This Agreement made effective this 1st day of May, 1999
Between:
Pinnacle Plastics Inc. (referred to as "PPI")
and
RPC Manufacturing Inc. (referred to as "RPC")
BACKGROUND
1. RPC is an Alberta corporation whose business is the manufacture and
wholesale selling of plastic sheeting.
2. RPC currently leases industrial commercial space at 00000 Xxxxx Xxxx 0000,
Xxxxxxxx Xxxx, Xxxxxxx (the "RPC Premises").
3. PPI is an Alberta corporation and licensee of Plastic Forming Technology
(the "Forming Technology") owned by 815969 Alberta Ltd. and used to produce
industrial receptacles for supply throughout the US and Canadian plastics
market.
4. PPI and RPC (collectively referred to as the "Parties") desire to enter
into a Purchase and Supply Agreement whereby RPC will manufacture and
supply plastic sheeting to PPI on a continuing basis. The terms and
conditions of supply are set out in this Agreement.
5. In order to facilitate the efficient operation of the respective Parties
business activities, RPC has agreed to sub-lease a portion of RPC Premises
to PPI (the "PPI Premises").
The Parties for consideration and upon the terms and conditions set out
below, agree as follows:
ARTICLE 1 - MANUFACTURE AND SUPPLY OF PLASTIC SHEETING
6. At the request of PPI, RPC agrees to produce and supply PPI with plastic
sheeting in accordance with the pricing, specifications, quantities and
delivery schedule set out in this Agreement and the Schedules thereto.
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Price
7. RPC will sell and PPI will purchase from RPC plastic sheet in accordance
with the specifications set out in Schedule "A" (the "Specifications") to
this Agreement at a price of six dollars ($6.00 CND) per sheet (the
"contract price") plus GST and any or all applicable manufacturing taxes
for a period of three (3) years from the date of this Agreement.
Resin
8. PPI shall be responsible for and shall pay all costs associated with the
supply and delivery of resin to the RPC Premises in accordance with the
Specifications or any change requested by PPI thereto agreed between the
Parties thereto.
9. PPI shall, on a best efforts basis establish and maintain at RPC Premises
an inventory of resin in an amount sufficient to allow for production of
the plastic sheets for the following 14 days. PPI shall at all times
including start up of manufacturing operations maintain a minimum resin
inventory of seven (7) days in advance of manufacture at the RPC Premises.
10. PPI shall be responsible for and pay costs associated with outdoor storage
of resin.
11. Legal title and risk associated with resin supplied to RPC by or at the
instruction of PPI shall at all times be vested in PPI and may be removed
from the RPC Premises only in the event if default by RPC pursuant to
paragraph 38 herein.
12. Legal title to all sheeting manufactured by RPC which incorporates in whole
or in part resin supplied by PPI shall at all times be vested in PPI. PPI
hereby grants to RPC a security interest in the plastic sheets manufactured
and delivered by RPC pursuant to the terms of this Agreement until payment
of the purchase price in full has been made and agrees to do all things and
execute all documents necessary to protect and perfect such security
interest pursuant to the Personal Property Security Act (Alberta).
Notwithstanding the proceeding sentence, RPC agrees that it will not
enforce its security interest as provided herein against bona fide
purchasers for value from PPI. PPI appoints RPC as its attorney to execute
any documents or other instruments necessary to perfect or enforce RPC's
security interest. RPC shall provide PPI with copies of all documents so
executed and RPC shall have the right to register such security interest at
the Personal Property Registry (Alberta) from time to time and at any time
during the term of this Agreement.
13. It is contemplated by the Parties that PPI may from time to time request
variation in resin components and specifications; including use of offspec,
regrind and oil bottle. Unless otherwise waived by RPC, PPI shall provide
request for variation in resin components and the Specifications in writing
to RPC forty-five (45) days in advance of manufacture to allow RPC
sufficient opportunity to review and approve requests for change. RPC
retains the sole right to refuse changes in resin composition and
specifications which in its opinion may either cause damage to RPC
equipment or compromise the fitness of plastic sheet supplied to PPI.
