EXHIBIT 10(S)
SUPPLY AND SERVICE AGREEMENT
This Agreement is made as of August 1, 2001, between Purico GmbH, a
German corporation (the "Buyer"), Purico (IOM) Limited, a company organized
under the laws of the Isle of Man ("Guarantor"), and Papierfabrik Schoeller &
Hoesch GmbH & Co. KG, a German limited partnership (the "Seller").
WHEREAS, Seller is engaged, among other things, in the manufacture
and sale of cigarette paper and other paper products and Seller's parent has
determined to sell its cigarette paper businesses;
WHEREAS, Buyer, in order to ensure a steady and reliable source of
supply of the Products desires to purchase from Seller, and Seller is able and
willing to manufacture and supply exclusively to Buyer for a period of three
(3) years (subject to extension), the Products on the terms and conditions
described in this Agreement;
WHEREAS, in conjunction with such supply arrangements, Seller agrees
to provide certain services to Buyer to facilitate the transition of Seller's
cigarette paper business to Buyer; and
WHEREAS, Buyer and Seller have agreed on a three (3) year period for
supply of the Products (subject to extension) in order to provide Buyer a
sufficient period of time to create alternative capacity to produce the
Products and to provide Seller a sufficient period to transition out of
producing the Products;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the Parties agree as follows:
1. DEFINITIONS.
"Acquisition Agreement" shall mean the Agreement for purchase of
certain assets and assumption of certain liabilities of the Ecusta business of
P.H. Glatfelter Company by and among Seller's parent, P.H. Glatfelter Company,
Guarantor and certain affiliates thereof.
"Customer" shall mean a cigarette manufacturer which is a customer
for the Products of Seller as of the date hereof and any customer of Buyer
after the date hereof for Products supplied by Seller.
"Effective Date" shall mean the date first written above.
"First Contract Year" shall mean the twelve (12) month period
beginning on the Effective Date.
"Monthly Target" shall be as defined in Section 7.2.
"Party" or "Parties" shall mean Buyer, Guarantor and/or Seller.
"Products" shall mean the grades of the tobacco paper products set
forth on Exhibit A, to be manufactured by Seller exclusively for Buyer in
accordance with the terms of this Agreement. The term "Products" shall also
include any and all improvements and modifications to the Products which Buyer
and Seller may make by mutual agreement during the term of this Agreement.
"Sales Agents" shall mean those currently under contract with Seller
as of the date hereof to provide sales and distribution services for the
Products.
"Second Contract Year" shall mean the twelve (12) month period
beginning on the first anniversary of the Effective Date.
"Third Contract Year" shall mean the twelve (12) month period
beginning on the second anniversary of the Effective Date.
2. AGREEMENT TO SUPPLY.
Seller shall sell exclusively to Buyer, and Buyer shall purchase, the
Products in the quantities set forth in Section 7 of this Agreement. The
Products shall be produced in accordance with each Customer's specifications as
further provided in accordance with Section 3 of this Agreement, incorporating
only such changes to the Product specifications used by Seller as of the date
hereof in producing Products for Customers as of the date hereof and such
improvements and modifications to the Products as Buyer and Seller may mutually
determine and agree upon from time to time. Inspection and packaging of the
Products shall at all times be conducted by Seller in its own manufacturing
facilities. Buyer shall not place Seller's brand on any of its products other
than those Products sold under this Agreement. Seller shall place its brand
(and trademarks) on the Products and consistent with past practice Buyer shall
be entitled to sell the Products using such brand and trademarks. In no event
shall Buyer acquire any rights under this Agreement to any trademark, service
▇▇▇▇ or other intellectual property right of Seller. Seller agrees to provide
Buyer with the specifications and technical manufacturing information specific
to the Products which are necessary to manufacture the Products.
3. ORDER PROCESSING.
For each order for Products to be sold under this Agreement, Buyer
shall deliver to Seller a purchase order consistent with past practice at least
thirty (30) days prior to the anticipated shipping date. Each purchase order
shall provide the volume ordered and all specifications for each Product by
grade in sufficient detail for the production of the Products, which
specifications shall include packaging and converting information, the quality
of the materials to be used and the performance standards of each of the
Products. Where no specification for packaging is provided, Seller shall
package the Product consistent with past practice. Each purchase order shall
also set forth the customers' names or customer's name, the date of delivery to
Buyer, the date of delivery to Buyer's customer, shipping information, invoice
information and all other information which is necessary to produce invoices
(in the form currently provided, by Seller unless otherwise notified to Seller
by Buyer), ship the Products and produce documents necessary to procure a
Letter of Credit (if applicable). The Products covered
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by a purchase order shall have been previously qualified and approved by the
customer. Seller shall supply the Products in accordance with the
specifications, and shall not materially deviate from these specifications
without the prior express written consent of Buyer. Subject to the Monthly
Targets set forth in Section 7, Seller guarantees fulfillment of each order for
Products which is delivered to Seller at least 30 days prior to shipping and
which sets forth the information required under this Section, provided that
each month 5% of the Monthly Target may be ordered up to but not less than five
days prior to shipping.
4. PURCHASE PRICE.
4.1 UNIT PRICE. The unit price for each of the Products is set forth
on the Exhibit A, which prices shall be subject to adjustment in accordance
with the provisions of Sections 4.2 and 4.3 of this Agreement. The unit price
for each of the Products for the Third Contract Year shall increase by the
amounts set forth in Exhibit A in addition to the other price adjustments
described herein.
