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Exhibit 10.3    
    

MANAGEMENT SERVICES AGREEMENT  

        This Management Services Agreement (this "Agreement") is made as of this 3rd day of November, 2003 (the
"Effective Date") by, between and among PIERRE FABRE, INC. (to be known as PHYSICIANS FORMULA, INC.), a New York corporation having its
address at 1055 West 8th Street, Azusa, California ("PFI"), RENE FURTERER INC., a New York corporation
("RF," and collectively with PFI, the "Parties"), and PIERRE FABRE DERMO-COSMETIQUE, S.A., a limited
company organized under the laws of France with its head office at 45, Place Abel Gance, Boulogne (92100), France ("PFDC"). 

W I T N E S S E T H:  

        WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), among PFDC, PFI, PFI Holdings Corp., a Delaware corporation ("Holdings Corp.") and PFI Acquisition Corp., a New
York corporation, Holdings Corp. will acquire all of the beneficial ownership interests in PFI from PFDC; 

        WHEREAS,
in connection with the consummation of the transactions contemplated by the Purchase Agreement, PFI has offered to render various management and administrative services to RF in
relation to RF activities in the Territory. 

        NOW,
THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally
bound hereby, PFI, RF and PFDC hereby agree as follows: 

ARTICLE I—DEFINITIONS  

        As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of
the terms defined): 

        1.1   "Affiliate" means, with respect to any Person, (i) any other Person of which securities or other ownership
interests representing more than fifty percent (50%) of the voting interests are, at the time such determination is being made, owned, Controlled or held, directly or indirectly, by such Person, or
(ii) any other Person which, at the time such determination is being made, is Controlling, Controlled by or under common Control with, such Person. As used herein,
"Control, " whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 

        1.2   "Approval" means any permit, license, certificate, approval, consent, notice, waiver, franchise, registration, filing,
accreditation, or other similar authorization required by any Requirements of Law, Governmental authority, or contract to which a Party is a party. 

        1.3   "Customer" means a person who actually uses or could potentially use any of the Products (as this term is defined
hereafter). 

        1.4   "Effective Date" means the date that PFI and the RF Parties shall have executed and delivered this Agreement. 

        1.5   "Governmental Authority" means any legislature, agency, bureau, branch, department, division, commission, court,
tribunal, magistrate, justice, multi-national organization, quasi-governmental body, or other similar recognized organization or body of any federal, state, county, municipal, local, or foreign
government or other similar recognized organization or body exercising similar powers or authority. 

        1.6   "Lien" means a mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise,
including, without limitation, any lien for taxes), security interest, preference, 

 

participation
interest, priority or security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any document under the Requirements of Law of any applicable jurisdiction to
evidence any of the foregoing. 

        1.7   "Products" means, initially, hair care and cosmetic products marketed and sold by RF in the Territory under the
Trademarks (as this term is defined hereafter), listed on Attachment A, and thereafter any cosmetic products marketed and sold in the Territory under
such brands as may be added under this Agreement from time to time by RF; provided that the ability to add such new products shall not materially expand the scope and quantity of services provided
historically by PFI and shall not supercede or modify any restrictions applicable to RF under any other agreement between the Parties or under any other provision of this Agreement. 

        1.8   "Quarterly Management Fee" means the quarterly management fee payable by RF to PFI pursuant to Article II. 

        1.9   "Requirements of Law" means, collectively, any law (statutory, common, or otherwise), constitution, treaty, convention,
ordinance, equitable principle, code, rule, regulation, executive order, or other similar authority enacted, adopted, promulgated, or applied by any Governmental Authority, each as amended and now or
hereinafter in effect. 

        1.10 "RF Business" means the business conducted by RF that was conducted by PFI in relation to the Excluded Businesses (as
defined in the Purchase Agreement) during the six-month period preceding the Effective Date. 

        1.11 "Services" means the various management (general & administrative) services as listed and described in  Attachment B, subject to Article II below.

        1.12 "Term" shall have the meaning ascribed to that term in Article III of this Agreement. 

        1.13 "Territory" shall mean the United States of America, and, through December 31, 2003, Canada. 

        1.14 "Trademarks" means the RF trademarks listed, identified or described on Attachment D. 

ARTICLE II—CONSIDERATION  

        2.1   In
consideration of the Services, RF agrees to pay PFI management fees equal to $81,000 per calendar quarter (the "Quarterly Management
Fee"), payable in advance of each such quarter and commencing on the Effective Date, prorated for any partial quarter. 

        2.2   PFI
shall invoice RF quarterly for all Quarterly Management Fees, and monthly for any other fees and expenses to be paid by RF pursuant to the terms of this Agreement,
which invoice shall be paid within thirty (30) days of receipt. 

        2.3   In
consideration of payment of the Quarterly Management Fee, PFI will diligently provide the Services to RF in accordance with the quality, timeliness and standards
specified in Attachment B attached hereto. 

        2.4   The
Services shall be provided with the assistance and support of all relevant electronic data systems of PFI, and shall be provided in accordance with the terms of  Attachment B attached hereto.
Notwithstanding the foregoing, PFI shall not be required to provide any such Services if PFI would be restricted
from providing such services pursuant to any Requirements of Law or any third-party contracts in existence as of the Effective Date (unless RF obtained all necessary consents prior to the Effective
Date). 

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        2.5   In
the event of a material breach of this Agreement by PFI under the terms of this Agreement that continues for a period of thirty (30) days following the
delivery of notice from RF pursuant to Section 3.2 below, then in such event, and without limiting its rights to terminate the Agreement pursuant to Section 3.2 below and without
limitation of any other remedy available to it hereunder, RF shall have the right to outsource the function not properly performed by PFI and to setoff the cost thereof from the Quarterly Management
Fees due hereunder. If RF elects to exercise such remedy, RF shall give PFI notice thereof, and shall thereafter provide PFI with copies of invoices for all such outsourced services. 

        2.6   PFI's
collection personnel shall promptly inform RF of any delinquent Customer accounts and coordinate its collection efforts with RF. 

        2.7   PFI
shall use commercially reasonable efforts at RF's expense (but only with respect to out-of-pocket fees and expenses) to collect outstanding
accounts receivable in a manner consistent with past practices, provided that in no event shall PFI be required to commence any litigation to effect collection. Any decision to threaten or commence
litigation shall be in RF's sole and absolute direction and control. PFI may not make any adjustment, concession, or settlement of any such accounts without the consent of RF. 

        2.8   All
accounts receivable arising out of the sale of Products, and all proceeds thereof, shall be the sole property of RF, and any amount collected by PFI shall promptly
be deposited into bank accounts designated and maintained by RF. Such accounts receivable and all proceeds thereof shall be maintained free of all Liens resulting from any actions or omissions of, or
asserted through, PFI. 

        2.9   Notwithstanding
any provision to the contrary, (a) any out-of-pocket costs incurred by PFI or its subsidiaries with respect to collections
shall be borne by RF and (b) PFI shall not be required to undertake any collection or other actions on behalf of RF with respect to any customer of PFI or any of its Affiliates if there is any
dispute between such customer and any of the RF, PFDC or their respective Affiliates. 

        2.10 PFI
shall keep adequate records and books of account in connection with the RF personnel and the Products (to the extent permitted pursuant to Requirements of Law) to
the extent consistent with past practices of RF Business and not involving materially more time or expense to PFI than prior to the Effective Date; provided that PFI shall have no obligation to
determine the appropriate amount of any proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts or otherwise. 

        2.11 Any
payment to be made by RF in accordance with Article II, shall be completed through wire-transfer to the following account, or any other account
PFI may from time to time designate promptly upon receipt of the corresponding invoice pursuant to Section 2.1 above: 

Bank: Wells Fargo Bank
 Account Number: 412-7012144
 ABA Number: 121000248 

        2.12 Notwithstanding
anything to the contrary in this Agreement, PFI shall only be required to provide Services to the extent that (x) such Services have been
provided by the Retained Businesses (as defined in the Purchase Agreement) to the RF Business and shall only be required to provide such Services with materially the same degree of quality and
timeliness as had been conducted by the Retained Businesses during the six-month period preceding the date hereof, and (y) such Services would not involve additional time or cost
than such Services required prior to the Effective Date (other than to the extent such additional time or cost would not have a sustained or material adverse effect on the operations of PFI, or to the
extent such additional time or cost resulted from a material breach of the Agreement by PFI). Without limiting the foregoing, (1) PFI shall not have any obligation to make any modifications,
improvements or enhancements to any of the Services or to any software, hardware, 

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data,
electronic devices or other systems utilized in connection with the provision of the Services, shall not be required to add additional inventory capacity or hire additional personnel and shall
not be required to invest in additional equipment or facilities, and (2) PFI shall not be responsible for any regulatory matters relating to the Products. 

ARTICLE III—TERM AND TERMINATION  

        3.1   This
Agreement shall commence on the Effective Date and shall remain in full force and effect during the twelve (12) full months following the Effective Date
unless extended or terminated prior to such date pursuant to this Section (as extended or otherwise modified, the "Term"). The Term shall terminate
automatically without notice at 11:59 P.M. on the last day of such 12th month, provided, however, that the Parties may extend the Term by mutual agreement. 

        3.2   Either
Party may terminate this Agreement for cause upon any material breach of this Agreement by the other Party, as provided in this Section 3.2. In the event
of a material breach of this Agreement by either Party, the non-breaching Party shall deliver written notice to the allegedly defaulting Party specifying in detail the nature of such
material breach. In the event such defaulting Party, as the case may be, fails to cure such material breach within thirty (30) days following the delivery of such notice if such breach is not
solely caused by the non-payment of fees and expenses under this Agreement, or five (5) business days following the delivery of such notice if such breach results from the
non-payment of any fees or expenses under this Agreement, the non-defaulting Party may immediately elect to terminate this Agreement. Additionally, either Party may terminate
this Agreement immediately on written notice to the other Party upon the occurrence of any of the following: 

3.2.1    the
insolvency of the other either of the Parties or of PFDC; 

3.2.2    the
institution of any proceeding or arrangement by or against either of the Parties or PFDC Holdings, relating to or in the nature of a bankruptcy, insolvency or assignment for the
benefit of creditors, which proceeding or arrangement is consented to by any such Party or PFDC (as applicable) or is not dismissed or discontinued within forty-five (45) days after
the institution of such proceeding or arrangement; or 

3.2.3    the
making of any assignment for the benefit of creditors or the appointment of a receiver of or for either of the Parties or PFDC, as the case may be, or of or for all or
substantially all of the business, assets or properties of either of Parties or PFDC, as the case may be. 

ARTICLE IV—CERTAIN COVENANTS AND OBLIGATIONS OF RF  

        RF covenants and agrees with PFI as follows: 

        4.1   RF
shall possess at all times during the Term all permits and/or other Approvals that are required to observe, perform or abide by each of the covenants to be observed,
performed or abided by RF under this Agreement; and 

        4.2   Notwithstanding
any provision to the contrary, RF shall reimburse to PFI any amounts that are required to be paid to any licensors of software, solely as a result of the
Services to be rendered hereunder, and any amounts that are required to be paid to any such licensors to obtain the consent of such licensors to provide any of the Services hereunder. RF hereby
indemnifies, defends and holds PFI harmless from and against (i) any damages or other losses arising out of any third party claim that PFI lacked any rights necessary to perform such Services
or (ii) any loss, costs, damages or expenses, including attorneys fees, arising out of or related to PFI's obligations to indemnify Mapics, Inc. under that certain Letter Agreement
between Mapics, Inc. and PFI and/or that certain Addendum to 

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Software
License Agreement between Mapics, Inc. and RF and acknowledged by PFI, in any case, to the extent arising as a result of any actions or omissions of RF. 

ARTICLE V—CERTAIN COVENANTS AND OBLIGATIONS OF PFI.  

        PFI covenants and agrees with RF as follows: 

        5.1   PFI
shall possess and use commercially reasonable efforts to maintain at all times during the Term all permits and/or other Approvals that PFI is required to possess and
maintain in order to perform its obligations under this Agreement which were obtained by PFI prior to the Effective Date. In addition, if any such Approvals are required in the future that were not
obtained by PFI prior to the Effective Date, PFI and RF shall cooperate to obtain such approvals at RF's cost, or if obtaining such Approvals is not practical at a reasonable cost or would have a
sustained or material adverse effect on PFI's business, then the Parties shall work together in good faith to eliminate the bases for the requirement of such Approval or else terminate all or part of
the Services. 

