FILM SUPPLY AGREEMENT
between
Rapak
LLC (“Buyer”)
and
CTI
Industries Corporation (“Seller”)
December
20, 2002
THIS
FILM
SUPPLY AGREEMENT (“Agreement”) is made effective as of December __, 2002, by and
between CTI Industries Corporation, an Illinois corporation (“Seller”), and
Rapak, LLC, an Illinois limited liability company (“Buyer”).
RECITALS
A. Seller
is
a supplier of laminated film embossed using Buyer’s embossed chill roll and
manufactured to Buyer’s Specifications (as defined below) (“Film”) and is
willing and able to supply Buyer's requirements in the United States, Canada
and
Mexico for such Film subject to the terms and conditions set forth in this
Agreement.
B. Buyer
is
willing to purchase from Seller its requirements for Film in the United States,
Canada and Mexico.
C. Seller
is
manufacturing Film for Buyer in connection with Buyer’s production and sale of
bags and/or pouches and/or packages (including form fill seal packages) with
dispensing valves and/or fitments.
D. The
parties desire to establish the terms and conditions under which Buyer will
order and purchase Film from Seller, and Seller will sell and deliver Film
to
Buyer.
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt of which
is
hereby acknowledged by both parties hereto, the parties hereto agree as
follows:
AGREEMENT
1. Definitions
1.1 “Affiliate”
means, with respect to a specified Person any Person that, directly or
indirectly, through one or more intermediaries, alone or through an affiliated
group, controls, is controlled by, or is under common control with such
Person.
1.2 “Change
of Control” means (i) a sale, exchange or other disposition to an Independent
Third Party or Independent Third Parties pursuant to which such Independent
Third Party or Independent Third Parties acquire (whether by sale, merger or
otherwise) 51% or more of the issued and outstanding capital stock of the
Seller, (ii) an Independent Third Party individually acquires or Independent
Third Parties collectively acquire the right, subsequent to the commencement
of
this Agreement, to appoint a majority of the directors to the board of the
Seller or otherwise acquires or acquire de facto management and control of
the
Seller (iii) a sale of all or substantially all of the Seller’s assets (other
than sales in the ordinary course of business); provided, however, that a merger
or sale of all or substantially all of the business and assets of Seller, or
a
sale of stock of Seller in which the purchaser shall acquire 51% or more of
the
issued and outstanding stock of Seller, in which (i) the surviving entity or
purchaser shall assume the obligations of Seller under this Agreement and (ii)
the purchaser shall not be engaged in the manufacture or sale of bags (including
but without limitation bag-in-box applications) and/or pouches and/or packages
(including form fill seal packages for any liquid applications) , with
dispensing valves and/or fitments, which compete at the relevant time with
the
business and/or customers of Buyer (“the Field”), shall not constitute a Change
of Control.
1.3 “Independent
Third Party” means any person who, is neither a Party nor an Affiliate of either
of the Parties.
1.4 “Party”
means either Buyer or Seller and “Parties” shall be construed
accordingly.
1.5 “Person”
means and includes any individual, corporation, partnership, association,
limited liability company, trust, estate, or other entity.
1.6 “Specifications”
means the Film specifications set forth on Schedule
1.6
attached
hereto or as varied by agreement between Buyer and Seller from time to
time.
2. Sales
and Purchase of Film.
2.1 Sale
and Purchase.
Subject
to the provisions of this Agreement, Seller agrees to sell and supply to Buyer
and its Affiliates, and Buyer or its Affiliates agree to purchase from Seller,
not less than Sixty-five Percent (65%) of all of Buyer’s requirements for
Film used during the term of this Agreement for the manufacture, conversion
or
processing of certain products as set out in Recital C in the United
States, Canada and Mexico, whether or not such manufacture, conversion or
processing is by Buyer or any other Party. Notwithstanding the foregoing, this
Agreement does not specify a minimum quantity of Film to be purchased by Buyer
or its Affiliates, nor does this Agreement obligate Buyer or its Affiliates
to
purchase any quantity of Film. The purchase of Film pursuant to this Agreement
will be by purchase order (each a “Purchase Order”) issued from time to time by
Buyer or its Affiliates
2.2 Forecasts;
Maximum Quantity.
Buyer
will provide Seller one month prior to the commencement of each calendar quarter
with forecasts of demand on a quarterly basis projecting the estimated amount
of
demand for the twelve (12) month period following the date of such forecast
(the
“Rolling Forecasts”). The Parties acknowledge and agree that the Rolling
Forecasts are intended solely for the purpose of assisting Seller in its
planning and procurement of materials. Seller shall respond to the Rolling
Forecasts within ten (10) business days by providing the Buyer with a
detail of the impact on the utilization of Seller’s ▇▇▇▇ laminator as used
currently for manufacture of the Film or any additional or replacement
laminators installed during the term of this Agreement (the “Laminator”) in
relation to the capacity of the Laminator and with a written response setting
out the maximum quantities which it is able to supply to Buyer for the period
covered by the Rolling Forecast. Buyer will respond promptly and not later
than
five (5) business days with a written commitment of its demand for the
quarter and its Purchase Order coverage. If the Buyer requires quantities of
Film in excess of its written commitment during the quarter, Seller will use
its
best commercial efforts to manufacture such amounts of Film. The Parties hereby
acknowledge and agree that the Buyer shall receive “most favored nation” status
from the Seller with regard to the utilization of the Laminator’s capacity. For
purposes hereof, “most favored nation” shall mean that the supply requirements
of the Buyer under written Purchase Orders to Seller shall take precedence
over
the requirements of any and all other customers of the Seller which might
involve the use of the Laminator; excluding commitments to customers by Seller
under purchase orders received by Seller from such customers prior to the date
of applicable written Purchase Orders from Buyer.
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2.3 Inventory.
