Exhibit 10.21
CONFIDENTIAL TREATMENT REQUESTED
UNDER
C.F.R SECTIONS 200.80(b)(4), 200.83 AND
230.406.
**** INDICATES OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST
FILED SEPARATELY WITH THE COMMISSION.
THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
SUPPLY
AGREEMENT
THIS SUPPLY AGREEMENT,
dated as of June 18, 1998, by
and between COLGATE PALMOLIVE COMPANY, a Delaware, U.S.
corporation (“Colgate”) and Inmobiliaria Hills, S.A.
de C.V. , a Mexican corporation (“IH”), and
RHONE-POULENC de Mexico, S.A. de C.V., a Mexican corporation
(“RP”).
WHEREAS, RP has agreed to invest the capital to construct
a manufacturing plant (the “Plant”) located at KM 47,
Carretera Federal 57 Queretaro-San Luis Potosi, Carretera Entroncal
a San Jose Iturbide, KM 0.8, San Jose Iturbide, Guanajuato, within
Mission Hills, Mexico (the “Colgate Facility), as more fully
set forth in that certain letter of intent, dated July 18,
1997 between Colgate and RP (the “Letter of
Intent”);
WHEREAS, RP shall lease the real property upon which the
Plant is located from a Colgate affiliate pursuant to a lease (the
“Lease”).
WHEREAS, pursuant to an “Operations
Agreement” (as defined herein) RP shall manufacture and
produce, dicalcium phosphate (the “Product”) at the
Plant, meeting the specifications set forth herein and bearing
RP’s trademark, and RP is willing to supply the Product to
Colgate and IH pursuant to this Agreement and the Operations
Agreement;
WHEREAS, Colgate and IH desire to purchase the Product
from RP pursuant to the terms and conditions as are set forth
therein; and
WHEREAS, Colgate desires to allocate purchases of Product
to its related entities and affiliates around the world and to
cause the same to purchase Product under this Agreement
NOW THEREFORE,
in consideration of the promises and
of the mutual agreements and covenants hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
CERTAIN
DEFINITIONS
Section 1.1. Defined Terms :
As used in this Agreement, the following terms shall have the
meanings set forth below:
“Commencement Date”
shall mean the date on which all design objectives for the Plant
have been met and commercial production of the Product
commences.
“Contract Year” shall
mean a twelve (12) month period during the Term (as defined in
Section 3.1); the first “Contract Year” shall
begin at the end of the month in which the Commencement Date
falls.
“Global Agreement” shall
mean the Global Supply Agreement, dated January 1, 1996, between RP
and Colgate, as amended or extended by the parties to that Global
Agreement from time to time.
“Operations Agreement”
shall mean that certain Operations Agreement, dated as of
June 18, 1998, between a Colgate affiliate and RP relating to
the Plant.
“Order” shall mean
orders by Colgate for the Product in accordance with Article
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“Output” shall mean the
quantity of Product to be manufactured by RP at the Plant, as
determined in accordance with annual, quarterly and monthly
forecasts provided to RP by Colgate, a Colgate affiliate or entity
and IH.
“PPI Index” shall mean
the Producer Price Index, less food component, published by the
United States Bureau of Labor from time to time.
“Specifications” shall
mean the specifications for the Product set forth on Exhibit A
hereto.
“Start-up Phase” shall
mean the period beginning on the Commencement Date and ending after
the thirty (30) day period during which the Plant is able to
produce Product at a rate of at least 54.7 (fifty four and seven
tenths) metric tons per day meeting the Specifications.
Other terms not defined in this
Article I but otherwise defined herein shall have the meanings so
otherwise defined.
ARTICLE 2
SUPPLY OF PRODUCT, QUANTITY
AND PRICE
Section 2.1. Supply of
Product
(a) Effective upon the Commencement
Date, RP shall (****) Output of the Plant and, as an inducement for
RP to consider and authorize the construction of the Plant using
capital provided by RP, Colgate, Colgate affiliates or entities and
IH shall purchase (****) Output of the Plant as follows:
(i) IH shall purchase (****)
Product, currently estimated to be (****) per year, from the Plant.
