1
EXHIBIT 10.25
MANUFACTURING AGREEMENT
Agreement made this 21st day of July, 1987, by and between Euro-Matic
Ltd., a company organized under the laws of the United Kingdom and having its
offices and principal place of business located at Sinclair House, The Avenue,
Ealing, London W13 BNT, England (hereinafter referred to as "Euro-Matic") and
Hedstrom Corporation, an Illinois corporation, having its offices and principal
place of business located at Sunnyside Road, P.O. Box 432, Bedford,
Pennsylvania (hereinafter referred to as "Hedstrom").
Euro-Matic desires to engage Hedstrom, and Hedstrom agrees to be
engaged by Euro-Matic, to manufacture, using machinery and tooling supplied to
Hedstrom by Euro-Matic, playpen balls pursuant to Euro-Matic's specifications
described on Exhibit A, attached hereto and made a part of this Agreement,
(hereinafter referred to as "Products"), as well as provide for the storage,
packing and shipping of Products, pursuant to Euro-Matic's instructions,
subject to the terms, conditions and limitations of this Agreement.
The parties hereto agree as follows:
1. Manufacture and Supply
(a) Euro-Matic hereby engages Hedstrom to manufacture Products
pursuant to the specifications set out in Exhibit A, using machinery and
tooling supplied to Hedstrom by Euro-Matic, and also to provide for the
storage, packing and shipping of Products all pursuant to instruction by
Euro-Matic. All Products shall be made by Hedstrom to conform to specifications
supplied by Euro-Matic covering in particular material, weight, finish, internal
pressurer and packing. It is understood by the parties hereto that Euro-Matic
may from time to time change the specifications, which changes shall be made by
Euro-Matic in writing to Hedstrom.
(b) If any Products produced by Hedstrom do not conform to
Euro-Matic's specifications or to warranties applicable thereto, and such
Products are not acceptable to Euro-Matic, Euro-Matic shall notify Hedstrom and
Hedstrom shall, at its expense, promptly produce a replacement quantity
conforming to Euro-Matic's specifications and all warranties hereunder.
Euro-Matic shall not be required to pay Hedstrom for the production of any
Products that fail to conform to Euro-Matic's specifications.
2. Equipment and Tooling
Euro-Matic shall arrange, within thirty (30) days of this Agreement,
for the delivery to Hedstrom of a Euro-Matic compact blow molder, extruder and
molds for the manufacture of Products by Hedstrom on behalf of Euro-Matic.
Euro-Matic represents and warrants that the compact blow molder, extruder and
molds to be supplied to Hedstrom shall be in good operating condition and shall
be able to manufacture the Products in full accordance with the specifications
provided to Hedstrom by Euro-Matic.
3. Pricing
(a) In consideration for the manufacture, storage, packing and
shipping of Products produced on Euro-Matic machinery by Hedstrom, Euro-Matic
hereby agrees initially (the "initial price") to pay Hedstrom Sixty Dollars
($60) per
2
1,000 Products, subject to revision from to time to time upon mutual agreement
of the parties hereto. The initial price has been calculated in major part upon
the following factors: (i) an average weight per individual Product of thirteen
(13) grams; (ii) a cycle time of 24 seconds using an eight (8) cavity mold;
and, (iii) a cots to Hedstrom for low density polyethylized resin of 37 cents
per pound. The parties agree from time to time to renegotiate the price to be
paid by Euro-Matic to the extent there is a material change in any of factor
(i), (i) or (iii) above.
(b) All prices are f.o.b. Ashland, Ohio or at such other Hedstrom
manufacturing location as the parties may determine appropriate. All payments
shall be made in U.S. funds to Hedstrom.
(c) The actual cost of shipping Products to Euro-Matic customers
shall not be included in the foregoing price but shall be billed separately to
Euro-Matic based upon the actual cost of shipping incurred by Hedstrom on
behalf of Euro-Matic.
(d) All amounts payable by Euro-Matic to Hedstrom hereunder shall be
made by the end of the calendar month following the date of Hedstrom's
invoice [net 60 days].
4. Marketing
It is understood by the parties hereto that Euro-Matic shall provide
all marketing for the sale of Products produced by Hedstrom on behalf of
Euro-Matic pursuant to this Agreement.