Seller
hereby agrees to maintain an inventory of Film at all times equal to an average
of six (6) weeks’ consumption of Film by Buyer and its Affiliates as determined
by the most recent quarterly forecast.
2.4 Other
Territories.
Seller
hereby agrees to assist the Buyer in (i) the selection of and (ii) the
provision of technical support for alternative sources of supply of Film
acceptable to Buyer in its sole discretion in North America and other
territories designated by the Buyer. To that end, Seller undertakes to enter
into licensing arrangements upon reasonable terms to enable competent third
parties to manufacture Film at the request of Buyer in accordance with the
following principles: (a) The alternative source nominated in North America
shall be licensed for the duration of this Agreement on a royalty free basis;
(b) Sources nominated outside North America shall pay a royalty of 1% to Seller
based on the net sales value of Film supplied thereunder (subject to (d) below);
(c) Seller will use its best endeavours to prosecute to grant and maintain
at
its own cost US patent application Serial No 10/042,955 filed on January 8,
2002
(“Patent Application”) (Buyer to provide reasonable assistance as appropriate);
(c) Seller will use its best endeavours to prosecute to grant and maintain
applications at its own cost based on the Patent Application in each of
Australia, New Zealand, China, Japan and Europe and any other jurisdictions
reasonably requested by Buyer; (e) All licenses granted by Seller will prohibit
the third party manufacturer from supplying Film to third parties competing
with
Buyer in the Field.
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2.5 Scope
of Agreement.
All
Film purchased by Buyer from Seller during the term of this Agreement shall
be
subject to the terms of this Agreement.
2.6 Sale
to Other Companies.
Seller
agrees that during the term of this Agreement and any renewal term, Seller
shall
not sell Film to any company engaged in the Field. For the avoidance of doubt
Seller will not sell Film to Liquibox Corporation, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Manufacturing, CDF, Arena or Shield Packaging or any of their Affiliates or
to
any other manufacturer or seller of bag-in-box bags without the prior written
approval of Buyer.
3. Term
of Agreement; Termination.
3.1 Term.
This
Agreement will commence on the date first set forth above, and except as
otherwise provided in this Agreement, shall continue for a fixed period until
October 31, 2005 (the “Term”). This Agreement shall continue thereafter for
further fixed periods (“renewal periods”) each of one year’s duration. During
the first two renewal periods, Buyer only may terminate by giving Seller no
less
than 90 days’ prior written notice to expire on the first or second anniversary
date of the expiry of the Term. Thereafter, either party shall be entitled
to
terminate this Agreement by giving the other Party no less than 90 days’ prior
written notice to expire on the anniversary date of the expiry of the Term.
3.2 Termination.
Notwithstanding the provisions of Section 3.1 this Agreement may be terminated
at any time immediately upon written notice in the following
circumstances:
(a) by
either
Party upon the occurrence of an Event of Default (as defined herein in section
15.1) with
respect to the other Party; or,
(b) by
Buyer
in the event of a Change of Control with respect to Seller.
3.3Post-Termination
Obligations.
Notwithstanding anything contained herein to the contrary, upon expiration
or
termination of this Agreement, at Buyer’s option, Seller shall diligently and
timely complete the shipment of all Film ordered by Buyer prior to expiration
or
termination and shall submit same to Buyer in accordance with the agreed upon
shipment and/or delivery dates. Expiration or termination of the Agreement
shall
not affect any obligation arising or to be performed prior thereto.
4. Prices
and Terms of Payment.
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4.1 Initial
Pricing. The
initial pricing for Film to be purchased under this Agreement shall be as set
forth in Schedule
4.1
attached
hereto.
4.2 Changes
in Pricing.
The
pricing for Film to be purchased hereunder shall be adjusted as described below
to reflect changes in raw material costs. Pricing for Film shall only be
adjusted in the event there is a change of at least five percent (5%)
(increase or decrease) in the cost of the raw material element of the total
cost
of producing Film. The model of raw material costs within the total cost of
producing Film is set forth on Schedule 4.1
attached
hereto along with an example of this change of pricing mechanism. Any such
adjustment to price shall become effective two (2) months from the date of
written notification by the Seller to the Buyer of such change in raw material
costs. If, at any time during the Term, Buyer receives an offer from a third
party supplier to purchase Film of like grade or quality in the same country
at
a lower price, or on more favorable terms and conditions than provided for
in
this Agreement, including any rebates, bonuses, discounts, free goods or other
allowances which offer shall (i) include all of terms for the benefit of Buyer
provided herein and (ii) a commitment for the term provided herein , Buyer
will
provide Seller with written notice of such superior offer. Seller shall have
fifteen (15) days after receipt of such notice to match such lower price
and/or more favorable terms and conditions presented in such superior offer.
In
the event Seller fails to match the terms of such superior offer, Buyer may
purchase Film from such third party supplier, and the quantity of Film required
to be purchased by Buyer as a minimum as set out in 2.1 shall be
reduced.
4.3 Improvement
in Pricing.
Throughout the Term, Seller and Buyer agree to use reasonable, ongoing efforts
to achieve a collective reduction of the total supply chain costs as measured
on
an annual basis. “Total supply chain costs” represent both Seller's and Buyers
costs. In an attempt to collectively reduce total supply chain costs, Seller
agrees to: (i) establish annual cost reduction objectives, (ii) evaluate cost
reduction proposals and set cost reduction priorities, (iii) assign resources
and assure accountability for cost reduction procedures, and (iv) manage and
monitor the progress and performance of achieving the cost reductions. Any
direct material cost reductions realized by Seller, other than raw materials
cost reductions as dealt with in section 4.2 hereof, will be immediately passed
on to Buyer as a price reduction. Additionally, all other savings shall be
split
equally among Buyer and Seller.