        5.2   Subject
to the terms and conditions of this Agreement and in consideration of RF' payments under Article II above, PFI shall perform the Services in accordance
with the terms of Section 2.12 and Attachment B. PFI shall provide all such Services throughout the Term in a timely and professional manner,
consistent with past practices of the Retained Businesses. 

        5.3   Except
as expressly stated in this Agreement, PFI DOES NOT MAKE ANY, AND HEREBY DISCLAIMS ALL, OTHER WARRANTIES EXPRESS OR IMPLIED, IN CONNECTION WITH THIS AGREEMENT. 

ARTICLE VI—CERTAIN REPRESENTATIONS AND WARRANTIES OF RF AND PFDC  

        Each of RF and PFDC, jointly and severally, represent and warrant to PFI as follows: 

        6.1   Each
of RF's and PFDC's execution, delivery and performance of this Agreement has been duly authorized and approved by all necessary corporate action (or the equivalent)
on the part of such entity. Each of RF and PFDC Holdings has duly executed and delivered this Agreement which constitutes a legal, valid and binding obligation of such entity enforceable against such
entity in accordance with its terms. 

        6.2   Neither
RF's nor PFDC's execution and delivery of this Agreement nor the performance of their obligations hereunder will result in a violation or material breach of, or
constitute a default with respect to, or accelerate the performance required under, any other agreement or obligation to which either of them are a party or to which either of them are otherwise
bound, and will not constitute a violation of either of their respective certificates of incorporation or bylaws (or their equivalent) or of any Requirements of Law to which either of them is subject. 

        6.3   Except
for actions of PFI immediately after Closing (as defined in the Purchase Agreement), (a) the execution and delivery of this Agreement by PFI and the
performance of its obligations hereunder will not result in a violation or material breach of, or constitute a default with respect to, or accelerate the performance required under, any other
agreement or obligation to which PFI or any Retained Subsidiary (as defined in the Purchase Agreement) are a party or to which PFI or any Retained Subsidiary are otherwise bound and will not
constitute a violation of PFI's or any Retained Subsidiary's certificate of incorporation or bylaws (or their equivalent) or of any Requirements of Law to which PFI or any Retained Subsidiary is
subject and (b) PFI possesses all permits and/or other Approvals that are required to perform its obligations under this Agreement after giving effect to the consummation of the transactions
consummated by the Purchase Agreement and to prevent a violation or material breach of, or constitute a default with respect to, or accelerate the performance required under, any other agreement or
obligation to which PFI is a party or to which PFI is otherwise bound. 

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        6.4   Except
as expressly stated in this Agreement, RF DOES NOT MAKE ANY, AND HEREBY DISCLAIMS ALL, OTHER WARRANTIES EXPRESS OR IMPLIED, IN CONNECTION WITH THIS AGREEMENT. 

ARTICLE VII—CONFIDENTIALITY  

        7.1   The
Parties agree to the terms of the Confidentiality Addendum, Attachment C, which is incorporated and made a part of this Agreement as though fully set forth herein. 

        7.2   The
expiration or termination of this Agreement shall not release either Party from its obligations under this Article VII. 

ARTICLE VIII—RELATIONSHIP OF THE PARTIES  

        8.1   PFI
and RF are independent contractors, and neither Party shall be, nor represent itself to be, the joint venturer, franchiser, franchisee, partner, broker, employee, or
servant of the other Party for any purpose. Neither Party shall be responsible for the acts or omissions of the other. 

        8.2   PFI's
personnel who may perform services in connection with this Agreement from time to time shall be PFI's employees or independent contractors and shall not for any
purpose be considered employees or agents of either of the RF Parties. PFI assumes full responsibility for the actions of all such personnel while performing PFI's Services and obligations under this
Agreement. 

        8.3   The
Parties agree that this Agreement is solely for the benefit of the Parties hereto, and no provision of this Agreement shall be deemed to confer upon any other person
or entity any remedy, claim, liability, reimbursement, cause of action or other right whatsoever. 

ARTICLE IX—FORCE MAJEURE  

        9.1   The
Parties will not be responsible towards each other for any delay if they cannot perform their respective contractual obligations under this Agreement due to any
cause of Force Majeure i.e. any cause, unavoidable and insurmountable with commercially reasonable efforts such as but not limited to: 

	•
	natural
disasters such as earthquake, flood, abnormal atmospheric conditions, epidemics;

	•
	state
of war, declared or not;

	•
	public
disorders such as insurrections, revolts, strikes, lock-outs, and other labour disputes of any nature and public and social demonstrations, riots;

	•
	binding
decisions of one Party's government or any international body such as embargo, prohibitions or limitations of any kind; or

	•
	any
other event beyond one Party's reasonable control. 

In
such a case, the Party claiming Force Majeure will notify the other Party without undue delay of the causes of any delay and the necessary extension of performance of time-limits. The
onus to establish the occurrence of a claimed Force Majeure event lies with the Party seeking to invoke this Article. 

        Any
delay due to a Force Majeure case will not be a sufficient reason to obtain an early termination of this Agreement in whole or in part except as provided below. 

        The
Party affected by the Force Majeure situation shall use its reasonable best efforts to continue performance when such situation is removed. 

        Notwithstanding
the foregoing, should the Force Majeure situation extend beyond a three (3) month period, either Party may immediately terminate the Agreement. 

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ARTICLE X—LIABILITY—INSURANCE—INDEMNITY  

        10.1 Subject
to Section 10.4 below, each Party shall take all necessary steps, at its own cost and on its own behalf, to properly insure, as far as reasonably
possible, its entire legal liability to any third party which might be incurred as a consequence of its activity relating to this Agreement. Each Party undertakes to inform the other Party upon
request therefore of the identity of its respective insurance carriers. 

        10.2 Except
as set forth in Section 10.5, and except for any breach of Article VII, in no event will PFI be liable under this Agreement for any damages,
claims, indemnification obligation or other losses of any kind or nature under or in connection with this Agreement, whether in contract, tort, statute or otherwise, to the extent that such losses
exceed in the aggregate (for all claims and occurrences) the aggregate revenues received by PFI under this Agreement. 

        10.3 Subject
to Section 10.4 below, during the Term, each Party hereto shall obtain, pay for, and keep in full force and effect (a) comprehensive general
liability insurance with one or more reputable insurance carriers; (b) errors and omissions insurance; and (c) other insurance required by Requirements of Law in relation to the full
performance of its obligations under this Agreement consistent with past practices. 

        10.4 Notwithstanding
the foregoing, PFI shall only be required to obtain or maintain such insurance to the extent such insurance was in full force and effect for the
six-month period immediately prior to the Effective Date and shall not be required to incur any costs or other liabilities which are greater than the costs incurred by PFI in the ordinary
course of business consistent with past practices of the RF Business prior to the Effective Date; provided that PFI shall cooperate with RF to obtain
and maintain such insurance as may be reasonably requested by RF, including without limitation, errors and omissions insurance, if RF agrees to reimburse PFI for the cost (or additional cost) with
respect to such insurance. 

        10.5 Each
Party shall indemnify and hold the other Party harmless from any and all liability to all third parties for any and all judgments, claims, causes of action, suits,
proceedings, losses, damages, demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and disbursements) arising from any negligence or
intentional or willful misconduct of the indemnifying Party in connection with this Agreement or any breach by the indemnifying Party of this Agreement. In addition and notwithstanding any provision
to the contrary in this Agreement, RF and PFDC, jointly and severally, shall indemnify and hold PFI harmless from any and all liability, judgments, claims, causes of action, suits, proceedings,
losses, damages (including, without limitation, consequential damages), demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and
disbursements) arising from PFI's performance under this Agreement except to the extent arising from PFI's negligence, intentional or willful misconduct or breach of this Agreement. Notwithstanding
any provision to the contrary in this Agreement, PFI shall indemnify and hold RF and PFDC harmless from any and all liability, judgments, claims, causes of action, suits, proceedings, losses, damages
(including, without limitation, consequential damages), demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and disbursements) arising
from PFI's negligence or intentional or willful misconduct in its performance of this Agreement or from PFI's breach of this Agreement; provided,  however,
that, except to the extent arising from PFI's intentional or willful misconduct, RF's and PFDC's sole and exclusive remedy under the foregoing
indemnification shall be to recover any amounts payable under PFI's applicable insurance policy, if any, as additional insured parties under such policy and, for the avoidance of doubt, except to the
extent arising from PFI's intentional or willful misconduct, PFI shall have no liability whatsoever for any uninsured liability, judgments, claims, causes of action, suits, proceedings, losses,
damages, demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and disbursements). 

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        10.6 No
Party shall be under any obligation to any other Party under or in connection with this Agreement or any material breach hereof, for any punitive, indirect, special
or consequential damages of such other Party, including, but not limited to, lost business, lost profits or damage to goodwill. 

ARTICLE XI—CONTROLLING LAW; RESOLUTION OF DISPUTES  

        11.1 All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal law of the State of New York, in
the United States of America, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York. 

        11.2 Except
as specifically provided in Section 11.3 below in the case of arbitration, and solely for purposes of any action or proceeding arising out of or relating
to this Agreement, each of the parties submits to the jurisdiction of the United States District Court for the Central District of California (or if not permitted, the Superior Court for the County of
Los Angeles) in any action or proceeding arising out of or relating to this Agreement, including any action or proceeding to enforce any Final Determination, and agrees that all claims in respect of
the action or proceeding may be heard and determined in any such court. Each party hereto hereby irrevocably submits to the jurisdiction of such courts, irrevocably consents to the service of process
by registered mail or personal service and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter have as to personal jurisdiction, the laying
of the venue of any such action or proceeding brought in any such court and any claim that any such action or proceeding brought in any court has been brought in an inconvenient forum and waives any
bond, surety or other security that might be required of any other party with respect thereto. Each party also agrees not to bring any action or proceeding arising out of or relating to this Agreement
in any other state or federal court unless and until the foregoing court renders a final order that it lacks, and cannot acquire, the necessary jurisdiction, and either all appeals have been exhausted
or the order is no longer appealable. Each party appoints CT Corporation (the "Process Agent") as its agent to receive on its behalf service of copies
of the summons and complaint and any other process that might be served in the action or proceeding. Any party may make service on any other party by sending or delivering a copy of the process
(i) to the party to be served at the address and in the manner provided for the giving of notices in Article XII or (ii) to the party to be served in care of the Process Agent at
the address and in the manner provided for the giving of notices in Article XII; provided, however  that if process is served in care of the Process
Agent, the serving Party shall also provide a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Article XII. Nothing in this Section, however, shall affect the right of any party to serve legal process in any other manner permitted by law or at
equity. Each party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at
equity. 

        11.3 Arbitration Procedure.

11.3.1    Except
as provided in Section 11.2 above with respect to equitable relief, the Parties agree that the arbitration procedure set forth below shall be the sole and exclusive
method for resolving and remedying any and all disputes, controversies or claims that arise out of or in connection with, or relate in any manner to, the rights and liabilities of the Parties
hereunder or any provision of this Agreement or the interpretation, enforceability, performance, breach, termination or validity hereof, including this Section relating to the resolution of disputes
(the "Disputes") and questions concerning arbitrability; provided that nothing in this Section shall
prohibit a party hereto from instituting litigation to enforce any Final Determination (as defined below). The Parties hereby acknowledge and agree that, except as otherwise provided in this Section
or in the Rules for Non-Administered Arbitration of Business Disputes (the "Rules") promulgated by the Center for Public Resources Institute
for Dispute Resolutions 

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(the
"Institute") as in effect from time to time, the arbitration procedures and any Final Determination hereunder shall be governed by, and shall be
enforced pursuant to, the United States Arbitration Act, 9 U.S.C. §1 et. seq. 

11.3.2    In
the event that either Party asserts that there exists a Dispute, such Party shall deliver a written notice to the other Party involved therein specifying the nature of the
asserted Dispute and requesting a meeting to attempt to resolve the same. If no such resolution is reached within ten business days after the delivery of such notice, the Party delivering such notice
of Dispute may thereafter commence arbitration hereunder by delivering to the other Party involved therein a notice of arbitration (a "Notice of
Arbitration"). Such Notice of Arbitration shall specify the nature of any Dispute and any other matters required by the Rules as in effect from time to time to be included
therein. The arbitrators shall permit and facilitate such discovery as the parties shall reasonably request and each of the Parties shall cause such designated arbitrators mutually to agree upon and
designate a third arbitrator; provided, however, that: (i) failing such agreement within 45 days of the date on which the Notice of Arbitration is delivered, the third arbitrator shall
be appointed in accordance with the Rules; (ii) if either Party fails to designate timely an arbitrator, the Institute shall appoint an arbitrator on behalf of such failing Party, and the two
designated arbitrators shall jointly designate a third arbitrator. Each Party shall pay the fees and expenses of their respectively designated arbitrators (or the arbitrator designated on their behalf
by the Institute) and shall bear equally the fees and expenses of the third neutral arbitrator; provided that at the conclusion of the arbitration, the
arbitrators shall award costs and expenses (including the costs of the arbitration previously advanced and the fees and expenses of attorneys, accountants and other experts) and interest at 8% per
annum to the prevailing Party. 

