Manufacturing And Distribution Agreement

Exhibit 10.2


MANUFACTURING AND DISTRIBUTION AGREEMENT


Manufacturing and Distribution Agreement, dated as of September 28, 2001 (this "Agreement"), between Church & Dwight Co., Inc., a
--------- Delaware corporation ("C&D"), and Armkel, LLC, a Delaware limited liability
--- company ("Armkel") (each of Armkel and C&D, a "Party" and collectively, the
------ ----- "Parties"). -------
RECITALS:


WHEREAS, Carter-Wallace, Inc., a Delaware corporation ("CW")
-- and Armkel have executed and delivered an Asset Purchase Agreement, dated as of May 7, 2001 (including the exhibits, schedules and annexes thereto, and as amended, the "Asset Purchase Agreement"), providing for, among other things, the
------------------------ sale, conveyance, transfer, assignment and delivery to Armkel of all of CW's and its Affiliates' rights, title and interest in and to the Purchased Assets (as defined in the Asset Purchase Agreement) and the assumption by Armkel of all of the Assumed Liabilities (as defined in the Asset Purchase Agreement; such sales, transfers, assignments, purchases, acceptances and assumptions collectively, the "Asset Purchase"); --------------


WHEREAS, in connection with the transactions contemplated by the Asset Purchase Agreement, C&D and Armkel have agreed that C&D will manufacture and distribute certain products for Armkel in North America, for the period and subject to the terms and conditions set forth in this Agreement.


NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:


ARTICLE I


DEFINITIONS


1.1 General Terms. For purposes of this Agreement, the
------------- following terms have the meanings hereinafter indicated:


"Affiliate" shall mean, with respect to any Person, any other
--------- Person directly or indirectly controlling, controlled by or under common control with such Person as of the time of determination.


"Agreement" shall have the meaning assigned thereto in the
--------- Preamble.


"Armkel" shall have the meaning assigned thereto in the
------ Preamble.


"Armkel Indemnified Parties" shall have the meaning specified
-------------------------- in Section 8.2.


"Asset Purchase" shall have the meaning assigned thereto in
-------------- the Recitals.


"Asset Purchase Agreement" shall have the meaning assigned
------------------------ thereto in the Recitals.


"Bankruptcy Event" with respect to a Party shall mean the filing
---------------- of an involuntary petition in bankruptcy or similar proceeding against such Party seeking its reorganization, liquidation or the appointment of a receiver, trustee or liquidator for it or for all or substantially all of its assets, whereupon such petition shall not be dismissed within 60 days after the filing thereof, or if such Party shall (i) apply for or consent in writing to the appointment of a receiver, trustee or liquidator of all or substantially all of its assets, (ii) file a voluntary petition in bankruptcy or similar proceeding or admit in writing its inability to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) file a petition or an answer seeking reorganization or an arrangement with its creditors or take advantage of any insolvency law with respect to itself as debtor, or (v) file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency proceedings or any similar proceedings.


"Business Day" shall mean any day other than a Saturday, a Sunday
------------ or a day on which banks in the City of New York are authorized or obligated by law or executive order to close.


"Capital Repairs" shall have the meaning specified in Section
--------------- 3.2.


"Change of Control" means the occurrence of any of the following
----------------- events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the capital stock of C&D outstanding at such time; (ii) a merger or consolidation or similar transaction involving C&D after which the holders of C&D's capital stock do not own at least 65% of the total voting power represented by the capital stock of the surviving entity of such merger or consolidation; or (iii) the adoption of a plan of complete liquidation or the sale or disposition by C&D of at least 75% of its assets in any one or series of transactions.


"Claim Notice" shall have the meaning specified in Section 8.3.
------------


"Closing" shall have the meaning set forth in the Asset Purchase
------- Agreement.


"Closing Date" shall have the meaning set forth in the Asset
------------ Purchase Agreement.


"Confidential Information" shall have the meaning specified in
------------------------ Section 9.2.