4.4 Terms.
Payment
terms for undisputed amounts owed hereunder are two percent (2%) discount for
payment within 10 days, net forty-five (45) days after the later of Buyer’s
receipt of the Film or Buyer’s receipt of Seller’s invoice. All applicable bills
of lading and shipping notices will be forwarded with Seller’s invoice. Seller’s
invoice will specify Buyer’s Purchase Order number. All amounts remaining due
from Buyer to Seller with respect to Film purchased and delivered hereunder
more
than forty-five (45) days after the date of receipt of the Film by Buyer shall
bear interest at the higher rate of either a flat 6% per annum or 3% per annum
above the Bank of America base rate from time to time, until paid; provided,
however, that interest shall not accrue with respect to any amount which is
disputed, in good faith, by Buyer.
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4.5 Claims.
Buyer
will notify Seller of any claims with respect to any Film shipped to Buyer
within ninety (90) days from the date of Buyer’s receipt thereof.
4.6 Taxes.
Unless
otherwise stated in writing by Seller, all prices quoted will be exclusive
of
all national, federal, state, local or any other governmental use, sales,
excise, occupational, property (ad
valorem)
and
similar taxes or duties now in force or enacted in the future. Whenever
possible, Seller will apply for and take advantage of any and all available
tax
exemptions. If, however, any such tax, fee or charge of any nature whatsoever
is
imposed on the transaction, such tax will be paid by Buyer in addition to the
prices quoted or invoiced. If Seller is required to pay any such tax (other
than
any federal, state or local income tax), fee or charge at the time of sale
or
thereafter, Buyer will promptly reimburse Seller after Seller provides Buyer
with evidence of the amounts paid.
4.7 Credits.
Amounts
owed to Buyer due to rejections of Film, or discrepancies on paid invoices
will
be, at Buyer’s option, fully credited against future invoices payable by Buyer,
or paid by Seller within thirty (30) calendar days from Seller’s receipt of
a debit memo or other written request for payment from Buyer.
5. Shipping.
5.1 Shipping.
Buyer
reserves the right to designate means of shipping, which will be as stated
on
the Purchase Order. All
Film
ordered by Buyer or its Affiliates shall be shipped to a Buyer facility
designated by Buyer or to some other location designated by Buyer or its
Affiliates in writing. Risk of loss and title to Film shall transfer to Buyer
or
its Affiliates at the time of delivery to the location specified by Buyer in
the
purchase order for such Film subject in all cases to Buyer’s rights of
inspection and acceptance pursuant to Section 8 hereof.
5.2 Shipping
Delays.
In the
event that Film ordered by Buyer has not been delivered to Buyer or to the
designated location, as applicable, within five (5) business days after the
delivery date specified in a Purchase Order under normal delivery conditions
(which delivery date when ex stock shall be not less than two days after the
date of the Purchase Order for deliveries to Romeoville and not less than five
days after the date of the Purchase Order for deliveries to Union City) or,
if
no delivery date is specified in the Purchase Order no later than thirty-five
(35) days following the issuance of the Purchase Order Buyer shall have the
right, without limiting its other remedies hereunder, to cancel the order for
the undelivered Film without liability. If Seller shall fail to deliver Film
ordered by Buyer within 35 days after the date of Purchase Order and such
failure shall not be excused pursuant to Section 20.2 hereof, Buyer Shall be
entitled to purchase similar Film from alternate suppliers in quantities up
to
those ordered from and not delivered by Seller, and to obtain reimbursement
from
Seller of the cost differential between the cost of purchasing Film from Seller
and from purchasing Film from alternate suppliers, including additional shipping
and handling costs. If Seller delivers an order to Buyer or to the designated
location after the order has been rightfully canceled by Buyer, Buyer shall
have
the right to refuse to accept such order, and shall not be responsible for
any
transportation or other charges incurred in connection with Seller’s delivery or
return of the Film. The remedies provided herein for delay or nonperformance
by
Seller shall be the sole and exclusive remedies of Buyer for such delay or
nonperformance.
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5.3 Rejection
of Shipped Film.
Buyer
reserves the right to reject and return, at Seller’s expense, Film delivered in
excess of the quantity ordered.
6. Purchase
Orders.
6.1 Orders
for Film.
Buyer
will order Film for delivery pursuant to this Agreement by submitting Purchase
Orders in writing. Each Purchase Order will contain, for each category of Film
ordered, the description, quantity, date for delivery or performance,
destination, and total price. Seller will have five (5) days after receipt
of a Purchase Order to reject the Purchase Order; provided,
however,
that
Seller shall only be entitled to reject a Purchase Order in the event the
capacity on the Laminator is exhausted under most favored nation (as described
in Section 2.2). By not rejecting the Purchase Order within five (5) days,
Seller will be deemed to have accepted the Purchase Order. Acceptance by Seller
is limited to the provisions of this Agreement and the Purchase Order. No
additional or different provisions proposed by Seller will apply. Seller will
not ship any Film to Buyer without prior receipt of a Purchase
Order.
6.2 Lead
Time.
Seller
acknowledges that time is of the essence under this Agreement. As such, Seller
shall provide all deliveries to Buyer on time and in full, unless otherwise
mutually agreed upon in writing.
6.3 Terms
and Conditions of Sale; Precedence.
Each
Purchase Order issued under this Agreement will be made part of, and be
incorporated into, this Agreement. Unless otherwise specifically agreed to
in
writing between Buyer and Seller, the terms and conditions of this Agreement
will take precedence over the Buyer’s standard terms and conditions, and this
Agreement will govern any purchase and sale of Film pursuant to this Agreement,
notwithstanding any contrary terms and conditions in the printed portion of
any
specific Purchase Order form or any of the Seller’s sales
acknowledgments.
