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Exhibit 14
AGREEMENT
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AGREEMENT ("Agreement") dated effective January 1, 1996 by and between
SHOREWOOD PACKAGING CORPORATION, a DELAWARE corporation ("Shorewood") and KAMSKY
ASSOCIATES, INC., a NEW YORK corporation, ("KAI").
It is hereby agreed as follows:
1. OBJECTIVE
(a) It is Shorewood Packaging Corporation's ("Shorewood")
objective to command a substantial share of the Chinese
printing and packaging industry by building and operating one
or more plants in the Peoples' Republic of China ("China") to
support key international companies currently operating in
China as well as developing high quality domestic consumer
product industry.
(b) Kamsky Associates, Inc. ("KAI") is well positioned to
assist Shorewood in formulating the appropriate market
strategy with which to reach this objective.
2. MARKET ENTRY STRATEGY
(a) KAI shall focus on identifying and qualifying one or
more projects, either majority owned joint ventures or wholly
foreign owned ("Project[s]") in strategic locations in China.
The decision to proceed with a joint venture and the terms of
any joint venture shall be determined solely by Shorewood and
its joint venture partner.
(b) The time frame for the implementation for this
strategy would be set in consultation with Shorewood. However,
given that Shorewood's objective is to command a majority
market share, KAI believes that current growth in the printing
and packaging industry would warrant that this time frame be
minimized.
(c) At present, a number of key international players are
extending their activities in China to service the growing
number of companies, particularly foreign-invested
enterprises, in China which require high quality packaging. To
serve as an example, one major Australian printing packaging
firm entered the Chinese market to support important customers
such as Mars Inc. and Walls Ice-cream, which have already set
up manufacturing facilities in Beijing. The company has
recently finished construction of a wholly owned factory in
southern Beijing, which is additional to operating joint
ventures in Qingdao and Beijing. As a further response to
customer demand, it is understood that this company has
already taken concrete steps to expand its presence to the
Shanghai region.
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(d) Another strategic consideration is the recent change
in tax laws in China, which will affect to a certain degree
the environment in which future foreign investors must
operate. As part of China's compliance with national treatment
requirements for entry to GATT and the World Trade
Organization, China's executive Vice Premier in charge of the
Economy, Mr. Xxx Xxxxxx, has recently announced that China
will phase out tax exemptions for capital equipment imports by
foreign-invested enterprises from January 1, 1996. This new
policy will increase the market entry price for foreign firms
considerably, especially those in technology and
equipment-intensive industries. However, companies which have
registered their projects with government authorities by this
date will not be affected.
(e) KAI, with its considerable experience in China, will
use its best efforts on Shorewood's behalf to find a creative
mechanism to try to avoid or lessen the impact of the new
policy on the company's planned investments.
(f) On the basis of current knowledge, KAI would recommend
Shorewood to consider five cities as possible locations for
the Project(s). KAI would classify these cities as "priority"
and "secondary" targets.
(g) The three "priority" cities of Tianjin, Shanghai, and
Guangzhou provide Shorewood with strategic China-wide
coverage. The "secondary" cities of Chengdu and Dalian have
the advantage of allowing Shorewood to support specialist
markets in those regions. KAI has extensive experience in
working in each of these cities
(h) Tianjin. Tianjin, a two hour drive to the east of
Beijing, is a major port city which has attracted substantial
foreign investment over the last few years, including major
existing and potential Shorewood customers such as Motorola,
Xxxxxxx Kodak, Heinz, Seagram and Samsung. Tianjin and its
locality provide a strong customer base for a potential
Shorewood venture. An excellent potential site for a Project
is the Tianjin Economic-Technological Development Area (TEDA),
the management of which KAI has had extensive dealings. A
number of foreign companies have successfully established
wholly foreign owned ventures in TEDA, and several Chinese
printing and packaging companies, which may prove to be
desirable joint venture partners, are also established in the
Area. TEDA provides investors with preferential tax treatment.
Tianjin is linked with China's Northeast by the
Beijing-Shenyang Railway line, allowing access as far north as
Jilin and Heilortgjiang Provinces. There are rail, road and
air links with Beijing and the surrounding areas of Shandong,
Hebei and Shanxi. As such, a Tianjin based venture would not
only be close to major potential and current customers, but
also can conveniently service the northern and north east
China markets.