11.3.3    The
arbitration shall be conducted in the English language in Los Angeles, California under the Rules as in effect from time to time. The arbitrator shall conduct the arbitration
so that a final result, determination, finding, judgment and/or award (the "Final Determination") is made or rendered as soon as practicable, but in no
event later than 90 business days after the delivery of the Notice of Arbitration nor later than ten days following completion of the arbitration. Notwithstanding any California law to the contrary,
the Final Determination shall be final and binding on each Party and there shall be no appeal from or reexamination of the Final Determination, including any right of appeal to any court in any
jurisdiction, except for fraud, perjury, evident partiality or misconduct by an arbitrator prejudicing the rights of any Party and to correct manifest clerical errors. 

11.3.4    This
Agreement has been negotiated and executed by the Parties hereto in English. To the extent a translation of this Agreement exists, each of the Parties hereto acknowledges that
it has been prepared solely for convenience and agrees that the provisions of the English version of the Agreement prevail. 

11.3.5    Notwithstanding
anything to the contrary, nothing in this Section 11.3 shall be construed to impair the right of either Party to seek injunctive or other equitable relief,
including pursuant to Section 11.2 above. 

ARTICLE XII NOTICES.  

        All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (i) when personally delivered, sent by telecopy (with hard copy to follow) upon receipt of mechanical confirmation of delivery, (ii) for deliveries within the
continental United States, one day following the day when deposited with a reputable and established overnight express courier (charges prepaid), 

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(iii) for
overseas deliveries, five days following the day when deposited with a reputable and established overnight express courier (charges prepaid), or (iv) for deliveries within the
continental United States, five days following mailing by certified or registered mail, postage prepaid and return receipt requested. Unless another address is specified in writing, notices, demands
and communications to the Parties shall be sent to the addresses indicated below: 

        Notices
to RF and PFDC shall be delivered to: 

Rene
Furterer Inc.

1055 West 8th Street

Azusa, CA 91702

Attn: President

Telephone: (626) 334-3395

Telecopy: (626) 812-9462 

        with copies to (which shall not constitute notice to RF or PFDC):

Pierre
Fabre Dermo-Cosmetique S.A.

Legal Department

Les Cauquillous

81 506 LAVAUR Cedex

France

Attn: Pierre-André Poirier

General Counsel—Company Secretary

Telephone: + 33 (5) 63 58 88 38

Telecopy: + 33 (5) 63 58 86 68 

Barack
Ferrazzano Kirschbaum Perlman & Nagelberg LLC

333 West Wacker Drive

Suite 2700

Chicago, Illinois 60606

Peter J. Barack, Esq.

Telephone: (312) 948-3101

Telecopy: (312) 984-3150 

        Notices to PFI shall be delivered to:

Pierre
Fabre, Inc.

1055 West 8th Street

Azusa, CA 91702

Attn: Chief Executive Officer

Telephone: (626) 334-3395

Telecopy: (626) 812-9462 

        with copies to (which shall not constitute notice to PFI):

Summit
Partners, L.P.

499 Hamilton Avenue

Suite 200

Palo Alto, California 94301

Attn:  Walter G. Kortschak

           Craig D. Frances

Telephone: (650) 321-1166

Telecopy: (650) 321-1188 

10

 

Kirkland &
Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Attn: Ted H. Zook, P.C.

Telephone: (312) 861-2000

Telecopy: (312) 861-2200 

ARTICLE XIII—ASSIGNMENT  

        This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted
assigns; provided that neither this Agreement nor any of the rights, interest or obligations hereunder may be assigned by either Party without the prior
written consent of the other Parties hereto and any attempt to do so will be void. Notwithstanding the foregoing, without the consent of the other Parties (a) any Party may assign any of its
rights or obligations arising from this Agreement to its Affiliates provided that the assignor remains liable for all of its obligations under this
Agreement and (b) PFI may assign its rights and obligations pursuant to this Agreement to any of its lenders as collateral security. 

ARTICLE XIV—INTERPRETATION  

        14.1 Any
reference to any federal, state, local or foreign law will also be deemed to refer to such law as amended and all rules and regulations promulgated thereunder,
unless the context otherwise requires. 

        14.2 This
Agreement, together with its Attachments hereto, constitutes the entire agreement and understanding of the Parties hereto in respect of its subject matter and
supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the
transactions contemplated hereby. 

        14.3 This
Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same
instrument. 

        14.4 This
Agreement may not be amended or modified, and no provisions hereof may be waived, other than in writing executed by each of PFI, RF and PFDC. No action taken
pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. 

        14.5 The
provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision hereof will not affect the validity or enforceability
of the other provisions hereof; provided that if any provision of this Agreement, as applied to any Party or to any circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator not
to be enforceable in accordance with its terms, the Parties agree that the Governmental Authority, arbitrator, or mediator making such determination will have the power to modify the provision in a
manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced. 

        14.6 The
Section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement. 

        14.7 The
attachments identified in this Agreement are incorporated herein by reference and made a part hereof. 

11

 

ARTICLE XV—PFDC GUARANTEE  

        15.1 PFDC
acknowledges and agrees that it will receive substantial direct and indirect benefits from the consummation of the transactions contemplated hereby. Accordingly,
PFDC hereby absolutely and unconditionally guarantees and shall be liable for the prompt payment and performance of all of the duties and obligations of RF under and pursuant to this Agreement as a
primary obligor and shall be jointly and severally liable with RF for all liabilities and obligations of RF under this Agreements. 

ARTICLE XVI—MISCELLANEOUS.  

        Each of the Parties agrees to take such reasonable actions and execute and deliver such other documents or agreements as may be reasonably necessary or desirable
for the implementation of this Agreement and the consummation of the transactions contemplated hereby and thereby. 

*    *    *    *    *

12

 

        IN
WITNESS WHEREOF, each of the Parties has executed this Management Service Agreement as of the day and year first above written. 

	 	 	PIERRE FABRE DERMO-COSMETIQUE, S.A..
	 	 	 	 	 
	 	 	By:	 	/s/  PIERRE-ANDRE POIRIER      

	 	 	Name:	 	Pierre-Andre Poirier
	 	 	Title:	 	Secretary
	 	 	 	 	 
	 	 	 	 	 
	 	 	RENE FURTERER INC.
	 	 	 	 	 
	 	 	By:	 	/s/  ANDRE PIETERS      

	 	 	Name:	 	Andre Pieters
	 	 	Title:	 	President
	 	 	 	 	 
	 	 	 	 	 
	 	 	PHYSICIANS FORMULA, INC.
	 	 	 	 	 
	 	 	By:	 	/s/  ANDRE PIETERS      

	 	 	Name:	 	Andre Pieters
	 	 	Title:	 	President

13

   Attachment C  

 CONFIDENTIALITY ADDENDUM  

        1.    Definitions.    Except as set forth below, any capitalized term in this Addendum shall have the meaning given to
such term in the Agreement. 

	(a)
	The
term "Addendum" means this Confidentiality Addendum.

	(b)
	The
term "Agreement" means the agreement entered into between the Parties to which this Addendum is attached.

	(c)
	The
term "Disclosing Party" means the Party disclosing any Confidential Information to one or more Receiving Party(ies) as applicable

	(d)
	The
term "Party" or "Parties" means, individually, a party, or collectively the
parties, as the case may be, to the Agreement.

	(e)
	The
term "PFI" means Pierre Fabre, Inc. (to be known as Physicians Formula, Inc., a New York corporation), and any of its
Affiliates after the effective date of the Agreement.

	(f)
	The
term "Pre-Effective Date PFDC Confidential Information" means all proprietary information, documents or trade secrets,
of whatever form, solely related to the business of (i) the Excluded Subsidiaries (as defined in the Purchase Agreement), or (ii) PFDC or any of its Subsidiaries (other than the Retained
Subsidiaries), that was disclosed to, or in the possession of, any other Party or any of their respective Affiliates at any time prior to the effective date of the Agreement.

	(g)
	The
term "Pre-Effective Date PFI Confidential Information" means all proprietary information, documents or trade secrets,
of whatever form, related to the business of PFI or any of its Retained Subsidiaries (as defined in the Purchase Agreement) at any tier, that was disclosed to, or in the possession of, any other Party
or any of their respective Affiliates at any time prior to the effective date of the Agreement; excluding,  however, the Pre-Effective Date PFDC
Confidential Information.

	(h)
	The
term "Receiving Party" means the Party receiving any Confidential Information from the Disclosing Party. 

        2.     The
term "Confidential Information" shall include all proprietary information, documents or trade secrets, of whatever
form, disclosed by a Disclosing Party to one or more Receiving Parties, in writing or orally, for the purposes of and pursuant to the Agreement, and corresponding to the conditions of Section 3
below, and including without limitation all written or printed documents, all samples, models or, more generally, all means of disclosing Confidential Information which may be chosen by either Party
during the term of the Agreement. Notwithstanding anything to the contrary, Confidential Information of PFI (as the Disclosing Party) shall include for all purposes the Pre-Effective Date
PFI Confidential Information and Confidential Information of PFDC (as the Disclosing Party) shall include for all purposes the Pre-Effective Date PFDC Confidential Information. 

        3.     Included
within the definition of "Confidential Information" is information or documents, of whatever form,
(i) transmitted by the Disclosing Party and designated Confidential Information by the Disclosing Party through the affixing or addition to them of a stamp or a formula or through the drawing
up and transmission or sending of written notification to this effect, or when they are disclosed orally, where the confidential nature of the information has been brought to the attention of the
Receiving Party, at the time of its disclosure and confirmed in writing as soon as possible (but, in no event later than thirty (30) days after the disclosure), or (ii) that a reasonable
person would consider and treat as confidential or proprietary in nature. Notwithstanding anything in this Addendum or the 

1

 

Agreement
to the contrary, the designation or marking of any Pre-Effective Date PFI Confidential Information or Pre-Effective Date PFDC Confidential Information as Confidential
Information shall not be required for protection or applicability of such Pre-Effective Date PFI Confidential Information or Pre-Effective Date PFDC Confidential Information,
as applicable, under this Addendum. 

        4.     Each
Receiving Party undertakes that all Confidential Information issuing from the Disclosing Party: 

	(a)
	shall
be protected and kept strictly confidential and be treated with the same degree of care and protection as would be given to its own Confidential Information of the same
significance;

	(b)
	shall
be used solely for the purposes of carrying out the Receiving Party's obligations under the Agreement, or as otherwise permitted by the Agreement;

	(c)
	shall
be disclosed solely to its own employees and contractors who need to know such information to carry out their duties as required or contemplated by the Agreement, in each case
under a written agreement with the Receiving Party pursuant to which the recipient agrees to maintain the confidentiality of such information in accordance with the terms of this Addendum and for use
solely as contemplated or permitted under the Agreement; and

	(d)
	shall
not be disclosed, either directly or indirectly to any third party except as permitted above in Section 4(c) or to the limited extent required under Section 5(f)
below. 

        5.     Except
as provided above, a Receiving Party shall be under no obligation and subject to no restriction with regard to a particular item of Confidential Information to the
extent it can show proof that: 

	(a)
	such
information was in the public domain prior to its disclosure or afterwards, but that in the latter case not as a result of any disclosure by such Receiving Party or any of its
Affiliates;

	(b)
	other
than with respect to the Pre-Effective Date PF Confidential Information or Pre-Effective Date PFDC Confidential Information, as applicable, that such
information was known to the Receiving Party prior to disclosure hereunder;

	(c)
	that
such information was received legitimately from an unaffiliated third party, without constraint or breach of this Addendum, the Agreement or any other agreement to which the
Receiving Party is bound;

	(d)
	that
such information was published by a third party without contravening the terms of this Addendum, the Agreement or any other agreement to which the Receiving Party is bound;

	(e)
	that
such information was the result of internal, independent research and development undertaken in good faith by the Receiving Party's employees without access to any Confidential
Information;

	(f)
	that
such information is compelled to be disclosed by judicial or administrative process or, based on the advice of other legal counsel, by other requirements of law and then still
subject to the provisions of this Addendum to the extent permitted by law; provided that the disclosing Party shall, to the extent practicable, provide
prior notice of such disclosure to the other Party; or

	(g)
	that
the use or disclosure was authorized in writing by the Disclosing Party. 