14. The parties acknowledge that the impact of a change in resin or the
Specifications may increase or reduce the rate of production due to change
in resin flow and density factors. In the
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event rate of production is affected by changes requested by PPI and
approved by RPC, the per sheet price charged to PPI for plastic
manufactures and supplied by RPC will be adjusted on a pro rata basis using
the following benchmark formula:
No of units produced in 1 hour x $6.00
--------------------------------------
Average* units of production per month
* Average units of production shall be determined at the end of the first
four months of full production of fifteen thousand (15,000) sheets based
upon the greater of:
i) the average number of plastic sheets of production produced in one
hour during any given month of the first four (4) months of full
production; and
ii) the average number of plastic sheets produced in one hour averaged
over the first four (4) months of production.
15. PPI acknowledges that RPC may from time to time improve or replace its
manufacturing equipment which may have the effect of increasing the average
units of production referred to above. In the event of any significant
improvement in the determination of the average units of production for the
purposes set out in this agreement shall be adjusted accordingly.
16. PPI may at any reasonable time request independent verification of RPC
determination of average units of production.
Delivery
17. F.O.B. RPC Premises.
18. PPI may at its cost and expense request out of building delivery of the
plastics sheets to a location other than the PPI Premises.
Quantity
19. PPI warrants that upon expiry of a four month proving period wherein PPI
will complete testing of the validity of resin formulations and supply
agreements with Cultec Inc, it warrants that it will accept and purchase
minimum annual delivery of forty-eight thousand (48,000) plastics sheets
per year during the term of this Agreement in accordance with the
Specifications herein or any approved changes thereto.
20. Notwithstanding paragraph 19 herein, PPI agrees that it shall accept and
pay for fifteen thousand (15,000) plastic sheets per month commencing
September 1, 1999 and for each and every month thereafter during the term
of this Agreement. PPI shall be at liberty to reduce its minimum monthly
purchase of sheets from RPC but only upon sixty (60) day written notice to
RPC.
21. In the event that PPI shall require delivery of plastics sheets in excess
of fifteen thousand (15,000) per month PPI shall provide RPC with thirty
(30) day written notice (the "Notice Period") and RPC shall have the first
right of refusal to supply such excess sheets to PPI
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pursuant to the terms and conditions contained in this Agreement
exercisable by advising PPI of its election in writing during the Notice
Period. The right of first refusal shall not apply any products that RPC
is not capable of manufacturing.
Inspection
22. PPI acting reasonably, shall have the right to reject any plastic sheeting
delivered by RPC in the event that such sheets do not conform with the
Specifications as set out herein, however PPI shall have no right of
rejection in the event that defects in the sheets are due to the quality,
purity or other matters related to the resin comprising the sheets. Reasons
for rejection by PPI must be communicated to PPI in writing no later than
72 hours after delivery to the PPI Premises. In the event PPI rejects
delivery of plastic sheeting for reasons other than those arising from the
resin content of the sheets RPC shall be responsible for all costs
associated with return and regrinding of plastic sheeting.
Terms
23. Payment in whole forty-five (45) days from the last day of the month in
which delivery is received by PPI (hereafter the "regular terms of
payment").
24. Interest shall accrue on all payments due and owing and outstanding
pursuant to paragraph 23 above at an annual interest rate of 18% calculated
and charged at 1.5% per month compounded annually.
25. Notwithstanding paragraph 23 herein, during the first four (4) months of
the term of this Agreement, PPI shall pay RPC three ($3.00) dollars for
each sheet delivered during that month on the 15th day of such month with
the remaining three dollars ($3.00) plus GST and any and all applicable
manufacturing taxes to be payable in full forty five (45) days from the
last day of each month. During the last eight months of the first year of
the term of this Agreement, PPI shall pay RPC three ($3.00) dollars per
sheet for each sheet to be delivered during that month to RPC on the 30th
day of such month with the balance to be paid in full within forty five
(45) days thereafter.
