Arrid Manufacturing Agreement

Exhibit 10.3


ARRID MANUFACTURING AGREEMENT


Arrid Manufacturing 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, included within the Purchased Assets and Assumed Liabilities are assets and liabilities relating to (i) the Arrid Extra Dry, Arrid XX and Lady's Choice anti-perspirant and deodorant product lines of the Business for the United States and Canadian markets (the "APD Product Lines")
----------------- and (ii) the Lambert Kay division of pet products (the "Lambert Kay Product
------------------- Line," and collectively with the APD Product Lines, the "Product Lines - ---- ------------- Business"); - --------


WHEREAS, with respect to the Product Lines Business, Armkel and C&D have executed and delivered an Amended and Restated Product Line Purchase Agreement, dated as of July 30, 2001 and effective as of May 7, 2001 (the "Product Line Purchase Agreement"), providing for, among other things, the
------------------------------- sale, conveyance, transfer, assignment and delivery to C&D of all of Armkel's rights, title and interest in and to the PL Purchased Assets (as defined in the Product Line Purchase Agreement) and the assumption by C&D of the PL Assumed Liabilities (as defined in the Product Line Purchase Agreement);


WHEREAS, following the Asset Purchase, Armkel will retain ownership and operation of the Cranbury, New Jersey manufacturing and distribution facility (the "Facility") where certain Products (as defined
-------- herein) related to the APD Product Lines are manufactured and distributed;


WHEREAS, pursuant to the Product Line Purchase Agreement, C&D has purchased the Equipment (as defined herein) located at the Facility and used in manufacturing the Products; and


WHEREAS, in connection with the transactions contemplated by the Asset Purchase Agreement and the Product Line Purchase Agreement, C&D and Armkel have agreed that Armkel will manufacture and sell and C&D will purchase supplies of the Products in the quantities, 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.


"APD Product Lines" shall have the meaning assigned thereto in
----------------- the Recitals.


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


"Armkel Indemnified Parties" shall have the meaning specified
-------------------------- in Section 8.1.


"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


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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 Product Line
------- Purchase Agreement.


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


"Collective Bargaining Employee" shall have the meaning
------------------------------ specified in Section 2.6(a).


"Collectively Bargained Agreements" shall have the meaning
--------------------------------- specified in Section 2.6(a).


"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 8.2.


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


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


"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.


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"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.


"Lambert Kay Product Line" shall have the meaning assigned
------------------------ thereto in the Recitals.


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


"Manufacturing Costs" shall mean, to the extent incurred in
------------------- manufacturing and supplying the Products hereunder, all of Armkel's (i) actual material and inbound freight costs, plus (ii) direct labor costs, plus (iii)
---- ---- manufacturing and quality control overhead, including without limitation, employees, production and lab supplies, repairs, maintenance and depreciation of equipment, warehousing and facility space costs, which overhead, in the case of employees of Armkel, shall be composed of the product of (x) the sum of all salary, wages and benefits of the relevant employee, multiplied by (y) the
------------- quotient of (I) the amount of time such employee is engaged in activities for Armkel that relate to the manufacture of the Products hereunder divided by (II)
---------- the total amount of time such employee is engaged in activities for Armkel.


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


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


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


"Product Lines Business" shall have the meaning assigned
---------------------- thereto in the Recitals.


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


"Production CBA" shall have the meaning specified in Section
-------------- 2.6(a).


"Production Employees" shall have the meaning specified in
-------------------- Section 2.6(a).


"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.


"QC CBA" shall have the meaning specified in Section 2.6.
------


"QC Employees" shall have the meaning specified in Section
------------ 2.6.


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"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.


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


"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.


"Transition Services Agreement" shall have the meaning
----------------------------- specified in Section 2.6(b).


"Union" shall have the meaning specified in Section 2.6(a).
-----


ARTICLE II


SERVICES AND PRODUCTS


2.1 Services. (a) Armkel shall provide or cause one of its
-------- Affiliates to provide to C&D or the relevant Affiliate of C&D the Manufacturing Services for the term of the Agreement. The Manufacturing Services shall be as described in Section 2.2. Additions or variations to the level of the Manufacturing Services or Manufacturing Costs may be made from time to time by agreement between the Parties. In the event any Manufacturing Service is terminated in accordance with Section 6.4, 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 Manufacturing 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.


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


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


(b) Revised Specifications. At the request and at the
---------------------- sole cost and expense of C&D, the Specifications for any Products manufactured hereunder may be revised at


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any time upon the agreement of Armkel, which agreement will not be unreasonably withheld, delayed or conditioned. The cost of conversion to the new Specifications shall be composed of Armkel's actual conversion costs reasonably incurred by Armkel at C&D's direction, and with Armkel's agreement contemplated by this Section 2.2.


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


2.4 No Competitive Products by Armkel. Armkel 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 Armkel in its reasonable discretion, provided that the Manufacturing Costs shall remain applicable to the Manufacturing Services hereunder. Except as provided in this Agreement, during the term of this Agreement, Armkel 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. Notwithstanding the foregoing, nothing contained in this Agreement shall prohibit Armkel from manufacturing and distributing products for the Arrid, Arrid XX and Lady's Choice product lines to the extent such assets or product lines are retained by Armkel under Section 1.2(a) of the Product Line Purchase Agreement (i.e., Armkel may manufacture and distribute the Arrid, Arrid XX and Lady's Choice product lines for the U.K. and Australian markets).