        6.     It
is expressly agreed between the Parties that disclosure of Confidential Information under the terms of this Addendum may in no way be interpreted as conferring on the
other Party either explicitly or implicitly any right whatsoever (in terms of a licence or by any other means) over the materials, inventions or discoveries to which the Confidential Information
relates. The same applies to royalties or other rights attached to literary and artistic copyright, trademarks or professional secrecy. 

2

 

Property
rights over Confidential Information disclosed under the terms of this document belong in any event, subject to rights of third parties, to the Party from whom they originate. 

        7.     Within
fifteen (15) days after termination or expiration of the Agreement for any reason, the Receiving Party shall (i) cease using the Disclosing Party's
Confidential Information, and (ii) at the option of the Disclosing Party, either return or destroy all materials and documentation in any medium that constitute, contain, refer or relate to,
whether in written or electronic format, the Disclosing Party's Confidential Information then in the possession, custody or control of Receiving Party or its Affiliates, and provide to the Disclosing
Party, within ten (10) business days thereafter a written certification, signed by a director of the Receiving Party, that all such materials have been either returned or destroyed as
applicable. 

        8.     The
confidentiality obligations of each Receiving Party shall continue hereunder indefinitely as to all trade secrets of the Disclosing Party (determined in accordance
with New York law), and for ten (10) years for all other Confidential Information, or in any case for the longest period of time permitted under applicable law, and shall survive expiration or
termination of the Agreement for any reason. For the sake of clarity, no license or other permission under any patent or copyright is express or implied hereunder. 

        9.     The
foregoing provisions of this Addendum shall apply only to Confidential Information exchanged under the Agreement (including any Pre-Effective Date PFI
Confidential Information and any Pre-Effective Date PFDC Confidential Information), and for the purposes of each Party's respective performance under the Agreement, and shall not apply to,
modify or supercede any other agreements or arrangements governing such information. 

3

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Exhibit 10.3QuickLinks
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Exhibit 10.4    
    

MANUFACTURING AGREEMENT AND LICENSE  

        This Manufacturing Agreement and License ("Agreement") is made as of this 3rd day of November, 2003 (the
"Effective Date") by and between PIERRE FABRE DERMO-COSMETIQUE S.A., a limited company organized under the laws of France with its head office at 45, Place Abel Gance, Boulogne (92100), France
("PFDC"), and PIERRE FABRE, INC. (to be known as PHYSICIANS FORMULA, INC.), a New York corporation having its address at 1055 West 8th
Street, Azusa, California ("PFI," and together with PFDC, the "Parties"). 

 
 

RECITALS    
    

        WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), among PFDC, PFI, PFI Holdings Corp., a Delaware corporation, and PFI Acquisition Corp., a New York corporation, Holdings Corp. will acquire all of the beneficial
ownership interests in PFI from PFDC; 

        WHEREAS,
PFDC has requested that PFI manufacture certain products, and PFI has agreed to manufacture such products for PFDC in accordance with the terms and conditions of this Agreement;
and 

        WHEREAS,
PFI has agreed to grant limited licenses under certain conditions to PFDC. 

        NOW,
THEREFORE, the Parties agree as follows: 

 
 

AGREEMENT    
    
    ARTICLE I—DEFINITIONS    
    

        As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of
the terms defined): 

        1.1   "Accepted Firm Order" shall mean a Firm Order for a month, which has been or is required to be accepted by PFI pursuant
to Section 7.4. 

        1.2   "Affiliate" shall mean any person or entity which (i) controls any Party to this Agreement; or (ii) is
controlled by any such Party; or (iii) is controlled by any such Party as is referred to in (i). A business entity shall be deemed to "control" another business entity if it owns, directly or
indirectly, in excess of fifty percent (50%) of the outstanding voting securities or capital stock of such business entity or other comparable equity or ownership interest in respect of a business
entity which is not a corporation or if any other relationship between the two business entities legally results in effective control by one entity over the management, business and/or affairs of the
other entity. 

        1.3   "Agreement" shall have the meaning stated in the preamble. 

        1.4   "COGS" shall mean the cost to PHYSICIANS FORMULA to manufacture and sell the Products under this Agreement, calculated in
accordance with PHYSICIANS FORMULA's practices during the 2003 fiscal year for "cost of goods sold," which cost shall include, without limitation, the costs and expenses for the Components,
manufacturing labor and benefits, workers compensation expenses, allocated utilities and rent for manufacturing facilities, quality control expenses and amoritization expenses, but excluding
administrative overhead expenses not directly related to such manufacturing activities. 

        1.5   "Components" shall designate raw materials, in bulk and ready for use, and the packaging items for each Product and for
all unfinished goods at all stages of Production. 

        1.6   "Confidential Information" shall have the meaning set forth in Appendix 8. 

 

        1.7   "Couvrance License Event" shall mean the termination of this Agreement by PFDC permitted by and in accordance with
Article XIV. 

        1.8   "Delivery Schedules" shall mean the schedule of orders, deliveries and forecasts communicated on a monthly basis from
PFDC to PFI in the form shown in Appendix 3, which shall in any case be subject to and consistent with the Standard Lead Times set forth in Appendix 1. 

        1.9   "Designated Couvrance Manufacturer" shall have the meaning set forth in Article XVII below. 

        1.10 "Direct Competitor" shall mean a competitor of PFI that markets or sells its own retail cosmetic products through one or
more third party retail establishments in the United States. 

        1.11 "Disputes" shall have the meaning set forth in Section 21.3 below. 

        1.12 "Effective Date" shall have the meaning set forth in the preamble above. 

        1.13 "Final Determination" shall have the meaning set forth in Section 21.3.3 below. 

        1.14 "Firm Order(s)" shall have the meaning set forth in Section 7.1 below. 

        1.15 "GAAP" shall mean generally accepted accounting principles in the United States, as in effect from time to time,
consistently applied. 

        1.16 "Governmental Authority" means any legislature, agency, bureau, branch, department, division, commission, court,
tribunal, magistrate, justice, multi-national organization, quasi-governmental body, or other similar recognized organization or body of any federal, state, county, municipal, local, or foreign
government or other similar recognized organization or body exercising similar powers or authority. 

        1.17 "Institute" shall have the meaning set forth in Section 21.3.1 below. 

        1.18 "Notice of Arbitration" shall have the meaning set forth in Section 21.3.2 below. 

        1.19 "Past Practices" shall mean the procedures, processes, practices, methods, specifications, formulations, and packaging
used by PFI in the manufacture for, and sale to, PDFC of Products during the 12-month period preceding the Effective Date, including but not limited to the rules of Good Practice for
Manufacturing of Cosmetic Products (Bonnes Pratiques de Production des Produits Cosmétiques (BPPC) as set out in Article 7 of the
amended EEC Directive 76/768 to the extent followed by Company prior to Effective Date. 

        1.20 "PF Intellectual Property" shall have the meaning set forth in Section 16.1 below. 

        1.21 "PFDC Intellectual Property" shall have the meaning set forth in Section 16.2 below. 

        1.22 "PF Components" shall have the meaning set forth in Section 4.2 below. 

        1.23 "PFDC Components" shall have the meaning set forth in Section 4.1 below. 

        1.24 "PPI" shall mean, with reference to a date, the average of the monthly United States Bureau Labor Statistics Producer
Price Index—Chemicals and Allied Products for the 12 months preceding such date. 

        1.25 "PPI Adjusted Limit" between a first date and a later second date shall mean the percentage increase, if any, in the PPI
on the second date as compared to the PPI on the first date, plus 10%. 

        1.26 "Process Agent" shall have the meaning set forth in Section 21.2 below. 

        1.27 "Production" shall designate operations for the purchase and storage of Components, and the manufacturing, packaging and
control of Products performed by PFI in accordance with orders from PFDC and with Appendix 1. 

2

 

        1.28 "Products" shall designate PFDC's cosmetic products in the formulations and according to the specifications in existence
as of the Effective Date and listed in Appendix 1 attached hereto, titled "Product References." The list in Appendix 1 may be amended during the duration of this Agreement only with the
mutual consent of PFDC and PFI. "Product" shall designate any of the Products. 

        1.29 "Requirements of Law" means, collectively, any law (statutory, common, or otherwise), constitution, treaty, convention,
ordinance, equitable principle, code, rule, regulation, executive order, or other similar authority enacted, adopted, promulgated, or applied by any Governmental Authority, each as amended and now or
hereinafter in effect. 

        1.30 "Rules" shall have the meaning set forth in Section 21.3.1. 

        1.31 "Term" shall have the meaning set forth in Article III. 

        1.32 "Three Month Forecast" shall have the meaning set forth in Section 7.2 below. 

 
 

ARTICLE II—PURPOSE    
    

        PFDC and PFI agree that PFI shall produce all of PFDC's requirements for the Products subject to the terms and conditions defined below and in accordance with the
Delivery Schedules provided each month by PFDC to PFI. 

 
 

ARTICLE III—DURATION    
    

        This Agreement shall take effect on the "Effective Date and remain in effect for a period of thirty-six (36) consecutive months, unless earlier
terminated pursuant to Article XIV (the "Term"). 

 
 

ARTICLE IV—SUPPLY OF COMPONENTS    
    

        4.1   Components supplied by PFDC ("PFDC Components")

        4.1.1 All
PFDC Components remain the property of PFDC and shall be supplied to PFI at no cost to PFI. PFI undertakes not to use such PFDC Components for any purposes other
than Production of Products ordered by PFDC. PFDC shall ensure that PFI shall have all PFDC Components necessary to permit PFI to manufacture at least five (5) months of Production (i.e., firm
orders over the applicable three (3) month period and forecasts for the two (2) following months). 

        4.1.2 Promptly,
but in any event no later than ten (10) days after receipt of any PFDC Components, PFI shall deliver a certificate of receipt to the Manufacturing
Department of PFDC, identifying the code and designation of the PFDC Component, the quantity received, the date of receipt and any possible reservations made to the carrier. 

        4.1.3 On
or before the fifth (5th) business day of each month, PFI shall provide notice to PFDC that shall indicate the quantity of all PFDC Components
currently held by PFI. 

        4.1.4 PFI
shall provide PFDC and its auditors reasonable access at reasonable times to verify the quantity of PFDC Components held by PFI. Any such inspection by PDFC and
its auditors shall be at the sole cost and expense of PFDC and without disruption to PFI's business operations. 

        4.1.5 PFI
shall use commercially reasonable efforts to maintain and safeguard the PFDC Components against loss or damage;  provided that as PFDC's sole remedy in the event of any difference between PFDC computer
data and the PFI inventory, any such missing or damaged
Components will be invoiced to PFI by PFDC at PFDC's actual cost determined in accordance with GAAP (except to the extent PFI delivered a certificate pursuant to Section 4.1.2 above with 

3

 

respect
to any such missing or damaged Component) beyond the following authorized annual percentage losses: 

Raw
materials: 5%

Packaging items: 3%

Labels: 5% 

        4.2   Components supplied by PFI

        4.2.1 Components
supplied by PFI are used to make the Products listed in Appendix 1 (Product References) (the "PF
Components"). PFI undertakes to supply the PF Components without additional charge (e.g., the applicable Product prices include all such PF Component costs). 

        4.2.2 PFI
will obtain supplies of the PF Components within the time frame and in the quantities sufficient to supply the Firm Orders in accordance with PFI's Standard Lead
Times (Appendix 1). Unless otherwise instructed in writing by PFDC, PFI will purchase PF Components necessary to permit PFI to manufacture at least five (5) months of Production based on
PFDC's Firm Orders and forecasts. If any forecast is cancelled or revised downward and PFI cannot subsequently use such PF Components, PFDC shall, within thirty (30) days, pay PFI for all PF
Components and finished goods resulting from such changes. 

        4.2.3 PFI
undertakes to submit to PFDC for approval the proofs for any new printing concerning the Components, together with cost estimates, prior to the commencement of
Production of such Components. PFDC, shall, within fifteen (15) days of receipt of such proofs, deliver written notice of its approval or disapproval of such proofs. If PFDC approves such
proofs, PFI may commence Production immediately. If PFDC does not approve such proofs, the Parties shall work together to develop mutually acceptable printing proofs. Re-printing of
existing materials will not be re-submitted for approval unless specifically requested in writing by PFDC. Upon receipt of reasonable documentation, PFDC will be responsible for printed
items and will be liable for all technical and organization costs for these items. 

