SUPPLY AND LICENSE AGREEMENT
EXHIBIT
10.1
PORTIONS
OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND
EXHANGE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT FILED
WITH THE COMMISSION PURSUANT TO RULE 24B-2
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
This
supply and license agreement (“Agreement”), effective as of January 1, 2008 (the
“Effective Date”), is by and between CTI Industries Corporation, having its
principle office located at 00000 X. Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000
(referred to herein as “Supplier” or “CTI”) and S. C. Xxxxxxx & Son, Inc., a
Wisconsin corporation, having its principal office located at 0000 Xxxx Xxxxxx,
Xxxxxx, Xxxxxxxxx 00000.
Whereas,
Xxxxxxx and Supplier have entered into this Agreement to reflect their mutual
understanding of the terms upon which Supplier will manufacture and supply
certain products to Xxxxxxx;
Whereas,
Supplier owns or controls the necessary property, plant and equipment so as
to
be able to produce such products;
Whereas,
Supplier has agreed to xxxxx Xxxxxxx the right to convert the manufacture and
supply arrangement described herein to a license arrangement described herein
upon the occurrence of certain events.
Now,
therefore, the parties agree as follows:
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1.
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DEFINITIONS
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1.1
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General.
The capitalized terms defined herein shall have the meanings indicated
for
purposes of this Agreement. Terms defined in the singular shall have
a
comparable meaning when used in the plural, and vice versa.
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1.2
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“Affiliate”
shall mean,
with respect to Xxxxxxx, any entity controlling or controlled by
Xxxxxxx,
where control means the power to direct the management and policies
of a
party, and with respect to Supplier it shall mean any entity controlling,
controlled by, or under common control with Supplier.
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1.3
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“Contract
Year”
means any period commencing on July 1 and ending on June 30 thereafter,
unless otherwise noted, provided, however, that the first Contract
Year
shall be an eighteen month period beginning January 1, 2008 and ending
June 30, 2009.
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1.4
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“Consumer
Fields of Use”
means all distribution channels of trade where consumers purchase,
direct
or indirect, products for ultimate use in the home or otherwise including
but not limited to food, drug, and mass distribution retailers,
do-it-yourself home improvement stores, warehouse clubs, office supply
stores and similar retailers and internet outlets. This term shall
not
include commercial sales of airtight vacuum bags to business end-users
for
airtight dry storage of parts.
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1.5
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“Effective
Date”
is defined in the first paragraph of this
Agreement.
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1.6
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“Xxxxxxx License
Agreement”
shall mean Xxxxxxx’x license and right to use, at Xxxxxxx’x option and
upon conversion pursuant to Sections
11.4 or 11.7
hereof, all Licensed Intellectual Property (defined under Section
21),
and shall include the right to sublicense third
parties.
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1.7
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“Net
Account Revenue”
means Xxxxxxx’x (including Xxxxxxx Affiliates’) gross sales of Bags that
utilize any Supplier Patent Rights, to third party retail customers
less
any deductions or payments including the
following:
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(A)
Supply Chain Logistics Discounts, meaning discounts for ordering
full
pallets, trucks, proper order lead times,
etc.
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(B)
Supply Chain Channel Discounts, meaning wholesaler or broker discounts
or
similar items.
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(C)
Supply Chain Discounts/Markdowns, meaning discounts applied to obsolete
goods in Xxxxxxx warehouses to incent secondary market
sales.
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(D)
Returns, meaning full case returns including any third party handling
fees.
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(E)
Remnants/Spoils, meaning less than full case returns or damaged cases
including any third party handling
fees.
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(F)
Cash Discounts, meaning discounts allowed for prompt payment of
invoices.
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(G)
Deals, meaning all other trade payments for account specific consumer
promotions, markdowns, volume or growth rebates, display programs,
slotting fees, etc.;
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provided
that, for purposes of this definition only, Bags shall be deemed
to
include Product starter kits that include both Bags and [*] Pumps
supplied by Supplier but shall not include Product starter kits that
include Bags supplied by Supplier without a [*] Pump supplied by
Supplier.
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| 1.8 | “Product(s)” means the following products, individually or collectively: |
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(A)
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a
zippered airtight vacuum bag, listed on Schedule
2.1,
incorporating a [*] valve and covered by claim(s) of Supplier’s patents
6,984,278, 6,033,113, 7,305,742, or other patents pending (the “Bag”),
and
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(B)
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a
[*] vacuum pump designed to interface with a [*] valve on the vacuum
bag,
as listed on Schedule
2.1
(the “Pump”).
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1.9
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“Supplier
Patent Rights”
means those U.S. and foreign patents and patent applications,
currently pending or issued, that are owned, licensed, or otherwise
controlled by Supplier, and that contain any issued valid claim that
reads
on the Product(s), including but not limited to those patents listed
in
Schedule
1.9,
attached hereto, and hereby incorporated herein by reference.
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CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
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1.10
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“Term”
as used herein shall have the meaning as set forth in Section
3
below.
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1.11
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“Territory”
means worldwide.
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2.
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TERMS
OF SALE
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2.1
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Supply
Commitment.
Subject to the terms and conditions of this Agreement, the Supplier
shall
manufacture and sell to Xxxxxxx and Xxxxxxx shall purchase from Supplier
the products listed in Schedule
2.1
("Product(s)"). Schedule
2.1
contains a list of the Products (“Product List”) and the price adjustment
mechanism(s) for the Products (“Price Adjustment Mechanism(s)”), if any.
The Product List may be amended from time to time by written agreement
of
the parties.
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2.2
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Purchase
Orders.
Xxxxxxx may place orders in writing, by phone (confirmed in writing),
or
by electronic data transmission (“Purchase
Order(s)”).
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2.3
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Shipments.
Shipments are according to Xxxxxxx’x delivery schedules and shipping
instructions (“Shipment Terms”) as set forth in Schedule 2.3.
The Shipment Terms apply until changed by Xxxxxxx.
Delivery schedules shall not materially exceed the capacity levels
and
forecasts as provided in Section
6
hereof.
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2.4
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Payment
Terms.
Payment terms for Bag purchases are forty (40) days from the later
of (i)
the date of invoice or (ii) acceptance of Product. Payment terms
for Pump
purchases are forty two (42) days from the shipment date, provided
that
the goods were received by Xxxxxxx a minimum of seven (7) days prior
to
the end of such time period and Xxxxxxx has not rejected the goods.
In no
event shall Xxxxxxx be required to make payment before receipt of
Product
nor shall invoices be dated prior to the date of shipment. Xxxxxxx
does
not waive any right it has for adjustment of the amount due to Supplier
by
its having paid for the Product.
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2.5
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Designated
Purchasers.
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(A)
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Xxxxxxx
may request that Supplier sell Product directly to a third party
purchaser. Under these circumstances, such designated third party
purchaser shall purchase the Product subject to the terms and conditions
of this Agreement. In the event that Supplier determines that a designated
third party purchaser is not performing according to the terms of
this
Agreement (including events of late payment), Supplier has the right
to
cease selling to such third party purchaser; provided, however, that
Supplier shall notify Xxxxxxx if a designated third party purchaser
is not
performing according to the terms hereof, and shall allow Xxxxxxx
at least
sixty (60) days to attempt to resolve the matter with the designated
third
party purchaser before Supplier ceases sales to such designated third
party purchaser.
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(B)
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References
to Xxxxxxx are considered a reference to such third party purchaser
if
Xxxxxxx has exercised its option to have Product sold to such third
party
purchaser. Xxxxxxx may change or add third party purchasers at any
time
upon written notice to the Supplier.
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2.6
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Additional
Terms.
Acceptance of this Agreement is limited to acceptance of the terms
and
conditions contained in this document. Any proposal for additional
or
different terms or attempt by Supplier or Xxxxxxx to change any of
the
terms and conditions of this Agreement is rejected and not of any
effect.
Additionally, if any terms of a Purchase Order, invoice or other
document
exchanged between the parties related to the purchase of the Product(s)
conflicts with the terms of this Agreement, the terms of this Agreement
shall apply.
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3
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3.
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TERM
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3.1
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Initial
Term.
This Agreement shall commence on the Effective Date and continue
in full
force and effect for an initial term ending June 30, 2011 (“Initial
Term”), unless renewed per the terms of Section
3.2
or
terminated earlier pursuant to this Agreement (the Initial Term and
any
renewal terms shall be referred to collectively as the “Term”).
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3.2
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Renewal
Terms.
After the Initial Term, this Agreement may be renewed for two additional
terms of two (2) years each. This Agreement shall automatically renew
for
a first renewal term of two (2) years (“Automatic First Renewal Term”) if
the Product prices for the fourth Contract Year as proposed by Supplier
to
Xxxxxxx pursuant to Section
4.2(A)
below are equal to or less than the target Product prices set forth
in
Schedule
3.2
attached hereto. If this Agreement does not automatically renew in
accordance with the preceding sentence, then Xxxxxxx shall have the
right
to unilaterally renew this Agreement for the first renewal term of
two (2)
years (“First Renewal Term”) by giving written notice to Supplier at lease
four (4) months prior to the end of the Initial Term. In addition,
provided this Agreement has been renewed for the Automatic First
Renewal
Term or First Renewal Term, Xxxxxxx shall have the right to further
extend
this Agreement for a second renewal term of two (2) years (“Second Renewal
Term”) by giving written notice to Supplier at least four (4) months prior
to the end of the such first renewal
term.
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4.
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PRICING
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4.1
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Price.
The initial price for each Product is set forth in Schedule
2.1.
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4.2
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Price
Adjustments.
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(A)
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Periodic
Price Adjustments. The Product prices in Schedule
2.1
(including the Supplier’s conversion cost component of the Product price
as stated in Schedule 2.1)
are firm for the entire Initial Term except
as provided in the Price Adjustment Mechanism in Schedule
2.1
and Sections
4.2
and 4.4.