"CW" shall have the meaning assigned thereto in the Recitals.
--


"C&D" shall have the meaning assigned thereto in the Preamble.
---


"C&D Indemnified Parties" shall have the meaning specified in
----------------------- Section 8.1.


"Distribution Services" shall have the meaning specified in
--------------------- Section 2.3.


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"Equipment" shall mean the equipment and tangible personal property
--------- set forth on Exhibit A.


"Facility" shall mean the facility where the Products are currently
-------- manufactured or such other facility as the Parties may agree.


"Fees and Costs" shall mean the Fees and Costs listed on Schedule A
-------------- hereto, or as otherwise agreed by the Parties.


"Force Majeure Event" shall have the meaning specified in Section 9.1.
-------------------


"Good Manufacturing Practices" shall have the meaning specified in
---------------------------- Section 5.9(a).


"Indemnified Party" shall have the meaning specified in Sections 8.1
----------------- and 8.2.


"Indemnifying Party" shall have the meaning specified in Sections 8.1
------------------ and 8.2.


"Indemnity Claim" shall have the meaning specified in Section 8.3.
---------------


"Kelso Member" shall have the meaning set forth in the LLC Agreement.
------------


"LLC Agreement" shall mean the Amended and Restated Limited Liability
------------- Company Agreement of Armkel, LLC, dated as of August 27, 2001, as the same may be amended or modified from time to time.


"Losses" shall have the meaning specified in Section 8.1.
------


"Manufacturing Services" shall have the meaning specified in Section
---------------------- 2.2(a).


"Marks" shall have the meaning specified in Section 9.4.
-----


"New Product" shall mean a new product for the Nair product line not
----------- initially included on Exhibit B on the Closing Date but which is added to Exhibit B in accordance with the provisions of Section 2.5. A New Product shall be deemed to constitute a Product from and after the date Exhibit B is amended pursuant to Section 2.5; provided that all references in this Agreement to New
-------- Products shall continue to include New Products that have become Products and have been added to Exhibit B.


"Notice Period" shall have the meaning specified in Section 8.3.
-------------


"Party" shall have the meaning assigned thereto in the Preamble.
-----


"Person" shall mean any individual, firm, partnership, association,
------ group (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended, as such Rule is in effect on the date of this Agreement), corporation, limited liability company or other entity.


"Product Production Order" shall have the meaning specified in Section
------------------------ 4.2.


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"Products" shall mean those products listed on Exhibit B, and those
-------- products, if any, which may be added to Exhibit B by the mutual written agreement of the Parties.


"Recall" shall have the meaning specified in Section 5.12.
------


"Rejection Notice" shall have the meaning specified in Section 5.10.
----------------


"Removal Period" shall have the meaning specified in Section 3.3.
--------------


"Representative" shall have the meaning specified in Section 2.8.
--------------


"Services" shall mean the Manufacturing Services and the Distribution
-------- Services as set forth on Schedule A.


"Specifications" shall mean the specifications currently used by CW to
-------------- produce the Products, as revised in accordance with Section 2.2 (b).


"Subsidiary" shall mean, with respect to any Person, more than 50% of
---------- the outstanding voting power of which is at the time owned or controlled directly or indirectly by such Person or by one or more of such subsidiary entities, or both.


"Third Party Claim" shall have the meaning specified in Section 8.3.
-----------------


"Variable Costs" shall mean the direct labor and direct materials
-------------- costs for producing units of a Product or New Product, as the case may be.


ARTICLE II


SERVICES AND PRODUCTS


2.1 Services.
---------


(a) C&D shall provide or cause one of its Affiliates to provide to Armkel or the relevant Affiliate of Armkel the Services for the term of the Agreement. The Services shall be as described on Schedule A. Additions or variations to the level of the Services or Fees and Costs identified on Schedule A hereto may be made from time to time by agreement between the Parties as set forth in a revised Schedule A. In the event any Service is terminated in accordance with Section 6.3(c), this Agreement shall remain in effect unless otherwise terminated in full in accordance with Article VI.


