EXHIBIT 10.7
MEMORANDUM OF AGREEMENT
Contract # JWR-90-03
1. BUYER: The Procter & ▇▇▇▇▇▇ Manufacturing Company
2. SELLER: Anchor Advanced Products, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. COMMODITY: Toothbrushes
4. QUANTITY:
Buyer's requirements, including quantities for its affiliate(s)
estimated at [*] units during the period of this agreement.
5. QUALITY:
Toothbrushes are to be produced in accordance with Buyer's applicable
general and individual specifications, including any subsequent additions or
alterations mutually agreeable to Buyer and Seller. In addition, the Seller will
commit resources to continual improvement of systems and quality, statistical
process control, submission of certificates of analysis (CDA's) with each
shipment which includes results of tests to be mutually agreed on by Buyer and
Seller, and a certification of quality (COQ) program to minimize Buyer
inspection of incoming materials. Buyer will provide resources to support
Seller's efforts.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
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6. PERIOD:
7-1-93 through 12-31-97 with option to extend for three (3) additional one
(1) year periods by mutual agreement.
7. PRICE:
[*] 2 pages omitted
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
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[*]
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 3 of 15
[*]
8. PAYMENT TERMS:
Net 30 days after receipt of complete and accurate invoice in Cincinnati.
Buyer agrees that if, upon Seller's submission of properly executed
invoices, actual payment experience as of October 1, 1993 does not reflect the
30 day payment term on 95% of all invoices due for payment during the previous
30 days, Buyer will immediately adjust the payment terms to Net-15 days as
compensation for the payment delay. The adjustment will remain in effect until
such time as buyer is able to pay 95% of all invoices on time. If an on tune
payment history is resumed for 3 months, the Net-30 terms will again apply. If
in the future the late payment problem re-occurs for a period exceeding 60 days,
Seller will be entitled to request an immediate reapplication of the above
procedure.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 4 of 15
9. FREIGHT PAYMENT:
F.O.B., Morristown, TN.; freight will not be prepaid nor invoiced for
Buyer.
10. SHIPMENTS:
From Seller's stock as determined by Buyer.
11. CAPITAL COMMITMENT:
Seller has made a capital investment of [*] to date. This investment has funded
[*]. [*] In the event that Buyer totally ceases to market toothbrushes in the
U.S. at any time between 7-1-93 and 12-31-97, Buyer will be obligated to repay
Seller for [*]. Buyer's obligation will be to pay Seller for [*]
7-1-93 - 12-31-93 [*] excluding installation
1-1-94 - 12-31-94 [*] excluding installation
1-1-94 - 12-31-95 [*] excluding installation
1-1-96 - 12-31-97 [*] excluding installation
Subject to [*] in Paragraph 12, Seller will retain ownership
of the [*]. Seller may not, under any circumstances [*]. The [*] at no charge.
Buyer has no commitment to pay under this section if business is reduced or
discontinued due to taking the business in house, or to another supplier under
Sellers default as defined in Paragraph 25. Buyer shall have no further
obligation as a result of such cancellation.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
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12. SELLER/BUYER EQUIPMENT CLAIM:
a. [*]
b. [*]
c. [*]
d. [*]
13. EQUIPMENT OWNERSHIP:
[*]
14. LICENSE AGREEMENT:
[*]
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 6 of 15
15. MAINTENANCE EXPENSES:
Seller agrees to provide all normal and generally accepted maintenance and
repair on molds/presses/tufting/packaging equipment without regard to ownership.
Seller agrees to follow manufacturers maintenance recommendations.
__ Repair, Maintenance and Spare Parts Expenses
[*]
16. SECURITY
Buyer will not unreasonably restrict representatives from the ▇▇▇▇▇▇ ▇. ▇▇▇
Company or First National Bank of Chicago, Algememe Bank Nederland N.V. or West
L. B. Bank who need to briefly view molding and/or fusion as a part of their
normal oversight responsibility. Seller agrees to provide 5 working days notice
prior to any visit and permit Buyer to accompany the viewing. Seller further
agrees that any bank representative will be required to sign a CDA prior to
visiting the fusion department.