Such requirement will be expressly excluded from
Colgate’s
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Mexican requirements under the
Global Agreement, and Colgate’s obligations under the Global
Agreement shall be reduced accordingly;
(ii) Colgate shall cause affiliates,
entities or operating divisions to purchase (****), after giving
effect to purchases of IH under Section 2.1(a)(i) above, in
partial satisfaction of its other requirements for the Product
outside of Mexico, which amounts shall not reduce or otherwise
affect Colgate’s obligations under the Global Agreement. Such
purchases may be allocated by Colgate in its sole discretion, and
may be made pursuant to individual supply agreements in the form
set forth in Exhibit C, or in a form substantially similar thereto.
Such agreements may include other terms and conditions, which shall
be binding, except to the extent that they conflict with this
Agreement, in which case, the latter shall control.
(b) Notwithstanding anything to the
contrary herein, Colgate, IH or other Colgate affiliates, entities
or operating divisions shall pay (****) of Product contracted as
set forth in Exhibit B, (****) per ton (collectively the
“(****)”) for all Product actually forecasted (****)
and meeting the Specifications, whether or not Colgate, IH, or any
Colgate affiliate or entity actually accepts delivery of such
Product, in accordance with Exhibit B. The parties acknowledge that
the volumes and pricing set forth herein are designed to enable RP
to recover its capital investment for the Plant (****).
Section 2.2. Price
.
(a) The price to be paid to RP for
each metric ton of Product (the “Price”) forecasted by
Colgate or IH and produced at the Plant shall be determined as set
forth on Exhibit B.
(b) If at any time during the term
of this Agreement RP sells (****) Product (****), IH or any Colgate
affiliate pursuant to this Agreement, at prices lower than the
Price then in effect, RP shall give Colgate and IH prompt written
notice of any such sale and its price and shall reduce the Price
for the Product to prices equivalent to the lower prices so
disclosed (****) of Product purchased by Colgate, IH or any Colgate
affiliate.
(c) For the purposes of determining
the Price, the parties acknowledge and agree that (****) Plant
relating to the manufacture of Product shall be supplied in
accordance with the terms of the Operations Agreement (****) under
the terms of that agreement.
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(d) Notwithstanding anything to the
contrary in this Agreement, the parties acknowledge and agree
that:
(i) (****) during each Contract Year
following the Start-Up Phase, and that the cost structure set forth
on Exhibit B is based upon (****); (ii) in the event that
(****) forecasted and/or purchased under this Agreement is (****)
per each such Contract Year, Colgate, IH or a Colgate affiliate or
entity agrees to pay to RP the (****) (it being expressly
understood and acknowledged that the (****) Product actually
produced at the Plant; such costs shall be calculated each month
and shall be included in the invoices issued pursuant to Sections
5.1); and (iii) if Colgate, IH or any Colgate affiliate or
entity (****) during any Contract Year the Price applicable to each
metric ton of Product (****) shall be adjusted in accordance with
Exhibit B.
ARTICLE 3
TERM AND
TERMINATION
Section 3.1. Term . The
term of this Agreement shall commence on the first day of the month
following the month in which the Commencement Date falls and
continue for an initial period of five (5) Contract Years from
such date, which period shall be automatically renewed for an
additional period of five (5) Contract Years, unless sooner
terminated in accordance with the terms hereof (collectively the
“Term”). Colgate may terminate this Agreement at any
time 3.25 years after commencement of the Term, upon one
year’s prior written notice to RP, which may not be given
prior to such , solely in the event that Colgate has reformulated
its downstream process to exclude or substantially reduce its use
of the Product as a raw material in Colgate’s products;
provided , however , that Colgate’s obligations
under the Global Agreement shall survive termination of this
Agreement.
Section 3.2. Termination by
Either Party . Any party hereto may terminate this Agreement
upon written notice of termination given to the others if any party
(a) shall have committed a material breach or default under
this Agreement, which breach or default shall not be remedied
within sixty (60) days after the receipt of written notice
thereof by the party in breach or default; (b) shall fail to
make any material payment when due hereunder; or (c) under any
applicable law (i) makes an assignment for the benefit of
creditors, (ii) permits the appointment of a trustee or
receiver of all or a substantial part of its assets,
(iii) admits in writing its inability to own its assets,
(iii) admits in writing its inability to meet its obligations
when due or commit any other act of bankruptcy or
(iv) institutes voluntary proceedings in bankruptcy or
insolvency, or permits voluntary institution of such proceedings
against it.