For the Renewal Terms,
Supplier will provide to Xxxxxxx, at least six months prior to the
commencement of the First or Second Renewal Term (as applicable),
the
Product price for the first year of the applicable Renewal Term.
The
Product prices for Bags will be fixed for each Renewal Term and will
be
based on the following price components as submitted for the first
Contract Year of the applicable Renewal Term: [*]
The Product prices for Pumps for each Renewal Term shall be calculated
per
Schedule
2.1.
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CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
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(B)
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Xxxxxxx
Requested Change. If Xxxxxxx requests a change in the Specifications
or
manufacturing process and the change would affect Supplier's conversion
cost and/or materials cost, the parties shall determine the impact,
if
any, the change would have on the Product price. If Xxxxxxx and Supplier
agree on a price adjustment, the Specification change or manufacturing
process change, or both, will be implemented, and the price change
will
become effective on the date the change is implemented.
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(C)
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Complete
Pricing. The Product prices are complete, and Supplier may not add
charges
of any type without Xxxxxxx'x prior written consent. Examples of
charges
that may not be added to the price include, without limitation, shipping,
packaging, labeling, customs duties, taxes, storage, insurance, boxing,
overtime (unless approved by Xxxxxxx in advance), and crating costs.
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(D)
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Most
Favored Pricing. The Supplier represents and warrants to Xxxxxxx
that the
Product prices are not less favorable than those currently extended
by
Supplier to any other person for the same or similar articles supplied
in
similar quantities. If permissible under applicable law, Supplier
shall
immediately reduce the price to Xxxxxxx for the affected Product
if
Supplier reduces its price to other persons for the same or similar
article for the supply of similar
quantities.
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(E)
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[*]
price adjustments. Product prices shall be subject to [*]
price adjustment made effective on the first day of each calendar
quarter
in accordance with Schedule
2.1
attached.
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4.3
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Shrinkage.
Supplier is responsible for all expenses relating to manufacturing
losses
and inventory losses until the Product is delivered to and accepted
by
Xxxxxxx.
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4.4
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Cost
Savings.
Supplier shall use its reasonable commercial efforts to generate
cost
savings in the cost of the Products. Cost
savings shall be allocated as
follows:
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(A)
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Cost
savings, which (i) result from Product or Product packaging modifications
or (ii) result from projects initiated jointly or solely by either
party
and require no investment by Supplier or (iii) result from a relocation
of
production to another Supplier manufacturing facility, will be applied
solely to reduce Product prices upon implementation. If Supplier
must
invest to achieve these savings, these savings will (i) first be
used to
fund the cost of the investment and (ii) thereafter will be applied
solely
to reduce Product prices.
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CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
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5.
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SPECIFICATIONS
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5.1
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Specifications.
Xxxxxxx has given Supplier copies of the Product Instruction Handbooks.
The Green General Specifications and Guidelines Handbook contains
general
specifications for goods being manufactured for Xxxxxxx. Specifications
for new products just being launched are in Red Product Instruction
Handbooks. Blue Product Instruction Handbooks cover the specifications
for
established products. Yellow Product Instruction Handbooks cover
the
specifications for special pack products. These Product Instruction
Handbooks contain Product-related, finished goods, and packaging
specifications; manufacturing instructions, formulas, processing
instructions, quality control procedures, finished goods and component
performance tests, Acceptable Quality Limits; and other information
relating to the manufacture of Product (the “Specification(s)”). Supplier
shall not use the Product Instruction Handbooks for any purpose other
than
to perform its obligations under this Agreement. Supplier shall
manufacture Product in compliance with the Product Instruction Handbooks.
The Product Instruction Handbooks (including all copies and related
notes)
must be returned to Xxxxxxx upon Xxxxxxx’x request or upon termination of
this Agreement. Upon changes in the Specifications, Xxxxxxx will
provide
amended Product Instruction Handbooks to
Supplier.
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5.2
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Changes.
Supplier must not change any Specification or manufacturing location
without Xxxxxxx’x prior written consent. Xxxxxxx shall have the right, but
not the obligation, to change the Specifications, from time to time,
upon
reasonable advance written notice to Supplier and, in that case,
Xxxxxxx
and Supplier shall enter into good faith negotiations to adjust the
price
in accordance with Section 4.2(B).
For changes to be effective, they must be set forth in a writing
that is
signed by the parties and incorporated as an amendment to the
Specifications.
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5.3
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Materials.
Unless otherwise agreed, Supplier is solely responsible for obtaining
the
equipment, materials, components, and services required by Supplier
to
manufacture and deliver Product. To the extent not covered by the
Specifications, providers of and specifications for materials and
components must be approved in advance by Xxxxxxx. If Xxxxxxx has
a
supplier of raw material and/or components that could result in a
Product
cost savings, Xxxxxxx shall have the right to change the Specifications
pursuant to Section
5.2
above to include such material and the designated supplier, subject
to the
terms of Section
5.2.
In addition, Supplier may use an alternative supplier if approved
in
advance and in writing by Xxxxxxx. If Supplier fails to obtain Xxxxxxx’x
prior written approval, Supplier shall assume any and all responsibility
in accord with Section
12.1
of
the Agreement.
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6.
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MANUFACTURING
CAPACITY
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6.1
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Capacity.
Supplier guarantees sufficient capacity at its production facilities
to
manufacture and deliver the quantities of Bags and Pumps during the
Product introduction phase as set forth in Schedule
6.1
hereto. Thereafter, Supplier will use reasonable commercial efforts
to
develop and maintain capacity at its owned or controlled production
facilities to manufacture and deliver at least 150% of Xxxxxxx’x annual
forecast requirements (updated quarterly) as forecasted under Section
6.2
for the Products, provided that, and notwithstanding anything else
herein,
if at any time Xxxxxxx’x actual Product purchases for a calendar quarter
causes Supplier’s capacity to fall below the 150% threshold (as compared
to such actual purchases), then Supplier will have one hundred fifty
(150)
days to meet the 150% requirement. This is not a commitment by Xxxxxxx
to
purchase any quantity. The minimum criteria for any Contract Year
of this
Agreement shall be that Supplier’s service permits Xxxxxxx to ship 99% of
its orders using Products to Xxxxxxx customers on time and complete.
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6
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6.2
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Forecasting.
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(A)
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Xxxxxxx
may provide on-line access for Supplier to Xxxxxxx’x production
forecasting system or its equivalent (collectively, “PFS”). This access
will permit Supplier to have current information relating to Xxxxxxx’x
estimates of production forecast. Xxxxxxx shall provide such other
information as Supplier may reasonably request concerning Xxxxxxx’x
forecasts. Supplier shall only access that portion of the PFS system
necessary for Supplier to determine Xxxxxxx’x Product needs. All
information in the PFS system is highly confidential and will be
treated
as Xxxxxxx Confidential Information pursuant to Section
17
below.
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(B)
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If
Supplier does not have access to Xxxxxxx’x PFS system, Xxxxxxx shall
provide non-binding annual forecasts, updated quarterly, and binding
written or electronic data input ("EDI") Purchase Orders. The initial
non-binding annual forecast is attached hereto as Schedule
6.2.
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6.3
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No
Requirements and No Minimums.
This is a not a requirements contract. Additionally, Xxxxxxx does
not have
to purchase a minimum quantity of Product. Xxxxxxx does not have
to use
its best efforts to promote and sell the Product, and Xxxxxxx may
discontinue or reduce its commercialization effort with respect to
any
Product at any time for any reason.
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6.4
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Exclusivity.
During the Term of this Agreement, Supplier and its Affiliates shall
not
directly or indirectly manufacture or sell the Product or any other
zippered air tight vacuum bag, or license the Supplier Patent Rights,
in
the Consumer Fields of Use in the Territory, for or to anyone other
than
Xxxxxxx, except that Supplier shall have the right to sell Supplier’s
commercialized zippered vacuum bag with a molded external valve to
department specialty stores (e.g. Kohl’s Department stores and Bed, Bath
and Beyond), sporting goods stores (e.g. Gander Mountain and Dick’s
Sporting Goods), the sporting goods/outdoor section of Mass Merchandise
stores (e.g. Wal-Mart’s sporting goods section) and direct sales through
internet channels.
Furthermore, Supplier shall have the right to sell large sized zippered
vacuum bags having a layflat surface area greater than two hundred
fifty
square inches that are intended for use in non-food home storage
applications through any channels of distribution. During the Term
of this
Agreement Xxxxxxx
will not manufacture or purchase the Product from anyone other than
Supplier, unless and until Xxxxxxx exercises its right and option
to
convert this Agreement to a Xxxxxxx License Agreement pursuant to
Section
11.4 or 11.7
below.
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7.
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BRAND
NAME
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Supplier
acknowledges that Xxxxxxx’x Ziploc brand (or another brand designated by
Xxxxxxx) will be the primary brand name for the Product. Xxxxxxx shall also
select, own and control any sub-brand for the Product.
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8.
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(INTENTIONALLY
OMITTED)
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9.
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ROYALTY
PAYMENTS AND REPORTS
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9.1
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Conversion
to Xxxxxxx License Agreement. If
this Agreement converts to a Xxxxxxx License Agreement pursuant to
Section
11.7
below, the royalty fee payable on Xxxxxxx’x Bag Product Net Account
Revenue shall be referred to herein as
“Royalties.”
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9.2
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Payment
Due Date.
Any and all Royalties payable pursuant to Section
11.7
shall be paid to Supplier at the address set forth on the first page
hereof, within sixty (60) days of the close of each calendar quarter
within which the royalties accrued. All Royalties payable hereunder
shall
be paid in USD. The royalties which are to be paid for sales made
in
non-USD shall be calculated separately for each month of the calendar
quarter by determining the aggregate Net Account Revenue of Products
for
that month in local currency, then converting same to USD using the
average of the conversion rates for the first and last business day
of
that month as published in the Wall Street Journal (New York edition).
The
royalties for each month of the calendar quarter shall be calculated
separately as described, and then added to arrive at the quarterly
royalty
payment.
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9.3
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Statements.
