Exhibit 10.18
SUPPLY AGREEMENT
----------------
AGREEMENT, entered in this 17th day of
October 2005 by and between
RFB LAKELAND INDUSTRIES PRIVATE LIMITED ("Buyer") an India
corporation having
its registered office at A-33, New Friends
Colony, New Delhi - 110 065, India;
And
RFB LATEX LIMITED, an Indian corporation having offices at Surya Plaza
K-185
Sarai Julena, New Delhi, India
("Supplier")
And
P.S. Ratra son of Late Sh. G. S. Ratra
resident of A-33, New Friends Colony, New
Delhi - 110 065 ( Promoter No. 1)
And
<PAGE>
2
Kamal Ratra son of Late Sh. G. S. Ratra
resident of A-33,
New Friends
Colony,
New Delhi - 110 065 (Promoter No. 2)
(collectively referred to as Promoters)
W I T N E S S E T H:
WHEREAS,
the Buyer desires to be assured of having available for its
purchase and use during the term of this Agreement, certain quantities of
"Products" (as that term is hereinafter
described); and
WHEREAS,
subject to the terms
and conditions of this Agreement, Supplier
is willing to supply Buyer's requirements of the Products, in order to assure
Buyer of the availability and source of supply
of such Products during the term
of this Agreement, and is willing to
contract to sell Products to the Buyer.
NOW,
THEREFORE, in consideration of the mutual covenants set forth in
this
Agreement, and under the terms and conditions
contained herein, Buyer agrees to
buy from Supplier and Supplier agrees to
sell to Buyer as follows:
1. Sale and Purchase of
Products
-----------------------------
a) During
the Stated Term of this Agreement, Supplier agrees to sell to
the
Buyer, and to accept orders from the Buyer for the Buyer's
requirements for
Supported and Unsupported Industrial Gloves currently
made or to
be developed by
Supplier, and other gloves for use in
safety
apparel
products of the types and specification as are provided to
<PAGE>
3
Supplier
ultimately for sale to
safety distributors and end users of such
gloves
in the United States and in other agreed markets worldwide
(hereinafter
collectively the
"Products"), all as
described in Exhibits
"A" and
"B" hereto. Supplier acknowledges that the raw materials of
Latex,
Nitrile,
Chemical Compounds and other components or
components bought by
Buyer are
the exclusive property
of Buyer. Buyer
acknowledges
that the
glove
Products that Supplier sources itself in India or elsewhere
are
designed
by Supplier and the designs and specifications are the
exclusive
property
of Supplier. Supplier
has a sales office in New Delhi, India and
that
sales office will solicit India Domestic sales and various
international sales
except for sales in the United States in most
instances.
Any sales order
procured by Supplier
shall be fulfilled by
Buyer
subject to the
condition that such sales shall be made at price
decided by
the Buyer. The
Supplier's sales office and factories have been
making
product for sale since 1989, and transfer pricing between the
Buyer
and
Supplier shall be in accordance with Exhibits A & B or where
otherwise
mutually
agreed on a case by case basis to conform to international
market
prices
depending upon who the customers are: being Domestic India,
International Master distributors, ordinary distributors or end
users, as
these
prices are
determined
solely by market
forces at those
specific
chain or
levels of the marketplace.
2. Term
----
The stated
term of this Agreement
(the "Stated
Term") shall be 364
days
commencing
October 17th 2005 and terminating October 16th 2006,
<PAGE>
4
provided
however, that the term
of the Agreement shall thereafter be then
subject to
the terms of the
Option Agreement
to Purchase Assets, the
Employment
Agreements, the Asset
Purchase Agreement and the Share Holders
Agreement
which are made a part
hereof if such Option to Purchase Assets
is
exercised.
3. Supply of Products
------------------
(a)
At Buyer's
option, for all orders of Products
submitted by Buyer
during the Stated Term
of this Agreement,
Supplier shall supply
Buyer's requirements
of glove Products, in such types and such
amounts of glove Products as Buyer shall request.
(b)
Supplier shall
dedicate such equipment, materials and labor hours in
its plant facilities
to the Buyer's requirements, so as to meet
Buyer's need and delivery dates for Products, and shall give Buyer
access to Supplier's
production
schedules and other production
information in order to coordinate delivery schedules of gloves
and
other raw material purchases. Supplier shall only ship to Buyer
full
or half containers,
unless Buyer
specifically directs
Supplier to
ship less than full containers.