The balance owing after partial payment shall be paid by PPI to RPC in
accordance with the regular terms of payment. Interest penalty shall not
accrue on partial advance payments.
Regrinding
26. PPI may from time to time provide RPC with resin trimmings and floor
sweepings from the manufactured plastic sheeting as well as other pre-cut
resin, all of which shall not be of a width greater than five (5) inches
and will be clean and free of all contaminants RPC shall regrind such resin
(the "regrind") and PPI shall pay RPC the price of eight ($0.08) cents per
pound for the regrind resin. Payment by PPI for the regrind shall be made
within thirty (30) days of the receipt of invoice from RPC. The regrind
shall, unless otherwise requested by RPC shall be stored at the RPC
Premises in such volume as shall be agreed to by the parties hereto.
27. RPC shall have the right to reject any resin based materials provided by
PPI for regrinding on the basis that such materials may damage or adversely
affect RPC's equipment.
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Production and Delivery Schedule
28. Within seven (7) days after delivery of the first installment of resin by
PPI to RPC pursuant to paragraph 9 herein, RPC will manufacture and deliver
fifty (50) plastic sheets ("test sheets") in accordance with the
Specifications in this Agreement for inspection, testing and approval by
PPI. Rejection by PPI shall be communicated in writing no later than
seventy two (72) hours after the date of delivery to PPI. In the event that
PPI rejects the initial test order other than for reasons of resin
composition RPC agrees to take reasonable steps to correct in a timely
manner all deficiencies and to continue to manufacture test sheets until
approved by PPI.
29. Immediately upon approval of the test sheets by PPI, RPC will unless
otherwise instructed by PPI commence production and delivery of plastic
sheeting in accordance with the Specifications and Delivery Schedule set
out in Schedule "A" and Schedule "B" to this Agreement.
ARTICLE 2 - PRECONDITIONS
30. As a condition of PPI entering onto this Agreement each of the Directors,
Shareholders and Employees shall execute Non-Disclosure and Confidentiality
Agreements to be prepared by PPI.
31. As a condition of this Agreement and subject to the consent and approval by
the Landlord of the RPC Premises, RPC and PPI shall execute a sub-lease for
portion of the RPC Premises on the terms and conditions consistent with the
head lease between RPC and its Landlord which terms and conditions shall
include those set out in Schedule C attached hereto.
32. As a condition of PPI entering into this Agreement, RPC shall deliver a
unanimous resolution of the shareholders of RPC consenting to the terms and
conditions as set out in Schedule "D" hereto.
33. 000000 Xxxxxxx Ltd. shall acknowledge and become bound by the terms of
RPC's Unanimous Shareholders Agreement dated effective September 7, 1994.
34. As a condition of PPI entering into this Agreement, RPC shall obtain and
deliver to PPI the release of Xxxxx Xxxxx ("Xxxxx") front the personal
guarantee granted by Xxxxx in favour of the Bank of Montreal.
ARTICLE 3 - FINANCIAL COMMITTMENT BY RPC
35. RPC shall unless otherwise agreed in writing by PPI repay all RPC
indebtedness including commercial facilities, operating lines of credit,
conventional loans, shareholders loans and reasonable expense accounts
recorded on the financial statements of RPC from net income after taxes in
such amounts and times as its Board of Directors deem prudent and in the
best interests of RPC.
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00. Notwithstanding the generality of the above RPC shall in any event repay
all financial indebtedness of RPC referred to above no later than May lst,
2002.
ARTICLE 4 - RENEWAL
37. This Agreement shall automatically renew for two successive two-year
periods on the same terms and conditions continued herein, unless otherwise
agreed to in writing by the parties.