Xxxxxxx shall prepare and issue a report for each calendar quarter,
identifying this Agreement and showing (A) total number or amount
of
Products by item sold by Xxxxxxx and its Affiliate sublicensees,
(B) Bag
Product Net Account Revenue, and (C) the royalties accrued during
the
quarter and payable to Supplier.
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9.4
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Taxes
and Other.
Xxxxxxx shall be responsible for payment of any taxes on the sale
of
Products. If any taxes are required to be withheld on the royalties
due
under this Agreement, which taxes would be owed by Supplier, Xxxxxxx
shall
pay such taxes on behalf of Supplier, provide to Supplier a copy
of the
withholding tax certificate, and deduct any such payments from the
amounts
due to Supplier.
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10.
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SUPPLIER
REPRESENTATIONS AND
WARRANTIES
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10.1
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Product
Representations and Warranties.
The Supplier represents and warrants to Xxxxxxx with respect to each
delivery of Product as follows:
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(A)
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Product
has been manufactured in compliance with the Specifications, is new,
and
is free from defects in materials and workmanship and conforms in
all
respects to agreed samples. Product is adequately contained, packaged,
marked, and labeled. Product is merchantable and is safe and appropriate
for the purpose for which goods of that kind are normally used and
shall
be suitable for food contact applications as defined by the FDA and,
for
product destined for the Canadian market, the Canadian equivalent
of the
FDA Notwithstanding the foregoing, Supplier shall not be responsible
for
Product defects to the extent caused by Bag valves supplied by Xxxxxxx’x
approved valve supplier, [*], or Bag zippers supplied by [*],
provided that Supplier fully complies with all of the Quality Control
procedures and standards contained in the Product Instruction Handbook
with respect to the inspection and testing of such valves and zippers.
For
the avoidance of any doubt, Supplier shall be responsible for Product
defects caused by Supplier’s breach of any such Quality Control
requirements applicable to the valves and zippers.
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CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
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(B)
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Supplier
has conveyed to Xxxxxxx good title to the Products, free from any
lawful
security interest, lien, or
encumbrance.
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(C)
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Supplier
and Supplier’s facilities comply with all applicable laws relating to the
manufacture, storage and sale of the Product, including import and
export
compliance. Xxxxxxx may audit Supplier’s compliance with applicable laws,
rules, regulations and the like, including a safety and environmental
audit.
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(D)
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To
Supplier’s best knowledge, neither Products nor Supplier’s methods and
means of manufacturing Products infringe a valid patent, copyright,
design
right, or trade secret of a third
party.
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(E)
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Waste
material generated in connection with the production of the Products,
as
well as any other products manufactured by Supplier at its facility,
has
been or will be disposed of in strict compliance with applicable
laws.
Upon request, Supplier shall certify its compliance with such
laws.
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(F)
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Supplier
is authorized to enter into and perform this Agreement and will not
breach
any obligations owed to another person by performing this
Agreement.
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(G)
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Product,
Product constituents, and production methodologies comply with all
applicable laws, regulations and government directives, including,
but not
limited to the Toxic Substances Control
Act.
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10.2.
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Patent Representations
and Warranties.
Supplier represents and warrants to Xxxxxxx with respect to Supplier
Patent Rights as follows:
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(A)
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Supplier
is the owner or exclusive licensee, and otherwise in control of all
of
said Supplier Patent Rights, and that all of the associated patents
and
patent applications, owned, licensed, or controlled by Supplier within
defined Consumer Fields of Use, are set forth in Schedule
1.9.
Furthermore, Supplier represents and warrants that said Schedule
captures
all of the patent rights owned, licensed or otherwise controlled
by
Supplier that fully cover the subject matter of Products as defined
herein.
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(B)
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Supplier
has authority to enter into this Agreement and to perform its obligations
under this Agreement and that it has been duly authorized to execute
and
to deliver this Agreement.
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(C)
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As
of the date of signature hereto, and with exception for any specific
disclosures made to Xxxxxxx within the prior ninety days by Xx. Xxxx
Xxxxxx on behalf of Supplier, Supplier is without knowledge, whether
actual or implied, of any pending or threatened infringement litigation
with respect to Supplier Patent Rights, and furthermore that it has
not
received any actual notices of infringement with respect to any of
its own
manufactured products that may or could be covered by or related
to
Supplier Patent Rights.
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(D)
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As
of the date of signature hereto, and with exception for any specific
disclosures made to Xxxxxxx within the prior ninety days by Xx. Xxxx
Xxxxxx on behalf of Supplier, Supplier is without actual or implied
knowledge of any patent, any document, or any other information,
that
would limit the validity of the Supplier Patent Rights under this
Agreement.
|
|
(E)
|
As
of the date of signature hereto, and with exception for any specific
disclosures made to Xxxxxxx within the prior ninety days by Xx. Xxxx
Xxxxxx on behalf of Supplier, Supplier is without knowledge that
the
practice of the Supplier Patent Rights is or may be limited by
intellectual property rights of third parties. Moreover, Supplier
shall
have a continuing obligation to notify Xxxxxxx within thirty days
of its
receipt of any non-public information that impacts this warranty
and
representation.
|
|
10.3.
|
Certification.
Upon Xxxxxxx’x request, Supplier shall provide Xxxxxxx with a warranty
certificate certifying compliance with any and all of the representations
and warranties contained in Sections 10.1
and 10.2.
|
|
10.4
|
Additional
Agreements of Supplier.
|
|
(A)
|
If
requested by Xxxxxxx, Supplier must participate in Xxxxxxx’x Systems
Quality Assurance Program (“SQA Program”) through Xxxxxxx’x Systems
Quality Assurance group. If the Supplier produces “Critical Level I”
products, as determined by Xxxxxxx, or Products that are used in
the
manufacture of products regulated by Good Manufacturing Practices
(“GMP”)
regulations, as determined by Xxxxxxx’x Regulatory group, Supplier agrees
to achieve a rating of 3.0 or higher in each of the “red” subsystems in
the SQA Program, and a rating of 2.5 or higher in each of the “yellow”
subsystems in the SQA Program. Supplier further agrees to continuously
improve in all areas of the SQA Program, with a target of an overall
score
of 4.0 or higher.
|
|
(B)
|
If
the Products are regulated or controlled by the United States Food
and
Drug Administration (“FDA”) or its Canadian equivalent, Supplier shall
maintain itself in good standing with the FDA and manufacture the
Products
in compliance with all Good Manufacturing Practices (“GMPs”) issued by the
FDA from time to time, and all raw materials used in such Products
shall
be suitable for food contact applications as defined by the FDA or
its
Canadian equivalent. Xxxxxxx or its agents shall have the right to
audit
Supplier’s GMP compliance at any
time.
|
|
(C)
|
If
the Products are registered with or regulated by the United States
Environmental Protection Agency (“EPA”) or Health Canada, Supplier shall
manufacture the Products in compliance with all applicable EPA or
Health
Canada rules and regulations, and shall promptly provide to Xxxxxxx
copies
of all reports, notices, filings and other correspondence with the
EPA or
Health Canada and similar state, provincial or local agencies related
to
the Products, including, without limitation, “6(a)2” forms. Xxxxxxx or its
agents shall have the right to audit Supplier’s EPA or Health Canada
compliance at any time.
|
|
(D)
|
If
Supplier’s projected annual sales to Xxxxxxx is $1 million to $5 million
in the United States, Supplier agrees to establish a Supplier Diversity
procurement target and agrees to report, on a semi-annual basis,
its
expenditures for materials and/or services with certified minority
and
women-owned businesses (i.e., certified by an approved third party
agency)
attributable to Products made for Xxxxxxx in the United States. If
Supplier’s projected annual sales to Xxxxxxx exceed $5 million in the
United States, Supplier further agrees to submit a written supplier
diversity procurement plan by March 31st
of
each year. Xxxxxxx does not accept
self-certification.
|
10
|
(E)
|
Supplier
acknowledges that it has received, is aware of and has reviewed Xxxxxxx’x
Manufacturing Code of Conduct (the “Code”), as amended from time to time,
and agrees to comply with the Code. Further upon request, Supplier
agrees
to certify its compliance with the Code to Xxxxxxx. Xxxxxxx shall
have the
right to audit Supplier’s compliance with the Code at any time. The Code
is attached hereto as Schedule
10.4(E).
|
|
(F)
|
Supplier
acknowledges that it has received, is aware of and has reviewed Xxxxxxx’x
Business Conduct and Ethics Policy (the “Policy”), as amended from time to
time, and agrees to comply with the Policy. The Policy is attached
hereto
as Schedule
10.4(F).
|
|
(G)
|
Upon
Xxxxxxx’x request, the parties will meet quarterly to review a “Supplier
Scorecard” as developed by Xxxxxxx to track and require improvement, when
necessary, the Supplier’s performance, including, but not limited to, key
metrics such as price, guaranteed cost savings, quality, and service.
Supplier will use reasonable commercial efforts to continually improve
its
performance on the metrics listed on the Supplier Scorecard. Supplier
will
track and report its performance related to these key
metrics.
|
|
(H)
|
If
Supplier is importing or transporting imported products to Xxxxxxx
or
Xxxxxxx’x designated third party purchaser into the U.S. or Puerto Rico,
and Supplier is eligible to become certified under the Customs -
Trade
Partnership Against Terrorism (“C-TPAT”) program, Supplier will become
C-TPAT certified and comply with the C-TPAT requirements. If Supplier
is
not eligible to become C-TPAT certified, Supplier will comply with
Xxxxxxx'x security measures, a copy of which is attached in Schedule
10.4(H).