4.2 PULP PRICE ADJUSTMENTS. The unit price of each of the Products
as provided on Exhibit A shall be adjusted on January 1, 2002 and every six
months thereafter during the term of this Agreement to reflect changes in the
prices of pulp over the immediately preceding six-month period (each, a "Pulp
Price Adjustment"). The Pulp Price Adjustment for each of the Products shall be
determined in the following way:
(i) PULP PRICE CHANGES. The change in price for each fiber
type (the "Pulp Price Changes") shall be determined by dividing the DM or
Euro equivalent of the six-month average prices for such fiber type by the
base price for such fiber types as defined on Exhibit E. The initial
six-month average prices shall be based on the prices for the six months
beginning July 1, 2001 as announced on the first day of each such month
(i.e., July 1, August 1, September 1, etc.) The six-month average price
shall then become the base price for the subsequent six-month period. The
six-month average prices shall be determined by averaging the month
beginning prices for such fiber types for each of the six months following
the Effective Date, and for every six months thereafter. Such monthly
prices shall be provided for each six-month period based on Seller's cost
for such fiber types as of that date, and as adjusted to DM equivalent as
appropriate.
(ii) PRODUCT PRICE CHANGES. The Pulp Price Adjustment shall
be determined by multiplying (a) the percentage for each fiber type set
forth on Exhibit E for each Product by (b) the applicable Pulp Price
Change minus one. The new Product Prices shall then be determined by
multiplying (x) the Pulp Price Adjustment for each Product plus one by (y)
the base Product prices. The resulting prices shall become the applicable
prices for the following six-month period. Additionally, the resulting
fiber type percentages shall be adjusted to reflect the Pulp Price Changes
for the previous six months.
(iii) PRICING EXAMPLE. Exhibit F provides an illustration
of this Pulp Price Adjustment mechanism.
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(iv) NOTICE. Seller shall provide Buyer with a schedule for
the calculation of the Pulp Price Adjustment for each Product fifteen days
prior to the beginning of each new six-month period.
(v) BAT. In the event British American Tobacco p.l.c.
("BAT") ceases to purchase all of the Products from Buyer during the First
Contract Year, the base prices set forth on Exhibit E will be modified by
the mutual consent of the Parties to reflect the loss of this volume and
its impact on base pulp price levels.
4.3 AGREEMENT EXTENSION PRICE ADJUSTMENT. In the event this
Agreement does not terminate on the third anniversary of the Effective Date,
the Parties shall negotiate in good faith annual adjustments to the prices set
forth on Exhibit A to reflect changes in material and manufacturing costs of
Seller in producing the Products. Such price adjustments shall take effect on
the third anniversary of the Effective Date and each anniversary thereafter and
shall be in addition to any Pulp Price Adjustments.
4.4 PAYMENT TERMS. Buyer shall remit to Seller the invoice amount of
the Products sold to Buyer on payment terms of net forty-five (45) days. Any
amount due and payable under this Agreement which remains unpaid when due shall
bear interest until paid at the annual rate of LIBOR for Euros plus 2%. Unless
otherwise agreed, the payment shall be made in the same currency as indicated
on the invoice.
4.5 VAT. All prices quoted in this Agreement and any Exhibit thereto
are net prices without value-added tax and shall be paid together with
value-added tax (where applicable) at its statutory rate prevailing from time
to time.
5. EXCLUSIVITY.
The Products shall be manufactured and sold by Seller solely and
exclusively to Buyer. In addition, Seller shall not manufacture or sell tipping
paper and standard plug wrap except to Buyer. For the purposes of this
Agreement, "tipping paper" means: papers manufactured for wrapping cigarette
filters; and "standard plug wrap" means: low porosity papers (below 2000
coresta units) used for combining a cigarette column with a cigarette filter.
The exclusivity obligations set forth in this Section 5 shall survive for a
period ending five (5) years from the Effective Date; provided that in the
event of termination of this Agreement by Seller pursuant to Section 13, Seller
shall be permitted to sell the Product for a period of six months or, if
longer, the remainder of the initial term of this Agreement, in order to sell
its inventory and transition its business to other products. Notwithstanding
the foregoing, this Section 5 shall not restrict Seller from rendering
consulting or other services to manufacturers of porous plug wrap manufacturing
equipment. For purposes of this Agreement, "porous plug wrap" means: papers
with a porosity above 2000 coresta units used for combining a cigarette column
with a cigarette filter.
6. DELIVERY AND ACCEPTANCE.
6.1 DELIVERY. Unless otherwise specified in the purchase order, all
Products purchased under this Agreement shall be delivered F.O.B. Seller's
Gernsbach plant per the date of delivery specified by the Buyer on the purchase
order, subject to the provisions of Section 3.
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Title to the Products shall pass from Seller to Buyer when the Products are
delivered to Seller's warehouse to be held on behalf of Buyer or, if the
Products are not delivered to Seller's warehouse, when the Products leave
Seller's premises. Risk of loss to the Products shall pass from Seller to Buyer
when the Products leave Seller's premises. Upon delivery of each order for
Product, Seller shall provide all documentation reasonably necessary for
transportation, quality control documentation (as required by the Customer),
customs and any letter of credit for such order.Seller shall arrange for all
necessary transportation of Products to Buyer's customers or to Buyer, at
Buyer's sole expense. Buyer agrees that it will accept all of the Products
meeting the specifications established pursuant to Section 3 of this Agreement,
subject to the other terms and conditions that are specified in this Agreement.
Seller agrees to provide technical consulting services to help Buyer convert
one of its paper machines to manufacture Porous Plug Wrap, provided that the
Parties agrees in advance on the fees for such services.
6.2 RETURNS. All complaints about or returns of the Products shall
be made using the following procedures:
(i) Complaints of defects shall be made to Seller in
writing. Samples are considered as proof only when they have been taken in
accordance with these procedures and in the presence of an agent
instructed by Seller. Seller shall make such agents available within a
reasonable period of time after the request of Buyer.
(ii) Upon receipt of any complaint from the Customer
regarding the Products, Buyer shall immediately give written notice of any
form of defects which are obviously different from those stipulated,
including but not limited to delivery of different Products or quantities.