(c)
Buyer
shall pay Supplier an amount of $280,000 annually as
processing charges for
the manufacturing
of the Products and for
supervisory personnel
services pursuant to paragraph 5 herein.
<PAGE>
5
This
amount shall increase to 10% of any glove sales that exceed
$2,500,000
USD as invoiced by Buyer to Lakeland Industries, Inc. and
additionally all direct sales to International customers outside the USA.
At the
termination
of this Supply
Agreement,
Supplier and Buyer shall
agree
on the total sales made during this 364 day term and add 10%
multiplied
by all glove sales that exceed $2,500,000 USD and pay that
sum
to
Supplier at year end. This additional amount cannot exceed $150,000
USD.
(d)
Buyer shall
allow up to $25,000 USD for repairs of machinery located
in Plots 24 and 81 and may agree mutually with Seller for an
increase in this amount, if justified.
4. Price and
Adjustments
---------------------
A.
Products;
Price and Price Adjustments
-------------------------------------
(1)
The initial
prices for
Products are listed on Exhibit "A"
annexed
hereto and made a part hereof (the "Base Prices") .
(2)
The Base
Prices shall remain in force and effect for all orders
submitted by the Buyer
during the Stated
Term of this
Agreement,
unless changed by
mutual agreement
of the parties
hereto, or as
hereinafter provided.
Where, however, Supplier purchases any raw
materials or components directly, then in the event that there is
a
change in Supplier's
actual costs per unit for components bought by
Supplier directly and contained in Buyers Products
<PAGE>
6
then, upon
Supplier's
verification
of such changes in its
actual
costs, the Base Prices
shall be adjusted
forthwith to reflect such
increases or
decreases as the case may be at that
time. In such
case, Supplier has supplied to Buyer current costs on such
component
items to be supplied
by Supplier as Exhibit
C attached hereto
and
made a part hereof.
Additionally,
Buyer shall
supply and pay the
number of direct factory workers working on Buyer's Products from
an
Independent Worker Contracting Company that leases employees in
the
Noida Special Economic Zone outside New Delhi, India. Supplier
shall
bear all fire, flood, storm, theft, vandalism, credit, and all
other
business risks until the Products are loaded in Buyer's
container.
B.
Favored
Nations Pricing
-----------------------
Notwithstanding anything to the contrary, express or implied,
contained in
Section 4A
above, the parties
hereto do hereby
expressly covenant and
agree that
the Buyer shall be entitled to receive throughout the Stated
Term of
this Agreement
the lowest Base Prices on similar terms and
conditions
to which any other party has or is receiving, or may, from time
to time,
receive, from Supplier for the Products.
Additionally,
Buyer
shall
seek quotes from other independent assembly operations or
manufacturers of
similar quality gloves using similar raw materials, and
if such
operations
quote lower
prices than
Supplier shall match those
lower
quoted prices.
<PAGE>
7
5. Payment Terms.
--------------
Buyer will
purchase all raw materials to manufacture only Buyer's gloves
and will
issue such raw materials to Supplier for Production, and the
cost
of these
raw materials
will be debited to
Supplier. Buyer will pay the
electricity bills on
Plots 24, 81, and 50 and debit this amount to
Supplier.
Buyer will buy all
heating oil and LP gas for Plots 24, 81, and
50 only
and only for such oil
and gas as used for
manufacturing
Buyer's
Products
and debit Supplier that amount. All direct labor on the shop
floors
of 24, 81, and 50 will be hired through an independent labor
contractor
and Buyer will pay the contractor and debit Supplier. Supplier
will
invoice Buyer for the
gloves manufactured
with the above inputs
at
its cost
of production the
(Base Prices) as listed in Exhibit A, attached
hereto
and made a part
hereof, and transfer the Products to Buyer's
custody or
control. No cash payments are to be made to Supplier or
the
Buyer as
these balances
will be debited or
credited to the
appropriate
party,
Buyer or Supplier, at the end of each month during the term of
this
Agreement,
and any remaining
debit or credit balance at year end shall by
paid to
Buyer or Supplier as appropriate. Buyer will upon the execution
of
this
agreement pay $150,000 to the Supplier and
the remaining
$130,000
shall be
payable in 6 equal monthly amounts of $21,666 USD in months
7-12
of this
Agreement. On month 12 a reconciliation will be made on sales
over
$2.5
million pursuant to paragraph 3 (c) herein.
