SUPPLY AGREEMENT
EXHIBIT 10.25
This SUPPLY AGREEMENT (“Agreement”) is entered into as of May 31, 2005 (the
“Execution Date”) and made effective as of September 1, 2005 (the “Effective Date”)
by and among PVC CONTAINER CORPORATION, a Delaware corporation (“Parent”), Novatec Plastics
Corporation, Inc. a Delaware corporation (“Novatec” and together with Parent, the “Buyer”)
and POLYONE CORPORATION, an Ohio corporation (“Supplier”).
RECITALS
A. On or about the Execution Date, Supplier purchased certain assets of the Buyer pursuant to
an Asset Purchase Agreement dated as of May 13, 2005 (the “Asset Purchase Agreement”).
B. As a result of such acquisition, Supplier manufactures and sells the polyvinyl chloride
compounds listed on Schedule A attached hereto (each a “Product” and collectively,
the “Products”).
C. Buyer desires to purchase the Products from Supplier pursuant to the terms of this
Agreement.
D. Supplier desires to sell the Products to Buyer pursuant to the terms of this Agreement.
AGREEMENTS
In consideration of the covenants and other agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth below.
“Agreement” shall have the meaning set forth in the first paragraph above.
“Annual Forecast” shall have the meaning set forth in Section 2(b).
“Asset Purchase Agreement” shall have the meaning set forth in the recitals.
“Change in Control” shall have the meaning set forth in Section 8.
“Closing Date” shall have the meaning set forth in Section 2(e).
“Confidential Information” shall have the meaning set forth in Section 7(a).
“Contract Year Volume Limit” shall have the meaning set forth in Section 2(a).
“Contract Year” shall mean each twelve (12) month period beginning on September 1,
2005 and continuing each twelve (12) month period thereafter until the end of the Term;
provided, however, that the final Contact Year shall not be a complete
twelve (12) month period but shall consist of the four month period from September 1, 2009
through December 31, 2009.
“Effective Date” shall have the meaning set forth in the first paragraph above.
“Execution Date” shall have the meaning set forth in the first paragraph above.
“Force Majeure Event” shall have the meaning set forth in Section 9.
“Maximum Product Volume” shall have the meaning set forth in Section 2(a).
“Price” shall have the meaning set forth in Section 4(a).
“Product” shall have the meaning set forth in the recitals.
“Quarterly Forecast” shall have the meaning set forth in Section 2(b).
“Specifications” shall have the meaning set forth in Section 2(e).
“Supplier” shall have the meaning set forth in the first paragraph above.
“Term” shall have the meaning set forth in Section 3(a).
“Transition Plan” shall have the meaning set forth in Section 5.
2. Supply of the Products; Minimum Supply; Exclusivity.
(a) Obligation to Purchase and Supply; Volume. Commencing on the Effective Date, and
during the Term, Buyer shall purchase from Supplier, and Supplier shall supply to Buyer, a
percentage of Buyer’s requirements for the Products each Contract Year as set forth below, provided
that, in no event shall Supplier be obligated to supply more than nine million (9,000,000) pounds
of Product per Contract Year (the “Maximum Product Volume”). Volumes of Products supplied
to Buyer by Supplier shall be based upon Buyer’s requirements for each Contract Year (the
“Contract Year Volume Limit”) as follows:
(i) 100% of Buyer’s Product requirements from September 1, 2005 through August 31, 2007;
(ii) 80% of Buyer’s Product requirements from September 1, 2007 through August 31, 2008;
(iii) 70% of Buyer’s Product requirements from September 1, 2008 through August 31, 2009; and
(iv) 50% of Buyer’s Product requirements from September 1, 2009 through December 31, 2009.
(b) Reporting. At least sixty (60) days prior to the beginning of each Contract Year,
Buyer shall provide Supplier with a written, good faith estimate of the aggregate volume of
Products (by Product) that Buyer will require in the next Contract Year (the “Annual
Forecast”). Within thirty (30) days prior to the commencement of each calendar quarter, Buyer
shall provide Supplier with a forecast for the upcoming quarter of the volume of Products (by
Product) for each month (the “Quarterly Forecast”) that Buyer will require for such
quarter.