Notice of hidden defects of any kind and the delivery of the Products or
quantities which are not obviously different from those stipulated shall
be given promptly upon their discovery but no later than sixty (60) days
from delivery to Customer, unless such defect could not have reasonably
been discovered within such sixty (60) day period. The Products shall be
deemed to be approved if no complaint is made within sixty (60) days from
delivery. The Products shall be deemed to be approved if the Customer
mixes the Products with other suppliers' goods or with other substances or
arranges for them to be modified except under normal manufacturing and/or
testing processes.
(iii) In the event of a defect for which Seller is
responsible in accordance with the foregoing paragraphs, Buyer may request
a refund for the purchase price of the Products. In the event Seller
rejects in writing Buyer's notification of defect, Buyer's warranty claims
shall expire two months after Seller has rejected in writing the
notification of defect unless Buyer objects within two months of Seller's
objection. Buyer may make no claims for damages against Seller except as
set forth under this Section or Section 15.
(iv) Buyer or Seller may not offset against any form of
counter-claim unless the counter-claim to be offset has been recognized by
Seller or Buyer, as applicable, or legally established; provided that this
restriction shall not apply to outstanding claims in excess of 10% of the
Monthly Target for such Product.
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7. QUANTITIES.
7.1 GENERAL. Seller shall sell Products in such quantities as
ordered by Buyer up to the Monthly Targets provided below for each Product.
Buyer shall purchase Products in quantities no less than the monthly minimum
volumes provided below for each Product. Calculation of fulfillment of all
Monthly Targets and monthly minimums shall be based upon Product purchased by
Buyer; for this purpose a purchase of Product shall be deemed to occur when the
Product is shipped by Seller to Buyer.
7.2 PURCHASE REQUIREMENTS. The Monthly Targets and monthly minimum
amounts for the First Contract Year shall be as follows:
------------------------------------------------------
First 6 Months Second 6 Months
-------------- ---------------
------------------------------------------------------
Cigarette papers
(aggregate sales of
100% woodpulp and
mixed pulp)
------------------------------------------------------
Monthly Target 958 tons 833 tons
------------------------------------------------------
Monthly Minimum 750 tons 750 tons
------------------------------------------------------
High porous plug wrap
------------------------------------------------------
Monthly Target 225 tons 183 tons
------------------------------------------------------
Monthly Minimum 135 tons 165 tons
------------------------------------------------------
In the event BAT ceases to purchase the Products from Buyer during
the First Contract Year, at the option of Buyer the Monthly Target and monthly
minimum amounts above may be reduced by one hundred ninety two (192) tons for
cigarette papers and fifty-three (53) tons for high porous plug wrap. The
Monthly Targets and monthly minimum amounts shall also be reduced in the event
that a Customer ceases to purchase one or more Products due to Seller's
material failure to deliver such Products meeting the specifications set forth
in the applicable purchase orders and/or a material failure to deliver the
Products on the applicable delivery dates. The amount of such reductions in
Monthly Targets and monthly minimum amounts shall be equal to the average
monthly purchases of the applicable Products by such Customer for the three (3)
full months immediately preceding such termination by the Customer.
The Monthly Target and monthly minimum amounts for the Second
Contract Year and the Third Contract Year shall be negotiated by Seller and
Buyer in good faith and established at least one hundred twenty (120) days
prior to the first anniversary of the Effective Date and the second anniversary
of the Effective Date, respectively. The Second Contract Year Monthly Target
amounts for cigarette papers in the aggregate shall be no more than eight
hundred thirty three (833) tons and no less than six hundred sixty six (666)
tons and the Monthly Target amount for high porous plug wrap shall be no more
than one hundred fifty (150) tons,
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provided that Buyer may permanently reduce the Monthly Target for high porous
plug wrap below 150 tons by giving Seller four (4) months prior written notice.
The Third Contract Year Monthly Target amounts for cigarette papers in the
aggregate shall be no more than two hundred sixty-seven (267) tons and the
Monthly Target amount for high porous plug wrap shall be no more than one
hundred fifty (150) tons, provided that Buyer may permanently reduce the
Monthly Target for cigarette papers below two hundred sixty seven (267) tons
and may permanently reduce the Monthly Target for high porous plug wrap below
one hundred fifty (150) tons in either case by giving Seller six (6) months
prior written notice; and provided further that if Buyer reduces the Monthly
Target for high porous plug wrap below 150 tons pursuant to the previous
sentence, the Monthly Target shall not exceed such lesser amount for the Third
Contract Year. The monthly minimum amounts for each Product for the Second
Contract Year and the Third Contract Year shall be 90% of the Monthly Targets.
The Monthly Targets and monthly minimum amounts for each Product for any period
after the Third Contract Year shall be negotiated in good faith by the Parties.
7.3 MONTHLY PURCHASE REQUIREMENTS. Each month Buyer shall purchase
at least the monthly minimum amounts and no more than 110% of the Monthly
Target for each Product. Each month Seller shall sell to Buyer the Products
ordered by Buyer provided that Seller shall have no obligation to sell more
than 110% of the Monthly Target for a Product during any month unless otherwise
agreed.
7.4 VOLUME FORECASTS. Buyer shall provide Seller with a good faith
written estimate of Buyer's requirements for the next three months for each
Product by grade at least fifteen (15) days prior to the start of each month
(the "Rolling Forecast"). Such Rolling Forecasts are solely for production
planning purposes and are not intended, nor should such reports be interpreted,
as actual purchase orders.