Miscellaneous Terms and Conditions
Confidentiality Agreements
38. Termination: If RPC shall fail to deliver plastic sheet in accordance with
the request of PPI as set forth in this agreement for reasons other than
PPI's failure to provide resin pursuant to paragraph 9 herein or for
reasons other than those relating to the composition of the resin or in
fulfilling any of the other obligations herein, and such default shall not
be cured within fifteen (15) days after written notice by PPI, PPI shall
have the right to terminate/cancel this Agreement by giving written notice
of termination/cancellation to RPC.
39. If PPI shall fail to accept delivery of the minimum quantity of plastic
sheet to be delivered pursuant to paragraph 19 herein, shall fail to
deliver resin pursuant to paragraph 9 herein, or shall fail to make timely
payment as set forth in this agreement and such default shall not be cured
within thirty (30) days after written notice by RPC, or the sublease
contemplated in Schedule "C" herein shall be terminated or breached by PPI,
RPC shall have the right to terminate/cancel this Agreement by giving
written notice of termination/cancellation to PPI.
40. Either Party shall have the right to terminate/cancel this Agreement by
giving written notice of termination/cancellation to the offending Party in
the event of any one of the following, such termination/cancellation being
effective upon receipt of such notice or five (5) days after such notice is
mailed, whichever is earlier:
i) Liquidation;
ii) Insolvency or bankruptcy whether voluntary or involuntary;
iii) Appointment of a trustee or receiver; and
iv) The institution by or against either party of any formal or informal
proceeding with respect to the dissolution or liquidation or winding
up of the affairs of either party.
41. The waiver of any default under this Agreement by either Party shall not
constitute a waiver of the right to terminate/cancel this Agreement for any
subsequent or like default, and the exercise of the right of
termination/cancellation shall not impose any liability by reason of
termination/cancellation nor have the effect of waiving any damages to
which the Parties might otherwise be entitled.
42. Force Majeure: Either RPC or PPI shall be released from its obligations
hereunder to the extent that performance thereof is delayed, hindered, or
prevented by force majeure as defined below, provided that the party
claiming hereunder shall notify the other with all possible
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speed specifying the cause, probable duration of the delay or
non-performance and shall minimize the effects of such delay or
non-performance. Force majeure shall mean any circumstances beyond the
reasonable control of the party affected. Without thereby being limited,
force majeure includes any one or more of the followings:
(a) acts or restraints of government or public authority;
(b) wars, revolution, riot or civil commotion;
(c) strikes, lock outs or other industrial actions;
(d) failure of supplies, power or fuel, damage to the premises or storage
facility of RPC by explosion, fire, corrosion, ionizing, radiation,
radio active contamination, flood, natural disaster, malicious or
encroach acts or accidents; and
(e) break down or failure of equipment whether of the affected party or
others.
If delivery by RPC is delayed and prevented for any reasons beyond its
reasonable control, PPI reserves the right to defer the delivery date.
Arbitration: In the case of any dispute arising between RPC and PPI as to
their respective rights and obligations pursuant to paragraphs 9, 13, 14,
15, 22, 27 and 28 only, the parties agree to negotiate in good faith toward
resolution of such dispute and in the event that such dispute cannot be
resolved through negotiations the parties agree to appoint a mutually
agreeable arbitrator who shall arbitrate the dispute in accordance with the
Arbitration Act (Alberta) and such arbitration and decision shall be final
and binding upon the parties.
43. Governing Law and Jurisdiction: This Agreement shall be construed in
accordance with the laws of the Province of Alberta, Canada and the Parties
agree to attorn to the jurisdiction of the courts in the Province of
Alberta, Canada for the purpose of this Agreement.
44. Survival: If any provision of this Agreement is declared invalid, illegal
or unenforceable by a Court of competent jurisdiction such provision shall
be severed from this Agreement and all other provisions of the Agreement
shall remain of full force and effect.
45. Amendments: This Agreement may be amended, modified, released, discharged
or abandoned only by an instrument executed buy the duly authorized
officers of the Parties.
