninety (90) days after the date of the
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written notice of dispute resolution, then and only then shall the parties be
free to pursue their remedies at law or in equity; provided, however, that the
parties shall be free at any and all times to seek injunctive relief,
regardless of whether they have availed themselves of the dispute resolution
process set forth in Section 18.1 and 18.2
ARTICLE XIX
MISCELLANEOUS
19.1 This Agreement constitutes the full understanding of the
parties, a complete allocation of risk KMG between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the manufacturing, purchase and sale of the Technical Product, Formulated
Product and the packaging of the Formulated Product hereunder and supersede
any and all prior agreements, whether written or oral, that may exist between
the parties. Except as provided otherwise in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or agreement
purporting to modify, vary, explain or supplement the terms or conditions of
this Agreement shall be binding unless hereafter made in writing and signed by
the parties to be bound, and no modification shall be effected by the
acknowledgment or acceptance of purchase order or shipping instruction forms
containing terms or conditions at variance with or in addition to those set
forth in this Agreement. No waiver by either party with respect to any breach
or default or of any right or remedy and no course of dealing, shall be deemed
to constitute a continuing waiver of any other breach or default or of any
other right or remedy, unless such waiver be expressed in writing signed by
the parties to be bound.
19.2 Section headings as to the contents of particular sections
(Articles) are for convenience only and are in no way to be construed as part
of this Agreement or as a limitation of the scope of the particular sections
(Articles) to which they refer.
19.3 All provisions of this Agreement are severable and any provision
which may be prohibited by law shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions.
19.4 This Agreement may be executed in counterparts, each of which
shall be deemed an original, but together which shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives all as of the date first
above written.
KMG-BERNUTH, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President
GB BIOSCIENCES CORPORATION
By: /s/ Xxxxxxx Xxxxxxxxxx
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Xxxxxxx Xxxxxxxxxx
Attorney-in-Fact
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