7.5 FAILURE TO MEET VOLUME REQUIREMENTS. In the event that Buyer
fails to purchase the monthly minimum for any Product for any such month, in
order to reimburse Seller for a portion of the damages sustained by Seller due
to such shortfall, Buyer shall pay to Seller within thirty (30) days of the end
of such month a Shortfall Payment. Each Shortfall Payment shall be an amount
calculated for such Product as follows:
(i) for each kilogram which is not purchased by Buyer below the
monthly minimum but at or above 50% of the Monthly Target,
Buyer shall pay 0.2 DM ([EURO]0.102) to Seller; and
(ii) for each kilogram which is not purchased by Buyer below 50%
of the Monthly Target, Buyer shall pay 0.4 DM ([EURO]0.205)
to Seller.
For the avoidance of doubt, for the amount which is not purchased by Buyer
between the monthly minimum and 100% of the Monthly Target, Buyer shall pay
nothing.
An example of a calculation of a Shortfall Payment is set forth on Exhibit B.
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8. SERVICES.
8.1 GENERAL. Seller shall provide to Buyer the services set forth
below at the costs to Buyer set forth on Exhibit C. Buyer shall pay for such
services monthly within thirty (30) days of the end of each month. Either Party
may terminate any such services on one hundred eighty (180) days advance
written notice to the other Party.
8.2 INVOICING. Seller shall produce and mail invoices for all
Products delivered by Buyer to its customers based upon the terms and
conditions of such sale, and shall provide copies of such invoices to Buyer.
Such invoices shall be in a form substantially similar to the invoices
delivered by Seller to Buyer with each shipment of Product to Buyer, provided
that such invoices shall use Buyer's logo, heading and payment terms.
8.3 SHIPPING. Seller shall make all arrangements on behalf
(including customary unloading and/or loading) of Buyer for transportation of
the Products to Buyer's customers per the due date specified on the purchase
order or any new due date that has been agreed, provided that all third party
expenses related to transportation of the Products shall be paid by Buyer.
8.4 TECHNICAL. Seller shall provide laboratory and technical support
for Product applications upon the reasonable request of Buyer.
8.5 INFORMATION TECHNOLOGY. Seller shall provide information
technology services necessary to create and print order confirmations using
Buyer's logo to be sent to Customers with the same design and format as
Seller's current order confirmation. Seller will continue to provide electronic
data information (EDI) communication with Customers with capabilities
consistent with the EDI capabilities of Seller as of the date hereof. Seller
will also produce printed information for sales by Customer and Product group
as currently defined, finished goods inventory and accounts receivable by
Customer. These services will be provided starting within ninety (90) days of
the Effective Date and will continue for the term of this Agreement, subject to
Section 8.1.
8.6 WAREHOUSE. Seller shall provide warehouse space and warehouse
management for storage of 650 tons of Products by Buyer free of cost to Buyer.
The warehouse space shall be an undesignated portion of the warehouse space
owned or leased by Seller, provided that such space will store 650 tons of
Product. Buyer shall have access to such warehouse for purposes of inspecting
its Products at reasonable business hours and pursuant to such reasonable
guidelines as Seller shall establish in good faith, taking into account the
reasonable business needs of Buyer. Notwithstanding anything else herein,
Seller shall continue to provide such warehouse space for storage of 650 tons
of Products for a period of up to ninety (90) days after termination of this
Agreement, provided that Buyer shall pay a reasonable fee to Seller for
administrative services related to such warehouse storage of Product for such
period.
8.7 LIMITATION OF LIABILITY. The limit of Seller's liability
(whether in contract, tort, negligence, strict liability in tort or by statute
or otherwise) to Buyer or to any third party concerning performance or
non-performance by Seller of the services provided under Section 8 of this
Agreement (other than Section 8.6), for any and all claims other than claims
for
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Seller's willful misconduct, shall not in the aggregate exceed the fees paid by
Buyer to Seller hereunder for such services. Buyer's exclusive remedy for any
claim arising out of a breach regarding the services provided under Section 8
of this Agreement (except Section 8.6), other than a claim covered by Section
15.2 hereof, shall be for Seller, upon receipt of written notice, to use
commercially reasonable efforts to cure the breach at its expense, and failing
that, the return of total fees paid to Seller for the services provided under
Section 8 of this Agreement up to the amount of damages suffered by Buyer.
9. PERSONNEL AND SALES AGENTS.
9.1 PERSONNEL. Buyer intends to hire the following cigarette product
related personnel of Seller ("Buyer Intended Hires"):
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (Sales Manager)
▇▇▇▇ Kaeschner (Customer Service Representative)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Seller shall use commercially reasonable efforts to assign to Buyer each
employment agreement currently in force between a Buyer Intended Hire and
Seller, subject to any restrictions on such assignment under such agreement and
applicable law. In the event one or more employment agreements may not be
assigned but the Buyer Intended Hires are willing to enter into new employment
agreements with Buyer, Seller shall cooperate with Buyer to facilitate the
negotiation of new employment agreements between Buyer and such Buyer Intended
Hires. In the event one or more Buyer Intended Hires in the marketing function
decline to be hired by Buyer after good faith negotiations by Buyer, Seller and
Buyer shall negotiate in good faith to amend this Agreement to expand the
services rendered by Seller to include sales and customer service support. The
services to be rendered by Seller to Buyer shall be equivalent to the work
performed by such Buyer Intended Hires who remain as employees of Seller
("Retained Employees") and shall be provided by Seller until the earlier of
termination of this Agreement or termination of any such Retained Employee's
employment with Seller. Buyer shall pay to Seller a fee for such additional
services equal to the fully burdened cost to Seller of continuing to employ
such the Retained Employees for so long as such services are provided to Buyer.
Buyer shall defend, indemnify and hold harmless Seller and its directors,
officers and employees from and against any and all claims, judgments, damages,
penalties, fines, costs, costs of defense and attorneys' fees arising out of
actions of Retained Employees after the Effective Date.