        4.2.4 PFI
will notify PFDC of any change in a material PF Components supplier. In addition, PFI shall obtain PFDC's consent prior to changing any PF Components supplier if
the PF Components that such supplier supplies are used solely in the production of Products for PFDC (and not for any products sold by PFI to its own customers outside of this Agreement). 

 
 

ARTICLE V—SPECIFICATIONS / PRODUCTION    
    

        5.1   Products
shall be manufactured and packaged by PFI consistent with Past Practices. 

        5.2   Subject
to the terms and conditions set forth elsewhere in this Agreement, PFI undertakes to produce the quantities ordered in the Accepted Firm Orders and deliver such
products in accordance with the Delivery Schedule, complying with all terms of the Agreement and Appendices. 

        5.3   PFI
undertakes to manufacture Products according to mutually agreed upon, pre-approved Standards & Specifications as listed in Appendix 4
attached hereto and made a part hereof. 

        5.4   PFI
undertakes to prepare and send to PFDC a batch file for each Product batch to be manufactured for PFDC. A model of a batch file is shown in Appendix 5. PFI
undertakes to prepare and send to PFDC a qualitative description of the formulas (and any other information required by law) with respect to any new Products. Such description shall be subject to the
provisions of Article XI and Article XVI. 

        5.5   No
more than once per twelve (12) month period during the Term, with reasonable prior notice, during working hours and without disruption to PFI's business
operations, PFDC shall be given 

4

 

reasonable
access to inspect PFI sites in order to determine whether the production of Products conforms to applicable Past Practices. During the Term, PFI shall also provide reasonable access to
Production and control documents for Products that are held by PFI upon request by PFDC. All of the foregoing rights shall be subject to PFDC's obligations and other restrictions with respect to the
use and disclosure of Confidential Information and PF Intellectual Property set forth in Article XI and Article XVI. 

 
 

ARTICLE VI—CONTROL    
    

        6.1   Each
delivery of Products of a type previously manufactured by PFI will be completed with the batch file in accordance with the terms of Appendix 5. 

        6.2   With
respect to delivery by air transport, PFDC shall have a period of forty-five (45) days from each such delivery to its carrier (as per EXW
delivery) to carry out a quality control with respect to the Products delivered in such delivery. With respect to delivery by ocean transport, PFDC shall have a period of sixty (60) days from
each such delivery to its carrier (as per EXW delivery) to carry out a quality control with respect to the Products delivered in such delivery. If PFI has not received written notification concerning
the quality control on or before the last day of such forty-five (45) day period or sixty (60) day period, as applicable, the batch will be deemed to be accepted. 

        6.3   In
the event that PFDC declares a batch to be non-compliant, PFDC will submit to PFI for evaluation samples of the Product in question and the quantity of
Products that are declared to be non-compliant. If, after this evaluation, PFI agrees with PFDC on the non-compliance and such non-compliance does not result from
the quality or condition of any of the PFDC Components (assuming such PFDC Components have been properly stored and maintained by PFI) or from conditions that occurred during shipping, then PFI
undertakes, at the written request of PFDC with as little delay as reasonably possible: 

        6.3.1 either
to reprocess the quantities of Products declared non-compliant, or 

        6.3.2 to
destroy them at its own cost and to re-launch production at its own costs. 

The
foregoing shall be PFDC's sole remedy in the event of a non-compliant batch, except as provided in Section 14.4 in the case of a repeated failure. 

        6.4   Should
acceptance of a batch be in dispute, the Parties undertake to analyse the problem jointly with the aim of finding an amicable solution. If, following such joint
analysis, the disagreement persists, the said problem will be brought before an independent expert appointed by common agreement. 

        6.4.1 The
Parties agree to accept whatever conclusions the expert may reach. 

        6.4.2 If
the expert considers the Product non-compliant, all expenses and fees incurred by the expert shall be the responsibility of PFI. 

        6.4.3 If
the expert considers the Product in conformity, all expenses and fees incurred by the expert shall be the responsibility of PFDC. In this case moreover, PFDC shall
waive any right to compensation from PFI for the value of the Components and shall pay PFI for the Products in accordance with this Agreement. 

 
 

ARTICLE VII—DELIVERY SCHEDULE—REVISIONS—ORDERS    
    

        7.1   At
least fifteen (15) days prior to the end of each month, PFDC will provide to PFI for the month or months that are not already the subject of a prior Firm
Order: (i) irrevocable, binding monthly purchase orders for PFDC's Product requirements over each of the following three (3) months (a "Firm
Order," or in the plural, "Firm Orders"); and (ii) a Delivery Schedule for such orders. PFDC 

5

 

shall
be responsible for payment in full of all Firm Orders shipped by PFI regardless of whether the corresponding actual orders are subsequently decreased. PFDC may increase or decrease a Firm Order
subject to PFI's consent in its sole discretion. This ordering procedure shall be applied on a rolling monthly basis. 

        7.2   At
the same time that PFDC provides its Firm Order for the following three months, PFDC shall also provide a good faith estimate, based upon its reasonable investigation
and analysis, of its Product requirements and anticipated delivery schedules for each of the three months following the months for which the Firm Orders are provided (the
"Three Month Forecast"). This forecasting procedure shall also be applied on a rolling monthly basis. 

        7.3   At
the same time that PFDC provides its Firm Order and the Three Month Forecast, PFDC shall also provide a non-binding good faith estimate, for PFI's
informational and planning purposes only, of its Product requirements and anticipated delivery schedules for each of the three (3) months following the Three Month Forecast. This forecasting
procedure shall also be applied on a rolling monthly basis. 

        7.4   PFI
shall accept forecasts and Firm Orders in accordance with this Section 7.4. Subject to Section 7.5, PFI shall accept each month's forecast within the
Three Month Forecast to the extent that such forecast for each month included within the Three Month Forecast is no more than 120% of the amount forecasted and accepted for such month in the prior
Three Month Forecast; or, if no such previously accepted forecast exists for any such month or such forecast is greater than 120% of such previously accepted forecast, PFI may accept or reject the
forecast for such month in its sole discretion. PFI shall accept each month's Firm Order if such Firm Order is no more than 120% of the then-current previously accepted forecast for such
month; otherwise, PFI may in its sole direction accept or reject such Firm Order. In all of the foregoing cases, PFI shall reject the forecast or Firm Order, as applicable, if at all, within fifteen
(15) calendar days of receipt of same from PFDC. If PFI neither accepts nor rejects a forecast or Firm Order within the applicable time period, such forecast or Firm Order shall be deemed
accepted. For the sake of clarity, and notwithstanding anything to the contrary herein, an Accepted Firm Order may not be changed by either PFDC or PFI without the Parties' mutual consent. 

        7.5   PFI
shall provide at least six months prior written notice to PFDC if PFI reasonably determines that due to reallocation of production capacity it could not, in the
exercise of commercially reasonable efforts, meet PFDC's projected requirements for the production and delivery of Products. In such notice, PFI shall state the monthly maximum orders that it
reasonably believes it could fulfill. In the event that PHYSICIANS FORMULA provides such notice to PFDC, PFDC shall have the right to terminate this Agreement as provided below in Article XIV.
PFI's reasonable determination of its inability to meet any such production and delivery requirements under this Section 7.5 shall not constitute a breach of this Agreement. In the event that
PFI delivers the notice set forth above, then effective six months after delivery thereof (or such later date as set forth in the notice), notwithstanding anything in this Agreement to the contrary,
under no circumstances shall PFI be obligated to manufacture or deliver more than the maximum monthly orders set forth in such notice. For the sake of clarity, the foregoing shall not permit PFI to
reject or refuse to manufacture and deliver Products according to any previously accepted Firm Order or Three Month Forecast (or, if applicable, any portion thereof). 

        7.6   Orders
by PFDC and deliveries required by the Delivery Schedule shall be placed in multiples of standard batches as defined in Appendix 1. 

        7.7   PFI
undertakes to deliver to PFDC only Products with a remaining shelf life of not less than thirty (30) months. 

6

 

        7.8   Subject
to Section 7.5, PFI shall use commercially reasonable efforts to meet the delivery dates for Products as indicated on the Delivery Schedule for Accepted
Firm Orders except to the extent that (i) a Force Majeure event occurs pursuant to Article XV; or (ii) any such delay is caused by PFDC. To enable PFI to meet deadlines fixed by
PFDC, PFDC shall make available to PFI all PFDC Components for five months in advance pursuant to Section 4.1.1 above (except due to Force Majeure pursuant to Article XV). 

        7.9   In
the event that PFDC fails to deliver PFDC Components in accordance with Section 4.1.1, the Delivery Schedule will be revised to make appropriate adjustments
(based on the actual delivery date of the PFDC Components and the Standard Lead Times) as a result of such failure to timely supply such PFDC Components. 

        7.10 Delivery
of Products to PFDC or any other person appointed by PFDC, in any place designated by PFDC, is the responsibility of PFDC who is free to select its carrier
subject to the shipping requirements of Section 6.2. For purposes of clarification, all risk of loss (including casualty loss) shall be borne by PFDC upon delivery by PFI to any such carrier,
provided that PFDC shall retain the right to inspect such Products for non-conformity to quality specifications as provided in Sections 6.2 and 6.3. 

        7.11 PFI
agrees to provide prompt notice to PFDC of any problem associated with Production of Products of a type that might disturb commitments made by PFI in relation to
PFDC on the question of supply flows in Products. PFDC agrees to provide prompt notice to PFI of any problem associated with the supply of PFDC Components or any other event which might disturb
commitments made by PFI in relation to PFDC on the question of supply flow in Products. 

        7.12 Except
as permitted hereunder, PFDC shall not manufacture any Products or acquire any Products from any party other than PFI during the term of this Agreement. 

 
 

ARTICLE VIII—PRICING—CURRENCY—EXCHANGE    
    

        8.1   In
payment for the services provided by PFI under this Agreement, PFDC shall pay PFI, for each Product, the prices shown in Appendix 2, attached hereto (TARIFFS). 

        8.2   PFDC
shall pay all of the direct out-of-pocket costs of shipping supplies in connection with PFI's obligations contemplated by this Agreement,
including without limitation, the shipping supplies at the prices set forth in the chart below: 

	Strapping	 	$	0.24
	Corner Angle Board Protectors	 	$	0.80
	Strapping Seals	 	$	0.04
	40" × 48" Plastic Pallet	 	$	5.00
	Pallet Box Cover	 	$	13.00
	Total Charge Per Pallet	 	$	19.08

        8.3   Prices
are expressed in US Dollars ("USD") and all amounts to be paid under this Agreement shall be paid in USD. 

        8.4   Notwithstanding
anything to the contrary in this Agreement, in the event that any Production, services, testing, specifications, or other activity that is a new or
changed (as compared with Past Practices) requirement or obligation of PFI under this Agreement, is inconsistent with or was not a requirement or obligation under Past Practices, which new or changed
requirement or obligation changes cause a sustained or material increase to PFI's costs (including internal expenses, labor and all allocable overhead), or a sustained or material adverse effect on
PFI's business, then PFI shall be excused from such requirement or obligation unless and until the Parties agree on a mutually satisfactory resolution of such new or changed requirement or obligation.
Without limiting the 

7

 

foregoing,
any changes to existing products, formulations, packaging or manufacturing will require lead times in accordance with Appendix 6. 

        8.5   PFDC
shall pay any and all tax, duties or similar levies imposed on the sales of Products to PFDC hereunder, excluding taxes that are measured by PFI's aggregate income. 

        8.6   Subject
to this Section 8.6, PFI may unilaterally amend and increase the prices set forth in Appendix 2 (TARIFFS) not more than two (2) times during
the Term as follows: (i) between August 1, 2004 and July 31, 2005, PFI may deliver a written notice of any such price increase (including an amended Appendix 2) (such
delivery date, the "First Reference Date"), effective five (5) months from the delivery of such written notice, and (ii) between August 1, 2005 and July 31, 2006, PFI may
deliver a written notice of any such price increase (including an amended Appendix 2) (such delivery date, the "Second Reference Date"), effective five (5) months from the delivery of
such written notice. With respect to each Product in any such amended Appendix 2, any increased price shall be no greater than the then-current COGS for such Product, multiplied by
1.38; provided, however, that PFDC shall have the right to terminate this Agreement upon not less than
three (3) months prior written notice, delivered within sixty (60) days of receipt of such amended Appendix 2, if, (x) with respect to the first price increase referenced
in (i) above, the weighted average of the percentage change in such prices between the Effective Date and the First Reference Date (weighted according to actual sales during the twelve
(12) month period immediately preceding the First Reference Date), or (y) with respect to the second price increase referenced in (ii) above, the weighted average of the
percentage change in such prices between the First Reference Date and the Second Reference Date (weighted according to actual sales during the twelve (12) month period immediately preceding the
Second Reference Date), exceeds the PPI Adjusted Limit for the period between, with respect to clause (x) above, the Effective Date and the First Reference Date, and with respect to
clause (y) above, the First Reference Date and the Second Reference Date. 