6.4 Delays.
Seller
will notify Buyer immediately if, at any time, it appears that the delivery
schedule set forth on the Purchase Order may not be met. Such notification
will
include the reasons for any anticipated delay (including, but not limited to,
the reasons set forth in Section 20.2, force
majeure)
and the
proposed revised delivery date.
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6.5 Buyer’s
Rights Upon Delivery.
Film
which is delivered in advance of schedule without authorization in writing
from
Buyer may, at Buyer’s option (i) be returned to Seller at Seller’s sole
risk and expense (including freight charges and Buyer’s handling fee),
(ii) be accepted by Buyer with payment withheld by Buyer until the date
that the Film was actually scheduled for delivery, or (iii) be placed in
storage, at Seller’s sole risk and expense, until the delivery date specified
under Buyer’s delivery schedule.
7. Quality
Assurance, Acceptance Testing.
7.1 Inspection
and Testing.
All
Film will be subject to inspection and testing by Buyer at reasonable times
and
places. If any inspection or test is made on the premises of Seller or Seller’s
supplier, Seller, without additional charge, will provide all reasonable
facilities and assistance for the safety and convenience of the inspectors
in
the performance of their duties. All inspections and tests on the premises
of
Seller or its supplier will be performed in such a manner as not to unduly
delay
the work of Seller or its suppliers.
7.2 Seller
Quality Control.
Seller
will provide and maintain an inspection and process control system covering
the
Film, and shall retain and maintain all records relating to the Film. Records
of
all inspection work done by Seller will be kept complete and will be made
available to Buyer during the performance of this Agreement and for three
(3) years or such longer periods as may be specified in a specific order.
Such records shall include, but are not limited to, test sheets for each batch
of Film that is provided to Buyer.
8. Inspection
of Shipments.
8.1 Inspection.
Film
purchased hereunder is subject to Buyer’s final inspection and approval
notwithstanding the receipt of any Film by Buyer or payment therefor. If Film
is
rejected, it will be held subject to Seller’s direction and returned at Seller’s
expense. Causes for rejection include, but are not limited to, (i) Film
does not conform to Specifications or other terms set forth in the Purchase
Order , or (ii) Film is of inferior quality or workmanship, as determined
in Buyer’s reasonable discretion, or Seller has otherwise breached any of the
warranties contained in Section 10 hereof. Upon Seller’s receipt of the
rejected Film, one of the following courses of action shall be taken in Buyer’s
sole discretion: (i) Seller shall promptly send replacement Film to Buyer,
at no additional cost to Buyer, F.O.B. Buyer’s designated facility; or
(ii) Seller shall promptly credit or refund (at Buyer’s sole option) Buyer
for the full purchase price of the rejected Film.
8.2 Failure
to Inspect.
Any
failure by Buyer to inspect any particular shipment of Film shall neither
preclude Buyer from exercising its rights and remedies under this Section 8
with respect to any subsequent shipments nor be deemed a waiver of Buyer’s
rights under this Agreement, with respect to the shipment in question or any
other shipment.
8
9. Country
of Origin, Export Authorization.
9.1 Certificates
of Origin.
Seller
will provide a separate certificate of origin, providing the country of
manufacture, for all Film delivered to Buyer. Assuming no changes, the
certificate will be considered valid for future releases against the same
Purchase Order or this Agreement for up to one (1) year from the date of such
certification. At the end of the year, or upon a change in the country of
origin, Seller will immediately issue a new certificate. Buyer must at all
times
have accurate information regarding the country of origin of all Film purchased
pursuant to this Agreement.
9.2 Export
Requirements.
Unless
otherwise agreed to by Seller in writing, Buyer will assume all responsibility
for obtaining any required export authorizations necessary to export from the
United States any Film purchased pursuant to this Agreement or technical data
or
documents to be supplied pursuant to this Agreement by Seller. Buyer will not
re-export Film or technical data or documentation supplied by Seller, directly
or indirectly or through others, or the product of such data, except in
compliance with U.S. Export Administration Regulations.
10. Warranties.
10.1 Title.
Seller
warrants it shall deliver good and absolute title to the Film, free and clear
of
any and all liens or encumbrances, and further warrants that it has the right
to
convey the Film and that the Film is free of all defects in title, liens and
encumbrances.
10.2 Defects.
Seller
warrants and represents that all Film sold pursuant to this Agreement will
be
free from defects in design, workmanship and materials. Seller’s liability under
this Section 10.2 shall include, but not be limited to, replacing any
non-conforming Film and refunding any amounts paid by or lost by Buyer in
respect of such Film, at Buyer’s sole option.
10.3 Specifications
Seller
hereby represents and warrants to Buyer that the Film will conform to applicable
Specifications, drawings, samples, and descriptions referred to in this
Agreement . Seller further represents and warrants to Buyer that the Film sold
under this Agreement is of such quality as would pass without objection in
the
trade and is fit for the ordinary purposes for which such goods are used and
is
of even kind, quality and quantity within each unit and among all units
involved.
10.4 Intellectual
Property.
(a) The
Seller owns or has the right to use pursuant to license, sublicense, agreement
or permission all Intellectual Property (as defined below) necessary or
desirable for the manufacture and sale of Film.
9
(b) The
Seller shall not interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of any third party
as
a result of or in connection with the manufacture or sale of Film.
(c) For
purposes hereof, “Intellectual Property” means the entire right, title and
interest in and to all proprietary rights of every kind and nature, including
patents, copyrights, trademarks, mask works, trade secrets and proprietary
information, all applications for any of the foregoing, and any license or
agreements granting rights related to the foregoing (i) subsisting in,
covering, reading on, directly applicable to or existing in the Film;
(ii) that are owned, licensed or controlled in whole or in part by the
Seller; (iii) that are used in or necessary to the development, manufacture
or testing of the Film.