(c) Supply. Buyer shall issue purchase orders for the Products setting forth the
specific quantities of each Product to be supplied by Supplier. Products shall be supplied by
Supplier based on the Specifications and the purchase orders. All purchase order volumes shall be
reasonably consistent with the Annual Forecast and the most recent Quarterly Forecast. Any
purchase order issued in connection with this Agreement shall be solely for the parties’ internal
accounting and operating purposes
and to facilitate payment; in no event shall the terms of any such purchase order (other than
the line items which identify the specific quantities of each Product to be supplied by Supplier
thereunder) become part of this Agreement or be deemed to have modified, amended or waived the
provisions hereof.
(d) Purchase Orders; Transportation; Title. Supplier shall arrange for shipment of
Products to Buyer based on the lead times set forth in Schedule B attached hereto (which
Schedule B is subject to change during the Term pursuant to the normal business practices
of Supplier). Title to and risk of loss for Products shall pass from Supplier to Buyer upon
Supplier’s delivery of the Products to the carrier selected by Supplier at Supplier’s plant.
(e) Specifications. Products sold to Buyer pursuant to this Agreement shall be
manufactured in accordance with the recipes and specifications for each Product as set forth in
Schedule A (the “Specifications”), which were provided to Supplier by Buyer and
used in Buyer’s business prior to the closing of the Asset Purchase Agreement (the “Closing
Date”).
3. Term; Termination.
(a) Term. Subject to the provisions of Section 3(b) and Section 8, the term of this
Agreement shall be the fifty-two (52) month period beginning on the Effective Date and ending
December 31, 2009 (the “Term”).
(b) Termination. This Agreement, and any rights granted hereunder, may be terminated
in whole or in part at any time as follows:
(i) by the mutual written consent of Supplier and Buyer effective on a date determined by the
mutual agreement of the parties;
(ii) by either Supplier or Buyer effective sixty (60) days after giving written notice to the
other party if such other party is in material breach or default of any term or condition of this
Agreement and such material breach or default remains uncured at the end of such sixty (60) day
period; or
(iii) by Supplier upon a Change in Control pursuant to Section 8 below.
(c) Effect of Termination. Any termination of this Agreement shall be without
prejudice to any other remedies that Supplier or Buyer may have against the other arising out of
any breach or default and shall not affect any rights or obligations of Supplier or Buyer arising
under this Agreement prior to such termination.
4. Pricing; Payments.
(a) Initial Price. During the Term, the initial price for each of the Products shall
be as follows (each as shall be adjusted from time to time pursuant to the provisions of Section
4(b) below, a “Price”): GP Bottle — $0.78; GP Bottle-UV — $.081; and FDA Bottle — $0.79.
The Price reflects bulk delivered pricing. An additional $0.015 per pound will be charged for each
Product packaged in xxxxxxx boxes. Additionally, if Buyer orders less than a truckload of Product,
there will be an additional upcharge pursuant to the provisions of Schedule B attached
hereto (which Schedule B is subject to change during the Term pursuant to the normal
business practices of Supplier). The Price shall be in effect for May 2005 and June 2005, and will
be the starting point for indexed Price movements beginning on July 1, 2005. Prices set forth in
this Agreement are based solely on the Specifications for each Product. Product prices for volumes
requested by Buyer in excess of the Maximum Product Volume shall be negotiated
separately from this Agreement. Pricing for products that use specifications substantially
different than the Specifications used in the Buyer’s business prior to the Closing Date shall be
negotiated separately from this Agreement.