(b) Each Party shall create and maintain full and accurate books in connection with the provision of the Services, and all other records relevant to this Agreement, and upon reasonable notice from the other Party shall make available for inspection and copy by such other Party's agents such records during reasonable business hours.


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2.2 Manufacturing Services.
----------------------


(a) Product Quantities. During the term of this Agreement, and
------------------ subject to the provisions of this Agreement, C&D shall manufacture and supply to Armkel in accordance with the terms of this Agreement, including, without limitation, the Specifications in respect to the Products, 100% of Armkel's total requirements for the Products (such manufacturing and supply services, the "Manufacturing Services"). ----------------------


(b) Revised Specifications. At the request and at the sole cost and
---------------------- expense of Armkel, the Specifications for any Products manufactured hereunder may be revised at any time upon the agreement of C&D, which agreement will not be unreasonably withheld, delayed or conditioned. The cost of conversion to the new Specifications shall be composed of C&D's actual conversion costs reasonably incurred by C&D at Armkel's direction, and with C&D's agreement contemplated by this Section 2.2.


2.3 Distribution Services. During the term of this agreement C&D will
--------------------- supply Armkel with supply chain and distribution services ("Distribution
------------ Services") with respect to all Armkel products, including order entry and - -------- processing, production planning and deployment of inventory, warehousing of products, transportation and the distribution services set forth on Schedule A. These services will be provided in the same manner that C&D uses in support of its own products. Where ever practicably possible C&D will bill Armkel for Distribution Services on a direct cost basis. Where a direct cost basis is not possible costs will be allocated on a mutually agreed upon basis.


2.4 Changes. Except with the prior written consent of Armkel, C&D
------- will not make any change to Product ingredients, components, Specifications, trade dress or packaging. Costs incurred by C&D for any changes requested by Armkel shall be borne by Armkel.


2.5 New Products. If Armkel develops a New Product for commercial
------------ manufacture, it may submit a proposal to C&D to manufacture and supply such product, which proposal shall include its best estimate of the Variable Costs of manufacturing and supplying the New Product. The Variable Costs of manufacturing such New Product shall be determined in a manner consistent with the calculation of Variable Costs for all other Products. C&D shall be obligated to manufacture such New Product for Armkel to the extent that such New Product is a line extension of an existing Product and the Parties agree upon reasonable Variable Costs; provided that C&D shall not be obligated to manufacture any New Product
-------- for Armkel for which C&D lacks the necessary equipment unless Armkel agrees to purchase or otherwise supply such equipment for C&D. Any proposal for the manufacture and distribution by C&D of a New Product that is a new formulation of an existing Product shall be discussed by the Parties as to the feasibility and reasonable costs of manufacturing such New Product. Notwithstanding anything to the contrary contained herein, Armkel shall have the right to have a New Product manufactured by a third party if Armkel decides not to accept C&D's final proposal for the manufacture and distribution of such New Product (in such case a New Product shall not become a "Product" for purposes of this Agreement). If Armkel accepts C&D's proposal with respect to the manufacture and distribution of a New Product, the Parties will reevaluate the manufacturing overhead costs set forth on Schedule A and if such New Product production is anticipated to materially increase such manufacturing overhead costs, the Parties will agree on a new


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manufacturing overhead costs. Armkel will purchase 100% of its requirements for any New Products for which the Parties agree that C&D will manufacture pursuant to this Section.


2.6 No Competitive Products by C&D. C&D agrees that it shall not
------------------------------ manufacture, nor cause or allow any of its Affiliates to manufacture, the Products for any reason except as provided in this Agreement. Notwithstanding the foregoing, the Parties acknowledge and agree that the Products may be manufactured by a third party from time to time for limited periods, as determined by C&D in its reasonable discretion, provided that the Fees and Costs set forth on Schedule A shall remain applicable to the Manufacturing Services hereunder. Except as provided in this Agreement, during the term of this Agreement, C&D shall not manufacture, nor cause any of its Affiliates to manufacture, for itself or for an other party, any product that is the same as, or similar in design, function or appearance to, the Products.