(i) Shanghai. Shanghai is one of China's economically most
dynamic cities. Many world renowned multinationals have been
attracted to the city, including
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existing and potential Shorewood customers as Xxxxxxxx, 3M,
Xerox, Xxxxxxx & Xxxxxxx and Lux. In addition, Shanghai has an
extremely well developed light and chemical industry sector,
with companies such as BASF, Du Pont, Ciba Geigy and SICPA
well represented. The city provides for strong support form
raw material and printing suppliers. KAI would consider the
Taopu Chemical Industry Area or the Pudong Development zone as
two of a number of potential sites for a Shanghai venture.
Shanghai is connected to an east-west railway line
reaching as far as Xi'an and ultimately Urumugi in Xinjiang
Province. Shanghai is also China's major port connecting the
city with international and domestic shipping lines.
Furthermore, inland China can be accessed via the Yangtze
River.
The city also has an excellent airport facility. A
second airport is planned for Shanghai to cover strong demand
for cargo transport. As such this city is an excellent
location from which to service China's eastern seaboard and
the Provinces of Shaanxi, Hubei, Sichuan, Jiangxi and Anhui.
(j) Guangzhou. Guangzhou is situated in the center of the
Pearl River Delta, the fastest growing region in China. This
area attracts one third of all foreign investment into China,
sourced from Hong Kong, the overseas Chinese communities of
Sough East Asia as well as the West. The region is a center
for the computer and compact Disk manufacturing industries, as
well as consumer electricals.
In addition to heavy investment in the food and
beverage industries, pharmaceuticals, cosmetics, electric and
other consumer items, the Province is supplying the needs of
the tobacco industry. Indeed, a new cigarette filter
manufacturing joint venture is currently being established in
the neighboring city of Zhuhai.
Guangzhou is linked to Hong Kong by rail, road and
air. The cities of Guizhou and Kunming, centers of the major
tobacco manufacturing regions of Guangxi and Yunnan, are all
accessible by rail and air from Guangzhou. Excellent road
links also exist between Guangzhou and Fujian Province.
(k) Chengdu. Chengdu is the capitol city of Sichuan
Province and is the hub of the tobacco industry in China. A
venture established in this town would strategically position
Shorewood vis-a-vis this industry which is, although
nationwide, concentrated in Sichuan, Yunnan and Guizhou.
There are a number of additional advantages to
investing in this inland Provincial capitol. There are strong
discrepancies in economic growth and living standards between
the coastal and inland regions, due to a skewed investment
pattern favoring coastal areas. It is a policy priority for
the Central Government to develop
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inland China, and therefore investments in this region are
encouraged at the central level.
As such, the environment in areas such as Chengdu can
be more flexible. A case in hand was recounted to Xxxxxxxx
Xxxxxx by the Governor of Sichuan, Mr. Xxxx Xxxx. Glaxo, the
English pharmaceutical company, had been discussing a joint
venture in Shanghai. After three years, with no results, the
company turned to Chengdu as a location for their investment,
and a joint venture was signed within three months.
(l) Dalian. Dalian, a coastal city in Liaoning Province,
is a focus for Japanese and Korean investment in China. The
area has a strong pharmaceutical base, with companies such as
Japan Medical Supplies and Pfizer investing in the area.
Furthermore, Dalian is a base for third country export for
Japanese as well as South Korean companies. The superior
quality of consumer items manufactured in this city, many
destined for the Japanese and third country markets, has
created a strong demand for high quality packaging products.
Dalian, a major port city, is linked to Chin's eastern
seaboard by boat, and to the northeast and northern China by
train.
(m) It is notable that the coastal province of Shandong
plays a similar role, particularly for Korean investors, as
Dalian. A high level South Korean official related to KAI that
over 10,000 South Korean consumer goods manufacturers have
relocated to Shandong to take advantage of the opportunities,
not only to access the Chinese domestic market, but also for
third country trade.
3. MARKET ANALYSIS
(a) KAI will carry out a national survey consistent with
KAI's past practices, focusing upon the areas listed above to
help identity potential Shorewood customers, both domestic and
international, in the high end consumer goods industry. KAI's
market analysis will also cover the activities of key local
and international competitors. KAI will source this
information from available reference materials as well as from
personal interviews with KAI's current and extensive industry
and government contacts.