 
 

ARTICLE IX—INVOICING—PAYMENT    
    

        9.1   An
invoice will be issued for each delivery and addressed in triplicate to: 

PIERRE
FABRE DERMO-COSMETIQUE

1, Avenue d'Albi

la Michonne

81 106 Castres Cedex

France

Attn: Service Comptabilité Fournisseurs 

Tel: + 33
(5) 63 58 88 00

Fax: + 33 (5) 63 58 86 56 

Invoices
will be issued by PFI in USD. They will mention order numbers and article codes and Product designations, together with quantities. 

        9.2   Payment
of invoices issued by PFI will be made by PFDC by wire transfer to the following account within thirty (30) days from invoicing date: 

Bank: Wells Fargo Bank
 Account Number: 412-7012144
 ABA Number: 121000248 

8

 
 
 

ARTICLE X—APPENDICES    
    

        10.1 The
Appendices listed below are an integral part of the Agreement. Subject to the other terms and conditions of this Agreement, such Appendices must be strictly
respected by each of the Parties. 

        10.2 These
Appendices are as follows: 

Appendix 1:
Product References and Standard Lead Times

Appendix 2: Tariffs

Appendix 3: Delivery Schedule

Appendix 4: Specifications and Technical Quality Framework

Appendix 5: Batch File for Existing Products

Appendix 6: Standard Lead Times For Formulation and Tooling Changes

Appendix 7: Couvrance Designated Manufacturer License Agreement

Appendix 8: Confidentiality Addendum 

 
 

ARTICLE XI—CONFIDENTIALITY    
    

        11.1 The
Parties agree to the terms of the Confidentiality Addendum, Attachment 8, which is incorporated and made a part of this Agreement as though fully set forth herein. 

        11.2 The
expiration or termination of this Agreement shall not release either Party from its obligations under this Article XI. 

 
 

ARTICLE XII—RESPONSIBILITY    
    

        12.1 Except
as expressly stated in this Agreement, PFDC acknowledges that PFI does not make any, and hereby disclaims all other warranties, express or implied, including
without limitation (i) any implied warranty of merchantability or fitness for a particular purposes and (ii) any and all warranties arising from course of dealing or usage of trade. 

        12.2 Except
as set forth in Section 13.4, and except for any breach of Article XI or Article XVI, neither Party shall be under any obligation to
compensate the other Party under or in connection with this Agreement or any breach thereof for any punitive, consequential or indirect damages, including without limitation, lost business, lost
profits or damage to goodwill. 

        12.3 Except
as set forth in Section 13.4, and except for any breach of Article XI or Article XVI, in no event will PFI be liable under this Agreement
for any damages, claims, indemnification obligation or other losses of any kind or nature under or in connection with this Agreement, whether in contract, tort, statute or otherwise, to the extent
that such losses exceed in the aggregate (for all claims and occurrences) the revenues received by PFI under this Agreement during the twelve (12) month period immediately preceding the
applicable loss. 

 
 

ARTICLE XIII—INSURANCE—INDEMNITY    
    

        13.1 Each
Party shall take all necessary steps, at its own cost and on its own behalf to properly insure as far as reasonably possible, its entire legal liability to any
third party which might be incurred as a consequence of its activity relating to this Agreement. Each Party undertakes to inform the other Party upon request therefore of the identity of their
respective insurance carriers. 

        13.2 During
the Term each Party hereto shall obtain, pay for, and keep in full force and effect (a) comprehensive general liability insurance with one or more
reputable insurance carriers and (b) other insurance required by Requirements of Law in relation to the full performance of its obligations under this Agreement. 

9

 

        13.3 PFI
will subscribe to reasonable damage insurance necessary, including without limitation warehouse liability insurance, to guarantee the PFDC Components actually
received by it and the Products against all reasonable risks until their delivery to the carrier appointed by PFDC. 

        13.4 Each
Party shall indemnify and hold the other Party harmless from any and all liability to a third party for any and all judgments, claims, causes of action, suits,
proceedings, losses, damages, demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and disbursements) arising from any negligence,
intentional or willful misconduct or a breach of this Agreement of or by the indemnifying Party (including product liability claims based on any negligent manufacture of Products in the case of PFI)
in connection with this Agreement or any breach by the indemnifying Party of this Agreement. In addition and notwithstanding any provision to the contrary in this Agreement, PFDC shall indemnify and
hold PFI harmless from any and all liability, judgments, claims, causes of action, suits, proceedings, losses, damages, demands, fees, expenses, fines, penalties or costs (including without limitation
reasonable attorney's fees, costs and disbursements) arising from PFI's performance under this Agreement except to the extent arising from PFI's negligence, intentional or willful misconduct or breach
of this Agreement. In addition and notwithstanding any provision to the contrary in this Agreement, PFI shall indemnify and hold PFDC harmless from any and all liability, judgments, claims, causes of
action, suits, proceedings, losses, damages, demands, fees, expenses, fines, penalties or costs (including without limitation reasonable attorney's fees, costs and disbursements) arising from PFI's
negligence, intentional or willful misconduct or breach of this Agreement; provided, however, that,
except to the extent arising from PFI's intentional or willful misconduct, PFDC's sole and exclusive remedy under the foregoing indemnification shall be to recover any amounts payable under PFI's
applicable insurance policy, if any, as an additional insured party under such policy and, for the avoidance of doubt, except to the extent arising from PFI's intentional or willful misconduct, PFI
shall have no liability whatsoever for any uninsured liability, judgments, claims, causes of action, suits, proceedings, losses, damages, demands, fees, expenses, fines, penalties or costs (including
without limitation reasonable attorney's fees, costs and disbursements). 

        13.5 PFI
will use commercially reasonable efforts to cooperate with PFDC, at PFDC's sole cost and expense, to assist PFDC in obtaining business interruption insurance at the
request of PFDC. 

        13.6 Notwithstanding
the foregoing, PFI shall only be required to obtain or maintain such insurance to the extent such insurance was in full force and effect for the
six-month period immediately prior to the Effective Date and shall not be required to incur any costs or other liabilities which are greater than the costs incurred by PFI in the ordinary
course of business consistent with past practices of the PFI prior to the Effective Date; provided that PFI shall cooperate with PFDC to obtain and
maintain such insurance as may be reasonably requested by PFDC if PFDC agrees to reimburse PFI for the cost (or additional cost) with respect to such insurance. 

 
 

ARTICLE XIV—TERMINATION OF AGREEMENT    
    

        14.1 Either
Party may at any time terminate this Agreement as provided in the last sentence of Article XV. 

        14.2 PFDC
may terminate this Agreement upon three (3) months prior written notice delivered to PFI, only if PFDC has a right to terminate under Section 7.5,
and only if PFDC's termination notice is delivered to PFI within the sixty (60) day period beginning on the date that PFI delivers (or the latest day on which PFI was obligated to deliver) to
PFDC the notice described in Section 7.5. 

        14.3 PFDC
may terminate this Agreement upon three (3) months prior written notice delivered to PFI, only if PFDC has a right to terminate under Section 8.6 and
only if PFDC's termination notice is delivered to PFI within the sixty (60) day period beginning on the date that PFI delivers (or the latest day on which PFI was obligated to deliver) to PFDC
the revised price list or notice described in Section 8.6. 

10

 

        14.4 Either
Party may terminate this Agreement upon any material breach of this Agreement by the other Party (including any repeated failure to properly perform which, even
if each individual breach is timely cured, the collective effect of such repeated breaches is material), other than as a result of Force Majeure or a breach of this Agreement by such Party, pursuant
to this Section. In the event of a material breach of this Agreement by one Party under the terms of this Agreement, the other Party shall deliver written notice to the allegedly defaulting Party
specifying in detail the nature of such breach. In the event PFI or PFDC, as the case may be, fails to cure such breach within sixty (60) days following the delivery of such notice, or, in the
case of a failure to make a timely payment, within fifteen (15) days following the delivery of such notice, the non-defaulting Party may elect to terminate this Agreement at any
time thereafter. 

        14.5 On
at least thirty (30) days notice to PFDC, PFI may terminate this Agreement in its sole discretion (such discretion not to be exercised in an unreasonable
manner) if a Direct Competitor acquires a controlling interest in PFDC. 

        14.6 Subject
to applicable law, this Agreement may be terminated by either Party in the event of (i) the insolvency of the other Party, (ii) the institution of
any proceeding or arrangement by or against the other Party relating to or in the nature of a bankruptcy, insolvency or assignment for the benefit of creditors, which proceeding or arrangement is
consented to by the other Party or is not dismissed or discontinued within forty-five (45) days after the institution of such proceeding or arrangement, or (ii) the making of
any assignment for the benefit of creditors or the appointment of a receiver of or for the other Party or of or for all or substantially all of the business, assets or properties of the other Party. 

        14.7 Upon
termination of this Agreement for any reason, PFDC shall purchase (i) all Products which have been manufactured pursuant to any Firm Orders outstanding at
the time of termination at the purchase price then in effect, and (ii) all PFI Components which have not been used to manufacture Products and which cannot subsequently reasonably be used by
PFI for the manufacture of its own products; provided that PFDC shall be relieved of its forecasting obligations, beyond the Firm Orders, set forth in
Article VII above. The purchase price for all such Components shall be equal to the aggregate direct out-of-pocket fees and expenses with respect to the acquisition and
maintenance of such Components and the cost to deliver such Components to PFDC plus a handling fee equal to five percent (5%) of the aggregate cost of such Components. 

        14.8 The
following provisions, in addition to this Section 14.8, shall survive termination or expiration of this Agreement: Article XI, Article XII,
Article XVI, Article XVII (subject to the limitations therein), Article XXI, Article XX, and Section 18.4 (to the extent provided therein). 

 
 

ARTICLE XV—FORCE MAJEURE    
    

        The Parties will not be responsible towards each other for any delay if they cannot perform their respective contractual obligations under this Agreement due to
any cause of Force Majeure i.e. any cause, unavoidable and insurmountable with commercially reasonable efforts such as but not limited to: 

	•
	natural
disasters such as earthquake, flood, abnormal atmospheric conditions, epidemics;

	•
	state
of war, declared or not;

	•
	public
disorders such as insurrections, revolts, strikes, lock-outs, and other labour disputes of any nature and public and social demonstrations, riots;

	•
	binding
decisions of one Party's government or any international body such as embargo, prohibitions or limitations of any kind;

	•
	the
failure of any third-party supplier to provide materials or components used in the manufacture of Products; 

11

 

	•
	any
other event beyond one Party's reasonable control. 

In
such a case, the Party claiming Force Majeure will notify the other Party without undue delay of the causes of any delay and the necessary extension of performance of time-limits. The
onus to establish the occurrence of a claimed Force Majeure event lies with the Party seeking to invoke this Article. 

        Any
delay due to a Force Majeure case will not be a sufficient reason to obtain an early termination of this Agreement in whole or in part except as provided below. 

        The
Party affected by the Force Majeure situation shall use its reasonable best efforts to continue performance when such situation is removed. 

        Notwithstanding
the foregoing, should the Force Majeure situation extend beyond a three (3) month period, either Party may immediately terminate the Agreement. 

 
 

ARTICLE XVI—INTELLECTUAL PROPERTY OWNERSHIP    
    

        16.1 The
Parties acknowledge that PFI owns the entire worldwide right, title and interest in and to all proprietary processes, formulas, compositions, molds, shapes,
inventions, trade secrets, copyrights, patents and all other intellectual property embodied in any product that was developed by PFI, in whole or in part, for its own (or its Retained Subsidiaries)
prior, existing or contemplated future products (as identified in laboratory notebooks following a "New Product Development Request" from PFI's Marketing Department made on or prior to
November 3, 2003) prior to the Effective Date and including the Avene Couvrance Products existing as of the Effective Date (the "PF Intellectual
Property"), and all documentation, in written or electronic format, related thereto; provided,  however, that PF Intellectual
Property shall not include the PFDC Intellectual Property, nor any trade secret or confidential information rights in any
formula, process or components thereof that are well-known in the cosmetics industry. 