9.2 SALES AGENTS. For those Sales Agents who only sell the Products
for the Seller , Seller shall use commercially reasonable efforts to assign to
Buyer each contract it has with such Sales Agent, subject to any restrictions
on such assignment under applicable law or the applicable agreement. As to any
Sales Agent whose contract is not assigned to Buyer, Seller shall cooperate
with Buyer in Buyer's negotiation of a contract with such Sales Agent for sale
or distribution of Products. Buyer shall cooperate with Seller in Seller's
negotiation of contracts with Sales Agents for sale of products other than
Products. Each Party shall inform the other of the terms of any such new
contracts with Sales Agents.
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9.3 REIMBURSEMENT. Seller shall reimburse Buyer for all amounts paid
by Buyer to any court or governmental authority or attorney's fees as a result
of actions taken by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ prior to the Effective Date in the scope
of his employment with Seller prior to the Effective Date, and for all amounts
paid by Buyer to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to reimburse him for such payments, to the
extent such payments are made pursuant to the Employment Agreement dated
December 22, 2000 between Seller and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, provided that any
settlement of such action shall be subject to the consent of Seller not to be
unreasonably withheld.
10. TERM AND TERMINATION.
This Agreement shall take effect upon the Effective Date and shall
continue in full force and effect until three (3) years from such date unless
terminated pursuant to Section 13. If, however, neither party gives written
notice of termination six months prior to the expiration date or any extension
of it, the term of this Agreement shall automatically be extended for
successive periods of six (6) months from the date of expiration then in
effect; provided, however, that in the event the Parties are unable to agree in
writing on the price and maximum and minimum volumes for each Product for any
one year extension by the date which is 120 days prior to the beginning of such
extension, this Agreement shall terminate upon expiration of the current
Contract Year, provided that in no event shall this Agreement continue for more
than five years. The rights and obligations set forth in Sections 5, 12 and 21
of this Agreement shall survive the termination for the periods indicated
therein.
11. PURCHASE OF EQUIPMENT, INVENTORY AND ACCOUNTS RECEIVABLE.
11.1 EQUIPMENT. On August 9, 2001 (the "Transfer Date"), title to the
converting and lab equipment listed on Exhibit D, including all spare parts
(the "Equipment") shall transfer to Buyer at no additional cost under this
Agreement. Seller represents and warrants that it has good and marketable title
to the Equipment, free and clear of all liens, claims, charges, security
interests and encumbrances. The equipment shall be transferred by Seller to
Buyer in its condition on the Transfer Date, as is, with all faults, if any,
with the express understanding of Buyer that except as provided in the
foregoing sentence Seller makes no representations or warranties of any kind,
directly or indirectly, express or implied, as to the Equipment, including its
quality, condition or fitness for any particular purpose, on the Transfer Date
or at the end of the lease period described in Section 11.3.
11.2 INVENTORY. Upon expiration of this Agreement, Seller shall sell
and Buyer shall purchase all of Seller's finished goods inventory of the
Products at a price to be negotiated by the Parties.
11.3 LEASE-BACK OF EQUIPMENT. Buyer hereby leases to Seller the
Equipment as of the Transfer Date until the termination of this Agreement, at
no cost to Seller other than as set forth in this Section 11.3. Title to the
Equipment shall remain with Buyer at all times after the Transfer Date and
Seller shall have no right, title or interest to the Equipment except as set
forth herein. The Equipment shall at all times be personal property
notwithstanding that any such Equipment may now or hereafter be affixed to
realty. The Equipment shall not be removed from Seller's principal place except
in the following manner: (1) #6 Slitter shall be relocated on the later of (i)
one hundred eighty (180) days after the Effective Date and (ii) the date on
which
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the Monthly Target for cigarette papers is reduced below 950 tons; (2) #3 and
#7 Slitters shall be relocated at the termination of this Agreement or any
extended period provided for in Section 10; and (3) any other Slitters may be
relocated prior to the termination of this Agreement only by mutual agreement
of the Parties based on the Targets under this Agreement in order for Buyer to
maintain its supply of the finished paper products for its Customers. Seller
shall use the Equipment in the manner for which it was intended, solely for
Seller's business purposes, and in compliance with all applicable laws and
regulations. Seller shall keep the Equipment in good working order, ordinary
wear and tear excepted, and shall furnish all parts, maintenance and servicing
for the Equipment at its own expense as required for normal operation of the
Equipment and consistent with past practice. Seller shall be responsible for
all other costs related to the operation of such equipment during the lease
period, including the cost of providing and maintaining insurance for such
equipment.
11.4 INSURANCE FOR EQUIPMENT. For so long as any item of equipment
remains on Seller's Property, Seller shall keep the Equipment insured against
theft and all risks of loss or damage from every cause whatsoever for not less
than the replacement cost of the Equipment. Seller shall pay the premiums for
such insurance and be responsible for all deductible portions thereof. In the
event of loss or damage of all or a portion of the Equipment, Seller shall
replace the Equipment with comparable equipment with the same or more capacity
and in similar operating condition as the Equipment for the duration of the
lease.
11.5 TRANSPORTATION. Buyer shall pay all costs related to the
disassembly and removal of the Equipment and shall pay all transportation costs
for shipment of the Equipment and inventory to Buyer or its designee pursuant
to this Section 11.
11.6 ACCOUNTS RECEIVABLE. On the Transfer Date, Seller shall sell,
transfer and assign and Buyer shall purchase all of the accounts receivable
related to the Seller's cigarette paper business on the books of Seller as of
the close of business on the day before the Transfer Date (the "Accounts
Receivable"). The purchase price for the Accounts Receivable shall be part of
the aggregate purchase price paid by Purico and its affiliates to P.H.