(b) In all of the foregoing locations, KAI shall identify
the operations which are engaged in printing and packaging
manufacturing for consumer products including, where
available, information as to size, revenues, description of
packaging and printing technology, samples of products, prices
of products and principal customers. KAI will assess these and
other entitles for their desirability as a joint venture
partner and provide this and other necessary information to
assist Shorewood in making the decision of to the structure of
each investment, whether that be majority share joint venture
or a 100% foreign owned.
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(c) KAI shall promptly prepare and present a proposed
schedule for the upcoming visit of Shorewood executives in
China. KAI would suggest that the trip encompass the three
priority cities, i.e. Guangzhou, Shanghai and Tianjin. An
alternative agenda might extend this schedule to include
Dalian and Chengdu. During each of these stopovers, KAI will
introduce Shorewood executives to key government officials in
charge of both foreign investment and the printing and
packaging industry, and potential joint venture partners or
sponsors for Project(s).
(d) KAI will make all necessary arrangements to ensure the
effectiveness of this trip. This will include full logistic
and on ground support, including, where possible and if
necessitated by severe traffic congestion, police escort.
4. Commitment of Personnel
(a) KAI will appoint a core team to work on Shorewood
Project(s).
(b) However, given the urgency of the task at hand, KAI
will set up several teams in the first instance to work in
concert on the geographical areas listed above, i.e. Shanghai,
Tianjin, Guangzhou, Chengdu and Dalian. The teams will be
supervised by the Managing Director of KAI Beijing. The
Managing Director will be responsible for consolidating
information gathered so as to provide a comprehensive briefing
on the basis of with Shorewood can make an informed decision.
(c) As Shorewood moves forward, the core team will
continue to provide full and appropriate support. KAI will add
to the team as XXX xxxxx reasonably necessary. Furthermore, if
necessary and subject to Shorewood's approval, KAI will assist
Shorewood in identifying and recruiting experts and
specialized support to assist Shorewood with the
implementation of the investment strategy.
(d) All KAI executive staff in Beijing are bilingual in
Chinese and English.
5. Project Registration and Contract Negotiation
(a) Once Shorewood has identified a Project or more than
one Project(s), KAI shall work closely with Shorewood to
provide the data required to make a decision. Upon making a
decision to proceed on a particular Project(s), KAI shall
coordinate with the Chinese joint venture partner or sponsor
regarding project registration and shall provide full
assistance on Shorewood's behalf, as required.
(b) KAI shall further assist with the preparation of a
letter of intent, memorandum of understanding, a
pre-feasibility study, if necessary, a formal contract, a
feasibility study, and numerous other documents required for
approval by the Foreign Investment Control Commission. A
feasibility study, together with a binding contract and
articles of association must be submitted to this body for
approval ("Approval of the Project"). In addition, KAI will
assist with any licensing
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permits, application for abatement or reduction of taxes and
exemptions, or reduction of duties on imported equipment and
raw materials, etc.
(c) KAI shall assist Shorewood throughout the approval
process for the Project(s). KAI shall provide comprehensive
logistical support throughout this period for Shorewood
personnel, including assistance in the negotiation,
preparation and execution of various documents. KAI's
facilities in Beijing will be available to Shorewood's
representatives.
6. Ongoing Support
(a) Upon commencement of the operation of Shorewood's
Project(s), KAI shall continue to assist with the expansion of
operations.
(b) KAI will further provide assistance with any
operational issues that arise, including the identification of
sources of raw materials, labor and equipment. With over 15
years experience in the China market, KAI is well positioned
to assist with the establishment of accounting, billing and
collection procedures, and will provide such assistance.
(c) KAI will utilize its comprehensive network in order to
assist Shorewood with the identification of suitable
management personnel.
7. Compensation
(a) KAI's compensation for the foregoing services shall be
at the rate of Twenty-five Thousand ($25,000.00) Dollars per
month, payable in advance, with the initial payment due as of
January 1, 1996 and thereafter equal successive payments on
each and every successive monthly anniversary date. Shorewood
has paid, and KAI acknowledges receipt of, $75,000
representing monthly payments due hereunder through March 1,
1996. Compensation shall be prorated for partial months. KAI
shall also be entitled to reimbursement of all reasonable out
of pocket expenses (exclusive of KAI's administration and
overhead, salaries, and similar expenses) incurred by KAI in
carrying out the terms of this Agreement including first class
air travel for KAI's managing director allocable to
Shorewood's business.