5. Manufacturer of Hedstrom Product
In the event that Hedstrom utilizes Euro-Matic machinery and tooling
supplied to Hedstrom hereunder for the manufacture of Hedstrom's own products,
Hedstrom shall pay Euro-Matic One Hundred Twenty-Five Dollars ($125) per day or
any portion thereof for use of such machinery and tooling. Hedstrom shall
account for use of actual machinery hours during which it uses Euro-Matic
machinery. Hedstrom shall provide such equipment necessary to register machine
working hours and account to Euro-Matic for all hours during which such
machinery has been utilized by Hedstrom on its own behalf. Euro-Matic shall be
entitled to send auditors from time to time to Hedstrom during reasonable
business hours to review Hedstrom's records with respect to usage of the
Euro-Matic machinery by Hedstrom. It is understood by the parties hereto,
however, that Euro-Matic has "first call" upon the machinery for the
manufacture of Products to satisfy Euro-Matic's stock level requirements.
6. Stock Level Requirements
Euro-Matic will from time to time notify Hedstrom to provide certain
stock levels of Products. Notification will be by written purchase order,
specifying the item requested, production date and price. Hedstrom agrees as
promptly as possible after receiving notice from Euro-Matic to maintain such
stock levels as directed by Euro-Matic. Hedstrom will invoice Euro-Matic every
Monday for total Products produced in the previous week as per the written
purchase orders issued by Euro-Matic. Euro-Matic shall pay the amount due on
such invoices in accordance with paragraph 3(d) of this Agreement. All such
inventory at Hedstrom premises shall be insured for Euro-Matic's benefit as part
of the general insurance maintained by Hedstrom and carried on all
-2-
3
Hedstrom inventory. Euro-Matic will also from time to time instruct Hedstrom to
manufacture special orders on Euro-Matic equipment which Hedstrom shall
undertake as promptly as possible. If goods are available from stock, an order
from Euro-Matic to Hedstrom shall be drop-shipped by Hedstrom to customers of
Euro-Matic within seven (7) days after the receipt of such order from
Euro-Matic. If Products are not available from stock, Hedstrom shall as
promptly as possible produce such required stock which shall be shipped to
Euro-Matic customers within seven (7) days after production of such stock.
7. Purchase Orders and Acknowledgements
Euro-Matic will use its best efforts to supply Hedstrom with written
purchase orders for Products to provide for full capacity usage during normal
business hours of the machinery and tooling supplied to Hedstrom pursuant to
this Agreement. Hedstrom shall provide Euro-Matic with written acknowledgement
of said purchase orders. All orders shall be non-cancellable after the date of
written acknowledgement.
8. Breach of Contract - Termination
(a) In the event of a breach of either party hereto of any term,
condition or provision of this Agreement, the other party, in addition to any
other rights and remedies it may have hereunder, shall have the right to
terminate this Agreement by giving notice of termination to the defaulting
party, provided that at least thirty (30) business days prior written notice of
the breach and intention to terminate has been given to the defaulting party
and the breach has not been cured during the thirty-day notice period.
(b) The foregoing notwithstanding, in the event that (i) Products
produced by Hedstrom at any time do not conform to Euro-Matic's specifications
or do not conform to warranties applicable to Hedstrom and Hedstrom does not
deliver to a particular Euro-Matic customer a replacement quantity of such
Products conforming to Euro-Matic's specifications and to all warranties
applicable thereto within thirty (30) days after notice to Hedstrom that the
Products produced by Hedstrom do not so conform, or (ii) the parties hereto
cannot reach agreement as to price revision as provided in paragraph 3(a)
hereof, either party hereto may, at its option, by written notice to the other
party terminate this Agreement.
(c) This Agreement shall be terminable by Euro-Matic by written notice
to Hedstrom in the event that: (i) Hedstrom ceases to operate its business for
fifteen (15) days (other than a temporary suspension resulting from an act of
God or cause beyond Hedstrom's control, including but not limited to strikes,
trade disputes, government regulations or restrictions) and is otherwise unable
to meet its obligations under this Agreement; (ii) Hedstrom ceases to operate
its business for 30 days for any reason; (iii) Hedstrom shall be unable to pay
its debts as they mature or shall admit in writing its inability to pay its
debts as they mature or shall make a general assignment for the benefit of its
creditors; (iv) Hedstrom shall file a petition seeking protection under the
United States Bankruptcy Code or any other applicable federal, state or other
law or shall consent to the institution of proceedings under such bankruptcy
laws; (v) an involuntary petition or complaint shall be filed against Hedstrom
seeking bankruptcy or reorganization with respect to it under the United States
Bankruptcy Code or other similar law, or seeking the appointment of a receiver,
liquidator, assignee or similar official of Hedstrom, and such petition or
complaint is not dismissed within sixty (60) days of the filing thereof; or
(vi) Hedstrom or any affiliate of Hedstrom
-3-
4
merges with or acquires substantially all of the assets of a company or is
acquired by a company which, at the time of such merger or acquisition, is a
competitor of Euro-Matic.