2.7 Parameters of Services; Standard of Service. (a) The Services
------------------------------------------- shall be in scope and nature substantially the same as such Services were provided within CW for the four quarters prior to the date of the Asset Purchase Agreement unless otherwise agreed to by the Parties.


(b) In performing the Services, C&D or any of its Affiliates providing the Services on its behalf shall provide substantially the same level of service and use substantially the same degree of care as consistent with the highest level of services, determined on an aggregate basis, provided by C&D to its own products, divisions or Subsidiaries, and in connection with the provision of such Services, C&D shall not favor its own products, divisions or Subsidiaries over those provided to Armkel (when viewed on an aggregate basis) (it being understood that C&D may be unable to retain and/or attract qualified employees from time to time; accordingly, to the extent C&D is so affected, C&D shall not be in breach of its obligations hereunder so long as it uses its reasonable best efforts to hire or make available replacement personnel to perform the Services required hereunder).


(c) C&D agrees that the person it appoints as a Representative in accordance with Section 2.8 hereof, the members of the manufacturing team and the providers of any other Services hereunder will have the appropriate skill sets to perform such functions in the good faith judgment of C&D and will not have any material conflicts of interest of which C&D has knowledge or responsibilities that materially conflict with performing those functions and Services, in either case without the prior consent of Armkel.


2.8 Representatives. Each of Armkel and C&D shall nominate a
--------------- representative (each, a "Representative") to act as the primary contact person with respect to the Services provided hereunder. Each of Armkel and C&D shall advise the other in writing of its appointment of a Representative or any successor Representative. The initial Representatives are:


For C&D: Mark Conish
For Armkel: Maureen Usifer


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The Representatives shall periodically discuss the quality of Services provided hereunder and shall attempt in good faith to resolve all matters that may arise during the term of this Agreement.


2.9 Ownership. Armkel represents that it has acquired all rights,
--------- title and interests in and to the Products and the related intellectual property pursuant to the Asset Purchase Agreement. Neither C&D nor any Affiliate thereof is acquiring pursuant to this Agreement any ownership interests in the Products manufactured hereunder or any related intellectual property (other than C&D's ownership of inventory in the ordinary course of manufacture hereunder, until title passes pursuant to Section 4.4).


2.10 Agreement to Provide Transition Services in the Event of a Third
---------------------------------------------------------------- Party Sale. In the event of a sale of Armkel or any Subsidiary or business unit - ---------- thereof to a third party, C&D shall be required to offer to provide to any such third party purchaser transition services for the purchased business of the type provided to Armkel pursuant to this Agreement. C&D shall offer to provide such services for a period of no less than one year from the date of such sale. The terms on which such services shall be provided shall be (a) for the first 90 days of any transition period, substantially similar to the terms on which services are provided by C&D to Armkel pursuant to this Agreement; and (b) thereafter, on a fully-allocated cost basis for the remainder of such one-year period.


ARTICLE III


EQUIPMENT


3.1 Equipment License. Armkel hereby grants to C&D a royalty-free
----------------- license to use the Equipment for the sole and exclusive purpose of manufacturing the Products for Armkel, and C&D hereby accepts such license, all on the terms and conditions set forth in this Agreement. The Equipment and Confidential Information shall at all times be and remain the property of Armkel, and C&D shall have no interest therein or rights thereto except as specifically provided in this Agreement. C&D shall not remove the Equipment from the Facility during the term of this Agreement or thereafter without Armkel's written consent. If requested by Armkel, C&D shall affix to the Equipment asset tags indicating that the Equipment is the property of Armkel. C&D acknowledges that it is a bailee with respect to the Equipment.


3.2 Maintenance and Repair of Equipment. During the term of this
----------------------------------- Agreement, C&D shall perform, at its cost and expense, all routine maintenance and repair in substantial conformity with what has historically been performed on the Equipment at such intervals as have been historically customary to maintain the Equipment in good working order, including but not limited to changing oil, replacing filters and lubrication. Armkel shall bear the costs and expenses of repairs to the Equipment that are not routine or which extend the useful life of the Equipment beyond routine maintenance and servicing (referred to herein as "Capital Repairs"). If the historical performance of maintenance,
--------------- cleaning, and repair failed to conform with current Good Manufacturing Practices, C&D agrees to henceforth comply with such equipment standard. If C&D ascertains that the Equipment requires any Capital Repairs, C&D shall promptly advise Armkel thereof by telephone or fax pursuant to Section 9.10 hereof.