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Section 3.3.
Decommissioning . Upon termination of the Lease, RP shall be
both obligated and entitled to decommission the Plant. Colgate or
its Mexican affiliates shall pay for the cost and expense of such
decommissioning; provided, however, that (i) such cost shall not
exceed the (****) (subject to escalation according to the
applicable PPI Index, retroactive to the beginning of any
applicable year, over the 1997 base therefor for all contract years
after 1997), and (ii) such decommissioning commences prior to
the fifth anniversary of the Commencement Date. For the purposes of
this Agreement, “decommissioning” shall mean the
restoration of the real estate upon which the Plant is located to
its original condition, including remediation of any subsurface
contamination caused by the construction or operations of the Plant
and excluding any remediation unrelated to the construction or
operation of the Plant, with all equipment and structures to be
removed and retained by RP.
Section 3.4. Removal and
Compensation Upon Termination . Upon the termination of this
Agreement for any reason whatsoever, Colgate or IH or affiliates or
entities designated by any of them shall no later than thirty
(30) days from the date of such termination, purchase from RP
all finished Products which meet the Specifications and all raw
materials, work in progress and intermediate chemicals and
packaging then in possession of RP, which were purchased or
processed specifically for production of the Products pursuant to
this Agreement (the “Other Products”); provided,
however, that the Other Products, to the extent practicable, shall
be converted by RP into and/or used to manufacture additional
finished Products which shall also be purchased by Colgate or IH or
affiliates or entities designated by any of them . The purchase
price for such finished Products and the Other Products shall be at
a cost consistent with RP’s method of determining the Price
pursuant to Exhibit B and in accordance with Section 2.2
hereof. Upon such purchase, Colgate or IH or affiliates or entities
designated by any of them shall promptly remove such purchased
Product and Other Products from the Plant, at its own cost and
expense.
Section 3.5. Continuing
Obligations . The expiration or termination of this Agreement
shall not (i) prejudice any remedy either party may have
against the other for breach or nonperformance of this Agreement,
(ii) relieve either party of any liability or obligation which
has accrued or arisen prior to the effective date of such
expiration or termination or (iii) affect the continued
operation or enforcement of any provision of this Agreement which
by its express terms is to survive any such expiration or
termination.
ARTICLE 4
ORDERING
PROCESS
Section 4.1. For the volumes
allocated to (****) as per Section 2.1, IH shall order Product
based on actual production (****). Inventory for IH’s Mexican
(****) will be managed by RP. Procedures to communicate (****) and
manage inventory will be agreed by the two parties. IH agrees to
supply RP with a three-month rolling
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forecast of Product (unless otherwise
specified), which will be updated within the first ten days of
every month.
Section 4.2. Regarding the
(****) as per Section 2.1 actual (****) will be communicated
to RP by Colgate or any Colgate affiliate or entities through a
local supply agreement including a written purchase or release
order, or electronically or by any means mutually agreed by the two
parties. Colgate or its affiliates or entities purchasing under
this Agreement agree to supply RP with forecasts of Product (unless
otherwise specified by the purchaser under this Agreement), as
appropriate, which may be updated within the first ten days of
every month. The amount of Product actually purchased by Colgate or
its entities or affiliates under this Agreement shall vary based
upon its or their actual production (****). The aforesaid forecasts
shall be neither a minimum nor maximum purchase guarantee but
rather shall serve as an estimate of Colgate volume (****);
provided, however, that notwithstanding the foregoing, the
provisions of Section 2.2(d) and Exhibit B relating to the
payments owed by Colgate affiliates or entities irrespective of its
or their actual purchases of Product under this Agreement shall
nevertheless apply.
ARTICLE 5
TERMS OF
PAYMENT
Section 5.1. RP shall invoice
IH at the end of each month for each shipment of Product ordered
pursuant to Section 4.1; such invoices shall also include the
Fixed Amounts Per Metric Ton whether or not Product is ordered by
IH. Terms of payment for each invoice shall be net fifteen
(15) days (Payment in US dollars or local
equivalent).