Due to the special nature of the tufting and molding systems and other
activities inside and outside the plant where competition would benefit from
knowledge, Seller commits, to the best of its ability, to maintain security
acceptable to Buyer. In particular, Seller will continue to provide a specially
secure area for all tufting machines and for presses and other
equipment/activities as special circumstances require. Buyer and Seller will
work together to define security systems and Seller will be required to commit
in writing to maintain security as mutually agreed. In no case is a current or
potential customer or other person who might directly or indirectly compromise
security have access to these areas. Only authorized employees, Buyer, and
Buyer's subcontractors (with prior authorization in writing from Buyer) may have
access to these areas.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 7 of 15
Without regard to any mutual agreement or writing, Seller unconditionally agrees
to make every reasonable effort to manage all P&G verbal and written data on a
strict need to know basis with its personnel and with suppliers or any other
person or company.
Seller also agrees to manage employee transfers to minimize security
problems and in all cases to advise P&G prior to the transfer and to have the
employee sign a confidential disclosure agreement.
Sellers failure to maintain security will be considered a default of
contract that could jeopardize volume or duration.
17. OPERATIONS:
a. Six or seven day operation will be provided, if required, to meet sales
demand. Cost premium, if any, will be limited to actual out-of-pocket expenses.
b. Effective with the date of this contract, Anchor agrees to provide the
following space within the plant:
Sq. Ft Sq. Ft.
1. Currently improved fusion 34,000 Committed for expansion* -0-
2. Currently improved molding 12,000 Committed for expansion* 1,000
3. Currently improved packaging 6,600 Committed for expansion* 6,000
* through 12/31/97, thereafter space will be committed yearly.
Cost to expand into currently unused space will be limited to the cost of
upfit to standards required for the space.
[*]
18. INVENTORY:
Seller agrees to make shipments on an as required basis using Buyer's
shipping forecasts. Should it be necessary for Seller to hold a limited quantity
of inventory to make Buyer's required shipments, there will be no
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 8 of 15
charge to Buyer. Limited is defined as not over one million brushes and for not
over 60 days per year. [*]
19. MATERIAL SUPPLIED BY BUYER:
[*]
20. Material and Labor Savings
Both companies agree that an aggressive mutual savings program will
continue. Savings opportunities will be developed by both companies and in
general the savings will be shared [*] with the exception of molding resin and
nylon market changes where price changes will be passed on as they occur.
Specifically, the following criteria will apply to savings:
When savings are expected to be less than [*]Year, sharing will be [*]
without regard to who had the idea and cost to implement.
When savings are expected to exceed [*] year, sharing will be determined
by mutual discussion prior to beginning the project. Factors that will always be
considered in addition to any other relevant factors are:
--- Who generated the idea
--- Capital/other cost to implement (qualification/equipment changes)
--- Who will fund
--- Personnel cost to implement (trips/staffing changes, etc.)
The general sharing guideline will be to split the savings in proportion to
the financial and personnel investment. Savings recap sheets will be used to
capture key elements, who participated in the review and precisely how the
savings will be split and for how long.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 9 of 15
20. SPECIFICATION CHANGES:
If Buyer desires to make changes in the specifications of any of the
commodity(ies) provided herein during the period of the Agreement, it shall be
Buyer's privilege to do so, and any change in price shall be only the mutually
agreed upon increased or decreased cost of material, labor, and equipment
revisions involved in producing commodity(ies) under the revised specifications.
If Seller is unable to produce the commodity(ies) in accordance with the new
specifications established by Buyer within a reasonable time, but not more than
90 days, and at a price acceptable to both parties, Buyer shall have the option
of purchasing such commodity(ies) from another source and terminating its
obligations under this Agreement for the commodity(ies) involved. Major
specification changes may, at Buyer's option, be subject to a separate inquiry
and/or reallocation of business.