10.5 Delivery.
Seller
hereby represents and warrants to Buyer that all Film ordered by Buyer shall
be
delivered in accordance with the specifications and standards stipulated by
Buyer in accordance with this Agreement and with all federal, state and local
laws and regulations applicable to the Film.
10.6 Survival.
These
warranties will survive any inspection, delivery, payment, and termination
of
this Agreement, and the benefit thereof will run to Buyer, its Affiliates and
their respective customers, successors, and assigns.
10.7 Remedies.
Buyer’s sole and exclusive remedy with respect to any breach of warranty
hereunder shall be (i) the replacement by Seller of any defective or
non-conforming Film supplied by Seller, or, at Buyer’s election, reimbursement
or credit to Buyer for the purchase price thereof and (ii) recovery of Damages
in an amount not to exceed $5,000,000 per occurrence or $6 million in the
aggregate in any one year. In no event shall Seller be liable or responsible
to
Buyer for any lost profits, incidental, consequential, or exemplary loss or
damage. Seller shall return to Buyer all Film as to which a claim of breach
of
warranty is made. “Damages” shall mean and include any actual loss or damage to
property suffered by Buyer or any injury or death to any person caused by any
breach of warranty hereunder.
11. Equipment;
Embossed Chill Roll.
11.1 Chill
Roll. Buyer
agrees to supply Seller with an embossed chill roll exclusively for use in
manufacturing the Film. The Parties hereby acknowledge and agree that the
embossed chill roll shall remain the sole property of the Buyer.
11.2 Maintenance.
Seller
agrees to maintain the embossed chill roll such that the Film complies with
Buyer's Specifications for the Film for Buyer’s benefit. Seller agrees to repair
the embossed chill roll as necessary so as to enable the Film supply and
inventory requirements. Such repairs shall be made at Seller's expense. Seller
further agrees to procure comprehensive general liability insurance in relation
to the embossed chill roll at Seller’s expense and provide at Buyer’s request a
certificate of insurance to Buyer.
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11.3 Replacement.
Buyer
agrees to have available an additional embossed chill roll at the end of the
embossed chill roll's economic life. In the event that the Agreement is
terminated, Seller agrees to return the embossed chill roll in good working
condition (fair wear and tear excepted) to Buyer within five (5) business
days of accumulating Film as required of the Seller in accordance with
Section 3.3 herein.
12. Insurance.
Seller
warrants to Buyer that it shall maintain Products Liability insurance in force
at all times during the term of this Agreement in an amount of $1
million
per
occurrence, $2
million
in the
aggregate per annum together with umbrella and/or Commercial Catastrophe
Liability coverage in the amount of $4 million per occurrence and in the
aggregate per annum. Seller shall name Buyer as an additional insured under
its
policy. Seller shall provide Buyer with a certificate of insurance, evidencing
compliance with this Section 12 within thirty (30) days of the
execution by both Parties of this Agreement, shall maintain the insurance as
required herein at all times during the term and any renewal term of this
Agreement. In the event of the termination or cancellation of the insurance
provided for herein, Seller shall provide notice thereof to Buyer within ten
days after receiving notification of such termination or
cancellation.
13. Indemnity.
13.1 Indemnity
by Seller.
Seller
will at all times be deemed to be performing as an independent contractor and
not as an agent or employee of Buyer. The acts and omissions of Seller’s
employees and agents and subcontractors of any tier will be deemed to be those
of Seller. Seller will indemnify, defend and hold harmless Buyer and its
directors, officers, employees, agents, employees, successors and assigns
(“Buyer Indemnified Parties”) from and against any and all liability, damages,
losses, claims, demands, judgments, reasonable costs and expenses of every
nature and kind (“Losses”) by reason of injury to or death of any person or
damage to or destruction of property to the extent arising out of the negligent,
wrongful or tortuous acts or omissions of Seller, its employees, subcontractors
or agents in performance under this Agreement; provided that the aggregate
amount which Seller may be obligated to pay pursuant to this Section 13.1 with
respect to any act or omission, shall not exceed the sum of One Million
($1,000,000) Dollars. Seller shall also indemnify, defend and hold harmless
the
Buyer Indemnified Parties for any and all Losses arising out of, related to,
or
in connection with a breach by the Seller of the representations and warranties
contained in Section 10.4 hereof; provided, however, that the
indemnification provided shall be solely with respect to Damages (as that term
is defined in Section 10.7 hereof) and the amount of such indemnification shall
not exceed the sum of $5,000,000 per occurrence or $6,000,000 in the aggregate
for acts or omissions occurring in any one year. Seller will not, however,
be
responsible for any such losses, liabilities, claims, judgments, costs, demands
and expense caused by the sole negligence or willful misconduct of Buyer, its
directors, officers or employees.
11
13.2 Indemnity
by Buyer.
Buyer
will at all times be deemed to be performing as an independent contractor and
not as an agent or employee of Seller. The acts and omissions of Buyer’s
employees and agents and subcontractors of any tier will be deemed to be those
of Buyer. Buyer will indemnify, defend and hold harmless Seller, its directors,
officers, employees, agents, employees, successors and assigns from and against
any and all Losses by reason of injury to or death of any person or damage
to or
destruction of property arising out of the negligent, wrongful or tortuous
acts
or omissions of Buyer, its employees, subcontractors or agents in performance
under this Agreement; provided that the aggregate amount which Buyer may be
obligated to pay pursuant to this Section 13.2 with respect to any one, or
a
series of related acts or omissions, shall not exceed the sum of One Million
($1,000,000) Dollars. Buyer will not, however, be responsible for any such
losses, liabilities, claims, judgments, costs, demands and expense caused by
the
sole negligence or willful misconduct of Seller, its directors, officer or
employees.
13.3 Indemnification
Procedure.