(b) Prior to but not later than the "Approval of the
Project(s)", whether by way of a joint venture, or a
wholly-owned operation, or otherwise, Shorewood shall issue or
cause to be issued to KAI a profit participation in the
Project(s) ("Interest") at the percentage levels set forth on
EXHIBIT A.
(c) If in Shorewood's good faith judgment, it is not
feasible for Shorewood to grant the Interest at that time,
Shorewood shall grant it at such a time that it is practicable
but in no event later than the earlier of (i) a date not less
than thirty (30) days prior to the sale of any interest in the
Project(s) or (ii) the date that any Project
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commences commercial operations. In connection with the
issuance of the Interest, Shorewood and KAI or their
Affiliates shall execute such documents and agreements
necessary to evidence the issuance of the Interest and to
assure compliance with state and federal securities laws
and/or exemptions therefrom. By way of example, Shorewood and
KAI may enter into a profit participation agreement containing
terms not inconsistent with the terms of this Agreement. At
Shorewood's election, the Interest may be in the form of
non-voting, second class stock, common stock, with or without
voting rights, or a participation in Net Profits (as herein
defined) and a share in Shorewood's Profit Upon Sale Or
Liquidation of its interest in the Project(s), or any other
structure determined by Shorewood provided that the net effect
to KAI is to irrevocably provide KAI with the percentage
interest in Net Profits and Profit Upon Sale Or Liquidation,
at the levels described above.
(d) For purposes of calculating KAI's share of Net
Profits, Net Profit shall mean "Gross Sales" (as herein
defined) from all Project(s) less all direct "Costs" incurred
in generating those sales (which costs shall exclude any
depreciation on Shorewood's "Invested Capital" or "Capital
Costs", as defined below) including, without limitation, the
cost of labor and material used in the manufacture of
Shorewood's product; marketing, sales and promotional expenses
and a reasonably proportionate share of Shorewood's interest
expense, depreciation on fixed assets acquired with Net
Profits, income taxes incurred in connection with Project(s),
overhead and administrative expenses for each fiscal year. All
of the foregoing shall be allocated and assigned by Shorewood
in accordance with its normal and customary administrative and
accounting practices as the same shall be applied and
implemented from time to time, which practices shall e in
accordance with U S. generally accepted accounting principles.
If in any fiscal year there is a loss (Costs in excess of
Gross Sales), losses shall be accrued and netted against
future Net Profits on a dollar for dollar basis until fully
absorbed in subsequent years. If at the time of sale or
liquidation of KAI's Interest such losses have not been fully
absorbed, such losses shall be deducted from any distribution
to KAI of Profit Upon Sale or Liquidation, or if Shorewood is
acquiring KAI's interest the accumulated loss, if any, may be
deducted from the purchase price; provided, however, that such
losses shall not be deducted from any distribution to KAI if
Shorewood is matching an offer to KAI, pursuant to Section 1
of Exhibit A hereto. KAI shall have no personal liability for
any Costs, accumulated losses or liabilities incurred by
Shorewood in connection with the operation of the Project(s),
whether or not any losses are fully absorbed by Net Profits.
For purposes hereof, "Gross Sales" shall mean all revenues
from the sale of product from all Project(s), less all
returns, costs of collection, rebates or other credits or
consideration given by Shorewood to its customers in the
ordinary course of business. For purposes hereof, "Invested
Capital" means Shorewood's aggregate cash investment in
Project(s) from time to time, whether such investment takes
the form of cash contributions or loans from Shorewood or its
Affiliates.
Notwithstanding anything to the contrary in this
Agreement, in making any calculations of costs pursuant to
this paragraph, any inter-corporate or other charges
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or transactions among Shorewood and its Affiliates (such as
transfer pricing among subsidiaries or inter-corporate loans)
shall be determined by Shorewood in the first instance as if
the entities involved were dealing on the open market on an
arm's length basis.