21. WARRANTY:
Seller warrants title and that the Commodity will be manufactured according
to the specifications described in paragraph 5 and will be free from
manufacturing defects and fit for use as a toothbrush. EXCEPT AS EXPRESSLY
PROVIDED WHEREIN, THERE ARE NO OTHER WARRANTIES EXPRESS OR IMPLIED.
22. ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇:
Seller warrants that the prices set forth in this Agreement are valid under
the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ (Price Discrimination) Act and all other
pertinent laws, orders and regulations.
23. FAVORED NATIONS:
If, during the life of the Agreement the Seller sells any products or
articles substantially the same as those listed herein at prices, including
applicable freight equalization terms, lower than the prices then effective
under this Agreement, said lower price shall apply on all goods thereafter
shipped under this Agreement during the period of sale at such lower price to
others, provided Seller can legally extend such lower price to Buyer.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 10 of 15
24. MEET OR RELEASE
If at any time during the period of this Agreement Buyer can purchase
commodity of like quality at a price which will result in a delivered cost to
Buyer that is lower than the delivered cost of the material purchased hereunder,
Buyer may notify Seller of such delivered cost and Seller shall have an
opportunity of pricing material hereunder, within a reasonable time, but not
more than 90 days, on such a basis as to result in the same delivered cost to
Buyer. If Seller fails to do so or cannot legally do so, Buyer may purchase from
the supplier of the lower delivered cost material, and any purchase made shall
be held to apply on this Agreement, and the obligation of Buyer and Seller shall
be reduced accordingly.
25. TERMINATION:
a. Should Buyer by reason of product reformulation, process change, package
redesign, production changes, or other business reasons, including but not
limited to competitive activity, safety or health issues, insufficient demand
for Buyer's product, or change in Buyer's ability to produce the product, deem
it necessary to reduce or discontinue its use of the commodity(ies) covered by
this Agreement, Buyer shall have the right to reduce or discontinue Seller's
shipments hereunder provided that any such reduction or discontinuance is in the
same proportion as applied by Buyer to other suppliers, if any, supplying this
material to Buyer, and provided further, that Buyer has given Seller not less
than ninety (90) days' written notice of such reduction or discontinuance for
non-safety or health-related reductions or discountenances.
b. For safety or health-related reductions or discountenances, Paragraph
25A applies except Seller agrees to discontinue production immediately upon
receipt of written notice from Buyer.
c. Buyer may terminate if Seller's acts or omissions would be, but are not
limited to:
1. Failure to maintain security
2. Failure to maintain safety and health standards
3. Failure to provide a reliable work force and supervision of
appropriate quantity and quality
4. Failure to meet Buyer's reasonable requirements for
quantity/quality/timely shipment of product
5. Any other material breach or default hereunder
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 11 of 15
d. Either party may provide written notice of breach or default to the
other, specifying the breach or default and granting a period of ten (lO) days
in case of non payment and forty-five (45) days with respect to all other
breaches or defaults to substantially cure the breach or default. The parties
will work cooperatively in order to resolve the problem. In the event of a
failure to cure, the non-defaulting party may terminate without obligation and
may exercise any remedies under the law.
26. FORCE MAJEURE:
Fire, flood, strikes, lockout, epidemic, accident, shortage of customarily
used transportation equipment (or suitable substitutes), or other causes beyond
the reasonable control of the parties, which prevent Seller from delivering or
Buyer from receiving and/or using the commodity(ies) covered by this Agreement,
shall operate to reduce or suspend deliveries during the period required to
remove such cause. In the event of reduced deliveries by Seller under the
provisions of this Paragraph, Seller shall allocate its available supply of
commodity, component raw materials, and related manufacturing facilities among
purchases and Seller's divisions, departments, and affiliates on such basis that
Buyer's percentage reduction will not be greater than the overall percentage
reduction in total quantity of commodity, component raw materials, and related
manufacturing facilities Seller had available for supply. Any deliveries
suspended under this Paragraph shall be canceled without liability, and the
Agreement quantity shall be reduced by the quantities so omitted.