Supplier will provide its certification number or evidence of its
membership in C-TPAT, or proof of its compliance with Xxxxxxx’x security
measures, whichever is applicable. Xxxxxxx may audit Supplier's compliance
at any time upon reasonable notice.
|
|
(I)
|
Union
of Orthodox Jewish Congregations of America. At the request of Xxxxxxx,
Supplier will support the obtaining of Orthodox Union (OU) certification
for the production line that manufactures Products. Thereafter Supplier
shall maintain Kosher compliance on all production lines that manufacture
OU certified product for Xxxxxxx. The Orthodox Union’s (OU) Rabbinic field
representatives shall have the right to perform Kosher inspections
of
these lines at any time. Xxxxxxx or its agents shall have the right
to be
present for such audits.
|
11
|
11.
|
TERMINATION/CONVERSION
OF AGREEMENT
|
|
11.1
|
Termination.
Xxxxxxx may withdraw any Product(s) or all Products from this Agreement
(the latter withdrawal of the entire Product portfolio being deemed
to be
tantamount to a termination of this Agreement) or terminate this
Agreement
in its entirety, at any time during the Initial Term, Automatic First
Renewal Term or any other Renewal Term at its sole discretion by
giving at
least one hundred twenty (120) days written notice. In the event
Xxxxxxx
withdraws a Product during the Initial Term, the Automatic First
Renewal
Term or, if there is no Automatic First Renewal Term then the First
Renewal Term, at its discretion pursuant to this Section
11.1,
then Xxxxxxx shall have no further right to sell or distribute the
applicable withdrawn Product hereunder as of the Product withdrawal
date
and, further, Xxxxxxx shall not be entitled to exercise its conversion
and
option rights pursuant to Section
11.7.
In the event Xxxxxxx terminates this Agreement in its entirety prior
to
the end of the Initial Term, the Automatic First Renewal Term or,
if there
is no Automatic First Renewal Term, the First Renewal Term at its
discretion pursuant to this Section
11.1,
or if the Initial Term shall expire without automatic renewal for
an
Automatic First Renewal Term or without a renewal at the election
of
Xxxxxxx for a First Renewal Term, then Xxxxxxx shall have no further
right
to sell or distribute the Products as of the date of termination
and,
further, Xxxxxxx shall not be entitled to exercise its conversion
and
option rights pursuant to Section
11.7.
In the event Xxxxxxx withdraws any Product or terminates this Agreement
at
its discretion pursuant to this Section
11.1
for effect (a) at the earlier of the last day of (i) the Automatic
First
Renewal Term (if applicable) or (ii) the First Renewal Term, or (b)
if
Xxxxxxx shall have renewed this Agreement for a Second Renewal Term,
any
time after the earlier of the dates specified in subpart (a), then
Xxxxxxx
shall have the right to convert this Agreement to a Xxxxxxx License
Agreement pursuant to the conversion and option rights in Section
11.7
below. In the event the Automatic First Renewal Term or the First
Renewal
Term, if any, shall expire without renewal for a Second Renewal Term,
then
Xxxxxxx shall have the right to convert this Agreement to a Xxxxxxx
License Agreement pursuant to the conversion and option rights in
Section
11.7
below. Furthermore, in the event Xxxxxxx terminates this Agreement
at any
time pursuant to Section
11.2,
then Xxxxxxx shall have the right to convert this Agreement to a
Xxxxxxx
License Agreement pursuant to the conversion and option rights in
Section
11.7
below.
|
|
11.2
|
Termination
for Breach.
Xxxxxxx or Supplier may terminate this Agreement, subject to Xxxxxxx’x
right to convert this Agreement to a Xxxxxxx License Agreement pursuant
to
the conversion and option rights in Section
11.7,
upon the other party’s breach of its obligations under this Agreement by
giving at least sixty (60) days written notice, which describes the
reason
for the termination. This Agreement will terminate, subject to Xxxxxxx’x
right to convert this Agreement to a Xxxxxxx License Agreement pursuant
to
the conversion and option rights in Section
11.7,
unless the party receiving the notice cures or remedies the situation
supporting termination within the sixty (60) day notice period. Supplier
shall not have the right to cure the breach if the breach relates
to
Supplier’s warranties and representations set forth in Section
10.1
hereof and such breach results in a Product recall or a government
regulatory action or proceeding concerning the Product.
|
|
11.3
|
Bankruptcy.
If Supplier makes any assignment of assets or business for the benefit
of
creditors, or if a trustee or receiver is appointed to administer
or
conduct Supplier’s affairs or business, or if it is adjudged in any legal
action to be either a voluntary or involuntary bankrupt, the obligations
of Xxxxxxx and the rights and privileges of Supplier under this Agreement
shall be deemed to have become a Xxxxxxx License Agreement (as defined
in
Section
11.7)
immediately prior to such assignment, appointment of trustee or receiver,
or bankruptcy without Xxxxxxx giving any notice or taking any legal
action.
|
12
|
11.4
|
Automatic
Grant of License Rights.
If
any Xxxxxxx forecast issued pursuant to Section
6.2
hereof states a forecasted annual volume (as updated quarterly)
[*]
or
Supplier’s capacity falls below that quantity of Bags for any reason, then
Xxxxxxx shall automatically be granted a Xxxxxxx License Agreement.
Such
Xxxxxxx License Agreement shall supplement and be in addition to
this
Supply Agreement, shall be on the same terms as the Xxxxxxx License
Agreement described in Section
11.7
except that the license shall be a sole non-exclusive royalty free
license
only during the term of this Agreement, and Xxxxxxx shall have the
right
to manufacture, market and sell Bags or any improved Bag(s) or any
similar
product to meet budgeted or actual volume requirements in excess
of the
lesser of the following volumes (i) [*]
or
(ii) Supplier’s actual Bag production capacity. Xxxxxxx’x use of a third
party contract manufacturer shall be subject to Supplier’s approval, which
approval shall not be unreasonably
withheld.
|
|
11.5
|
Change
in Control.
If a controlling interest in Supplier is transferred to a third party,
then Supplier must immediately notify Xxxxxxx of such transaction.
In that
event, Xxxxxxx shall have the right to convert this Agreement to
a fully
paid-up royalty free Xxxxxxx License Agreement pursuant to Section
11.7
below provided that (i) the third party is a competitor of Xxxxxxx
in one
or more product categories within one or more of Xxxxxxx’x ten largest
markets, or (ii) Xxxxxxx reasonably believes the third party does
not meet
its requirements for a supplier of product.
|
|
11.6
|
Assignment.
If
this Agreement and the rights and obligations hereunder are assigned
by
Supplier to a third party pursuant to Section
23.4
below, then Supplier must immediately notify Xxxxxxx of such transaction.
In that event Xxxxxxx shall have the right to convert this Agreement
to a
Xxxxxxx License Agreement pursuant to Section
11.7
below provided that (i) the third party is a competitor of Xxxxxxx
in one
or more product categories in one or more of Xxxxxxx’x ten largest
markets, or (ii) Xxxxxxx reasonably believes the third party does
not meet
its requirements for a supplier of
product.
|
|
11.7
|
Xxxxxxx’x
Conversion and Option Rights. Notwithstanding anything
else herein, (a) upon termination of this Agreement by Xxxxxxx (i)
at the
end of the Automatic First Renewal Term or the end of the First Renewal
Term, if there is no Automatic Renewal Term, or at any time thereafter
pursuant to Section
11.1,
or (ii) at any time during the Term hereof pursuant to Section
11.2,
(b) in the event the Automatic First Renewal Term or the First Renewal
Term, if any, shall expire without renewal of this Agreement for
a Second
Renewal Term, or (c) upon the occurrence of an event described in
Sections
11.5 or 11.6
hereof, then Xxxxxxx shall have the right to convert this Agreement
to a
Xxxxxxx License Agreement on written notice to Supplier. In addition,
this
Agreement shall automatically convert to a Xxxxxxx License Agreement
upon
the occurrence of an event described in Section 11.3.
The Xxxxxxx License Agreement shall be on the same terms and conditions
as
set forth in this Agreement, except (A) the Xxxxxxx License Agreement
shall include the grant to Xxxxxxx of the non-exclusive right and
license
to use any and all Licensed Intellectual Property to manufacture,
or have
manufactured the Product, any improved or modified Product, or any
substantially similar product anywhere in the world, and to market,
import, distribute and sell Product or any improved or modified Product
anywhere in the Territory, (B) the royalty rate for the Xxxxxxx License
Agreement shall be [*]
of
Net Account Revenue payable to Supplier provided that the royalty
will
cease upon the expiration of the last Supplier Patent Right, (C)
the Term
of the Xxxxxxx License Agreement shall be indefinite, and (D) the
Xxxxxxx
License Agreement shall include the right to sublicense third parties.
Upon conversion to a Xxxxxxx License Agreement, Supplier will promptly
disclose all Licensed Intellectual Property to Xxxxxxx. All grants
pursuant to this Section
11.7
shall include the right on the part of Xxxxxxx to make or have made
the
Product by Xxxxxxx, a Xxxxxxx Affiliate or a third party contractor.
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
13
|
11.8
|
Effect
of Termination.
Upon termination, Supplier shall promptly stop all work and observe
Xxxxxxx’x instructions regarding work in process.
|
|
12.
|
DEFECTIVE
PRODUCT
|
|
12.1
|
Remedies
for Defective Product.
Supplier shall promptly replace or correct defects in any Product,
which
Xxxxxxx reasonably deems is not or may not be in compliance with
the
Specifications or poses a health and/or safety risk (in any such
case, a
“Defective Product”), without expense to Xxxxxxx. If Supplier does not
promptly correct defects or replace Defective Products, Xxxxxxx may
notify
Supplier and make the corrections or replace the Product itself or
from a
third-party supplier and charge Supplier for all costs and expenses
incurred by Xxxxxxx in doing so.
|
|
12.2
|
Inspection.
The inspection, test, acceptance, or use of Product does not affect
any of
Supplier's obligations to Xxxxxxx. Representations and warranties
survive
inspection, test, acceptance, and use of Product. Supplier's
representations and warranties run to Xxxxxxx, its successors, and
assigns.
|
|
13.
|
EQUIPMENT,
molds and tooling
|
|
13.1
|
Equipment.
|
|
(A)
|
Supplier
Equipment.