For the purpose of calculation of KAI's share of
Profit Upon Sale or Liquidation, Profit Upon Sale or
Liquidation (i) shall mean Shorewood's profit then it sells,
disposes of, liquidates, transfers, assigns or otherwise
disposes of any portion of its interest in any Project
(whether such interest is in the form of stock, partnership
interest or otherwise) and (ii) shall mean the cumulative net
proceeds realized by Shorewood from such sale(s),
liquidation(s) or other disposition(s), after retirement of
applicable debt and expenses related to the transaction or
transactions, together with interest on any notes received by
Shorewood upon the sale of the Project(s), less all of
Shorewood's direct start-up costs and capital expenditures
made in connection with all Project(s), including without
limitation, the cost of land, buildings, construction costs,
construction labor, construction interest, manufacturing,
office or other equipment, permits, licenses or approvals,
architects, contributions of working capital, engineers,
attorneys and other professionals and consultants, including
fees and expenses paid to KAI pursuant to Paragraph 7 (a)
above (all of the foregoing defined as "Capital Costs"). Net
Profits reinvested in the Project(s), if any, are specifically
excluded from Capital Costs. In the event Shorewood sells less
than its entire interest in the Project(s) in an offering of
securities, whether public or private, and Shorewood retains
an interest in the Project(s), the amount received by KAI in
connection with such sale shall only be charged with that
portion of Shorewood's cost recovery, bearing the same
percentage as the interest sold by Shorewood bears to the
entirety of enterprise.
It is the intent of the parties that "Costs" and
"Capital Costs" shall not include or double-count the same
items.
In the event Shorewood obtains financing on any
Project(s) and distributes all or any part of the net proceeds
of such financing as a dividend or otherwise, KAI shall
receive a distribution in an amount calculated by multiplying
KAI's percentage Interest by the total amount to be
distributed to Shorewood as a dividend.
The entity which owns the Project(s) shall use such
fiscal year as Shorewood shall determine in its sole
discretion. Distributions of Net Profits, if any, shall be
made at such times, if at all, that Shorewood shall determine
in its sole discretion.
(e) The transfer of the Interest shall be subject to the
provisions set forth on Exhibit A attached hereto and
applicable state and federal securities laws. Notwithstanding
the Approval of the Project(s) or the issuance of the
Interest, Shorewood may postpone, delay, terminate or abandon
the Project(s) at any time in its sole and absolute discretion
subject however to Shorewood's obligation, if any,
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to pay KAI any compensation earned through the date of
termination and the compensation described in the next
paragraph below.
(f) In the event of the termination of this Agreement by
Shorewood without good cause or by KAI for good cause, those
compensation provisions relating to the granting to KAI of the
Interest shall continue and be earned to the extent that
Shorewood enters into Project(s) in China within 30 months
from the date of this Agreement or twelve (12) months from the
termination of this Agreement, if the Agreement is extended
pursuant to Paragraph 8(a), whichever is later.
Notwithstanding the preceding sentence, in the event of the
termination of this Agreement by Shorewood, with or without
good cause, within three (3) months of the date hereof, those
compensation provisions relating to the granting to KAI of the
Interest shall continue and be earned to the extent that
Shorewood enters into Project(s) in China within 30 months
from the date of this Agreement, provided KAI has specifically
identified and/or contributed material services and/or such
services materially contributed or lead to the consummation by
Shorewood of the joint venture, wholly-owned operation or
other arrangements respecting the Project(s). For purposes of
this Agreement, Shorewood will be deemed to have entered into
a Project(s) at such time that any Project is constructed,
permitted, staffed, equipped and stocked such that there are
no conditions or impediments to the commencement of commercial
operations beyond Shorewood's reasonable control. Without
limiting Shorewood's remedies following a breach of contract
by KAI, any Interest previously earned by KAI, or to which KAI
is entitled hereunder, shall not be forfeited solely because
of the termination of this Agreement by Shorewood for cause.
8. Term
(a) The term of this Agreement shall be eighteen (18)
months from the date hereof, provided however Shorewood shall
have the right to extend this Agreement for three, six-month
increments upon written notice given not less then thirty days
prior to the expiration of this Agreement as the same may be
extended from time to time.
(b) Notwithstanding the foregoing, KAI may terminate this
Agreement without cause upon ninety (90) days written notice
to Shorewood and Shorewood may terminate this Agreement
without cause upon thirty (30) days written notice to KAI.