2.5 Parameters of Services; Standard of Service. (a) The
------------------------------------------- Manufacturing Services shall be in scope and nature substantially the same as such Manufacturing 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 Manufacturing Services, Armkel or any of its Affiliates providing the Manufacturing Services on its behalf shall provide substantially the same level of service and use substantially the same degree of care as consistent with the level of services provided within CW for the four quarters prior to the date of the Asset Purchase Agreement, and in connection with the provisions of such Manufacturing Services, Armkel shall not favor its own products, divisions or Subsidiaries over those provided to C&D (when viewed on an aggregate basis) (it being understood that Armkel may be unable to retain and/or attract qualified employees from time to time; accordingly, to the extent Armkel is so affected, Armkel 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 Manufacturing Services required hereunder).


2.6 Collective Bargaining Employees. (a) Upon the Closing, and
------------------------------- to the extent consistent with its obligations under the Collectively Bargained Agreements (as defined herein), Armkel shall make available to C&D a sufficient number of (i) certain production employees ("Production Employees") who are
-------------------- covered under the collective bargaining agreement (the "Production CBA") between
-------------- Armkel and the Paper, Allied-Industrial, Chemical and Energy Workers International Union, AFL-CIO, CLC and its Local 2-5570 (the "Union") to operate
----- the


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APD Product Lines operations at the Facility and (ii) certain quality control employees ("QC Employees", and together with Production Employees, the
------------ "Collective Bargaining Employees") who are covered under the collective ------------------------------- bargaining agreement (the "QC CBA," and collectively, with the Production CBA,
------ the "Collectively Bargained Agreements") between the Union and Armkel to
--------------------------------- perform, at the direction of C&D's employees, certain quality control functions with respect to the APD Product Lines consistent with past practice at the Facility. As of the date of this Agreement, C&D estimates that it will require 78 Production Employees and 15 QC Employees. C&D will update such estimates monthly during the term that Manufacturing Services are provided.


(b) Subject to the Collectively Bargained Agreements and the Transition Services Agreement, dated as of the Closing Date, between Armkel and CW (the "Transition Services Agreement"), C&D shall have priority rights to
----------------------------- choose which skilled or partially qualified Collective Bargaining Employees are made available to it by Armkel.


(c) C&D will use its best efforts to provide Armkel with 30 days' prior written notice if it shall require that Armkel reduce or increase the number of Collective Bargaining Employees it is providing to C&D, but Armkel shall be required to provide additional Collective Bargaining Employees to C&D only if Armkel has such Collective Bargaining Employees available to it and to the extent consistent with its obligations under the Collectively Bargained Agreements and the Transition Services Agreement.


(d) No Collective Bargaining Employee and no employee of Armkel performing Manufacturing Services for C&D at the Facility shall be deemed to be an employee of C&D; provided, however, that no Collective Bargaining
-------- Employee and no employee of Armkel performing Manufacturing Services for C&D at the Facility shall be permitted by C&D to perform any task for which such Collective Bargaining Employee or employee of Armkel performing Manufacturing Services for C&D at the Facility does not possess necessary training, education and background, or for which such Collective Bargaining Employee or employee of Armkel performing Manufacturing Services for C&D at the Facility is otherwise disqualified by applicable law or regulation.


2.7 Ownership. Neither Armkel 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 Armkel's ownership of inventory in the ordinary course of manufacture hereunder, until title passes pursuant to Section 4.4).


ARTICLE III


EQUIPMENT


3.1 Equipment License. C&D hereby grants to Armkel a
----------------- royalty-free license to use the Equipment for the sole and exclusive purpose of manufacturing the Products for C&D, and Armkel 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 C&D, and Armkel shall have no interest therein or rights thereto except as specifically provided in this Agreement. Armkel shall not remove the Equipment from the


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Facility during the term of this Agreement or thereafter without C&D's written consent. If requested by C&D, Armkel shall affix to the Equipment asset tags indicating that the Equipment is the property of C&D. Armkel acknowledges that it is a bailee with respect to the Equipment.


3.2 Maintenance and Repair of Equipment. During the term of
----------------------------------- this Agreement, Armkel 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. C&D 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, Armkel agrees to henceforth comply with such equipment standard. If Armkel ascertains that the Equipment requires any Capital Repairs, Armkel shall promptly advise C&D thereof by telephone or fax pursuant to Section 9.10 hereof. Except in the case of an emergency, C&D shall have the right to direct the manner in which such Capital Repairs shall be effected, and Armkel shall abide by such directions. To the extent Armkel reasonably incurs any out-of-pocket costs or otherwise at C&D's direction for Capital Repairs (including time of its own employees in diagnosing or effecting any such repairs), Armkel shall invoice C&D therefor, which invoice shall be accompanied by the invoices or vouchers for such costs. C&D 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"), C&D and its designated
-------------- contractors shall have the right (which C&D may exercise at any time and from time to time during such period, upon reasonable notice and subject to the consent of Armkel, 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, Armkel may reasonably restrict access by C&D's employees to the areas of the Facility where products other than C&D's products are being manufactured; provided, that in no
-------- event shall C&D 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 Armkel without further act or charge. Armkel shall cooperate with C&D and shall provide at C&D's request employees to assist C&D in disassembling and crating any such Equipment prior to its removal. Armkel's obligation to provide employees to assist in disassembling and crating equipment sh ...