(a) A
Party
making a claim for indemnification under Section 13.1 or 13.2 (“Claim”) shall
give notice to the indemnifying Party of such Claim, but the failure to notify
the indemnifying Party will not relieve the indemnifying Party of any liability
that it may have to any indemnified Party, except to the extent that the
indemnifying Party demonstrates that the defense of such action is prejudiced
by
the indemnifying Party’s failure to give such notice.
(b) If
any
Claim is made against an indemnified Party and such indemnified Party gives
notice to the indemnifying Party of such Claim, the indemnifying Party will
be
entitled to participate in the defense of such Claim and, if the indemnified
Party consents (which consent may not be unreasonably withheld), assume the
defense of such Claim. If the indemnifying Party assumes the defense of a Claim,
(i) it will be conclusively established for purposes of this Agreement that
the
claims made in that Claim are within the scope of and subject to
indemnification; (ii) no compromise or settlement of that Claim may be effected
by the indemnifying Party without the indemnified Party’s consent (which consent
may not be unreasonably withheld) unless (A) there is no finding or admission
of
any violation of law or any violation of the rights of any Person and no effect
on any other Claims that may be made against the indemnified Party, and (B)
the
sole relief provided is monetary damages that are paid in full by the
indemnifying Party; and (iii) the indemnifying Party will have no liability
or
future additional expense with respect to any compromise or settlement of such
Claim effected without its consent. If notice is given to an indemnifying Party
of a Claim and the indemnifying Party does not, within twenty (20) days after
the indemnified Party’s notice is given, give notice to the indemnified Party of
its willingness to assume the defense of such Claim, provided there is no
dispute whether such Claim is within the scope of and subject to
indemnification, the indemnifying Party will be bound by any determination
with
respect to said Claim or any compromise or settlement effected by the
indemnified Party.
12
(c) Notwithstanding
the foregoing, if an indemnified Party determines in good faith that there
is a
reasonable probability that a Claim may adversely affect it or its Affiliates
other than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified Party may, by notice
to
the indemnifying Party, assume the exclusive right to defend, compromise, or
settle such Claim, but the indemnifying Party will not be bound by any
determination of a Claim so defended or any compromise or settlement effected
without its consent (which consent may not be unreasonably
withheld).
14. Confidential
Data and Disclosures.
14.1 Confidentiality.
Each
Party (the "Receiving Party") agrees for the term of this Agreement and
thereafter to keep confidential and not use for its own benefit or disclose
to
any other person or entity (other than employees of such Parties and their
Affiliates who need to know such information in connection with the performance
of this Agreement, which employees shall be notified of and bound by such
confidentiality obligations) (i) the existence of, and the terms and provisions
of, this Agreement, and (ii) any information concerning the business or affairs
of the other Party or its Affiliates or customers. The Receiving Party will
not,
without prior written consent from the Party disclosing information under this
Agreement (the “Disclosing Party”), disclose to any person or use for its own
benefit any such information. This undertaking by Receiving Party will survive
termination of this Agreement. Receiving Party will take all necessary
precautions to ensure that all of its employees and employees of its
subcontractors treat such material and information as confidential and do not
divulge such material. All material provided to Receiving Party remains the
property of Disclosing Party and will not be reproduced in any manner except
as
required for performance of this Agreement.
14.2 Exclusions.
The
Parties agree that the Receiving Party will have no obligations with respect
to
information which (i) is previously known to it or is independently
developed by or for it; (ii) is or falls into the public domain through no
wrongful act of the Receiving Party; (iii) is approved for release by the
written authorization of the Disclosing Party; or is released by the Disclosing
Party without restriction; or (iv) is required to be disclosed by law
provided,
however,
that
where practicable or possible not less than ten (10) days’ prior written notice
is given to the Disclosing Party before such disclosure is made.
13
15. Default.
15.1 Event
of Default.
Upon
the occurrence of an Event of Default, either Party may avail itself of any
and
all remedies at law or in equity or otherwise including, without limitation,
the
right to terminate this Agreement by written notice to the other Party or to
cancel any affected Purchase Order(s) without any charge, obligation or
liability whatsoever, except as to the payment for services satisfactorily
completed and/or for Film already received and accepted by Buyer. For the
purposes of this Agreement, an Event of Default shall be deemed to have
occurred:
(a) in
the
event one of the Parties is in breach or default of any term, condition or
covenant of its Agreement or any Purchase Order placed pursuant to this
Agreement and such breach or default has continued for a period of
sixty (60) days after the giving of written notice to the Party in breach;
provided,
however,
that,
failure by Buyer to pay any amount allegedly due under any Purchase Order that
is the subject of a good faith dispute will not be deemed to be a breach or
default by Buyer; or
(b) in
the
event of a Party’s Bankruptcy, defined for the purposes of this Agreement as
(i) an assignment for the benefit of creditors, (ii) the filing of a
voluntary petition in bankruptcy, (iii) an adjudication of bankruptcy or
insolvency, (iv) the filing of a petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation (other than a solvent
reorganisaton which has the prior approval of the other Party), (v) the
filing of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against any Party hereto in any
bankruptcy proceeding, (vi) a Party seeking, consenting to or acquiescing
in the appointment of a trustee, receiver or liquidator of all or any
substantial part of the Party’s properties, or (vii) the failure to
dismiss, within sixty (60) days after its commencement, any proceeding
against such other Party seeking reorganization, arrangement composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law
or regulation.
16. Arbitration.
16.1 Agreement
to Arbitrate.
Unless
Buyer formally requests a different approach to dispute resolution, which Seller
undertakes to consider and respond to in a reasonable manner, the Parties agree
that any dispute, controversy or claim arising out of or relating to this
Agreement, or to the interpretation, performance, breach or termination thereof,
shall be resolved by binding arbitration under the Commercial Rules and
Regulations of American Arbitration Association (“AAA”), as amended from
time to time. The arbitration will be conducted in the City of Chicago,
Illinois, unless the Parties agree in writing to another location. The
appointing authority will be the AAA. The number of arbitrators will be
three (3), who shall constitute the “Arbitral Panel”.