From time to time, Xxxxxxx may request that Supplier purchase and
place
specific equipment at the Supplier’s facility for the sole purpose of
producing the Products (the “Supplier Equipment”), and Supplier agrees to
comply with such request(s). Supplier shall not use the Supplier
Equipment
for any purpose other than for production of the Products, unless
Xxxxxxx
has provided its prior written approval, and if such approval is
given
then Xxxxxxx will be credited for Supplier Equipment amortization
at a
rate to be agreed as part of the approval process. The Supplier Equipment
is listed in Schedule
13.1
attached hereto, which will be reviewed and updated annually, if
necessary, no later than February 15 of each year. Schedule
13.1
also describes, for each item of Supplier Equipment, the amortization
schedule for purposes of determining Xxxxxxx’x Supplier Equipment purchase
rights and obligations and Supplier’s sale obligations in the event of a
withdrawal, termination or conversion of this Agreement, as further
described in Section
13.3
below.
|
14
|
(B)
|
Xxxxxxx
Equipment.
Xxxxxxx may directly or indirectly purchase certain production equipment
for use by the Supplier at Supplier’s facility for the sole purpose of
producing the Products (“Xxxxxxx Equipment”). Supplier shall not use the
Xxxxxxx Equipment for any other purpose. The Xxxxxxx Equipment is
listed
on Schedule
13.2
attached hereto, which shall be reviewed and updated annually, if
necessary, no later than February 15 of each year. Supplier shall
xxxx the
Xxxxxxx Equipment as being owned by Xxxxxxx in a highly visible location
on or adjacent to the Xxxxxxx Equipment, in a manner acceptable to
Xxxxxxx. Supplier shall keep the Xxxxxxx Equipment free of any liens,
encumbrances or other rights of third
parties.
|
|
(C)
|
Risk
of Loss.
Supplier shall bear the entire risk of loss, damage, theft, or destruction
to the Supplier Equipment and Xxxxxxx Equipment (collectively the
“Equipment”). In addition, Supplier shall carry and maintain, at all times
and at its expense, physical damage insurance providing “all risks”
coverage for the Equipment and public liability and property damage
insurance in an amount levied upon the possession or use of the
Equipment.
|
|
(D)
|
Taxes
and Fees.
Supplier shall pay all fees, taxes and governmental charges imposed
or
levied upon the possession or use of the
Equipment.
|
|
(E)
|
Care
of Equipment/Indemnification.
Supplier shall, at its expense, keep the Equipment in good condition
and
working order and shall make all necessary adjustments, repairs,
services
and replacements in a manner consistent with prudent industry practice
and
subject to Xxxxxxx’x approval, from time to time. Supplier shall defend,
hold harmless and indemnify Xxxxxxx from and against any damage (including
incidental and consequential damages), expense (including reasonable
attorney’s fees), loss, claim, demand, or liability resulting from or
arising out of the use of the Xxxxxxx Equipment by Supplier, including
but
not limited to any personal injury, wrongful death or other claims.
|
|
(F)
|
Personal
Property. Supplier
shall ensure that the Equipment remains personal property even though
it
may be installed on real property. Supplier shall, at its expense,
comply
with all laws, rules, regulations, requirements, orders and guidelines
applying to the Equipment and its use (including, but not limited
to, all
requirements for safe operation of the Equipment), maintenance, repair,
condition, storage and operation. Supplier shall not use the Equipment
for
any function not intended by its manufacturer, or operate the Equipment
with any materials that do not meet the specifications of its
manufacturer. Supplier shall keep all Equipment free of liens, claims
and
encumbrances.
|
15
|
13.2
|
Molds
and Tooling.
The following governs all molds and tooling, if any, used by the
Supplier
to make Products:
|
|
(A)
|
Supplier
shall manufacture or have manufactured all molds and tooling required
to
manufacture the Products. The method by which the
cost
of the molds or tooling is funded is provided in Schedule
13.1.
|
|
(B)
|
In
the event new molds or tooling are required due to normal wear, or
the
molds or tooling become obsolete, Supplier shall replace such molds
or
tooling. The method by which the cost of the molds or tooling is
funded is
provided in Schedule
13.1.
|
| (C) | The provisions of Section 13.1 also apply to all molds and tooling. |
|
13.3
|
Xxxxxxx’x
Right to Purchase.
Xxxxxxx shall have the right (and in some instances shall have the
obligation) to purchase, and Supplier shall have the obligation to
sell,
all or any of the Supplier Equipment, molds, or tooling pursuant
to the
terms and conditions set forth in Schedule
13.1
attached hereto. Xxxxxxx’x purchase price for such Supplier Equipment,
molds, or tooling is set forth in Schedule
13.1.
In
that case, Supplier will promptly cooperate with Xxxxxxx to transfer
and
deliver such equipment to Xxxxxxx.
|
|
14.
|
INVENTORY
|
|
14.1
|
Seasonal
Carry-Over or Slow-Moving Inventory.
Xxxxxxx shall reimburse Supplier for raw material or component inventory
carrying costs for seasonal carry-over or slow-moving inventory.
Seasonal
carry-over or slow-moving inventory is defined as inventory purchased
by
Supplier under a Purchase Order for the exclusive use in the Products
which is not anticipated to be needed in the next one hundred twenty
(120)
days of production and is not obsolete. Seasonal carry-over or slow-moving
inventory does not include materials or components otherwise usable
by
Supplier or purchased without Xxxxxxx’x approval or under a Purchase
Order. Carrying costs shall mean the cost of warehousing, using a
third-party warehouse, and interest expense at Supplier’s Borrowing Rates.
Payment of such costs will commence thirty (30) days after the number
of
turns specified in the Price Template for the affected Product, or
as
otherwise agreed, and will discontinue when production begins again
for
the Product.
|
|
14.2
|
Closing
Inventories.
Supplier may rely upon Purchase Orders to purchase the materials
and
components necessary to assure the supply of Products. If Xxxxxxx
terminates the Agreement,
Xxxxxxx shall purchase Supplier's inventory of materials and components
at
Supplier’s cost, but only to the extent the inventory is dedicated solely
to the manufacture of Product and was purchased to supply Product
under a
Purchase Order. Xxxxxxx shall purchase finished Product that was
produced
in good faith against a Purchase Order at the price in effect as
of the
termination date. If Xxxxxxx decides not to purchase finished Product
on
the termination date, Xxxxxxx will purchase the finished Product
within
six (6) months after the termination date if Xxxxxxx pays Supplier
a
reasonable, mutually agreed upon monthly carrying cost. Upon termination,
Supplier shall cancel (if possible) open purchase orders for materials
and
components. Supplier shall assign non-cancelable orders to
Xxxxxxx.
All
requests that Xxxxxxx purchase finished
Products, materials or components pursuant to this Section
14.2
must be made by Supplier in writing within ninety (90) days after
the
later to occur of (a) notification by Xxxxxxx that such finished
Products, materials or components are obsolete, or (b) (i) in
the case of obsolete finished Products, the last manufacture by Supplier
of such finished Products or (ii) in the case of obsolete materials
or components, the last use of such materials or components by Supplier
in
the manufacture of Products.
|
16
|
14.3
|
Obsolescence.
Xxxxxxx shall purchase from Supplier at Supplier’s cost any materials or
components purchased in good faith against a Purchase Order that
are made
obsolete by a Xxxxxxx-approved change in the Specifications if Supplier
cannot use the materials or components to manufacture other products
or,
if compatible with the other products, the materials or components
are in
excess of Supplier's 120-day requirement when aggregated with other
stocks
on hand or on order. Xxxxxxx shall purchase finished Product that
becomes
obsolete as a result of reformulation, relabeling, or repackaging
if the
Product was originally produced in good faith against a Purchase
Order.
Xxxxxxx shall purchase Product at the price in effect on the date
of the
Purchase Order against which such Product was
manufactured.
|
|
14.4
|
Purchase
Condition.
Xxxxxxx’x obligation to purchase materials, components, or finished
Product under this Section
14
does not apply to materials, components, or Product not in compliance
with
applicable Specifications.
|
|
15.
|
INDEMNIFICATION
|
|
15.1
|
Supplier Indemnification.
|
|
(A)
|
Supplier
shall defend, hold harmless, and indemnify Xxxxxxx from and against
any
damage (including incidental and consequential damages), expense
(including reasonable attorney’s fees), loss, lawsuit, claim, demand, or
liability to the extent such results from or arises out of (i) any
omission, misrepresentation, negligence, or breach of this Agreement
by
Supplier; (ii) any allegation against Supplier that Supplier’s
manufacturing methods or equipment infringe upon, or constitute the
misappropriation of, the patent or other intellectual property rights
of
any third party; (iii) any allegation against Xxxxxxx that Xxxxxxx’x use
or sale of any Product, because manufactured using Supplier Patent
Rights
or Licensed Intellectual Property, infringes upon, or constitutes
the
misappropriation of, the intellectual property rights of any third
party;
(iv) any allegation that the materials or components used without
the
authorization of Xxxxxxx to manufacture and deliver Products infringe
upon, or constitute the misappropriation of, the patent or other
intellectual property rights of any third party; or (v) any allegation
that the materials or components used without the authorization of
Xxxxxxx
to manufacture and deliver Products caused any injuries or damages.
|
|
(B)
|
Supplier
shall defend, indemnify and hold Xxxxxxx harmless from and against
any
damage (including incidental and consequential damages), expense
(including reasonable attorney’s fees), loss, lawsuit, claim, demand, or
liability arising out of bodily injury (including death), property
damage,
and personal injury, to the extent such results from or arises out
of
Supplier’s use or possession of the Equipment.
|
17
|
(C)
|
Supplier
also hereby agrees to defend, hold harmless, and indemnify Xxxxxxx
against
any and all third party liability, claims, actions, suits, and expenses,
and any other damages incurred by a third party or Xxxxxxx arising
out of
Xxxxxxx’x use of Supplier’s Patent
Rights.
|
|
15.2
|
Xxxxxxx
Indemnification.
Xxxxxxx shall defend, indemnify and hold Supplier harmless from and
against any damage (including incidental and consequential damages),
expense (including reasonable attorney's fees), loss, lawsuit, claim,
demand, or liability arising out of bodily injury (including death),
property damage, or personal injury to the extent such arises out
of (i)
Xxxxxxx’x breach of this Agreement or (ii) Xxxxxxx’x production and sale
of Products pursuant to a Xxxxxxx License
Agreement.
|
|
15.3
|
Notice.
The parties shall promptly notify each other in writing of the institution
of any suit, claim, demand, or proceeding with respect to which a
party
may be entitled to indemnification.
|
|
15.4
|
Insurance.
Supplier shall carry insurance during the term of this Agreement
and for
at least two years thereafter as
follows:
|
|
(A)
|
Workers
Compensation and Employers Liability as required by law,
and
|
|
(B)
|
Comprehensive
General Liability Insurance, which includes, without limitation,
bodily
injury liability, personal injury liability, property damage liability,
products liability, and completed operations liability
coverage.
|
|
15.5
|
Insurance
Amounts.
Supplier’s insurance must have total limits of at least US$10 million for
each occurrence, combined single limit for bodily injury and property
damage, including personal injury liability, products liability,
contractual liability, and completed operations liability. Supplier
shall
name Xxxxxxx as an “additional named insured” on the insurance
policies.
|
|
15.6
|
Certificate
of Insurance.
Within thirty (30) days after execution of this Agreement, Supplier
shall
provide to Xxxxxxx a Certificate of Insurance showing Supplier, the
issuing insurance company, the type of insurance, the policy number,
the
effective date, the expiration date, and the limits of liability.
The
insurance must provide for at least thirty (30) days written notice
to the
parties regarding cancellation or material change in the
insurance.
|
|
16.
|
INSPECTIONS
AND RECORDS
|
|
16.1
|
Right
to Inspect.
Xxxxxxx may, during regular business hours access any of Supplier’s
premises to examine (i) Supplier’s records relating to its performance
under this Agreement, and (ii) materials, components, manufacturing
facilities, procedures, and Product in any state of production or
delivery. Xxxxxxx’x inspection of Product (or its election not to inspect)
does not operate as a waiver of Xxxxxxx’x right to reject and return
Product under Section
12.
|
|
16.2
|
Retention
of Records.
Supplier shall maintain books and records relating to this Agreement
for
at least three (3) years.
|
18
|
16.3
|
Retain
Samples.
Supplier shall maintain retain samples and manufacturing records
related
to any Product for at least three (3) years after such Product has
been
de-listed by Xxxxxxx.
|
|
16.4
|
Financial
Statements.
Supplier shall give Xxxxxxx a copy of its (i) annual report if it
is a
public company or (ii) audited financial statements if it is a
privately-owned company.
|
|
16.5
|
Audits.
Supplier shall carry out regular (at least once every six (6) months)
and
diligent audits of its manufacturing and supply chain processes and
procedures and record keeping to ensure it is complying with the
terms of
this Agreement. Xxxxxxx shall have the right, but not the obligation,
to
require Supplier to carry out further audits in addition to the regular
audits referred to above.
|
|
17.
|
CONFIDENTIALITY
|
|
17.1
|
Definition.
"Confidential Information" means any information disclosed by Xxxxxxx
relating to its products or business. Confidential Information may
be
disclosed in oral, written, visual, or physical form by Xxxxxxx employees
or by other persons disclosing under Xxxxxxx authorization. Information
will not be considered Confidential Information if it can be shown
to have
been:
|
|
(A)
|
Rightfully
in Supplier’s possession prior to the date of Xxxxxxx'x disclosure to
Supplier,
|
|
(B)
|
Available
to the public prior to the date of Xxxxxxx'x disclosure to Supplier
or to
have become available to the public after Xxxxxxx'x disclosure without
any
unauthorized act or omission by
Supplier,
|
|
(C)
|
Disclosed
to Supplier without restriction by a third party who had a right
to
disclose and was not under an obligation of confidence to Xxxxxxx,
or
|
|
(D)
|
Independently
developed by Supplier by a person having no access to the Confidential
Information.
|
Confidential
Information will not be deemed to be generally available to the public or in
Supplier’s possession merely because it may be embraced by a more general
disclosure or merely because it may be derived from combinations of disclosures
generally available to the public or in Supplier’s possession.
|
17.2
|
Confidentiality
Obligation.
Supplier shall not disclose any Confidential Information to any third
party or use or reproduce any Confidential Information for any purpose
other than to carry out its obligations under the Agreement. Supplier
will
disclose Confidential Information only to its employees who have
a need to
know. However, Supplier may disclose Confidential Information in
compliance with applicable law or an order of a court of competent
jurisdiction if Supplier gives Xxxxxxx prompt, advance notice of
its need
to disclose and cooperates with Xxxxxxx in an effort to narrow or
avoid
such disclosure, obtain any available protective order, or the like.
Supplier agrees not to use any reference to Xxxxxxx or its products
or
trademarks, including, but not limited to, its logos, in Supplier’s
advertising, web page, or other materials given or exposed to third
parties without Xxxxxxx'x express prior written permission granted
by a
Xxxxxxx officer. Notwithstanding anything else herein, Xxxxxxx
acknowledges and agrees that Supplier must comply with certain SEC
disclosure requirements, and may include reference to Xxxxxxx and
this
Agreement in documents filed with the SEC and related disclosure
materials. Supplier shall redact from such disclosures any confidential
business information to be extent permitted by the SEC. Supplier
shall
provide Xxxxxxx with an advance copy of any such SEC filings that
include
a reference to Xxxxxxx or this Agreement.
|
19
|
17.3
|
Return
of Confidential Information.
Xxxxxxx may request the return of the Confidential Information at
any
time. If Xxxxxxx makes that request, Supplier will promptly comply,
returning to Xxxxxxx any and all written or physical embodiments
of the
Confidential Information that are then in Supplier’s possession or
control, including all physical or electronic
copies.
|
|
17.4
|
Time
Limitation.
The confidentiality obligations in this Section
17 remain
in effect for a period of three (3) years following termination of
this
Agreement, except that information identified by Xxxxxxx as strictly
confidential will be maintained in confidence as long as it is
confidential as defined under Section
17.1.
|
|
17.5
|
Additional
Obligation.
The obligations in this Section
17
do
not abrogate, and are in addition to, any prior confidentiality agreements
entered into between Supplier and
Xxxxxxx.
|
|
18.
|
FORCE
MAJEURE
|
|
18.1
|
Force
Majeure.
|
|
(A)
|
Xxxxxxx
Excuse.
Xxxxxxx may delay delivery of Products occasioned by causes beyond
its
control. Supplier shall hold delayed Products at Xxxxxxx’x direction and
shall deliver the Products when the cause for the delay ends. Xxxxxxx
is
responsible only for Supplier's direct additional costs in holding
the
Products or delaying performance of this Agreement at Xxxxxxx'x
request.
|
|
(B)
|
Supplier
Excuse.
Supplier will be excused if delivery is delayed by the occurrence
of
unforeseen or unforeseeable events or by causes beyond its control,
provided Supplier promptly notifies Xxxxxxx of the events and gives
Xxxxxxx a revised delivery schedule. If a delay exceeds thirty (30)
days
from the original delivery date, Xxxxxxx may cancel the affected
Purchase
Order and convert this Agreement to the Xxxxxxx License Agreement
pursuant
to Section
11.4
above in order to manufacture or have manufactured that quantity
of
Product contained in Xxxxxxx’x cancelled Purchase Orders. Xxxxxxx shall be
entitled to pre-qualify its own production line or that of a third
party
in order to prepare for such an event. If Supplier's production is
only
partially restricted or delayed, Supplier shall use its best efforts
to
accommodate Xxxxxxx'x requirements and shall give unfilled Xxxxxxx
Purchase Orders preference and priority over those of other customers
that
were placed after Xxxxxxx'x Purchase
Orders.
|
|
19.
|
DISPUTE
RESOLUTION
|
|
19.1
|
Dispute.
Any dispute arising out of or relating to this Agreement, except
for
disputes involving or arising out of third-party claims described
in
Section
15,
(“Dispute”) shall be resolved in accordance with the procedures specified
in this Section
19,
which shall be the sole and exclusive procedures for the resolution
of any
such disputes.
|
20
|
19.2
|
Non-binding
Negotiation.
The parties shall attempt in good faith to resolve any Dispute promptly
by
negotiation between executives who have authority to settle the
controversy and who are at a higher level of management than the
persons
with direct responsibility for administration of this Agreement.
Any party
may give the other party written notice of any Dispute not resolved
in the
normal course of business. Within twenty (20) business days after
delivery
of the notice, the receiving party shall submit to the other a written
response. The notice and the response shall include (a) a statement
of
such party’s position and a summary of arguments supporting that position,
and (b) the name and title of the executive who will represent that
party
and of any other person who will accompany the executive. Within
ten (10)
business days after delivery of the responding party’s response, the
executives of both parties shall meet at a mutually acceptable time
and
place, and thereafter as often as they reasonably deem necessary,
to
attempt to resolve the Dispute. All reasonable requests for information
made by one party to the other will be honored. All negotiations
pursuant
to this clause are confidential and shall be treated as compromise
and
settlement negotiations for purposes of applicable rules of
evidence.
|
|
19.3
|
Non-binding
Mediation.
If a Dispute has not been resolved by negotiation within thirty (30)
days
of the disputing party’s notice, or if the parties fail to meet within
twenty (20) days, one or both parties may request in writing to settle
the
dispute by mediation under the then current CPR Model Mediation Procedure
for Business Disputes. Unless otherwise agreed, the parties will
select a
mediator from the CPR Panel of Neutrals and shall notify CPR to initiate
the selection process. Unless otherwise agreed, mediation shall take
place
in Milwaukee, Wisconsin.
|
| 19.4 | Arbitration. |
|
(A)
|
If
a Dispute is not resolved by a non-binding procedure as provided
herein
within sixty (60) days of the delivery of the original notice, one
or both
of the parties may request in writing that it be settled by arbitration
in
accordance with the then current CPR Non-Administered Arbitration
Rules by
a sole arbitrator mutually acceptable to the parties provided, however,
that if either party will not participate in a non-binding procedure,
the
other may initiate arbitration before expiration of the above period.
The
arbitration shall be governed by the United States Arbitration Act,
9
U.S.C. §1-26, and any court having jurisdiction thereof may enter judgment
upon the award rendered by the arbitrator. The place of arbitration
shall
be Milwaukee, Wisconsin. The arbitrator is empowered to award damages
as
provided in this Agreement.
|
|
(B)
|
The
parties recognize that a party may need a preliminary remedy or other
assistance of a court in aid of arbitration hereunder. The parties
hereby
consent to the jurisdiction of the courts in Wisconsin with respect
to any
application for preliminary injunctive relief or other assistance
in
connection with any arbitration hereunder and for entry of judgment
with
respect to the award of the
arbitrator.
|
|
(C)
|
The
statute of limitations of Wisconsin applicable to the commencement
of a
lawsuit shall apply to the commencement of an arbitration hereunder,
except that no defenses shall be available based upon the passage
of time
during any negotiation called for by the preceding paragraphs of
this
Section
19.
|
21
|
(D)
|
Each
party shall be responsible for its own arbitration costs, including
attorney fees.
|
|
19.5
|
Performance
Pending Dispute.
During the pendency of any Dispute under this Section 19,
the parties shall continue to perform all of their respective obligations
under this Agreement unless one party has terminated this Agreement
under
Section
11.
The obligations under this Section
19 may
survive termination at the sole discretion of the party terminating
the
Agreement under Section
11.
|
|
20.
|
INDEPENDENT
CONTRACTOR
|
|
20.1
|
Independent
Contractor.
The parties are independent contractors. This Agreement does not
create a
partnership, joint venture, employer-employee, principle-agent, or
any
similar relationship between the parties. Neither party has the right
or
authority to assume or create obligations or responsibilities, express
or
implied, on behalf of the other and neither may bind the other in
any
manner or thing whatsoever.
|
|
21.
|
INTELLECTUAL
PROPERTY
|
|
21.1
|
Definitions.
|
|
(A)
|
"Intellectual
Property (IP)" shall mean any invention (whether patentable or not
and
including, but not limited to, apparatuses, procedures, and designs),
together with any data, writings subject to copyright, any patent,
patent
application, trademark, trade name, trade secret, service xxxx, drawing,
formula, method of treatment, processing technique, or other intellectual
property, and any secret know-how.
|
|
(B)
|
“Project
Intellectual Property” shall mean Intellectual Property relating to the
Product, which includes any Improvements as defined herein below,
whether
invented solely by Supplier (also sometimes referred to in this
Section
21
as
“CTI”), solely by Xxxxxxx, or jointly by Supplier and Xxxxxxx under this
Agreement, but shall not include any of Xxxxxxx’x or Supplier’s
pre-Agreement Intellectual Property, the latter constituting Background
Intellectual Property, as defined herein below (except for that portion
of
Supplier’s Background Intellectual Property which comprises Supplier
Patent Rights or Xxxxxxx'x Patent Rights, each as defined above,
and as
specifically identified in current Schedule
1.9).
|
|
(C)
|
“Improvements”
shall mean any and all contributions to Project Intellectual Property
under this Agreement, [*],
including but not limited to added features, enhancements or modifications
of the Product, including the use of, or means or methods of
manufacturing, the Product.
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
22
|
(D)
|
“Background
Intellectual Property” shall mean all Intellectual Property owned
respectively by Supplier or Xxxxxxx prior to this Agreement, but
not
including Intellectual Property created under said separate Term
Sheet.
|
|
(E)
|
“Licensed
Intellectual Property” shall mean the subset of Supplier's Background
Intellectual Property (including all of Supplier’s Patent Rights
identified in Schedule
1.9)
which is necessary for Xxxxxxx'x manufacture and sale of the Product,
any
improved or modified Product or any substantially similar product
in the
event that Xxxxxxx converts this Agreement to a Xxxxxxx License Agreement
pursuant to Sections
11.4 or 11.7
hereof.
|
| (F) | [*] |
|
21.2
|
Rights
to Intellectual
Property.
|
|
(A)
|
No
disclosure of Confidential Information will be deemed by implication
or
otherwise to vest in Supplier any ownership rights in any of Xxxxxxx'x
Intellectual Property, Project Intellectual Property, or Background
Intellectual Property. In addition, no disclosure of Confidential
Information, or any grant of rights to Xxxxxxx by Supplier hereunder
will
be deemed by implication or otherwise to vest in Xxxxxxx any ownership
rights in any of Supplier’s Background Intellectual Property.
Notwithstanding any of the foregoing, Supplier is hereby granted
a limited
license to use Xxxxxxx'x Project Intellectual Property to the limited
extent required to perform its obligations under this Agreement.
|
|
(B)
|
Except
as may be otherwise provided under this Agreement, each party shall
continue to solely own its respective Background Intellectual Property,
and nothing in this Agreement, apart from any actual grant a license,
shall be construed as a grant by one party of a license to the other
party
of any Background Intellectual Property owned by the one party as
of the
date of this Agreement.
|
|
(C)
|
Supplier
shall be entitled to a royalty-free, fully paid-up, non-transferable,
non-sublicensable, non-exclusive license back from Xxxxxxx under
all or
any part of Project Intellectual Property to allow Supplier to use
the
Project Intellectual Property for a term running to the last to expire
patent included within such Project Intellectual Property in the
following
Supplier Field of Use: (i) Supplier’s commercialized zippered vacuum bags
with a molded external valve sold either alone or with a [*] or [*]
vacuum
pump through department specialty stores (e.g. Kohls Department stores
and
Bed, Bath and Beyond), sporting goods stores (e.g. Gander Mountain
and
Dick’s Sporting Goods) and the sporting goods/outdoor section of Mass
Merchandisers (e.g. Wal-Mart sporting goods department) or direct
sales
through internet channels, and (ii) airtight vacuum bags sold for
commercial uses but excluding sales to the Consumer Field of Use.
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
23
|
(D)
|
The
spirit of this Agreement shall be one of open collaboration. Upon
completion of any development work hereunder, both Supplier and Xxxxxxx
shall provide the other with details of fruits of all results, including
documentation (electronic and hard copies) and any tangible materials
associated therewith so that compliance with terms of this Agreement
may
be fully met. Each party shall promptly disclose, in writing to the
other,
all Project Intellectual Property made, developed, or conceived which
arises out of work conducted pursuant to this Agreement, said separate
Term Sheet, or out of any Confidential Information provided to one
party
by the other.
|
|
(E)
|
Supplier
shall continue to be responsible for its own Background Intellectual
Property, and shall pay all maintenance fees due and payable on said
subset of Supplier's Background Intellectual Property under which
Xxxxxxx
is licensed hereunder. Supplier agrees to cooperate with Xxxxxxx
in the
perfection of Xxxxxxx’x rights to Project Intellectual Property, including
any required assistance in the preparation and execution of all documents
(including patent applications, assignments, and updates or additions
to
Schedule
1.9,
of any and all patent rights), in a timely
manner.
|
|
(F)
|
Xxxxxxx
will have the sole right to determine when and if it is appropriate
to
prosecute patent infringement by others within Xxxxxxx’x Consumer Fields
of Use concerning Project Intellectual Property. In the event of
any such
prosecution of patent infringement, Xxxxxxx shall have the absolute
right
to control all aspects of such prosecution and Supplier hereby agrees
to
become an indispensable party to any lawsuit brought by Xxxxxxx.
Xxxxxxx
will pay the costs of such prosecution. However, with respect to
any
patent infringement that occurs within CTI’s Fields of Use, Supplier shall
be free to pursue any patent infringement actions against third parties.
|
|
(G)
|
The
parties' obligations and rights under said Term Sheet will survive
any
early termination of this Agreement. Moreover, in the event of discrepancy
between said Term Sheet and this Agreement, said Term Sheet shall
be
controlling and shall govern.
|
|
(H)
|
In
the event of termination and conversion of this Agreement to a Xxxxxxx
License Agreement pursuant to Section
11.7 hereof,
then Xxxxxxx shall have a non-exclusive license to Supplier’s Background
Intellectual Property to manufacture, have manufactured, distribute
and
sell the Product, any improved or modified product, and any substantially
similar product.
|
|
21.3
|
Assistance
by CTI.
CTI shall provide all reasonable assistance to Xxxxxxx to effectuate
the
requirements of this Section
21,
including, but not limited to, providing all necessary information
and
executing all necessary documents requested by
Xxxxxxx.
|
|
22.
|
REGULATORY
COMPLIANCE
|
As
and
when requested by Xxxxxxx in writing, Supplier shall promptly provide Xxxxxxx
with all information necessary for Xxxxxxx to comply with all legal and
regulatory requirements relating to the Products or any products in which the
Products are to be incorporated, including, without limitation, the
registration, packaging, labeling and provision of safety information (e.g.,
material safety data sheet) in all countries where products incorporating the
Products are sold from time to time. Xxxxxxx may disclose such information
as
required by applicable law.
24
|
23.
|
MISCELLANEOUS
|
|
23.1
|
Governing
Law.
This Agreement and the relationship of the parties hereunder is governed
by and interpreted in accordance with the internal laws of the State
of
Wisconsin without regard to its principles of conflict of
laws.
|
|
23.2
|
Survivability.
The claims of either party for indemnification or breach of warranty
under
this Agreement, as well as Sections
10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21
shall survive termination of this
Agreement.
|
|
23.3
|
Modification.
This Agreement is not modified or supplemented by any agreement or
representation that is not contained in this document. Modifications
or
supplements to the Agreement must be agreed to in writing and signed
by
the parties.
|
|
23.4
|
Assignment.