(b) Price Formula Adjustments. Commencing July 1, 2005, the Price for Product shall
be adjusted upward or downward by 85% of the price movement published by Chemical Data Inc. for GP
suspension resin (the “CDI”) in the prior two calendar months. By way of example, if the
CDI increases $0.01 per pound in May 2005 from the CDI in April 2005, then the July 2005 GP Bottle
Price shall be $0.7885 per pound, calculated as follows: $0.01 price increase between the prices
in April and May x 85% = $0.0085; $0.0085 + $0.078 (the initial price for a GP Bottle as shown in
Section 4(a)) = $0.7885 per pound.
(c) Payment Terms. Payment to Supplier for Products shipped to Buyer shall be made in
U.S. dollars within forty-five (45) days of the date of Supplier’s invoice. Buyer will receive a
discount equal to 1% of the total amount invoiced if Supplier receives payment for Products in
Buyer’s lockbox within ten days after the date of the invoice submitted by Supplier to Buyer.
5. Toll Manufacturing. At Seller’s request, Buyer shall toll manufacture some of the
Products listed on Schedule A for Supplier for the period commencing September 1, 2005 and
continuing up to but no longer than December 31, 2005. Buyer and Supplier shall use their good
faith efforts to ensure the provision to Supplier of the Products requested by Supplier pursuant to
this Section 5.
6. Warranty; Limitation of Warranties.
(a) Warranty. Supplier hereby warrants to Buyer that all of the Products shall
conform to the Specifications set forth on Schedule A and shall be free from all defects in
material and workmanship.
(b) No Other Warranties. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
SUPPLIER MAKES NO WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE
PRODUCTS. THIS PROVISION WILL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR PUNITIVE, CONSEQUENTIAL, SPECIAL, OR INCIDENTAL
DAMAGES UNDER OR IN CONNECTION WITH THIS AGREEMENT.
(c) Off Spec Products. If any Product fails to conform to the relevant Specifications
(each an “Off Spec Product”), Buyer shall return the Off Spec Product to Supplier or
dispose of the Off Spec Product, in either case at the option and expense of Supplier. Supplier
shall replace any Off Spec Product within a commercially reasonable period, which period shall not
exceed thirty (30) days from receipt by Supplier of notice from Buyer of the failure of the Product
to meet the Specifications, or shall refund the Price of such Off Spec Product, at the option of
Buyer. Buyer agrees to cooperate with Supplier in remedying any nonconformity and with the return
or disposal of any Off Spec Product.
7. Confidentiality.
(a) For purposes of this Agreement, “Confidential Information” shall mean the terms of
this Agreement and certain manufacturing, technical, scientific, application, employee, financial,
customer, supplier, marketing and sales information of Buyer or Supplier that is a confidential,
proprietary and valuable commercial asset of such party, including, without limitation, the
Specifications,
as well as information provided in writing by one party to the other party that is marked
“Confidential” or, if disclosed orally, information that is designated as “Confidential” at the
time of disclosure and is confirmed in writing as “Confidential” within thirty (30) days of such
oral disclosure.
(b) Each party (i) shall treat all Confidential Information of the other party as confidential
by taking all reasonable precautions in accordance with procedures each party follows to prevent
disclosure with respect to its own confidential information; (ii) shall not, without consent of the
other party, disclose Confidential Information of such other party, directly or indirectly, to any
third party, except to each party’s employees, agents, lenders, attorneys or advisors, who are made
aware of the confidential obligations herein and who are reasonably required to have access to such
Confidential Information in order to perform the obligations of one of the parties under this
Agreement; and (iii) shall not use any portion of such Confidential Information for any purpose not
authorized by this Agreement.
(c) It is agreed that the obligations of this Section 7 shall not apply to Confidential
Information if: (i) either party can reasonably demonstrate that the Confidential Information was
independently developed by any such party after the Closing Date; (ii) the Confidential Information
is or becomes available to the public generally, other than by or through acts or omissions of such
party; (iii) the Confidential Information is rightfully obtained by either party without
restriction from sources that are rightfully in possession of such Confidential Information after
the Closing Date and not under any obligation of confidentiality; or (iv) the Confidential
Information is required to be disclosed by any federal, provincial or state law, rule or
regulation, or by any applicable judgment, order or decree of any court or governmental body or
agency having jurisdiction over either party; provided, however, that each party will give to the
other reasonable prior notice of such disclosure.