Section 5.2. RP shall invoice
other Colgate affiliates or entities for each shipment of Product
pursuant to Section 4.2. Terms of payment for each invoice
shall be net ninety (90) days.
Section 5.3 RP reserves the
right to charge interest at the rate of 1.5% per month for any
invoices outstanding more than ninety (90) days.
ARTICLE 6
DELIVERY, SHIPMENT AND STORAGE
OF FINISHED PRODUCT
Section 6.1. Packing and
Shipping . RP shall pack the Product in standard packages of 25
kg and 27.5 kg bags, jumbo bags (1 to 2 MTS) and bulk. [As a
reference, a 20 ft FCL based on 25 kg or 27.5 kg bag can be filled
with 16.5 MTS of Product.] RP shall deliver Product to IH or
Colgate affiliates or entities ex works the Plant in accordance
with instructions received pursuant to Article 4. RP shall arrange
for shipping, at the sole cost and expense of IH or Colgate
affiliates or entities, of all Product in accordance with the
instructions received from any of them. Title to
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in process and finished Product shall transfer
to Colgate upon departure of such Product from the
Plant.
Section 6.2. Losses in
Connection with Shipping . Although RP shall in good faith use
its best efforts to package and load the Product for shipment in
accordance with instructions received from IH or any Colgate
affiliate or entity. The parties agree that RP shall not be liable
to Colgate for any losses or damages suffered due to a delay in or
damage from shipment.
Section 6.3. Product
Information . RP shall furnish with each shipment hereunder
Material Safety Data Sheets (“MSDS”), which include the
appropriate chemical abstract service number and confirmation that
the product is also listed on the Toxic Substances Control Act
(“TSCA”) chemical substances inventory maintained by
the U.S. Environmental Protection Agency. MSDS shall also contain
health, safety, and other hazard communication information
consistent with the Occupational Safety and Health
Administration’s communication standard. Colgate shall
disseminate appropriate health and safety information to
Colgate’s employees, contractors, and customers who handle,
use, buy or may be exposed to the Product.
ARTICLE 7
PRODUCT
SPECIFICATIONS
Section 7.1. Product
Specifications . The Product Specifications listed on Exhibit A
hereto may be changed from time to time by mutual agreement of the
parties to meet the demands of the market or as a result of process
changes the parties may agree to make. If the changes to the
Product Specifications result in a cost change to RP, then RP shall
only be required to proceed with such changes if the parties agree
to an adjustment in the Price for the Product to the extent
affected.
ARTICLE 8
CLAIMS AND WARRANTIES;
INDEMNITY
Section 8.1. RP’s
Warranty . RP warrants exclusively to Colgate and IH that
Product sold and delivered hereunder shall at the time of delivery
conform to the applicable Product Specifications.
Section 8.2. Exclusive
Warranty . THE WARRANTY PROVIDED FOR IN SECTION 8.1 IS
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WHETHER PERTAINING TO THE PRODUCT AND WHETHER
ARISING BY LAW, CUSTOM, CONDUCT, OR USAGE OR TRADE, AND THE RIGHTS
AND REMEDIES OF COLGATE PROVIDED IN ARTICLE 8 ARE EXCLUSIVE AND IN
LIEU OF ALL OTHER RIGHTS AND REMEDIES.
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Section 8.3. RP’s
Covenants . RP covenants to comply with all federal or
national, state or regional, local or municipal laws, regulations,
ordinances, permits and orders, including, without limitation, all
environmental, health, safety, child welfare, wage and hour, labor
and other workplace laws regulations, and RP shall obtain all
necessary permits and approvals, in each case as is necessary in
connection with RP’s performance of this
Agreement.
Section 8.4. Colgate’s
Remedies . If any Product is shown to be in breach of
RP’s warranty contained in Section 8.1
(“Non-Conforming Product”), Colgate’s and
IH’s exclusive remedy shall be to return to RP the
Non-Conforming Product and to receive a credit in the amount paid
to RP hereunder for such Non-Conforming Product and related
transportation costs (including costs of returning such
Non-Conforming Product) or to have RP replace such Non-Conforming
Product.
Section 8 5.
Consequen