46. Further Assurances: The Parties shall execute, acknowledge and deliver all
such further assurances, instruments and documents and do all such other
acts as may be necessary or appropriate in order to carry out the intent
and purposes of this Agreement.
47. Assignment: This agreement and the rights and obligations hereunder may not
be assigned by the Parties without prior written consent of the Parties.
48. Effective Date: the effective date of this agreement shall be May 1, 1999.
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49. Notices: Any communication required to be given under this Agreement shall
be in writing and may be given by personal delivery, registered mail or
facsimile:
To: Pinnacle Plastics Inc.
Attention: Xx. Xxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
To: RPC Manufacturing Ltd.
Attention: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxx Xxxxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000)000-0000
IN WITNESS WHEREOF THE PARTIES TO THIS AGREEMENT HAVE EXECUTED THIS AGREEMENT BY
AFFIXING THEIR CORPORATE SEALS AND SIGNATURES OF THEIR AUTHORIZED OFFICERS
RPC MANUFACTURING INC.
Per: [ILLEGIBLE]
----------------------
PINNACLE PLASTICS INC.
Per: /S/XXXXXXX X. XXXXXXX
----------------------
Xxxxxxx X. Xxxxxxx
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SCHEDULE "A"
--------------------------------------------------------------------------------
SPECIFICATIONS - PLASTIC SHEET
DESCRIPTION
Dimension* A surface area not to exceed 5,200 square inches
Resin High Density Polyethylene
Gauge" .130-.150
--------------------------------------------------------------------------------
Unless otherwise requested by PPI:
* plastic sheet dimension shall be 48* inches x 108 inches untrimmed
** plastic sheet gauge shall be .140
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--------------------------------------------------------------------------------
SCHEDULE "B"
DELIVERY SCHEDULE
-----------------
DATE MINIMUM QUANTITY FOR DELIVERY
--------------------------------------------------------------------------------
May 1999 4,000 sheets
June " 8,000 sheets
July " 10,000 sheets
August " 12,000 sheets
September 1999 - May 2001 15,000 sheets
--------------------------------------------------------------------------------
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SCHEDULE "C"
TO THE MANUFACTURING AGREEMENT DATED EFFECTIVE MAY 1, 1999
BETWEEN RPC MANUFACTURING INC. AND
PINNACLE PLASTICS INC.
Sub-lease Premises: 00000 Xxxxx Xxxx 0000 Xxxxxxxx Xxxx Xxxxxxx X0X 0X0
Tenants Name: Pinnacle Plastics Inc.
Square footage: 2500 Square Feet
Term: Three (3) years
Occupancy Date: June 1, 1999
Rent: Two Thousand ($2,000) dollars in advance of the first day of
each and every month of the term plus the proportionate
share of occupancy costs, plus all applicable GST
Renewal Options: Two lease renewal options at the written request of PPI (6
months in advance) for two year periods for a total renewal
period of four (4) years
Insurance: In accordance with the provisions of insurance contained in
the lease agreement between RPC and its Landlord
1. Lunchroom and washroom facilities located in the RPC Premises. The sublease
premises are divided by a common wall and are as shown and outlined in red
on the floor plan attached as Schedule "C" to this Agreement.
2. Interior access to the PPI Premises shall be restricted to protect the
proprietary nature of the Forming Technology. Arrangements for lock box
access shall be made in advance in the event emergency entrance to PPI
premises is required. Access to the common areas by PPI shall not be
restricted by RPC.
3. RPC consents to the construction of an access through the common interior
wall to facilitate convenient delivery of plastic sheeting by RPC and PPI.
PPI shall be responsible for and pay all costs associated with the
construction of the access.
4. PPI shall be responsible for and pay costs associated with the hook-up,
installation and recorded monthly use charges for:
a) gas and power check meters; and
b) utilities on the sublease premises
5. RPC will give uninterrupted exterior passage across or along outside RPC
leasehold building including access along lanes, entrances and exits.