(d) Each party, at the written request of the other, shall promptly return all documents
received from the other or containing any Confidential Information of the other party disclosed to
it, in whatever form contained, including all notes and copies thereof.
(e) The confidentiality provisions of this Agreement shall apply during the term of this
Agreement and for a period of five (5) years following the date this Agreement expires or is
terminated in its entirety.
8. Change in Control of Buyer. If, during the term of this Agreement, Buyer shall
propose to engage in a Buyer Change in Control (as defined below) transaction, then Buyer shall
notify Supplier in writing of such proposed Buyer Change in Control promptly (and in any case,
prior to the consummation of such Buyer Change in Control). Upon such Buyer Change in Control, (i)
if the acquiror in such Buyer Change in Control engages in a Restricted Business, then Supplier may
terminate this Agreement as of the date of such Buyer Change in Control, or (ii) if the acquiror
does not engage in a Restricted Business, or if the acquiror engages in a Restricted Business but
Supplier elects not to exercise its right to terminate this Agreement under subpart (i) above, then
this Agreement shall be assigned by Buyer to the acquiror in the Buyer Change in Control
transaction. Upon such assignment, the acquiror must agree in writing (a copy of which is
delivered to Supplier prior to the consummation of such Buyer Change in Control) to assume this
Agreement and to be bound by the terms of this Agreement. For purposes of this Agreement,
“Change in Control” means the sale of all or substantially all of a target’s assets to any
person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) (a “Person”), other than an affiliate, (ii) any reorganization, merger, consolidation or
similar transaction which would result in the transfer of more than fifty percent (50%) of all
voting equity securities of a target immediately prior to such transaction to a Person other than
an affiliate, or (iii) a sale or issuance of more than fifty percent (50%) of all voting securities
of a target to a Person other than an affiliate. For purposes of this Agreement, “Buyer Change
in Control” means a Change in Control transaction in which Buyer is the target. For purposes
of this Agreement, “Restricted Business” means (i)
the business of manufacturing and internally producing polyvinyl chloride compounds, or (ii)
the business of manufacturing and internally producing polyvinyl chloride resins.
9. Force Majeure. Supplier shall not be responsible for its failure to perform its
obligations under this Agreement for such time and to the extent such failure to perform is caused
by fire, flood, earthquake, tornado, hurricane, or other acts of God, strikes, riots, war, acts of
terrorism, rules or regulations of any governmental authority, or by compliance with any order or
decision of any court, board or other governmental authority (each a “Force Majeure
Event”). Supplier shall promptly give verbal notification, promptly confirmed in writing, to
Buyer of the nature and extent of the matter causing the delay or failure and estimated duration of
the suspension period.