(c) This Agreement can be terminated by Shorewood or KAI,
without penalty, for good cause, at any time during the Term
upon fifteen (15) days' prior written notice from one party to
the other setting forth the reason for termination for cause;
provided however, that in the case KAI or Shorewood as the
case may be, shall have fifteen (15) days from receipt of such
written notice to cure the cause set forth in such written
notice as being the reason for such termination. In the event
that such cause cannot be cured within such fifteen (15) days,
the cause shall be deemed cured if the defaulting party
immediately commences the cure upon receipt of the written
notice
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and diligently prosecutes such cure to completion. For
purposes hereof, "good cause" shall mean a material breach of
this Agreement, including but not limited to poor performance
of KAI or failure by Shorewood to pay amounts due hereunder.
However, it is understood by Shorewood that China is a
developing nation, subject to certain inherent political and
economic instability. Accordingly, nothing stated or implied
herein shall be construed as a guaranty or assurance by KAI
that any particular Shorewood goals or objectives can or will
be met, and KAI shall be entitled to all compensation
otherwise payable hereunder, even if Shorewood does not meet
its goals or objectives, or political or other prevailing
conditions render such goals impossible or not feasible, as
long as KAI is using its reasonable best efforts on
Shorewood's behalf and otherwise performs its obligations
contained in this Agreement. Performance is to be judged by
reference to facts and circumstances existing at the time. Any
dispute as to whether good cause exists to terminate this
Agreement or whether such default has been cured, shall be
determined by arbitration consistent with the arbitration
provisions of this Agreement.
(d) Upon expiration of the term or earlier termination as
provided in this Paragraph, KAI shall deliver to Shorewood all
reports, studies, approvals and other documents related to the
Project(s) in KAI's possession. KAI may retain copies of all
such items for its records.
9. Director Designation
During the period in which KAI owns an Interest in
the Project(s), Shorewood, at KAI's request, shall elect
Xxxxxxxx X. Xxxxxx or her designee as a member of the board of
directors of the Project(s) (or similar governing body),
provided there is a board of directors (or similar governing
body) of the entity which owns the Project(s). Any designee of
Xxxxxxxx X. Xxxxxx must be acceptable to Shorewood and nothing
herein shall limit Shorewood's right to determine the number
of board members.
10. Miscellaneous
(a) KAI's services rendered in fulfillment of the terms
and obligations of this Agreement shall be as an independent
contractor and not as agent, employee, partner, or joint
venturer. KAI shall not represent itself to third persons to
be other than Shorewood' s independent contractor, nor shall
KAI offer or agree to incur or assume any obligations or
commitments for or in the name of Shorewood.
(b) KAI shall maintain the confidentiality of all
proprietary information obtained from Shorewood or obtained in
the course of providing services to Shorewood, connected with
and arising out of or pertaining to Shorewood's business
except that information which has been actually disclosed to
the public by Shorewood in the ordinary course of its business
such as its annual reports or quarterly filings with the SEC
or such information that is disclosed through no fault of KAI,
is disclosed by
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a person whom KAI does not know to be subject to any
confidentiality agreement, or is disclosed pursuant to any
statute, law, rule, regulation, judgment, order, decree, edict
or the like.
(c) During the term of this Agreement (as such term may be
shortened or extended pursuant to the terms of this Agreement)
and (if KAI has been issued an Interest hereunder during such
term) for a period of two (2) years after KAI disposes of the
Interest, KAI and its sole shareholder, Xxxxxxxx Xxxxxx, shall
not represent or perform any services for any company or
person whose services or products manufactured and/or sold are
competitive with Shorewood's business of manufacturing folding
cartons, consumer packaging and printed materials; provided,
however, that (i) KAI's current or future services in
providing general economic and China-related advice to
Westvaco shall not be considered a breach of this provision,
provided such services rendered to Westvaco do not expand to
assisting or advising Westvaco in areas that could reasonably
be deemed to be competitive with Shorewood's business
described above and (ii) the non-competition provisions of
this paragraph shall in no event apply if this Agreement has
been terminated without cause by Shorewood or Shorewood has
breached the terms of this Agreement. If Shorewood has not
issued an Interest to KAI hereunder during the term of this
Agreement (as such term may be shortened or extended pursuant
to the terms of this Agreement), the foregoing non-competition
provision shall apply only for a period of one year following
the end of such term; provided, however, that if Shorewood
issues an Interest to KAI in a bona fide Project during such
one-year period, then the foregoing non-competition provision
shall be effective for a period of two years after KAI
disposes of such Interest.