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Except in the case of an emergency, Armkel shall have the right to direct the manner in which such Capital Repairs shall be effected, and C&D shall abide by such directions. To the extent C&D reasonably incurs any out-of-pocket costs or otherwise at Armkel's direction for Capital Repairs (including time of its own employees in diagnosing or effecting any such repairs), C&D shall invoice Armkel therefor, which invoice shall be accompanied by the invoices or vouchers for such costs. Armkel shall pay such invoice within 30 days after its receipt thereof.


3.3 Return of Equipment. After any termination hereunder and for one
------------------- month thereafter (the "Removal Period"), Armkel and its designated contractors
-------------- shall have the right (which Armkel may exercise at any time and from time to time during such period, upon reasonable notice and subject to the consent of C&D, which consent shall not unreasonably be withheld) to enter upon the Facility and remove the Equipment or any components thereof therefrom, provided,
-------- however, that such removal shall not unreasonably interfere with operation of - ------- the Facility. During the course of such removal, C&D may reasonably restrict access by Armkel's employees to the areas of the Facility where products other than Armkel's products are being manufactured; provided, that in no event shall
-------- Armkel be ultimately prevented from removing the Equipment as a result of such restrictions. Equipment not removed by the expiration of the Removal Period shall be and become the property of C&D without further act or charge. C&D shall cooperate with Armkel and shall provide at Armkel's request employees to assist Armkel in disassembling and crating any such Equipment prior to its removal. C&D's obligation to provide employees to assist in disassembling and crating equipment shall be contingent upon C&D having employees available for such duties without adversely impacting C&D's other operations; provided, that to the
-------- extent Armkel has requested of C&D that Equipment be removed and it is not removed due to C&D not providing sufficient employees to assist in the removal, the date referenced in the first sentence of this Section 3.3 shall be extended to the extent required to permit removal of the Equipment with the necessary assistance of C&D's employees. Armkel shall repair any damage to the Facility caused by such removal and shall reimburse C&D for reasonable out-of-pocket costs (including time of C&D's own employees) incurred by C&D in disassembling and crating the Equipment, costs for which are to be agreed upon by both parties in good faith in advance of any such activity. It is Armkel's responsibility to validate that Equipment is operational before removal and, without limiting C&D's obligation to provide Armkel assistance as contemplated hereby, it is Armkel's sole responsibility to ensure successful removal, transportation and reinstallation in Armkel's facility. C&D makes no warranties for Equipment other than that it will be maintained as described herein. During Equipment removal, Armkel agrees to adhere to the general contractor and removal procedures and standards observed in the consumer products industry.


ARTICLE IV


PRODUCT SCHEDULING


In order to permit production and supply in the most efficient and economical manner possible, the following procedures shall apply during the term of this Agreement:


4.1 Best Estimated Forecast of Product Requirements. Armkel shall
----------------------------------------------- provide C&D with its best estimated 12-month rolling forecasts of Armkel's requirements, by month and


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by seven digit SKU number, for supply of the Products. Except for the first forecast which shall be delivered at or prior to the Closing and which shall be for the number of days from the date of the Closing until the next following December 31, each such forecast will be for a 12-month period beginning on the first month to which it applies and shall be due 60 days before commencement of the period to which it applies. The forecasts delivered hereunder are not firm commitments by Armkel to order or purchase the Products, but are provided only as a guide to assist C&D in scheduling production.


4.2 Production Orders. Armkel will issue to C&D production orders
----------------- which shall serve as a firm order for the Products (each, a "Product Production
------------------ Order"). Such Product Production Orders shall be issued at least fourteen - ----- calendar days prior to the anticipated delivery date for Products covered by such order or such other longer lead ...