10. Notices. Any notice or other communication given under this Agreement shall be in
writing and shall be (a) delivered personally; (b) sent by documented overnight delivery service;
(c) sent by facsimile transmission, provided that a confirmation copy of such transmission is sent
no later than the business day following the day of such transmission by documented overnight
delivery service or first class mail, postage prepaid; or (d) sent by first class mail, postage
prepaid. Such notice shall be deemed to have been duly given (i) on the date of delivery, if
delivered personally; (ii) on the business day after dispatch by documented overnight delivery
service, if sent in such manner; (iii) on the date of facsimile transmission, if so transmitted; or
(iv) on the fifth business day after sent by first class mail, postage prepaid, if sent in such
manner. Notices or other communications shall be directed to the following addresses:
If to Supplier:
|
PolyOne Corporation | |
| 00000 Xxxxxx Xxxx | ||
| Xxxx Xxxx, Xxxx 00000 | ||
| Attn: Xxxxxx Xxxxxxx, Vice President and General Manager — Vinyl | ||
| Compounds | ||
| Fax No.: (000) 000-0000 | ||
With a copy to
|
PolyOne Corporation | |
(which copy shall
|
00000 Xxxxxx Xxxx | |
xxx xxxxxxxxxx
|
Xxxx Xxxx, Xxxx 00000 | |
notice):
|
Attn: Xxxxx X. Xxxxx, Chief Legal Officer | |
| Fax No.: (000) 000-0000 | ||
| And to: | ||
| Xxxxxxxx Xxxx, LLP | ||
| 0000 Xxx Xxxxx | ||
| 000 Xxxxxx Xxxxxx | ||
| Xxxxxxxxx, Xxxx 00000 | ||
| Attn: April V. Boise, Esq. | ||
| Fax No.: (000) 000-0000 | ||
If to Buyer:
|
PVC Container Corp. | |
| 0 Xxxxxxxxxx Xxx Xxxx | ||
| Xxxxxxxxx, Xxx Xxxxxx 00000 | ||
| Attn: Xxxxxxx X. Xxxxxx, President and Chief Executive Officer | ||
| Fax No.: (000) 000-0000 |
With a copy to
|
Xxxxx Day | |
(which copy shall
|
North Point | |
not constitute
|
000 Xxxxxxxx Xxxxxx | |
xxxxxx):
|
Xxxxxxxxx, Xxxx 00000 | |
| Attn: Xxxxxx X. Xxxxxx, Esq. | ||
| Fax No.: (000) 000-0000 |
Either party may, by notice given in accordance with this Section 10, specify a new address for
notices under this Agreement.
11. Governing Law. This Agreement, together with all Exhibits and Schedules hereto,
shall be construed and interpreted according to the laws of the State of Ohio without giving effect
to any choice or conflict of law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
12. Assignment. This Agreement shall be binding and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This Agreement may not be
assigned by either party without the prior written consent of the other party hereto, which consent
shall not be unreasonably withheld; provided, however, that, subject to the
provisions of Section 8 above, this Agreement may be freely assigned by either party hereto in a
Change in Control transaction (without the requirement of the other party’s consent).
13. Dispute Resolution.
(a) Cooperation. The parties agree that if any dispute or controversy, other than a
matter for which a party is entitled to specific performance, injunctive relief or other equitable
relief, arises out of this Agreement or the performance, breach, validity, interpretation or
enforcement hereof, it is in the best interests of the parties for such dispute or controversy to
be resolved in the shortest time and with the lowest cost of resolution practicable. Consequently,
the parties, at all times acting in good faith, agree to attempt to resolve any such dispute or
controversy pursuant to the terms of this Section 13, other than a matter for which a party may be
entitled to specific performance, injunctive relief or other equitable relief.
(b) Negotiation. If any dispute or controversy arises under this Agreement, the
parties will negotiate in good faith in an attempt to agree as to whether a dispute exists, the
exact nature of the dispute and the manner in which the dispute should be resolved. If deemed
appropriate by the parties, a professional mediator may be engaged to assist in resolving the
dispute. Any resolution of the dispute will be evidenced by a written agreement setting forth in
reasonable detail the actions to be taken by each party. If no such written agreement is reached
within 30 days after the date on which a party first notifies the other in writing of its belief
that a dispute or controversy exists, a party may pursue other remedies under Section 13(c) below.
(c) Arbitration. In the event that the parties are unable to resolve a dispute after
complying with the provisions of Section 13(b) above, then a party may seek to resolve such dispute
by final and binding arbitration in Cleveland, Ohio, under the rules of the American Arbitration
Association. The parties shall select a single arbitrator mutually agreeable to both such parties.