(d) It is understood that in the event this Agreement is cancelled or
terminates, Euro-Matic shall reimburse Hedstrom or otherwise pay for packaging
cartons provided by Hedstrom specifically to ship Euro-Matic Products.
(e) Upon termination of this Agreement, Euro-Matic shall arrange at its
expense for removal of its machinery, molds and inventory from Hedstrom's
premises.
9. Non-Compete Agreement
Hedstrom agrees that neither Hedstrom nor any companies affiliated with
Hedstrom will directly or indirectly market or seek to market or offer for sale
to Euro-Matic customers or in Euro-Matic's general market (which includes
restaurants, schools and other educational, health and supportive institutions
and the amusement industry) any items of the same or similar nature to the
Products manufactured for Euro-Matic pursuant to this Agreement during the term
of this Agreement and for the three (3) years thereafter. Similarly, Euro-Matic
agrees that during the term of this Agreement and for three (3) years
thereafter neither Euro-Matic nor any affiliate of Euro-Matic will market any
Products which are the same or similar nature to products manufactured by
Hedstrom, to the wholesale discount market, food and drug chain stores, or the
retail toy industry. Either party hereto may seek injunction relief to enforce
the terms of this paragraph 9.
10. Term and Termination Without Cause
This Agreement shall continue from year to year until it is cancelled by
either party hereto pursuant to the provisions of this Agreement.
Notwithstanding any other provisions of this Agreement, either party may
terminate this Agreement by written notice to the other party not less than
ninety (90) days prior to the effective date of termination. Termination of
this Agreement under any provisions hereof shall not relieve Euro-Matic's
obligation to pay Hedstrom for Products manufactured pursuant to Euro-Matic
purchase orders or on behalf of Euro-Matic's customers to accept delivery of
Products manufactured pursuant to such purchase orders.
11. Patent Infringement and Indemnification
(a) Euro-Matic warrants and guarantees that the manufacture of the
Products and the use of the machinery and tooling provided to Hedstrom by
Euro-Matic shall be free of infringement of any patent, patent right or any
other rights belonging to third parties. Nothing in this Agreement shall be
construed as imposing on Hedstrom any obligation to institute any suit or
action for infringement of any patent or imposing on Hedstrom any obligation to
defend any suit or action brought by any third party which challenges
Hedstrom's rights under this Agreement. Euro-Matic shall indemnify and hold
harmless Hedstrom from and against any and all claims, damages, suits,
expenses, liabilities and judgments, and from and against the costs (including
reasonable attorneys' fees and disbursements) related to any claims made
against Hedstrom related to the Products for patent infringement or the
violation of the right claimed by any third party in the Products.
-4-
5
(b) Hedstrom shall indemnify and hold harmless Euro-Matic from and
against the attempted imposition by any customer of Euro-Matic of any claims,
damages, suits, expenses, liabilities and judgments, and from and against the
costs (including reasonable attorneys' fees and disbursements) of defending
against the same, with respect to any such claims, damages, suits, expenses,
liabilities and judgments resulting from the sole failure of Hedstrom to
conform to Euro-Matic's specifications in the production of Products hereunder
or other negligence in the production thereof on the part of Hedstrom.
(c) Euro-Matic shall indemnify and hold harmless Hedstrom from and
against the attempted imposition by any customer of Euro-Matic of any claims,
damages, suits, expenses, liabilities and judgments, and from and against the
costs (including reasonable attorneys' fees and disbursements) of defending
against the same, with respect to any such claims, resulting from Euro-Matic's
specifications, provided, however, that Hedstrom has produced the Products in
conformance with the specifications provided by Euro-Matic without any
negligence on the part of Hedstrom.
13. Product Warranty
Hedstrom warrants and agrees that it will ship good and marketable
title to Products to Euro-Matic's customers and the Products will conform to
Euro-Matic's specifications, will be free from defects in workmanship and
material and will comply with all applicable statutes, laws, orders, rules and
other governmental regulations. These warranties shall survive inspection,
shipment and payment.
14. Best Efforts and Maintenance of Equipment
Hedstrom shall in good faith and with diligence use its best efforts to
conduct all manufacturing, storage, packing and shipping of the Products in
accordance with the best business customs of its industry. In addition,
Hedstrom shall maintain all machinery and tooling supplied to it by Euro-Matic
and used by Hedstrom pursuant to this Agreement in good working order, subject
to normal wear and tear, and shall be liable to Euro-Matic for any damage
thereto due to Hedstrom's negligence. It is understood that Euro-Matic shall be
responsible for any major repairs or replacements to machinery and tooling not
caused by the negligence of Hedstrom. Title to all machinery and tooling
supplied by Euro-Matic to Hedstrom shall remain with Euro-Matic and Euro-Matic
shall have the right to affix permanently to such machinery and tooling an
appropriate sign or label showing that title is retained by Euro-Matic. All
such machinery and tooling at Hedstrom's premises shall be insured for
Euro-Matic's benefit as part of the general insurance carried on all Hedstrom
equipment.