In the event non-availability of raw materials cause Seller to reduce
shipments to Buyer, Seller agrees to give Buyer the option to provide such raw
materials to Seller at a price not to exceed market price. If Buyer provides
such raw materials to Seller at such price, Seller will increase deliveries of
commodity to Buyer by the amount produced with raw materials supplied by Buyer
up to the quantity specified in the Agreement.
27. LABOR LAWS COMPLIANCE:
Whether this Agreement refers to manufactured items or to work, Seller
warrants and agrees that it has complied, and will comply, with (1) Fair Labor
Standards Act as amended, and (2) Social Security and ▇▇▇▇▇▇▇'▇ Compensation
Laws as amended, if work is done on Buyer's premises, and (3)
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 12 of 15
all other applicable laws, codes, regulations, rules and orders. Seller agrees
to indemnify Buyer and save Buyer harmless if Seller fails to comply with the
foregoing, and in the ▇▇▇▇▇ of such failure Buyer may, in addition, cancel this
Agreement.
28. FEDERAL FOOD, DRUG, AND COSMETIC ACT AND RELATED LAWS COMPLIANCE:
If this Agreement relates to the purchase of any food, drug, cosmetic or
device, or substance the intended use of which results or may reasonable be
expected to result, directly or indirectly, in its becoming a component or
otherwise affecting the characteristics of any food (including any substance
intended for use in producing, manufacturing, packing, processing, preparing,
treating, packaging, transporting, or holding food), Seller hereby guarantees
that the article comprising each shipment or other delivery now or hereafter
made by Seller to Buyer, as of the date of such shipment or delivery, is not
adulterated or misbranded within the meaning of the Federal Food, Drug, and
Cosmetic Act, as amended, or within the meaning of applicable State laws or
Municipal ordinances in which the definitions of adulteration and misbranding
are substantially the same as those contained in the above Act, and not an
article which may not, under the provisions of Section 404 or 505 of the Act, be
introduced into interstate commerce; and, that if any such article is a coal-tar
color or contains a coal-tar color, that said color was manufactured by Seller,
and is from a batch certified in accordance with the applicable regulations
promulgated under the Federal Food, Drug, and Cosmetic Act, as amended, or that
Seller has in its possession a guaranty to the same effect from the manufacturer
of said color.
29. EQUAL EMPLOYMENT OPPORTUNITY:
Some of the material or services covered by this Order is to be used on a
contract with the Federal Government to which the provisions of Section 202 of
Executive Order 11246, Section 402 of the Vietnam Era Veterans Readjustment
Assistance Act of 1974 and Section 503 of the Rehabilitation Act of 1973 apply,
and consequentially, the provisions of Section 202, Section 402 and Section 503
will become binding upon the vendor upon acceptance of the order, if this order
exceeds $10,000 or applies against a contract exceeding $10,000 in one year with
respect to Sections 202 and 402, and $2,500 with respect to Section 503.
Regulations
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 13 of 15
under the Executive Order, The Vietnam Era Veterans Readjustment Assistance Act
and the Rehabilitation Act may require Seller to develop an Affirmative Action
Compliance Program, to file an Employee Information Report EEO-1 or other
reports as prescribed, and to certify that its facilities are not segregated on
the basis of race, color, religion, or national origin. (See 41 CFR 60.)*
30. PATENT INFRINGEMENT:
By acceptance of this agreement and in consideration thereof. Seller
warrants and agrees that it will defend any suit that may arise against the
Buyer or any subsidiary or affiliated company thereof for alleged infringement
of any patents relating to any article or articles furnished hereunder, and that
the Seller will indemnify and save harmless the Buyer and any subsidiary or
affiliated company thereof, against any loss, including damages, costs and
expenses, including attorney's fees, which may be incurred by the assertion of
any patent rights by other persons. This clause shall be considered inapplicable
to agreements covering basic raw materials and basic structural material which
are unpatented and unpatentable. Buyer agrees to hold Seller harmless with
respect to liability for infringement of a design patent by reason of making or
furnishing to Buyer hereunder, any article or articles the ornamental appearance
of which was specified by Buyer and not offered by Seller as an option.