(d) In the performance of the services contemplated by
this Agreement, KAI and Shorewood, their principals and
employees shall comply with all applicable federal, state and
local laws and regulations, including without limitation, the
Foreign Corrupt Practices Act, the provisions of which will be
incorporated herein by reference as if fully set forth herein.
KAI and Shorewood and their respective employees shall also
comply with all applicable laws and regulations of China and
other government authorities therein.
(e) In the event of a dispute or controversy under this
Agreement the parties shall promptly submit the dispute or
controversy to arbitration, to be conducted in accordance with
the commercial rules and regulations of the American
Arbitration Association. Any such arbitration shall be
conducted in the City and County of New York before a single
arbitrator selected in accordance with the commercial rules
and regulations of the American Arbitration Association. The
determination by the arbitrator shall be final and binding and
may be entered as a final judgment by the parties with any
judge having the jurisdiction thereof. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed
entirely therein. The arbitrator shall have the power to award
the prevailing party its reasonable costs incurred in
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connection with the arbitration (including, without
limitation, the cost of experts and the arbitrator) and
attorney fees.
(f) Any notice, report or writing required or permitted to
be given hereunder shall be in writing and shall be served by
delivering the same personally either to the other party, or
to the agents, officers or other representatives thereof
hereinbelow designated, if any, or by depositing the notice,
contained in a sealed envelope, postage prepaid, in the United
States Postal System as registered or certified mail, with
return receipt requested or by reputable overnight courier
such as Federal Express or by electronic facsimile
transmission ("Fax"). Any and all such notices shall be
delivered to the parties at their respective addresses or Fax
numbers specified as follows:
If to Shorewood:
Shorewood Packaging Corporation
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: President
Fax Number: (000) 000-0000
If to KAI:
Kamsky Associates, Inc.
0 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attention: Managing Director
Fax Number: (000) 000-0000
Any such notice deposited in the mail shall be
conclusively deemed delivered to and received by the addressee
seventy-two (72) hours after the deposit in the mail or one
business day after delivery to the overnight courier or one
business day after the Fax transmission, if all of the
foregoing conditions of notice shall have been satisfied and
if such notice shall at the time of mailing or delivery have
been contained in an envelope or wrapper addressed to the
party at the address above, or in the case of a Fax, shall be
preceded by a Fax cover sheet correctly setting forth the name
and Fax number of the intended recipient. Any party hereto may
change its address or Fax Number for the purposes of this
paragraph by giving such other party notice, as provided for
herein, of the new address or Fax Number.
(g) This Agreement is for the sole benefit of and shall be
binding upon the parties hereto, their respective heirs,
successors and assigns, and no other person or entity shall be
entitled to rely upon or receive any benefit from this
Agreement or any term hereof.
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(h) This Agreement and the exhibits attached hereto which
are hereby made a part hereof embody the entire Agreement of
the parties regarding the subject matter hereof. All prior
negotiations and representations are merged herein. This
Agreement may not be altered or modified, except by an
instrument in writing signed by both parties (which may be in
counterpart); nor may any provision be waived by a party
unless in writing signed by such party.
(i) Neither party may assign its rights or delegate the
performance of its obligations without the prior written
consent of the other, except to an "Affiliate". For purposes
hereof an Affiliate shall mean an entity or person
controlling, controlled by, or under common control with a
party. No such assignment or delegation shall relieve the
assignor of its obligations. Without limiting the foregoing
provisions of this paragraph, any acquirer of any Project, or
of control thereof, shall be bound by the payment provisions
of this Agreement to the extent KAI's Interest was not sold or
liquidated in connection with such acquisition.
IN WITNESS WHEREOF the parties hereto have set their hands hereto
effective the date first above written.