In the event that the parties are unable to agree upon an arbitrator, then each party shall select
an arbitrator within ten (10) days thereof, those two arbitrators shall select a third arbitrator,
and such third arbitrator shall arbitrate the dispute. In the event that a party does not timely
select an arbitrator under the preceding sentence, then the arbitrator selected by the other party
shall arbitrate the dispute. In the arbitration, each party shall
present its case and proposed resolution of the dispute to the arbitrator, and such arbitrator
shall resolve such dispute by selecting one such proposed resolution as the final and binding
resolution of the dispute. The arbitrator shall have no power to add to, subtract from or modify
any of the terms or conditions of any proposed resolution.
14. Miscellaneous.
(a) Buyer agrees to indemnify and hold harmless Supplier and Supplier’s officers, directors,
employees, affiliates, agents and representatives (collectively, the “Supplier Indemnified
Parties”) from and against all liabilities, claims, losses, damages, deficiencies and expenses,
including reasonable attorney’s fees (collectively, “Losses”) incurred by the Supplier
Indemnified Parties that arise from or relate to Buyer’s gross negligence or willful misconduct in
the performance of its obligations and duties under this Agreement. Supplier agrees to indemnify
and hold harmless Buyer and Buyer’s officers, directors, employees, affiliates, agents and
representatives (collectively, the “Buyer Indemnified Parties”) from and against all Losses
incurred by the Buyer Indemnified Parties that arise from or relate to Supplier’s gross negligence
or willful misconduct in the performance of its obligations and duties under this Agreement.
(b) Counterparts. This Agreement may be executed in counterparts, each of which shall
be considered an original, but all of which together shall constitute the same instrument.
(c) Waiver. No waiver by Buyer or Supplier of any breach of or default under this
Agreement shall constitute a wavier of any other breach or default.
(d) Relationship of Parties. The parties hereby acknowledge that Supplier and Buyer
are acting solely in the capacity as an independent contractor and nothing in this Agreement shall
be construed to constitute either Supplier or Buyer as an agent of the other.
(e) Remedies. The parties’ remedies hereunder will be cumulative and in addition to
any other remedies afforded by law or equity.
(f) Severability; Enforceability of Remedies. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, invalid or void to any extent for
any reason, that provision shall remain in full force and effect to the maximum extent allowable,
if any, and the enforceability and validity of the remaining provisions of this Agreement will not
be affected thereby.
(g) Headings. The headings and titles of the sections in this Agreement are for
convenience of reference only and shall not affect the interpretation or construction of any
provisions.
(h) Entire Agreement. This Agreement, the Asset Purchase Agreement and the schedules
and exhibits attached hereto and thereto (and hereby incorporated herein), together are a complete
and exclusive statement of the terms of the agreement between the parties with respect to the
subject matter hereof and may not be amended, changed, modified, or waived except by an instrument
in writing executed by Supplier and Buyer. Any provisions in Supplier’s or Buyer’s purchase
orders, invoices, billing remittances, acknowledgment forms or similar documents which are
inconsistent with the provisions of this Agreement shall be of no force or effect, regardless of
whether such provisions would materially alter the terms hereof.
[signature page to follow]
The parties hereto have caused this Agreement to be duly executed by their respective
officers, thereunto duly authorized, as of the date first written above.
SUPPLIER:
|
|||||
PolyOne
Corporation |
|||||
By:
|
/s/ Xxxx Xxxxxxxxx | ||||
Name:
|
Xxxx Xxxxxxxxx | ||||
Title: |
Treasurer | ||||
BUYER:
|
|||||
PVC
Container Corporation |
|||||
By:
|
/s/ Xxxxxxx X. Xxxxxx | ||||
Name:
|
Xxxxxxx X. Xxxxxx | ||||
Title: |
President & CEO | ||||
Novate Plastics Container Corporation has caused this Supply Agreement to be duly executed by
its respective officer, thereunto duly authorized, as of the date first written above.
BUYER:
|
|||||
Novatec Plastics Corporation |
|||||
By:
|
/s/ Xxxxxxx X. Xxxxxx | ||||
Name:
|
Xxxxxxx X. Xxxxxx | ||||
Title: |
President & CEO | ||||