▇▇▇▇▇▇▇▇▇▇ Company under the Acquisition Agreement. In the event that after one
hundred twenty days (120 days) the amount of Accounts Receivables which Buyer
and its affiliates collect is less than DM 8,875,600, Seller shall promptly
reimburse Buyer for the difference; in the event that Buyer collects Accounts
Receivable which are greater than DM 8,875,600, Buyer shall promptly reimburse
Seller for the difference. Any Account Receivable received by Buyer more than
one hundred twenty (120) days after the Transfer Date shall be promptly
remitted by Buyer to Seller.
11.7 AUDIT. Buyer shall keep and maintain complete and accurate
records and books of account documenting all Accounts Receivable collected by
Buyer or its affiliates. Buyer and any relevant affiliates shall permit
independent accountants retained by Seller, upon reasonable prior written
notice, to have access to Buyer's and its affiliates' records and books and
premises for the sole purpose of determining the amount of Accounts Receivable
collected pursuant to Section 11.6. Such examination shall be conducted during
regular business hours and at the Seller's own expense. If such examination
reveals that such costs or payments have been misstated, any adjustment shall
be promptly refunded or paid, as appropriate. The Seller shall pay the fees and
expenses of the accountant engaged to perform the audit, unless such audit
reveals a discrepancy of five percent (5%) or more for the period examined
which is to the
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disadvantage of the Seller, in which case the Buyer shall pay all reasonable
costs and expenses incurred by the Seller in the course of making such
determination, including the fees and expenses of the accountant.
12. CONFIDENTIAL INFORMATION.
Buyer and Seller acknowledge that during the course of performance of
this Agreement, each may learn confidential and proprietary information
regarding the other's business, costs, products, practices, procedures,
operations or plans (collectively "Confidential Information"). Confidential
Information shall not be deemed to include information which (i) is already
rightfully and lawfully known to the Party prior to disclosure, (ii) is already
public information or otherwise generally available, (iii) is subsequently
disclosed to the receiving Party by a third person not under any obligations of
confidentiality as to such information, or (iv) is subsequently developed
independently by the receiving Party. All other information exchanged is deemed
to be Confidential Information. Except as required by legal process, law,
statute or regulation, no Party will disclose Confidential Information to any
third person or entity, or use Confidential Information for any purpose other
than performance of its obligations under this Agreement without prior written
consent having been obtained from the Party to whom the Confidential
Information belongs. Each Party shall be liable to the other for any breach of
this Section 12 by such Party's directors, officers, employees, agents and
representatives.
13. BREACHES AND REMEDIES.
13.1 VOLUNTARY TERMINATION. Either Party may terminate this Agreement
by giving written notice of termination to the other Party, at any time, upon
or after the filing by the other Party of a petition in bankruptcy or
insolvency, or upon the commencement of any other voluntary proceeding or
action whether by or against the Party under the relevant law on insolvency or
bankruptcy, or upon the expiration of sixty (60) days following the
commencement of any involuntary proceeding if after such sixty (60) days such
proceeding has not been dismissed or withdrawn, or after the making by the
other Party of any assignment or attempt of assignment for the benefit of
creditors, or upon or after the institution of any proceedings for the
liquidation or winding up of the other Party's business, or for the termination
of its corporate charter. In the event of the giving of such notice, this
Agreement shall terminate immediately upon the receipt of that notice by the
notified Party. Upon the occurrence of any of the events enumerated in this
Section, any pending purchase orders may be cancelled at the option of the
terminating party.
13.2 TERMINATION FOR BREACH. If a Party (the "Defaulting Party")
fails to comply with any material term or condition of this Agreement, other
than a failure by Buyer to order the minimum amounts of each Product set forth
in Section 7, the other Party (the "Non-Defaulting Party") may provide written
notice to the Defaulting Party stating the nature of such failure (the "Default
Notice"). If the Default Notice relates to (i) a failure by the Defaulting
Party to pay any amount due and payable to the Non-Defaulting Party and the
Defaulting Party fails to pay such sum within fifteen (15) days after receipt
of the Default Notice or (ii) a failure by Seller to deliver Product on the
delivery date meeting the specifications set forth in the applicable purchase
order and the Seller fails to deliver Product meeting the specifications set
forth in the applicable purchase order within seven (7) days after receipt of
the Default Notice or
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(iii) a failure by Defaulting Party to comply with any other material term or
condition of this Agreement and such failure is not cured within thirty (30)
days after the Defaulting Party's receipt of the Default Notice, or in the
event of a cure which requires in excess of thirty (30) days to complete, if
the Defaulting Party has not substantively commenced such cure within such
thirty (30) day period and thereafter does not promptly and diligently
prosecute the cure to completion, the Non-Defaulting Party in any such case
shall be entitled to either suspend or terminate this Agreement and pursue any
other remedies it may have under this Agreement.
13.3 EFFECT OF WAIVER. Any waiver by either Party of a breach of any
term or condition of this Agreement shall not constitute a waiver of any
subsequent breach of the same or any other term or condition of this Agreement.
14. ASSIGNABILITY.
This Agreement or any rights or obligations hereunder may not be
assigned by any of the Parties to any third party without the prior written
consent of the other Party, provided that Buyer or Seller may assign this
Agreement to an affiliate, in which event the transferee shall agree in writing
that this Agreement and all of its provisions shall be binding upon that
transferee as if the transferee were an original signatory to this Agreement.
Notwithstanding any assignment permitted by this Section 14, the Guaranty in
Section 20 hereof shall remain in effect.
15. INDEMNIFICATION.
15.1 BUYER. Buyer shall defend, indemnify and hold harmless Seller
and its directors, officers and employees from and against any and all claims,
judgments, damages, losses, penalties, fines and costs of defense (including
attorneys' fees) asserted by third Parties arising out of Buyer's negligence,
or willful misconduct or acts or omissions in its use or sale of Products
provided by Seller, other than claims arising from Seller's negligence, willful
misconduct or failure to manufacture the Products in accordance with Customer's
specifications.