        16.2 The
Parties acknowledge that PFDC owns the entire worldwide right, title and interest in and to (i) any of PFDC's proprietary marketing techniques, trademarks
and associated goodwill, trade dress, copyrights, or trade names associated with the Avene Couvrance products, and (ii) to the extent provided to PFI prior to the Effective Date and used by PFI
solely for the manufacture of PFDC products, any of PFDC's processes, formulas, compositions, molds, shapes, trade secrets, copyrights, patents and all other intellectual property embodied in the
KLORANE branded products as of the Effective Date (collectively, the "PFDC Intellectual Property"). 

        16.3 PFDC
shall not do or cause to be done any act or thing contesting or, in any way, impairing or tending to impair any part of the PF Intellectual Property for the
duration of this Agreement and after its expiration. PFI shall not do or cause to be done any act or thing contesting or, in any way, impairing or tending to impair any part of the PFDC Intellectual
Property for the duration of this Agreement and after its expiration. 

        16.4 Immediately
upon expiration or termination of this Agreement for any reason, PFDC shall itself, and shall cause any third party to, at the option of PFI, either return
or destroy all documentation in any medium that constitutes, contains, refers to or relates to, whether in written or electronic format, any PF Intellectual Property then in its possession and provide
PFI within five (5) business days thereafter a written certification, signed by a PFDC director, that all such materials have been either returned or destroyed, as applicable. Notwithstanding
the foregoing, PFDC may retain any such copies of PF Intellectual Property to use solely for the following purposes: (i) as may be required by applicable laws or regulations relating to PFDC's
product registrations with any applicable government entities, but only for the time required by such laws or regulations, and (ii) for the benefit of the Couvrance Designated Manufacturer (as
applicable) for the term of the Couvrance License only. 

12

 

        16.5 Immediately
upon expiration or termination of this Agreement for any reason, PFI shall itself, and shall cause any third party to, at the option of PFDC, either return
or destroy all documentation in any medium that constitutes, contains, refers to or relates to, whether in written or electronic format, any PFDC Intellectual Property then in its possession and
provide PFDC within five (5) business days thereafter a written certification, signed by a PFI director, that all such materials have been either returned or destroyed, as applicable.
Notwithstanding the foregoing, PFI may retain any such copies of PFDC Intellectual Property to use solely as may be required by applicable laws or regulations relating to PFI's product registrations
with any applicable government entities, but only for the time required by such laws or regulations. 

        16.6 Except
as otherwise set forth herein, this Agreement does not grant to PFDC any rights in the PF Intellectual Property, including without limitation, any manufacturing,
distribution, ownership or license rights. Except as otherwise set forth herein, this Agreement does not grant to PFI any rights in the PFDC Intellectual Property, including without limitation, any
manufacturing, distribution, ownership or license rights. PFDC shall not reverse engineer or otherwise derive the formulas or processes embodied in the Avene Couvrance Products or the Galenic products
(to the extent that any PF Intellectual Property is embodied in or used in the manufacture of such Galenic products). PFI shall not reverse engineer or otherwise derive the formulas or processes
embodied in the KLORANE, RENE FURTERER and ADERMA products. 

 
 

ARTICLE XVII—LICENSE FOR MANUFACTURE OF COUVRANCE PRODUCTS    
    

        17.1 Upon
the occurrence of a Couvrance License Event, and only if PFDC has obtained Supervisory Board approval for the guarantees set forth in Section 17.2 below and
has delivered to PFI an opinion of PFDC's outside counsel confirming the validity and enforceability of the guarantees set forth in Section 17.2 below, PFDC shall have the right to designate an
alternate manufacturer to manufacture the Avene Couvrance Products on behalf of PFDC (the "Couvrance Designated Manufacturer"); provided that PFDC shall
not designate as a Couvrance Designated Manufacturer any entity that is a Direct Competitor of PFI. Upon such proper designation, PFI hereby grants to such Couvrance Designated Manufacturer the
license attached hereto as Appendix 7 (the "Couvrance License"), which shall expire in any event no later than three (3) years from the
Effective Date. It is understood and agreed by the Parties that such license agreement may be revised or modified in order to comply with any applicable laws or regulations, including without
limitation, any laws or regulations of the European Union; provided, however, that such modification
shall be to the minimum extent necessary to comply with such laws or regulations and shall reflect the intent of the Parties. 

        17.2 Subject
to PFDC Supervisory Board approval, PFDC hereby absolutely and unconditionally guarantees and shall ensure that the Couvrance Designated Manufacturer strictly
performs and complies with, all of the restrictions, duties and obligations under and pursuant to the Couvrance License, and PFDC shall be liable to PFI for all breaches or violations of the Couvrance
License. The foregoing guarantee and covenants shall apply regardless of whether or not the Couvrance License is enforceable against the Couvrance Designated Manufacturer, regardless of whether or not
the Couvrance Designated Manufacturer accepts and agrees to such Couvrance License, and regardless of any affirmative defenses that such Couvrance Designated Manufacturer may have. 

 
 

ARTICLE XVIII—PFDC DISTRIBUTION RIGHTS    
    

        18.1 During
the Term, with respect to the Couvrance product lines, PFDC shall not itself, and shall cause its Affiliates, distributors, suppliers and retailers not to, make
any changes to the current marketing position of such product lines as premium, dermatological corrective makeup products marketed only as part of the Avene product line. 

13

 

        18.2 During
the Term, PFDC shall not itself, and shall cause its Affiliates, distributors, suppliers and retailers not to, market, sell or distribute the Products (other
than the Klorane Products set forth in Appendix 1) in the United States, Canada, or Australia. 

        18.3 No
more than once during any six (6) month period during the Term, PFI shall, at its expense, have the right to
engage a third party to inspect the books of account and other relevant records relating to PFDC's sale, distribution and marketing of the Couvrance products for the purpose of verifying PFDC's
compliance with its obligations under this Article XVIII. PFI shall be obligated to keep confidential any information obtained in the course of such audits in accordance with its obligations
under Article XI of this Agreement. 

        18.4 Notwithstanding
the foregoing restrictions, PFI grants to PFDC the right to market, sell and distribute (i) Couvrance Products manufactured by PFI under this
Agreement throughout the world (except, for the sake of clarity, during the Term, not in the United States, Canada or Australia); (ii) Couvrance product inventory in existence as of the
Effective Date (not to exceed $80,000 at wholesale prices, in the United States; and (iii) for one (1) year after the termination (for any reason) or expiration of this Agreement, the
Couvrance Products manufactured by PFI under this Agreement throughout the world (subject to any restrictions contained in any other agreement to which PFDC is a party). 

 
 

ARTICLE XIX—TRANSFER OF RIGHTS    
    

        19.1 Neither
this Agreement nor any of the rights, interest or obligations hereunder may be assigned by either Party without the prior written consent of the other Party
hereto and any attempt to do so will be void. Notwithstanding the generality of the foregoing, PFDC may assign all of its rights and obligations under this Agreement in connection with the sale of all
or substantially all of the assets or stock associated with PFDC's Avene business; provided that (i) such successor or purchaser agrees in writing to assume all obligations and restrictions
applicable to PFDC under this Agreement and (ii) pursuant to PFI's reasonable determination, such successor or purchaser (or any Affiliate thereof) is not a Direct Competitor. Notwithstanding
the generality of the foregoing, PFI may assign its rights and obligations pursuant to this Agreement to any of its lenders as collateral security. 

        19.2 Notwithstanding
the foregoing, this Agreement may be assigned by any Party to one or more of its Affiliates; provided
that such assignment shall not relieve the assigning Party from its obligations hereunder. 

 
 

ARTICLE XX—OTHER CONDITIONS    
    

        20.1 All
notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (i) when personally delivered, sent by telecopy (with hard copy to follow) upon receipt of mechanical confirmation of delivery, (ii) for deliveries within the continental
United States, one day following the day when deposited with a reputable and established overnight express courier (charges prepaid), (iii) for overseas deliveries, five days following the day
when deposited with a reputable and established overnight express courier (charges prepaid), or (iv) for deliveries within the continental United States, five days following mailing by
certified or registered mail, postage prepaid and return receipt requested. 

14

 

Unless
another address is specified in writing, notices, demands and communications to PFDC and PFI shall be sent to the addresses indicated below: 

Notices to PFDC:

Pierre
Fabre Dermo-Cosmetique S.A.

Legal Department

Les Cauquillous

81 506 LAVAUR Cedex

France

Attn: Pierre-André Poirier

General Counsel—Company Secretary

Telephone: + 33 (5) 63 58 88 38

Telecopy: + 33 (5) 63 58 86 68 

with a copy to (which shall not constitute notice to PFDC):

Barack
Ferrazzano Kirschbaum Perlman & Nagelberg LLC

333 West Wacker Drive

Suite 2700

Chicago, Illinois 60606

Peter J. Barack, Esq.

Telephone: (312) 948-3101

Telecopy: (312) 984-3150 

Notices to the PFI:

Physicians
Formula, Inc. (f/k/a Pierre Fabre, Inc.)

1055 West 8th Street

Azusa, CA 91702

Attn: Chief Executive Officer

Telephone: (626) 334-3395

Telecopy: (626) 812-9462 

with a copy to (which shall not constitute notice to PFI):

Summit
Partners, L.P.

499 Hamilton Avenue

Suite 200

Palo Alto, California 94301

Attn: Walter G. Kortschak

          Craig D. Frances

Telephone: (650) 321-1166

Telecopy: (650) 321-1188 

Kirkland &
Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Attn: Ted H. Zook, P.C.

Telephone: (312) 861-2000

Telecopy: (312) 861-2200 

        20.2 This
Agreement, including the appendices attached hereto, constitutes the whole agreement between the Parties in respect of its purpose and cancels all declarations,
negotiations, oral or written commitments, acceptances, agreements, and previous accords between the Parties relating to the terms to which this Agreement applies or for which it provides. 

15

 

        20.3 Any
amendment, supplement or modification to this Agreement shall not be effective against the Parties unless such amendment is in writing and is signed by the Parties. 

 
 

ARTICLE XXI—APPLICABLE LAW—SETTLEMENT OF DISPUTES    
    

        21.1 All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal law of the State of New York, in
the United States of America, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York. 

        21.2 Except
as specifically provided in Section 21.3 below in the case of arbitration, and solely for purposes of any action or proceeding arising out of or relating
to this Agreement, each of the Parties submits to the jurisdiction of the United States District Court in Central District of California (or if not permitted, the Superior Court for the County of Los
Angeles) in any action or proceeding arising out of or relating to this Agreement, including any action or proceeding to enforce any Final Determination (as defined below), and agrees that all claims
in respect of the action or proceeding may be heard and determined in any such court. Each Party hereto hereby irrevocably submits to the jurisdiction of such courts, irrevocably consents to the
service of process by registered mail or personal service and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter have as to personal
jurisdiction, the laying of the venue of any such action or proceeding brought in any such court and any claim that any such action or proceeding brought in any court has been brought in an
inconvenient forum and waives any bond, surety or other security that might be required of any other Party with respect thereto. Each Party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other state or federal court unless and until the foregoing court renders a final order that it lacks, and cannot acquire, the necessary jurisdiction, and
either all appeals have been exhausted or the order is no longer appealable. Each Party appoints CT Corporation (the "Process Agent") as its agent to
receive on its behalf service of copies of the summons and complaint and any other process that might be served in the action or proceeding. Any Party may make service on any other Party by sending or
delivering a copy of the process (i) to the Party to be served at the address and in the manner provided for the giving of notices in Section 20.1 above;  provided, however, that if process is served in care of the Process Agent, the serving Party shall also
provide a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 20.1 above or (ii) to the Party to be served in
care of the Process Agent at the address and in the manner provided for the giving of notices in Section 20.1 above. Nothing in this Section however, shall affect the right of any Party to
serve legal process in any other manner permitted by law or at equity. Either Party may be entitled to seek equitable relief against material breaches of this Agreement, without posting of a bond or
other security. 

        21.3 Arbitration Procedure

        21.3.1 Except
with respect to injunctive or other equitable relief, the Parties agree that the arbitration procedure set forth below shall be the sole and exclusive method
for resolving and remedying any and all disputes, controversies or claims that arise out of or in connection with, or relate in any manner to, the rights and liabilities of the Parties hereunder or
any provision of this Agreement or the interpretation, enforceability, performance, breach, termination or validity hereof, including this Section relating to the resolution of disputes (the
"Disputes") and questions concerning arbitrability; provided that nothing in this Section shall prohibit
a party hereto from instituting litigation to enforce any Final Determination (as defined below). The Parties hereby acknowledge and agree that, except as otherwise provided in this Section or in the
Rules for Non-Administered Arbitration of Business Disputes (the "Rules") promulgated by the Center for Public Resources Institute for
Dispute Resolutions (the "Institute") as in effect from time to time, 

16

 

the
arbitration procedures and any Final Determination hereunder shall be governed by, and shall be enforced pursuant to, the United States Arbitration Act, 9 U.S.C. §1 et. seq. 