15. Assignment
Without the prior written consent of Euro-Matic, Hedstrom shall have no
right to transfer or assign to any unrelated third party the right to use
Euro-Matic machinery or tooling. Provided, however, that Hedstrom may assign
this Agreement, or any of its rights hereunder, to its corporate parent or a
wholly-owned subsidiary of its parent or Hedstrom or may assign this Agreement
and all of its rights hereunder (but only in its and their entirety) to any
entity which succeeds to all or substantially all of Hedstrom's assets or those
of any permitted assignee by merger, consolidation, reorganization or purchase.
-5-
6
16. Independence of Parties
This Agreement shall not be construed as creating a relationship of
joint venture partnership or principal and agent between the parties. Neither
party shall act or attempt to act or represent itself as acting directly or by
implication as agent for the other or in any manner assume or create or attempt
to assume or create any obligation on behalf of the other.
17. Euro-Matic Authority
Euro-Matic hereby warrants that it has all necessary right, title and
authority to permit Hedstrom to manufacture, package and ship Products pursuant
to this Agreement.
18. Application of Agreement to Other Products
It is understood by the parties hereto that Euro-Matic may specify that
Hedstrom produce for Euro-Matic, on the same or different machinery and molds
supplied to Hedstrom by Euro-Matic, products other than playpen balls as called
for hereunder. Subject to agreement by the parties hereto as the price payable
by Euro-Matic to Hedstrom for such other products, the parties agree that this
agreement shall apply in full for the production by Hedstrom of any such other
products.
19. Confidential Information
During the term of this Agreement and for three (3) years thereafter,
Hedstrom will regard as strictly confidential all knowledge and information
which it may acquire from Euro-Matic, or from employees or consultants,
respecting Euro-Matic's market and other private matters. This information and
knowledge shall be regarded as strictly confidential and held in trust and
solely for Euro-Matic's benefit and use, and shall not be directly disclosed by
Hedstrom other than to Euro-Matic without Euro-Matic's written permission.
Confidential information under this provision shall not include: (i) any
information that Hedstrom can demonstrate was in its possession on or prior to
the date hereof; (ii) any information available to Hedstrom on a
non-confidential basis through other sources; and (iii) any information
generally available to the public. Notwithstanding the foregoing, Hedstrom will
endeavor in good faith to keep Euro-Matic information confidential even though
such information may be generally available to the public.
20. Notice
All notice and other communication from either party hereto to the
other party under this Agreement shall be in writing and addressed to such
other party at its address first written above or sent by telex, telefax or the
equivalent thereof. Either party may by notice in writing to the other, change
its address. Notices and other communications required by this Agreement shall
be sent by registered or certified mail, return receipt requested, or the
United Kingdom equivalent thereof, and shall be deemed to have been given on
the day such notice or communication was mailed.
-6-
7
21. Governing Law
This Agreement has been entered into and shall be governed, construed
and interpreted pursuant to in accordance with the laws of the State of
Pennsylvania.
22. Integration
This Agreement sets forth the entire understanding between the parties
hereto and may not be added to or modified by oral representations or
understandings. No change in the printed terms of this Agreement shall be of
any force or effect unless in writing and signed by each party. Section
headings are for convenience only and shall not be considered a part of this
Agreement, nor referred to in any construction or interpretation thereof.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
HEDSTROM CORPORATION EURO-MATIC LIMITED
By: /s/ JAMES D. BRAEUNIG By: [illegible]
----------------------- -----------------------
Title: Vice President Mfg Title: President
-------------------- -------------------
-7-
8
[HEDSTROM LOGO]
Euro-Matic Limited
July 21, 1987
EXHIBIT A
SPECIFICATION
Ball Size: 73 mm
Material: Low Density Polyethylene - First Grade
Melt Index 2.0, Density 0.92
40% Virgin, 60% Regrind
Weight: 12 - 14 grams
Finish: Very little flash/minimum to none
Color: Clean and free from imperfections, stripes
and contamination
To match Euro-Matic colors
Internal Pressure: Atmosphere 1.2
Packing: 500 per carton
1 net bag/carton
Sealed center and wings
Page 4