<PAGE>
8
6. Quality.
-------
Supplier
acknowledges
that Buyer is relying
upon the skill and technical
knowledge
of Supplier in the
manufacture of the
subject Products
which
Buyer
shall purchase from Supplier pursuant to this Agreement, and
Supplier
represents, warrants and agrees that the subject Products will
be
suitable
for use for the purposes of Buyer's business. Supplier further
represents, warrants and agrees that all of the Products to be
supplied by
Supplier
to Buyer shall be made in accordance with Buyer's purchase
orders,
delivery dates and generally established industry standards,
suitable
for the acknowledged intended uses for such Products by Buyer
and
its
customers,
and that all the
Products sold to Buyer will be free from
any
defects in material or
workmanship. Supplier
shall legally bear
all
product
liability responsibilities as the manufacturer and the
Products
shall be
warranted as merchantable, saleable, useable, and free from
defects.
Nonetheless,
Buyer out of necessity shall purchase product
liability
insurance in the United States as recent judicial trends seem
to
ignore the
existence and legality of the corporate veil and limited
liability,
and allow tort jurisdiction to attach to whoever has deep
pockets,
no matter what the connection to the Tort. Buyer shall debit
Supplier
for the cost of such
insurance pursuant to
Section 5.
Supplier
will
replace or allow Buyer full credit, including shipping and handling
expenses,
for any defective
Products sold to Buyer subject to a 1% defect
rate in
favor of Supplier.
Calculation
of waste rates shall
use what is
bought by Buyer in raw materials
and other components as a
<PAGE>
9
unit of
count and aggregated and calculated monthly for accounting
purposes
as to what finished
gloves are returned versus the raw materials
used
as laid out in Exhibit B "Waste Factors and Raw Material
Utilization". All Products supplied by Supplier under this
Agreement shall
conform in
all respects to any specifications issued by Buyer or Supplier
or
specifically
agreed to in writing
by Supplier and Buyer.
Buyer shall
have the
right to inspect
the Products prior to and after boxing and
shipment
to insure that
Supplier is meeting
specifications
and quality
standards
and counts as
represented by Buyer
in Exhibit B. Supplier also
represents
that it is ISO 9001 certified and will make its best efforts to
get Buyer
ISO 9001 or 9002
certified as soon as possible, and Buyer will
pay all
out of pocket expenses of such certifications, and Supplier shall
also make
its best efforts
to obtain CE
certification
for Buyer for it
proprietary line of Indian gloves and designs, being sold in
Europe, South
America,
Asia, and Australia.
7. Risk of Loss
------------
The risk
of loss shall pass from Supplier to Buyer when Supplier packs
and
seals the
container at plots 24, 81 or 50. Supplier shall arrange Buyers
transportation in
concert with Buyer's
logistics department
in the USA,
and Buyer
will pay all
transportation,
brokerage,
insurance,
tariffs,
quotas,
and other miscellaneous transportation fees from Supplier's
premises
to containers destinations in the USA and such charges for
non-USA
shipments will be
negotiated with the
purchasing
customer on
<PAGE>
10
a case by
case basis,
for example, FOB, CIF, C & F, DDP, with South
American
or European customers.
8. Assignment: Binding
Effect
--------------------------
This
Agreement or any part thereof shall not be assigned by any party
hereto,
either voluntarily or by operation of law, except with the
written
consent of
the other; provided,
however, that either party shall have the
right and
obligation,
without the prior
written consent of the other, to
assign its
rights and obligations
hereunder to any third party (including
an
Affiliate), but only in connection with the sale and transfer of
all or
substantially all of
the assets or securities of a party hereto (whether
through
stock sale, asset sale, merger, consolidation or like
combination)
to
a third party. Notwithstanding the foregoing, any third party
transferee
to this Agreement shall execute a counterpart hereof, pursuant
to which
such third
party shall agree to perform all of the terms and
conditions
hereof.
9. Right of Buyer to
Manufacture or Purchase from Alternate Sources
----------------------------------------------------------------
Notwithstanding anything to the contrary, express or imp