14
16.2 Notice
of Arbitration.
The
arbitration will begin on the date on which a notice of demand for arbitration
(“Notice of Demand”) is delivered in accordance with the terms of
Section 20.5 hereof to the responding Party (the “Respondent”) at the
address appearing for such Party in Section 20.5 hereof by the Party
asserting a claim (the “Complainant”). The Notice of Demand shall include the
following and any other information required by the AAA: (a) a demand that
the dispute be submitted to arbitration; (b) the names and domiciles of the
Parties; (c) a reference to this Agreement and this arbitration provision;
(d) a description of the alleged failure to perform an obligation under
this Agreement and of the petitions and amounts claimed.
16.3 Certain
Procedures; Confidentiality.
The
Respondent shall respond within fourteen (14) days of the date on which the
Notice of Demand was received. If Respondent does not respond to the Notice
of
Demand within fourteen (14) days of receipt thereof, it will been deemed to
have accepted all of the assertions made by the Complainant in the Notice of
Demand. The Arbitral Panel will be designated by the AAA within
fourteen (14) days following the delivery of the Notice of Demand. Within
the seven (7) days next following the end of the fourteen (14) day
period for answering the Notice of Demand, the Arbitral Panel will notify the
parties as least thirty (30) days in advance of the date on which the
hearing will be conducted for purposes of presenting evidence and arguments,
indicating the date and time for the hearing. The hearing will be completed
within three (3) days of starting, unless the Arbitral Panel determines
that a longer period is required. At least fifteen (15) days prior to the
date of the hearing, the parties will deliver to the Arbitral Panel:
(i) the names and addresses of any witness that they intend to present and
an affidavit duly signed by each such witness, which will detail the content
of
his or her testimony; (ii) the documents that will be submitted at the
hearing; and (iii) a description of any other evidence to be presented in
the arbitration. The Parties agree to continue performing their respective
obligations under this Agreement during the resolution of any dispute regarding
the Agreement. All the matters regarding or submitted to the Arbitral Panel
during any arbitration proceeding described herein will be treated as
“confidential information” and any and all arbitrators will maintain its
confidentiality.
16.4 Interim
Relief.
The
Parties expressly agree that prior to the selection of the Arbitral Panel,
nothing in this Agreement shall prevent the Parties from applying to a court
that would otherwise have jurisdiction for provisional or interim measures.
After the Arbitral Panel is selected, it shall have sole jurisdiction to hear
such applications, except that the Parties agree that any measure ordered by
the
Arbitral Panel may be immediately and specifically enforced by a court otherwise
having jurisdiction over the Parties.
16.5 Additional
Recourse.
The
Arbitral Panel’s award will be issued no later than ten (10) days after the
beginning of the arbitration hearing. The award will be final and binding,
without additional recourse, and will be the exclusive remedy of the Parties
for
all claims, counterclaims, issues or accountings presented or pleaded to the
Arbitral Panel. The Arbitral Panel will render its award strictly in accordance
with this Agreement and does not have authority to change or diverge from any
provision of this Agreement. The Arbitral Panel may impose indemnification
measures as part of the award. The arbitral award will (i) be granted and
paid in United States Dollars exclusive of any tax, deduction or offset and
(ii) include interest from the date the award is rendered until it is fully
paid, computed at the rate of ten percent per annum (10%).
15
16.6 Judgment
on Award. Judgment
upon the arbitral award may be entered in any court of competent jurisdiction.
The parties submit themselves to the exclusive jurisdiction of the courts of
the
State of Illinois for purposes of enforcing any interim or final award of the
Arbitral Panel. Any additional costs, fees or expenses incurred in enforcing
the
arbitral award shall be charged against the Party that resists its
enforcement.
16.7 Expenses
of Arbitration; Attorneys’ Fees.
In any
arbitration proceeding hereunder, each Party shall bear the expenses of its
witnesses. All other costs of arbitration, including, without limitation, the
fees and expenses of the Arbitral Panel, the cost of the record or transcripts
thereof, if any, administrative fees, the attorneys’ fees of the Parties, and
all other fees and costs shall be allocated to the Parties to the arbitration
as
determined by the Arbitral Panel, except that the prevailing Party in such
arbitration will be entitled to recover its reasonable attorneys’ fees and
expenses.
16.8 Law
Applicable.
Notwithstanding anything to the contrary contained herein, the law applicable
to
the validity of this Section 16 regarding arbitration, the conduct of the
arbitration, including any resort to a court for provisional or interim
remedies, the enforcement of any award and any other question of arbitration
law
or procedure, shall be the United States Federal Arbitration Act, 9 U.S.C
§§ 1, et
seq.
17. Compliance
with Laws.
The
parties will comply with the provisions of all laws and all orders, rules and
regulations issued thereunder applicable to this Agreement and performance
pursuant to this Agreement. Film will be manufactured, labeled, packaged, sold
and shipped in accordance with all applicable laws, orders, rules and
regulations.
18. Legal
Relationships.
Buyer
and Seller each represents and warrants to the other that they have entered
into
no agreements, nor are subject to any obligations, which prevent them from
entering into and performing this Agreement. It is understood and agreed that
Buyer and Seller are, and at all times during the effective period of this
Agreement will remain, independent contractors. This Agreement will not be
construed as creating any relationship between Buyer and Seller’s employees.