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6. RPC shall provide on its premises without charge interior storage for resin
in a space approximately thirty (30) feet by one hundred and thirty (130)
feet. RPC shall be responsible to feed resin from the said storage area
into RPC's extruder.
7. In the event that PPI requests interior bulk storage of resin significantly
greater than the area described above PPI will be responsible to provide a
suitable storage tank and auger, pump or other appropriate mechanical
feeder to transfer resin from the interior storage container to the RPC
extruder.
8. The Parties will share equally the responsibility for costs, use and
maintenance where applicable for:
i) Construction of a common loading dock (contractor and cost to
construct to be agreed between the Parties);
ii) Forklift leasing and fuel (costs not to exceed eight hundred ($800.00)
dollars per month) The parties hereto confirm that at all times, title
to and legal ownership of the forklift shall vest in RPC;
iii) Forklift Operator wages if operator services are requested by PPI
(operator to be selected by PPI and hourly wage to be agreed to by the
Parties);
9. PPI shall hire and pay for the services of a Production Manager. As
circumstances and common purposes may permit the Parties may share the
services and salary of the Production Manager. Where the services of the
Production Manager are shared, the Parties shall jointly select and approve
the name of the Production Manager and shall agree in advance and in
writing to a description of the respective duties to be performed by the
Production Manger which writing shall be attached to and form part of this
Agreement. Such schedule to be amended in writing from time to time as
manager responsibilities and requirements change between the Parties. The
Production Manger shall at all times and in any event be an employee of
PPI.
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SCHEDULE "D"
TO THE MANUFACTURING AGREEMENT DATED EFFECTIVE MAY 1, 1999
BETWEEN RPC MANUFACTURING INC. AND
PINNACLE PLASTICS INC.
1. The Shareholders of RPC shall consent to the transfers of shares in RPC by
Tradeseas Corporation and Xxxxx Xxxxx to 815969 Alberta Ltd.;
2. 000000 Xxxxxxx Ltd. shall be exempted from any cash call made by the
Corporation or the Shareholders pursuant to the terms of RPC's Unanimous
Shareholders Agreement dated September 7, 1994 (the "USA") or any amendment
thereto or replacement thereof;
3. 000000 Xxxxxxx Ltd. shall be granted the right to appoint one director to
the board of directors of RPC at each annual general meeting of the
Shareholders of RPC during the term of the Manufacturing Agreement;
4. 000000 Xxxxxxx Ltd. shall be granted an option (the "Option") to acquire up
to 39.1% of the issued and outstanding common shares in the capital of the
Corporation exercisable as of May 1, 2002, on a pro rata basis from each of
the Shareholders, for a purchase price of $1,000.00 per share. The Option
shall only be exercisable by 815969 Alberta Ltd. in the event that the
total number of plastic sheets purchased by PPI during the term of the
Manufacturing Agreement is not less than 360,000. In the event that RPC
fails to have extinguished all of its financial indebtedness by May 1, 2002
the existing indebtedness shall be apportioned pro rata to all the issued
and outstanding shares of the Corporation and 815969 Alberta Ltd. shall be
entitled to set off such amounts against the purchase price pursuant to the
exercise of the Option;
5. In the event PPI renews the Manufacturing Agreement pursuant to the terms
contained therein, 815969 Alberta Ltd. shall be granted a continuous right
of first refusal ("ROFR") with respect to the purchase of all remaining
issued and outstanding shares in the capital of the Corporation exercisable
as of May 1, 2002 for a purchase price to be determined by an independent
valuator;
6. Upon 000000 Xxxxxxx Ltd. exercising the Option and acquiring 39.1% of the
issued and outstanding common shares in the capital of the Corporation, the
Unanimous Shareholders Agreement dated effective September 7, 1994 (the
"USA") shall be terminated and be of no further force and effect; and
7. There shall be no further amendment to the USA without 815969 Alberta
Ltd.'s written consent.
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