31. SELLER OWNERSHIP CHANGE:
Seller agrees that in the event that sale of its business or the segment of
its business used to supply product under this agreement, is considered during
the initial term of this agreement or during any of the 3 optional years, Seller
will consult Buyer in accordance with the August 28,1990 letter from ▇▇▇▇▇▇ ▇.
▇▇▇ Company (Attachment II).
32. FDA 483 NOTICE:
Seller agrees to notify Buyer in writing within 5 working days of receipt
of a formal notice or information given to Seller by the FDA which Seller
understands will result in a formal notice.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 14 of 15
Notification is not required if the 483 pertains to a specific operation used
only on a product made for another customer. Any notice relating to general or
specific plant operation where Buyer process would or could be effected requires
that Seller notify Buyer.
33. ION:
Seller agrees to develop and maintain an ION (electronic mail) interface
with Buyer.
34. ENTIRE AGREEMENT:
This Agreement and the CDA's between the parties dated 4/13/89 and 9/25/89
supersede all existing understandings, contracts, memoranda and correspondence
between the Buyer and the Seller which in any way affect the Seller's obligation
to manufacture and sell and the Buyer's obligation to buy the Commodity during
the term. This Agreement many be modified or amended only by a written document
signed by both parties.
35. NOTICES:
All notices relating to said Memorandum of Agreement shall be in writing
and sent by certified mall, overnight or express delivery or facsimile
transmission or delivered in person and shall be deemed delivered upon receipt.
THE PROCTER & ▇▇▇▇▇▇ MANUFACTURING CO. (Buyer)
By: /s/ ▇. ▇. ▇▇▇▇▇ Date 12/16/93
------------------------------ ---------------------------------
Name ▇. ▇. ▇▇▇▇▇ Title Health Care Product Supply Manager
----------------------------- ----------------------------------
ANCHOR ADVANCED PRODUCTS, INC. (Seller)
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Date 12/14/93
----------------------------- ---------------------------------
Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Title Exec. Vice President and
----------------------------- ---------------------------------
General Manager -Dental/Medical
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 15 of 15
ATTACHMENT II
-------------
▇▇▇▇▇▇ ▇. ▇▇▇ Company ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Telephone
▇▇▇-▇▇▇-▇▇▇▇ Fax ▇▇▇-▇▇▇-▇▇▇▇
August 28, 1990
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Purchasing Manager
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ Technical Center
▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇:
At ▇▇▇ ▇▇▇▇▇▇'▇ request, I want to follow up on ▇▇▇▇ ▇▇▇▇▇'▇ letter of May
29th. In particular, I would like to elaborate on the manner in which we would
propose to consult with you regarding any future sale of Anchor Advanced
Products. As we discussed, such involvement on the part of key customers is
unusual in our experience. However, in light of the importance of the
relationship between Anchor and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, and the proprietary nature of
the product you are developing, we feel strongly that your company's comfort and
confidence regarding a new owner is in the best interest of all parties.
We would suggest the following as a framework for your participation:
a) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ would be informed, on a confidential basis, when the
Board of Directors of Anchor has made a decision to pursue the sale of
the business;
b) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ would be provided with a list of all parties who make
formal offers or express strong interest in acquiring Anchor in the
course of any sale process; and
c) At the point in time when the list of likely acquirors has been
narrowed to a reasonably small group, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ would be
afforded the opportunity to meet with ▇▇▇▇▇▇ ▇. ▇▇▇ Company and
Anchor's senior management to discuss each of the buyers and express
particular issues and concerns that any of them might raise from
▇▇▇▇▇▇▇ & Gamble's perspective.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Letter to ▇▇▇▇▇ ▇▇▇▇▇
August 28, 1990
Page Two
I hope that this framework give you comfort that you will have a full
opportunity to consult with us during a process of sale. Please feel free to
call me or ▇▇▇▇ ▇▇▇▇▇▇ if you have any questions regarding this approach.
Very truly yours,
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
SAS:slu
cc: ▇▇▇▇▇▇ ▇▇▇▇▇▇
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