Seller’s employees will not be entitled as a result of this Agreement to any
benefits under any employee benefit plan Buyer presently has in effect or may
put into effect, nor will Seller’s employees be considered employees of Buyer
for the purpose of any tax or contribution levied by any federal, state or
local
government. Buyer’s employees will not be entitled as a result of this Agreement
to any benefits under any employee benefit plan Seller presently has in effect
or may put into effect nor will Buyer’s employees be considered employees of
Seller for the purpose of any tax or contribution levied by any federal, state
or local government. At no time will either Party represent to any third Party
that it is the agent of the other for any reason whatsoever. Buyer and Seller
further covenant that no authorization will be given to any employee to act
for
the other Party. Without limiting the foregoing, Seller and Buyer agree that
they will not, during or after the term of this Agreement, represent themselves
as acting for the other Party or without the other Party’s name, or advertise
its relationship with the other Party without the other Party’s express written
consent in each instance.
16
19. Waiver
of Terms and Conditions, Survival.
19.1 No
Waiver.
The
failure of Buyer or Seller in any one or more instances to insist upon
performance of any of the terms and conditions of this Agreement, or to exercise
any right or privilege contained in this Agreement or the waiver of any breach
of the terms or conditions of this Agreement, shall not be construed as a waiver
of any such terms, conditions, rights or privileges, and the same will continue
and remain in force and effect as if no waiver had occurred.
19.2 Survival.
Either
Party’s obligations under this Agreement which by their nature would continue
beyond the termination, expiration or cancellation of this Agreement will
survive termination, expiration or cancellation of this Agreement including
but
not limited to Section 10, Warranties; Section 13, Indemnity;
Section 14, Confidential Data and Disclosures; and Section 16,
Arbitration.
20. Miscellaneous.
20.1 Authority;
No Conflict.
Each
Party executing this Agreement represents and warrants to the other Parties
(i) that it has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and that, upon execution and
delivery thereof by other parties, this Agreement will constitute the legal,
valid and binding obligation of such Party, and (ii) that the execution and
delivery of this Agreement and the performance of the transactions contemplated
hereby, will not, directly or indirectly (with or without notice or lapse of
time), contravene, conflict with, or result in a violation of any provision
of
the organizational documents or board or shareholder action of such Party,
and
(iii) that such Party is not, and will not be, required to give any notice
to obtain any consent from any third Party in connection with the execution
and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated hereby.
20.2 Force
Majeure.
The
Parties will not be considered in default or liable for any failure to perform
their obligations under this Agreement if such failure arises out of an act
of
nature, war, strikes, lockouts, trade disputes, fires, quarantine restrictions,
Governmental action or by causes beyond the reasonable control of the Party
whose performance is so affected, (the “Affected Party”). The Affected Party
will immediately notify the other Party in writing of any such circumstances
as
promptly as possible after they occur. Any delays in performance of the Affected
Party hereunder shall be extended by the amount of time lost due to any such
circumstances. Performance hereunder shall resume promptly after the
circumstances in question have abated. Should Seller’s inability to perform any
such circumstances continue for a period in excess of thirty (30) days, Buyer
will not be obligated to purchase, at a later date, that portion of the Film
that Seller is unable to deliver because of any such circumstances.
17
20.3 Severability.
If any
provision of this Agreement or the application of any such provision to any
person or circumstance, is declared judicially to be invalid, unenforceable
or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, it being the intent and agreement of the parties
that this Agreement will be deemed to have been amended by modifying such
provision to the extent necessary to render it valid, legal and enforceable
while preserving its intent or, if such modification is not possible, by
substituting therefor another provision that is legal and enforceable and that
achieves the same objective.
20.4 Assignment.
Neither
Party will assign this Agreement or any rights, responsibilities, or obligations
in this Agreement, without the express written approval of the other. However,
Buyer will have the right to assign, all or part of this Agreement, to any
Affiliate or in connection with the sale of a controlling interest of Buyer
or
substantially all of Buyer’s assets.
20.5 Notices.
All
notices required or permitted by or made pursuant to this Agreement must be
in
writing and shall be deemed to have been duly given: (i) when delivered by
hand; (ii) when sent by facsimile provided that a copy is mailed by
Certified U.S. Mail, return receipt requested; (iii) three (3) days
after being sent by Certified U.S. Mail, return receipt requested; or
(iv) one (1) day after deposit with a nationally recognized overnight,
commercial courier service for next day delivery, in each case to the
appropriate address and facsimile numbers set forth below (or to such other
address or facsimile numbers as a Party may designate by notice to the other
Party):
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If
to Buyer:
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Rapak,
LLC
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Fax:
▇▇▇-▇▇▇-▇▇▇▇
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18
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If
to Seller:
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CTI
Industries Corporation
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▇▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Attn:
President
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Fax:
▇▇▇-▇▇▇-▇▇▇▇
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20.6 Subject
Headings.
The
subject headings of this Agreement are included for purposes of convenience
only
and shall not affect the construction or interpretation of any of its
provisions.
20.7 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original but all of which together shall constitute one and the same
instrument.
20.8 Governing
Law.
This
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Illinois, without taking into account provisions
thereof regarding choice or conflict of laws.
20.9 Entire
Agreement and Modification.
This
Agreement and the attachments to this Agreement and made a part of this
Agreement sets forth the entire understanding of the Parties with respect to
the
subject matter of this Agreement and supersedes and merges all prior agreements
and understandings, whether written or oral. No amendment, modification or
waiver of any provisions of this Agreement or consent to any departure therefrom
will be effective unless in writing signed by duly authorized officers or
representatives of both parties.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
19
IN
WITNESS WHEREOF,
Seller
and Buyer have caused this Agreement to be signed as of the date set forth
above.
| “BUYER” | “SELLER” | ||
| RAPAK LLC | CTI INDUSTRIESCORPORATION | ||
| By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ | By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
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| Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ | Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
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| Title: President | Title: Executive Vice-President | ||
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[SIGNATURE
PAGE TO FILM SUPPLY AGREEMENT]
20
LIST
OF SCHEDULES
Schedule
1.6 Product
Specifications
Schedule
4.1 Seller’s
Initial Price
21