EXHIBIT 10.2
SUPPLY AGREEMENT
This Supply Agreement (this "Agreement") is made the 28th day
of
March, 2006, by and between Scott's Liquid Gold-Inc., a
Colorado
corporation ("Purchaser"), and Keltec Dispensing Systems USA,
Inc., a Delaware corporation ("Supplier").
RECITALS
A.
Purchaser currently manufactures the plastic caps and
containers listed on Exhibit A (the "Parts") for use in spray
aerosol cans and other products.
B.
Purchaser is selling to Supplier certain plastic
molding machines and other equipment (the "Equipment"), as more
particularly described in an Acquisition Agreement between the
parties of even date herewith, and leasing to Supplier
manufacturing, warehouse, and office space (the "Leased
Space"),
as more particularly described in a Lease between the parties
of even date herewith.
Prior to this Agreement, Purchaser used
the Equipment and Leased Space to manufacture the Parts.
C.
Following the sale of the Equipment and lease of the
Leased Space, Purchaser wishes to outsource to Supplier the
manufacture of the Parts. Supplier has the expertise to
manufacture the Parts and wishes to commence manufacturing the
Parts for Purchaser.
AGREEMENT
In consideration of the foregoing recitals, which are hereby
incorporated by this reference, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.
DEFINITIONS.
1.1 Specific
Definitions. As used
herein, the following
terms shall have the meanings set forth below:
"Renewal Period" means the 12-month period immediately
following the Open Costing Period or any prior Renewal Period,
if
the parties elect to renew this Agreement pursuant to Section
9.2.
"Renewal Prices" means the Prices applicable for any
Renewal Period, as agreed to by the parties.
"Initial Period" means the 12 months from Closing
date, on any business day prior to July 1, 2006. Purchaser
shall
provide Seller with written notice of the desired Closing date
at least five (5) business days prior thereto and the Closing
shall occur on such date unless Seller requests a later date
that is within five (5) business days of the date Purchaser
requested. In all
events the parties shall use their reasonable
efforts to select a mutually acceptable Closing date.
"Initial Requirement Estimates" means the estimates of
requirements of Purchaser for Parts for the Initial Period, as
set forth in Exhibit A hereto.
"Intellectual Property" has the meaning set forth in
Section 7.1.
"License" has the meaning set forth in Section 7.2.
"Open Costing Data" has the meaning set forth in
Section 3.2.
"Open Costing Prices" has the meaning set forth in
Section 3.2.
"Open Costing Period" means the six months immediately
following the Initial Period
"Parts" has the meaning set forth in Recital A.
"Initial Prices" means the Prices for the Initial
Period set forth in Exhibit A.
"Period" means, as applicable, the Initial Period, the
Open Costing Period, and any Renewal Period.
"Prices" means the price per Part, including, as
applicable, the Initial Prices, the Open Costing Prices, and
any
Renewal Prices.
"Purchase Order" means any purchase order issued from
time to time by Purchaser to Supplier for the purchase of
Parts.
"Specifications" means the specifications provided by
Purchaser to Supplier for all Parts to be supplied hereunder,
as
such specifications are applicable to each such Part.
1.2 General
Application and Interpretation. Unless a
clear contrary intention appears, as used herein (a) the
singular
includes the plural and vice versa, (b) reference to any
document
means such document as amended from time to time, (c) "include"
or "including" means including without limiting the generality
of
any description preceding such term, (d) the word "or" is not
exclusive, unless otherwise expressly stated, (e) the terms
"hereof," "herein," "hereby," and derivative or similar words
refer to this entire Agreement including the Exhibit attached
hereto and incorporated herein by this reference, as the same
may be amended from time to time, and (f) headings are for
convenience only and do not constitute a part of this
Agreement.
2.
PRODUCTION OF PARTS.
2.1
Specifications.
Supplier shall manufacture the Parts
in accordance with the mutually agreed Specifications. In the
event of any changes to the Specifications, Purchaser shall
provide 30 days written notice to Supplier of such changes to
the Specifications; provided, however, that if such changes to
the Specifications are unacceptable to Supplier, this Agreement
shall immediately terminate.
2.2 Initial
Requirement Estimates.
Purchaser has provided
to Supplier its Initial Requirement Estimates on Exhibit A
hereto.
2.3 Open Costing
Period Estimates. At
least 30 days prior
to the start of the Open Costing Period, Purchaser shall provide
to
Supplier an estimate of its requirements for Parts for the Open
Costing Period.
2.4 Renewal
Period Estimates. If
the parties agree to
renew this Agreement for any Renewal Periods, Purchaser shall
provide an estimate of its requirements for Parts for each
Renewal
Period to Supplier at least 30 days prior to the start of such
Renewal Period.
2.5 Mold
Maintenance. Purchaser
is responsible for
purchase, repair, and maintenance of mold.
2.6 Purchase of
Keltec Dispensing System Technologies.
Keltec Dispensing Systems USA, Inc., offers to SLG their entire
dispenser range from Keltec Dispensing Systems USA, Inc., for
cost
price plus 3% margin (normal 35%), this through an open
calculation from Keltec Dispensing Systems USA, Inc. Scott's
Liquid Gold-Inc. intends to start and buy and use at least 1
type
of the Keltec Dispensing System dispenser ranges as soon as
possible in 2006.
3.
PRICING
3.1 Initial
Period Pricing. During
the Initial Period,
Purchaser shall pay the Initial Prices as indicated on Exhibit
A.
3.2 Open Costing
Period Pricing. At
least 30 days prior
to the start of the Open Costing Period, Supplier shall provide
to
Purchaser a detailed summary of its costs of manufacturing the
Parts, including raw materials, utilities, labor, overhead
charges,
and any other costs, including anticipated profit margin
(collectively, the "Open Costing Data"). During the 30 days
before the start of the Open Costing Period, the Parties shall
negotiate in good faith on the basis of the Open Costing Data
to
adjust the Prices for the Open Costing Period (the "Opening
Costing Prices"); provided, however, that if the parties are
not
able to agree on Open Costing Prices, the Prices for the Open
Costing Period shall be equal to the Initial Prices.
3.3 Renewal
Period Pricing. At
least 30 days prior to the
end of the Open Costing Period or any Renewal Period, in its
discretion Purchaser may provide to Supplier price quotations
received from other suppliers for the manufacture of the Parts,
as a basis for good faith negotiations regarding Renewal Prices.
The renewal product pricing will be revised through an open
costing format and adjusted to a level that is mutually
agreeable
to both parties, using as a guideline a quotation provided by
Purchaser of February 2006 from a local Denver supplier. A copy
of
this quote has been shared. If the parties are able to agree on
Renewal Prices for a Renewal Period, this Agreement may be
renewed pursuant to Section 9.2. If the parties are unable to
agree on Renewal Prices for any Renewal Period, this Agreement
shall terminate pursuant to Sections 9.1 or 9.2.
3.4 Cost
Adjustments. Keltec
Dispensing Systems USA, Inc.,
will deliver the Parts at a fixed price for the needed volumes
based on the estimates in Exhibit A for the lifetime of the
mentioned products. However, the price as determined under
sections 3.1, 3.2, and 3.3 are subject to adjustment for the
following; raw material increases and decreases will be
transferred in the purcha