15.2 SELLER. Seller shall defend, indemnify and hold harmless Buyer
and its directors, officers and employees from and against any and all claims,
judgments, damages, losses, penalties, fines and costs of defense (including
attorneys' fees) asserted by third Parties arising out of Seller's negligence,
willful misconduct or failure to manufacture the Products in accordance with
Buyer's or customer's specifications, other than those claims arising from
Buyer's negligence, willful misconduct or acts or omissions in its use or sale
of Products provided by Seller.
15.3 NO CONSEQUENTIAL DAMAGES. In no event shall Seller or Buyer be
liable to the other for any special or consequential damages arising out of or
in connection with this Agreement, except for the damage suffered by Buyer as a
result of a claim by a Customer which arises from the Seller's material failure
to perform under the terms of this Agreement, provided that Buyer and Seller
agree in good faith, such agreement not to be unreasonably withheld by Seller,
that payment of such damages is necessary to preserve relations with the
Customer.
15.4 NOTICE. To receive the foregoing indemnities, the party seeking
indemnification must promptly notify the other in writing of a claim or suit
and provide
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reasonable cooperation (at the indemnifying party's expense) and full authority
to defend or settle the claim or suit. The indemnifying party shall have no
obligation to indemnify the indemnified party under any settlement made without
the indemnifying party's written consent.
16. INDEPENDENT CONTRACTORS.
The relationship of the Parties is that of independent contractors,
and neither Party will incur any debts or make any commitments for the other
party except to the extent expressly provided in this Agreement. Nothing in
this Agreement is intended to create or will be construed as creating between
the Parties the relationship of joint venturers, co-partners, employer/
employee or principal and agent.
17. REPRESENTATIONS AND WARRANTIES.
17.1 ORGANIZATION, AUTHORITY AND AUTHORIZATION OF SELLER. Seller is
a partnership duly formed and in good standing under the laws of Germany and
has full power and authority as a partnership to execute and deliver this
Agreement and any documents contemplated hereby, effect the transactions
contemplated hereby and thereby and has duly authorized the execution, delivery
and performance of this Agreement and any document contemplated hereby by all
necessary partnership action. Seller has full power and authority as a
partnership necessary to carry on its business as now conducted, to own or
lease and operate its properties as and in places where such business is now
conducted and such properties are now owned, leased or operated. This Agreement
has been duly executed and delivered by Seller and constitutes the valid and
legally binding obligations of Seller, enforceable against it in accordance
with its terms.
17.2 NO VIOLATIONS BY SELLER. The execution, delivery and performance
of this Agreement by Seller and the performance of the transactions
contemplated hereby and thereby do not and will not result in a breach or
violation of any provision of the governance document of Seller or in a
material violation of any statute, rule, regulation governmental permit or
ordinance applicable to Seller or violate or result in a breach of or
constitute an event of default (or an event which might, upon the passage of
time or the giving of notice, or both, constitute an event of default) under
any provision of, result in acceleration or cancellation of any obligation
under, or give rise to a right by any party to terminate or amend its
obligations under, any mortgage, deed of trust, conveyance to secure debt,
note, loan, indenture, lien, material lease, agreement, instrument, order,
judgment, decree or other material arrangement or commitment to which Seller is
a party or by which its assets or properties are bound, or violate any order,
judgment, decree, rule or regulation of any court or any governmental agency or
body having jurisdiction over Seller or any of its assets or properties, except
for such consents, approvals, orders or authorizations, registrations,
declarations or filings where failure of compliance would not, individually or
in the aggregate, have a material adverse effect on the ability of Seller to
consummate the transactions contemplated hereby. No consent, approval, order or
authorization of or registration, declaration or filing with, any person is
required by Seller in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or
thereby, except for such consents, approvals, orders or authorizations,
registrations, declarations or filings where failure of compliance would not,
14
individually or in the aggregate, have a material adverse effect on the ability
of Seller to consummate the transactions contemplated hereby.
17.3 ORGANIZATION, AUTHORITY AND AUTHORIZATION OF BUYER. Buyer is a
corporation duly formed and in good standing under the laws of Germany and has
full power and authority as a corporation to execute and deliver this Agreement
and any documents contemplated hereby, effect the transactions contemplated
hereby and thereby and has duly authorized the execution, delivery and
performance of this Agreement and any document contemplated hereby by all
necessary partnership action. Buyer has full power and authority as a
corporation necessary to carry on its business as now conducted, to own or
lease and operate its properties as and in places where such business is now
conducted and such properties are now owned, leased or operated. This Agreement
has been duly executed and delivered by Buyer and constitutes the valid and
legally binding obligations of Buyer, enforceable against it in accordance with
its terms.
17.4 NO VIOLATIONS BY BUYER. The execution, delivery and performance
of this Agreement by Buyer and the performance of the transactions contemplated
hereby and thereby do not and will not result in a breach or violation of any
provision of the governance document of Buyer or in a material violation of any
statute, rule, regulation governmental permit or ordinance applicable to Buyer
or violate or result in a breach of or constitute an event of default (or an
event which might, upon the passage of time or the giving of notice, or both,
constitute an event of default) under any provision of, result in acceleration
or cancellation of any obligation under, or give rise to a right by any party
to terminate or amend its obligations under, any mortgage, deed of trust,
conveyance to secure debt, note, loan, indenture, lien, material lease,
agreement, instrument, order, judgment, decree or other material arrangement or
commitment to which Buyer is a party or by which its assets or properties are
bound, or violate any order, judgment, decree, rule or regulation of any court
or any governmental agency or body having jurisdiction over Buyer or any of its
assets or properties, except for such consents, approvals, orders or
authorizations, registrations, declarations or filings where failure of
compliance would not, individually or in the aggregate, have a material adverse
effect on the ability of Buyer to consummate the transactions contemplated
hereby. No consent, approval, order or authorization of or registration,
declaration or filing with, any person is required by Buyer in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or thereby, except for such consents,
approvals, orders or authorizations, registrations, declarations or filings
where failure of compliance would not, individually or in the aggregate, have a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby.
18. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, together with the Acquisition Agreement and the
letter agreement pertaining to this Agreement entered into as of the Effective
Date, is the entire understanding between the Parties with respect to the
subject matter hereof and supersedes any contracts, agreements or
understandings (oral or written) of the Parties with respect to the subject
matter hereof. No part of this Agreement may be amended, altered or otherwise
modified unless done so in a writing duly executed by the Parties to this
Agreement.
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19. FORCE MAJEURE.
If the performance of any part of this Agreement by Seller or Buyer
is prevented, hindered or delayed by reason of any cause or causes beyond the
control of Seller or Buyer, as the case may be, and which cannot be overcome by
due diligence, including, but not limited to, acts of God, floods, storms,
earthquakes, hurricanes, tornadoes, or other severe weather or climatic
conditions, acts of public enemy, war, blockades, insurrection, vandalism or
sabotage, fire, accident, wreck, explosion, strike or labor dispute, embargoes
or governmental laws, orders, or regulations which cause interruption in
production or delivery of Product at or from Seller's plant, the party affected
shall be excused from such performance to the extent that it is necessarily
prevented, hindered or delayed during the continuance of any such happening or
event, and this Agreement shall be suspended so long as and to the extent that
any such cause prevents or delays its performance.
20. GUARANTEE.
In consideration for the payment of $1.8 million from Seller or its
affiliate to Guarantor by wire transfer in immediately available funds on the
Transfer Date and to induce Seller to enter into this Agreement, Guarantor
hereby irrevocably and unconditionally guarantees to Seller and becomes surety
to Seller for the punctual and full payment of all amounts due from Buyer to
Seller and the performance of all other obligations of Buyer, whether now
existing or hereafter arising, pursuant to this Agreement. Seller may enforce
this guarantee directly again the Guarantor, and the Guarantor shall waive any
right or remedy to require that any action be brought against Buyer or any
other person or entity before proceeding against the Guarantor. Seller may
pursue its rights and remedies under this Agreement in whatever order, or
collectively. Without limiting the generality of the foregoing, the obligations
of Guarantor hereunder shall remain in full force and effect without regard to,
and shall not be released, discharged or in any way affected by:
(a) any amendment, modification or supplement to this
Agreement provided such amendment, modification or supplement has been
agreed by Guarantor;
(b) any exercise or nonexercise of or delay in exercising any
right, remedy, power or privilege under or in respect of this Agreement,
or any waiver, consent, indulgence or other action or inaction in respect
thereof;
(c) any bankruptcy, insolvency, arrangement, composition,
assignment for the benefit of creditors or similar proceeding commenced
by or against Buyer;
(d) any extension of time for payment or performance of any of
the obligations under this Agreement;
(e) the genuineness, validity or enforceability of this
Agreement;
(f) the release of Buyer from performance or observance of
any of the agreements, covenants, terms or conditions contained in this
Agreement by operation of law;
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(g) the failure of Seller to keep Guarantor advised of Buyer's
financial condition, regardless of the existence of any duty to do so; or
(h) any other circumstances which might otherwise constitute a
legal or equitable discharge of a guaranty or surety.
21. GOVERNING LAW; JURISDICTION.
This Agreement shall be construed and interpreted in accordance
with, and the rights and obligations of the Parties shall be determined by, the
laws of the Federal Republic of Germany. The Parties consent to the exclusive
jurisdiction of the courts in Frankfurt, a.M. for all matters arising out of or
relating to this Agreement; provided, however, that Seller shall have the right
to bring legal action against the Guarantor before any other court having
jurisdiction over the Guarantor or its assets.
22. NOTICES.
Unless otherwise indicated differently, all notices, requests,
information or demands which any party may desire or may be required to give to
any other party under this Agreement, shall be in writing and shall be
personally delivered or sent via e-mail, telegram, telex, telecopy, or first
class certified registered mail, postage prepaid return receipt requested, and
sent to the party at its address appearing below or such other address as
either party shall subsequently inform the other party by written notice given
as described above; provided, however, that notices from Buyer providing
purchase order information need not be sent by certified mail:
If to Buyer: ▇▇▇▇ ▇▇▇▇▇
Analyst House
20-26 Peel ▇▇
▇▇▇▇▇▇▇, Isle of ▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: Nat Puri ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
If to Seller: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Managing Director
Hordener ▇▇▇▇▇▇▇▇▇▇▇ ▇-▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇-▇▇▇▇-▇▇▇▇▇ (fax)
17
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Corporate Counsel and Secretary
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇-▇▇▇▇ (fax)
All notices, requests, information or demands so given shall be deemed
effective upon receipt or, if mailed, upon receipt or the expiration of the
third day following the date of mailing, whichever occurs first, except that
any notice of change in address shall be effective only upon receipt by the
party to whom the notice is addressed.
23. SEVERABILITY.
In the event any provision of this Agreement conflicts with the
law under which this Agreement is to be construed, such provision shall be
deleted from the Agreement, and the Agreement shall be construed to give effect
to the remaining provisions thereof.
24. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement.
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In witness, the Parties, intending to be legally bound, have
caused this Agreement to be executed in their corporate names by their duly
authorized officers as of the Effective Date.
PAPIERFABRIK SCHOELLER &
HOESCH GmbH & CO. KG
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------
Name:
Title:
PURICO GmbH
/S/ N.R. PURI
-------------
Name:
Title:
PURICO (IOM) LIMITED
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------
Name:
Title: