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SUBSEQUENT EVENTS
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6 Months Ended |
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Jun. 30, 2012
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| SUBSEQUENT EVENTS [Abstract] | |
| SUBSEQUENT EVENTS |
NOTE 10--SUBSEQUENT EVENTS
Master Contract Manufacturing Agreement with Ashland, Inc.
On August 1, 2012, Manufacturers Chemicals, LLC (“MC”), a wholly owned subsidiary of the Company, entered into a Master Contract Manufacturing Agreement with Ashland, Inc. (“Ashland”) that sets forth the terms and conditions that will apply to any purchase order or work request that Ashland may submit to MC in connection with MC’s proposed manufacture of products and performance of other services related to the production of a line of defoamer products.
The initial term of the Agreement is for two years and includes a provision for automatic renewal of the Agreement for successive one year terms unless and until either party terminates the Agreement with not less than six months’ notice prior to the end of the initial term or the end of a renewal term. Termination of the Agreement may also occur under the following circumstances: (1) if Ashland and MC do not agree on the cost sheets that are used for product pricing each quarter, either party may terminate the agreement upon 60 days’ notice; and (2) if either party fails to comply with a material provision of the Agreement and, after notice from the non-defaulting party, the defaulting party fails to cure the default within the time periods provided by the Agreement, the non-defaulting party may terminate the Agreement.
For any goods and services provided by MC to Ashland, pricing must be agreed upon quarterly, and will consist of the following: (a) a tolling charge for each product produced; (b) raw material cost plus an agreed upon up charge; (c) container costs; (d) packing charges; and (e) short-term warehousing charges. A quarterly cost sheet will be prepared by MC not later than two weeks prior to the beginning of each quarter, at which time Ashland may accept or reject the proposed pricing.
Under the Agreement, MC will provide Ashland with a volume discount on tolling charges for defoamer products produced in excess of a combined volume of 22 million pounds annually.
The Agreement does not specify any minimum amount of product that Ashland must purchase, and permits Ashland to purchase the defoamer products from other third parties or to manufacture them itself. The Agreement prohibits MC from producing competing products for itself or other third parties without Ashland’s consent.
The Company performs an evaluation of events that occur after the balance sheet date but before financial statements are issued for potential recognition or disclosure of such events in its financial statements. The Company evaluated subsequent events through the date that the financial statements were issued.
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