KAMSKY ASSOCIATES, INC. SHOREWOOD PACKAGING
CORPORATION
By: /s/ Xxxxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxx
-------------------------------- --------------------------------
Xxxxxxxx Xxxxxx, President Xxxxxx Xxxxxxx,
Executive Vice President
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EXHIBIT A
---------
The Interest if and when issued to KAI may be disposed of as follows:
1. In the event that a bona fide written offer has been received by
KAI to purchase its Interest, Shorewood shall be notified in
writing by KAI, within five (5) days of the receipt of such offer,
of the terms thereof. Shorewood shall thereafter have fifteen (15)
business days within which to match such offer upon substantially
identical terms contained in the offer by notifying KAI in writing
to that effect. If matched, Shorewood shall purchase the Interest
within thirty (30) days of its acceptance by the payment in U.S.
Dollars required thereunder by making payment to KAI at the address
as herein set forth. If Shorewood's matching right has expired, KAI
shall be able to sell the Interest upon terms and conditions not
more favorable to the offeror than the terms of the aforementioned
offer within sixty (60) days thereafter and if not consummated
within such sixty (60) day period then the Interest may not be sold
by KAI except in the manner hereinabove set forth. In all events
Shorewood has the right to disapprove of a sale of the Interest or
any portion thereof to any person whom Shorewood, in good faith,
considers to be a competitor of Shorewood's. Nothing herein shall
preclude KAI from transferring all or any part of its Interest to
any Affiliate or principal of KAI.
2. All but not some of the Interest may be "put" by KAI to Shorewood
after KAI has held the same for at least three (3) years after the
Project(s) produces its first commercial product and the purchase
price for the Interest to be paid by Shorewood shall be determined
as follows:
(a) if the Interest is common stock or any other security and if
any shares of common stock of the Project(s) or other security are
being traded publicly then the purchase price per share shall be
the average selling price per share of such stock at the end of
each of the thirty (30) days preceding the written offer to
Shorewood, or
(b) in all other cases not covered by Paragraph 2(a) above, then at
a purchase price per share or unit on the date upon which Shorewood
shall have received KAI's offer to sell, determined by an
internationally recognized investment banker who has been mutually
selected by KAI and Shorewood within thirty (30) days of the
receipt of such offer by KAI. In all other cases not covered by
Paragraph 2(a) above, and if such banker has not been selected by
the parties, then such investment banker shall be selected by the
American Arbitration Association located in New York City upon the
application of either party with both parties sharing equally in
any expenses thereof. Absent fraud or similar wrongdoing, the
determination of the investment banker shall be final and shall be
enforceable in accordance with paragraph 10(b) of this Agreement.
Payment in U.S. Dollars to KAI shall be promptly made upon the
determination of the purchase price per share of such Interest and
the release and assignment of the interest by KAI. In making such
determination, the investment
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banker shall not take into account any discount for KAI's minority
interest, for the illiquidity of such interest, or similar
considerations.
3. In the event that Shorewood has accepted an offer to sell any or
all of its equity in the Project(s), Shorewood shall promptly
notify KAI in writing of the written terms thereof and KAI shall
have the right to include its Interest in such sale in the same
proportion that the equity to be sold by Shorewood bears to the
total equity of the Project(s). KAI must notify Shorewood in
writing, within ten (10) days after written notice of the intended
sale, that it desires to include its Interest, to the extent of the
aforementioned proportion, in the sale thereof; otherwise, it shall
have no further right to have its Interest sold.
4. KAI's profit percentage shall be at the following levels:
Aggregate Invested Capital in
Project(s) (not inclusive of loans
from unrelated third parties, in KAI PROFIT INTEREST
millions of U.S.$) (percentage)
---------------------------------------- ---------------------------
up to 24.99 5.0
25 - 29.99 4.75
30 - 34.99 4.50
35 - 39.99 4.25
40 - 44.99 4.0
45 - 49.99 3.75
50 - 54.99 3.50
55 - 59.99 3.25
60 - 64.99 3.0
65 - 74.99 2.75
75 - 84.99 2.50
85 - 94.99 2.25
95 and above 2.0
5. KAI's profit percentage for any given Project shall be determined
by reference to the above chart in Paragraph 4 of this Exhibit,
based upon the aggregate capital investment by Shorewood in China
(as to which KAI has been issued an interest) as of the date of the
issuance of the Interest relating to the Project.
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