        21.3.2 In
the event that any Party asserts that there exists a Dispute, such Party shall deliver a written notice to each other Party involved therein specifying the nature
of the asserted Dispute and requesting a meeting to attempt to resolve the same. If no such resolution is reached within ten business days after the delivery of such notice, the Party delivering such
notice of Dispute may thereafter commence arbitration hereunder by delivering to each other Party involved therein a notice of arbitration (a "Notice of
Arbitration"). Such Notice of Arbitration shall specify the nature of any Dispute and any other matters required by the Rules as in effect from time to time to be included
therein. The arbitrators shall permit and facilitate such discovery as the parties shall reasonably request and each party will cooperate with requests by the arbitrators. Each Party shall designate
one arbitrator within fifteen (15) days of the date on which the Notice of Arbitration is delivered. Each Party shall cause such designated arbitrators mutually to agree upon and designate a
third arbitrator; provided however, that: (i) failing such agreement within 45 days of the date on which the Notice of Arbitration is
delivered, the third arbitrator shall be appointed in accordance with the Rules; (ii) if either Party fails to designate timely an arbitrator, the Institute shall appoint an arbitrator on
behalf of such failing party, and the two designated arbitrators shall jointly designate a third arbitrator. Each Party shall pay the fees and expenses of their respectively designated arbitrators (or
the arbitrator designated on their behalf by the Institute) and shall bear equally the fees and expenses of the third neutral arbitrator; provided,  that at
the conclusion of the arbitration, the arbitrators shall award costs and expenses (including the costs of the arbitration previously advanced
and the fees and expenses of attorneys, accountants and other experts) and interest at the Applicable Rate to the prevailing Party. 

        21.3.3 The
arbitration shall be conducted in the English language in Los Angeles, California under the Rules as in effect from time to time. The arbitrator shall conduct the
arbitration so that a final result, determination, finding, judgment and/or award (the "Final Determination") is made or rendered as soon as
practicable, but in no event later than ninety (90) business days after the delivery of the Notice of Arbitration nor later than ten days following completion of the arbitration.
Notwithstanding any California law to the contrary, the Final Determination shall be final and binding on each Party and there shall be no appeal from or reexamination of the Final Determination,
including any right of appeal to any court in any jurisdiction, except for fraud, perjury, evident partiality or misconduct by an arbitrator prejudicing the rights of any Party and to correct manifest
clerical errors. 

        21.3.4 This
Agreement has been negotiated and executed by the Parties hereto in English. To the extent a translation of this Agreement exists, each of the Parties hereto
acknowledges that it has been prepared solely for convenience and agrees that the provisions of the English version of the Agreement prevail. 

        21.3.5 Notwithstanding
anything to the contrary, nothing in this Section 21.3 shall be construed to impair the right of either Party to seek injunctive or other
equitable relief. 

*
* * * * 

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        IN
WITNESS WHEREOF, each of the Parties has executed this Manufacturing Agreement as of the day and year first above written. 

	 	 	PIERRE FABRE, INC.
	

 	
 	

By:	
 	

/s/ ANDRE PIETERS

	 	 	Name:	 	Andre Pieters
	 	 	Title:	 	President
	

 	
 	

PIERRE FABRE DERMO-COSMETIQUE, S.A.
	

 	
 	

By:	
 	

/s/ PIERRE-ANDRE POIRIER

	 	 	Name:	 	Pierre-Andre Poirier
	 	 	Title:	 	Secretary

18

 
 

APPENDIX 8—CONFIDENTIALITY    
    
    CONFIDENTIALITY ADDENDUM    
    

1.    Definitions.    Except as set forth below, any capitalized term in this Addendum shall have the meaning given to such term in
the Agreement. 

	(a)
	The
term "Addendum" means this Confidentiality Addendum.

	(b)
	The
term "Agreement" means the agreement entered into between the Parties to which this Addendum is attached.

	(c)
	The
term "Disclosing Party" means the Party disclosing any Confidential Information to one or more Receiving Party(ies) as applicable

	(d)
	The
term "Party" or "Parties" means, individually, a party, or collectively the
parties, as the case may be, to the Agreement.

	(e)
	The
term "PFI" means Pierre Fabre, Inc. (to be known as Physicians Formula, Inc., a New York corporation), and any of its
Affiliates after the effective date of the Agreement.

	(f)
	The
term "Pre-Effective Date PFDC Confidential Information" means all proprietary information, documents or trade secrets,
of whatever form, solely related to the business of (i) the Excluded Subsidiaries (as defined in the Purchase Agreement), or (ii) PFDC or any of its Subsidiaries (other than the Retained
Subsidiaries), that was disclosed to, or in the possession of, any other Party or any of their respective Affiliates at any time prior to the effective date of the Agreement.

	(g)
	The
term "Pre-Effective Date PFI Confidential Information" means all proprietary information, documents or trade secrets,
of whatever form, related to the business of PFI or any of its Retained Subsidiaries (as defined in the Purchase Agreement) at any tier, that was disclosed to, or in the possession of, any other Party
or any of their respective Affiliates at any time prior to the effective date of the Agreement; excluding,  however, the Pre-Effective Date PFDC
Confidential Information.

	(h)
	The
term "Receiving Party" means the Party receiving any Confidential Information from the Disclosing Party. 

2.    The
term "Confidential Information" shall include all proprietary information, documents or trade secrets, of whatever form, disclosed
by a Disclosing Party to one or more Receiving Parties, in writing or orally, for the purposes of and pursuant to the Agreement, and corresponding to the conditions of Section 3 below, and
including without limitation all written or printed documents, all samples, models or, more generally, all means of disclosing Confidential Information which may be chosen by either Party during the
term of the Agreement. Notwithstanding anything to the contrary, Confidential Information of PFI (as the Disclosing Party) shall include for all purposes the Pre-Effective Date PFI
Confidential Information and Confidential Information of PFDC (as the Disclosing Party) shall include for all purposes the Pre-Effective Date PFDC Confidential Information. 

3.    Included
within the definition of "Confidential Information" is information or documents, of whatever form, (i) transmitted by
the Disclosing Party and designated Confidential Information by the Disclosing Party through the affixing or addition to them of a stamp or a formula or through the drawing up and transmission or
sending of written notification to this effect, or when they are disclosed orally, where the confidential nature of the information has been brought to the attention of the Receiving Party, at the
time of its disclosure and confirmed in writing as soon as possible (but, in no event later than thirty (30) days after the disclosure), or (ii) that a reasonable person would consider
and treat as confidential or proprietary in nature. Notwithstanding anything in this Addendum or the Agreement to the contrary, the designation or marking of any Pre-Effective Date PFI
Confidential Information or Pre-Effective Date PFDC Confidential Information as Confidential Information shall not be required for protection or applicability of such
Pre-Effective Date PFI Confidential Information or Pre-Effective Date PFDC Confidential Information, as applicable, under this Addendum. 

4.    Each
Receiving Party undertakes that all Confidential Information issuing from the Disclosing Party: 

	(a)
	shall
be protected and kept strictly confidential and be treated with the same degree of care and protection as would be given to its own Confidential Information of the same
significance;

	(b)
	shall
be used solely for the purposes of carrying out the Receiving Party's obligations under the Agreement, or as otherwise permitted by the Agreement;

	(c)
	shall
be disclosed solely to its own employees and contractors who need to know such information to carry out their duties as required or contemplated by the Agreement, in each case
under a written agreement with the Receiving Party pursuant to which the recipient agrees to maintain the confidentiality of such information in accordance with the terms of this Addendum and for use
solely as contemplated or permitted under the Agreement; and

	(d)
	shall
not be disclosed, either directly or indirectly to any third party except as permitted above in Section 4(c) or to the limited extent required under Section 5(f)
below. 

5.    Except
as provided above, a Receiving Party shall be under no obligation and subject to no restriction with regard to a particular item of Confidential Information to the extent it can
show proof that: 

	(a)
	such
information was in the public domain prior to its disclosure or afterwards, but that in the latter case not as a result of any disclosure by such Receiving Party or any of its
Affiliates;

	(b)
	other
than with respect to the Pre-Effective Date PF Confidential Information or Pre-Effective Date PFDC Confidential Information, as applicable, that such
information was known to the Receiving Party prior to disclosure hereunder;

	(c)
	that
such information was received legitimately from an unaffiliated third party, without constraint or breach of this Addendum, the Agreement or any other agreement to which the
Receiving Party is bound;

	(d)
	that
such information was published by a third party without contravening the terms of this Addendum, the Agreement or any other agreement to which the Receiving Party is bound;

	(e)
	that
such information was the result of internal, independent research and development undertaken in good faith by the Receiving Party's employees without access to any Confidential
Information;

	(f)
	that
such information is compelled to be disclosed by judicial or administrative process or, based on the advice of other legal counsel, by other requirements of law and then still
subject to the provisions of this Addendum to the extent permitted by law; provided that the disclosing Party shall, to the extent practicable, provide
prior notice of such disclosure to the other Party; or

	(g)
	that
the use or disclosure was authorized in writing by the Disclosing Party. 

6.    It
is expressly agreed between the Parties that disclosure of Confidential Information under the terms of this Addendum may in no way be interpreted as conferring on the other Party
either explicitly or implicitly any right whatsoever (in terms of a licence or by any other means) over the materials, inventions or discoveries to which the Confidential Information relates. The same
applies to royalties or other rights attached to literary and artistic copyright, trademarks or professional secrecy. Property rights over Confidential Information disclosed under the terms of this
document belong in any event, subject to rights of third parties, to the Party from whom they originate. 

7.    Within
fifteen (15) days after termination or expiration of the Agreement for any reason, the Receiving Party shall (i) cease using the Disclosing Party's Confidential
Information, and (ii) at the option of the Disclosing Party, either return or destroy all materials and documentation in any medium that constitute, contain, refer or relate to, whether in
written or electronic format, the Disclosing Party's Confidential Information then in the possession, custody or control of Receiving Party or its 

Affiliates,
and provide to the Disclosing Party, within ten (10) business days thereafter a written certification, signed by a director of the Receiving Party, that all such materials have been
either returned or destroyed as applicable. 

8.    The
confidentiality obligations of each Receiving Party shall continue hereunder indefinitely as to all trade secrets of the Disclosing Party (determined in accordance with New York
law), and for ten (10) years for all other Confidential Information, or in any case for the longest period of time permitted under applicable law, and shall survive expiration or termination of
the Agreement for any reason. For the sake of clarity, no license or other permission under any patent or copyright is express or implied hereunder. 

9.    The
foregoing provisions of this Addendum shall apply only to Confidential Information exchanged under the Agreement (including any Pre-Effective Date PFI Confidential
Information and any Pre-Effective Date PFDC Confidential Information), and for the purposes of each Party's respective performance under the Agreement, and shall not apply to, modify or
supercede any other agreements or arrangements governing such information. 

QuickLinks

Exhibit 10.4

RECITALS

AGREEMENT ARTICLE I—DEFINITIONS

ARTICLE II—PURPOSE

ARTICLE III—DURATION

ARTICLE IV—SUPPLY OF COMPONENTS

ARTICLE V—SPECIFICATIONS / PRODUCTION

ARTICLE VI—CONTROL

ARTICLE VII—DELIVERY SCHEDULE—REVISIONS—ORDERS

ARTICLE VIII—PRICING—CURRENCY—EXCHANGE

ARTICLE IX—INVOICING—PAYMENT

ARTICLE X—APPENDICES

ARTICLE XI—CONFIDENTIALITY

ARTICLE XII—RESPONSIBILITY

ARTICLE XIII—INSURANCE—INDEMNITY

ARTICLE XIV—TERMINATION OF AGREEMENT

ARTICLE XV—FORCE MAJEURE

ARTICLE XVI—INTELLECTUAL PROPERTY OWNERSHIP

ARTICLE XVII—LICENSE FOR MANUFACTURE OF COUVRANCE PRODUCTS

ARTICLE XVIII—PFDC DISTRIBUTION RIGHTS

ARTICLE XIX—TRANSFER OF RIGHTS

ARTICLE XX—OTHER CONDITIONS

ARTICLE XXI—APPLICABLE LAW—SETTLEMENT OF DISPUTES

APPENDIX 8—CONFIDENTIALITY CONFIDENTIALITY ADDENDUM

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