The rights and duties under this Agreement are not assignable or
delegable
by either party without the other party's prior written consent,
except
that Xxxxxxx may assign or delegate this Agreement, or any portion
thereof, to a Xxxxxxx Affiliate without Supplier’s consent and Supplier
may assign this Agreement to a third party purchaser of all or
substantially all of its business (including all assets related to
the
performance of this Agreement).
|
|
23.5
|
Time
of the Essence.
Time and punctual performance are of the
essence.
|
|
23.6
|
Waiver.
Waiver by either party of nonperformance or any breach of this Agreement
does not constitute a waiver of any subsequent nonperformance or
other
breach of the same or any other
provision.
|
|
23.7
|
Notices.
Notices must be in writing and must be sent to the recipient at the
address set forth at the beginning of this Agreement. Either party
may
change the address to which notice must be given by written notice
to the
other party. Notices are effective upon receipt or 10 days after
sending,
whichever comes first, if the notice is sent by an overnight delivery
service or if mailed postage prepaid, certified or registered mail,
return
receipt requested.
|
|
23.8
|
Severability.
If any provision of this Agreement is held to be invalid, the validity
of
the remainder of the Agreement will not be affected, and the rights
and
obligations of the parties will be construed and enforced as if the
Agreement did not contain the invalid provision. The provisions of
this
Agreement are severable.
|
|
23.9
|
Entire
Agreement.
This Agreement and the documents referred to herein constitute the
entire
agreement between the parties relating to the subject matter of this
Agreement. It supersedes any other agreement between the parties
relating
to this subject matter. It does not in any way alter, affect, or
set forth
the terms of a contractual relationship between the parties relating
to a
subject matter other than that set forth in this
Agreement.
|
|
23.10
|
UN
Convention.
The United Nations Convention on Contracts for the International
Sale of
Goods shall not apply to this
Agreement.
|
25
|
23.11
|
No
Rule of Strict Construction.
The parties chose the language used in this Agreement to express
their
mutual intent. No rule of strict construction is to be applied against
either party.
|
|
23.12
|
Section
Headings.
The section headings in this Agreement are inserted for convenience
only
and are in no way to be construed as part of this Agreement or as
a
limitation or enlargement of the scope or meaning of the particular
section to which it refers and shall not affect the interpretation
of any
provisions of this Agreement.
|
|
23.13
|
Schedules
and Exhibits.
All schedules and exhibits referred to herein are intended to be
and
hereby are specifically made a part of this
Agreement.
|
| Signed: | ||||
| CTI Industries Corporation | S. C. Xxxxxxx & Son, Inc. | |||
| By: |
/s/
Xxxx Xxxxxx
|
By: |
/s/
Xxxxxx X.
Xxxxxx
|
|
| Name: |
Xxxx
Xxxxxx
|
Name: |
Xxxxxx
X. Xxxxxx
|
|
| Date: |
February
1, 2008
|
Date:
|
February
1, 2008
|
|
26
SCHEDULE
1.9
| Assignee | Patent Number and Title |
| CTI Industries Corporation | US Patent Number 6,033,113 for "Seal for Zipper-Type Plastic Bags and the Like" |
| CTI Industries Corporation | US Patent Number 6,984,278 for "Method for Texturing a Film" |
| CTI Industries Corporation | US Patent Number 7,305,742 for "Seal for Zippered Bag" |
27
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
|
SCHEDULE
2.1
|
||
|
Product
List
|
| Item Code | Description |
Initial
Price
|
|
200263
200264
200261
|
Quart
vacuum bag
Gallon
vacuum bag
[*] vacuum
pump
|
[*]
[*]
[*]
|
|
Product
Prices
|
||
|
The
Prices for the Products are subject only to the Price Adjustment
Mechanism
in this Schedule
2.1
and Sections
4.2 and 4.4
of
the Agreement. All prices are in USD.
|
||
|
The
Price is based on a print and extrusion run equivalent to [*]
quart bags or [*]
gallon bags.
|
||
|
Bag
- Price Defined
|
||||||
|
Item
Code
|
200263
|
200264
|
||||
|
Bag
Description
|
quart
vacuum
|
gallon
vacuum
|
||||
|
$/bag
|
$/bag
|
|||||
|
[*]
|
[*]
|
(1)
|
Bag
|
|||
|
[*]
|
[*]
|
(2)
|
Depreciation
|
|||
|
[*]
|
[*]
|
(3)
|
Zipper
|
|||
|
(4)
|
Valve
cost based
|
|||||
|
on
number of bags
|
||||||
|
purchased
|
||||||
|
[*]
|
[*]
|
0
to [*]
|
||||
|
[*]
|
[*]
|
[*]
to
[*]
|
||||
|
[*]
|
[*]
|
[*]
and
over
|
||||
|
(5)
|
Total
bag price based
|
|||||
|
|
on
number of bags
|
|||||
|
purchased
|
||||||
|
[*]
|
[*]
|
0
to [*]
|
||||
|
[*]
|
[*]
|
[*]
to
[*]
|
||||
|
[*]
|
[*]
|
[*]
and over
|
||||
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
28
|
[*]
|
[*]
|
(6)
|
Conversion
Cost
|
|||
|
(Included
in (1) Bag cost)
|
||||||
|
(1)
|
Bag
|
|||||
|
Includes:
|
-
bag material cost, scrap, finance fee, pallets, shipment packaging
materials, labor and margin to produce the bag
-
cost to ship the valve to Supplier, scrap cost of the valve and
cost to
apply the valve and zipper
|
|||||
|
-
folding each quart and gallon bag one time in half and
packing
|
||||||
|
Excludes:
|
-
cost of zipper and zipper scrap
|
|||||
|
-
cost of the valve
|
||||||
|
-
margin on the zipper and valve
|
||||||
|
(2)
|
Depreciation
|
|||||
|
Depreciation,
see Schedule
13.1
|
||||||
|
Depreciation
is based on [*]
lines and [*]
bags
(total of quart and gallon).
|
||||||
|
Depreciation
shall be removed from the price after [*]
bags have been purchased.
|
||||||
|
(3)
|
Zipper
|
|||||
|
There
shall be no margin cost for the zipper.
|
||||||
|
Shipping
cost from [*], to Barrington, IL is included in the zipper
cost.
|
||||||
|
If
the cost of the zipper changes, the cost of the zipper shall be passed
through to Xxxxxxx in the price of the finished bag.
|
||||||
|
The
zipper cost is the following:
|
||||||
|
quart
|
gallon
|
|||||
|
$/ft
|
[*]
|
[*]
|
||||
|
in/bag
|
[*]
|
[*]
|
||||
|
$/bag
|
[*]
|
[*]
|
||||
|
$/bag+5%scrap
|
[*]
|
[*]
|
||||
|
(4)
|
Valve
|
|||||
|
There
shall be no margin cost for the valve.
|
||||||
|
If
the cost of the valve changes, the cost of the valve shall be passed
through to Xxxxxxx in the cost of the finished bag.
|
||||||
|
Based
on the total number of quart and gallon bags purchased by Xxxxxxx,
the
cost of the valve is as follows:
|
||||||
|
Valve
- clear
|
||||||
|
$/valve
|
valves
(bags) purchased
|
|||||
|
[*]
|
0
to [*]
|
|
||||
|
[*]
|
[*]
to
[*]
|
|||||
|
[*]
|
[*]
and over
|
|||||
|
If
the valve is changed from a clear valve to a colored valve, the bag
purchases are cumulative.
|
||||||
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
29
|
(5)
|
Total
bag price
|
|||||
|
(6)
|
Conversion
Cost
|
|||||
|
Included
in (1) Bag cost.
|
||||||
|
Conversion
Cost includes the:
|
||||||
|
-
production labor
|
||||||
|
-
overheads associated with production (factory, supplies, depreciation
(excluding the bag production equipment), utilities)
|
||||||
|
-
expenses associated with ordering, handling, and storing of
inventory
|
||||||
|
-
profit
|
||||||
|
Pump
- Price Defined
|
|||||||
|
Pump
|
|||||||
|
$/pump
|
|||||||
|
[*]
|
(1)
|
Pump
|
|||||
|
[*]
|
(2)
|
Depreciation
|
|||||
|
Pump
Price
|
[*]
|
||||||
|
(1)
|
Pump
|
||||||
|
Based
on PIH
|
|||||||
|
(2)
|
Depreciation
|
||||||
|
Depreciation,
see Schedule
13.1
|
|||||||
|
Depreciation
is based on [*]
pumps.
Depreciation
shall be removed from the price after [*] pumps have been
purchased.
|
|||||||
Price
Adjustment Mechanism
Bag
- [*]
Adjustment
The
bag
[*]
are
[*]
and
[*]
a
[*]
a [*].
Supplier
purchases the [*],[*],[*] and
the [*].
The
[*]
Adjustments of the [*]
sheet
and the [*]
film are
based on the [*]
costs of
the manufacturers that produce the [*]
and
[*]
that
Supplier purchases. The [*]
cost is
based upon [*]
quarterly average pricing and is calculated on a formula that is subject to
Xxxxxxx’x approval. All Bag [*]
cost
adjustments will be subject to review and approval by Xxxxxxx.
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
30
Product
prices will be updated quarterly, effective the first day of each calendar
quarter, beginning April 1, 2008, based on the cost of [*]
film,
[*],[*]
and
[*]
used
in
the Price.
Each
March 15, June 15, September 15, and December 15 the new cost will be calculated
and entered into the Price and submitted to Xxxxxxx by the Supplier. The updated
Product prices will be effective on the following April 1, July 1, October
1,
and January 1, respectively.
The
[*]
Adjustment for the [*]
and
[*]
used
in
the Price will be the difference of the previous cost of the [*]
and the
previous cost of the [*]
multiplied times the ratio of the new Third-Party Average [*]
Price
over the previous quarter Third-Party Average [*]
Price.
The
Third-Party Average [*]
Price
is
defined as the simple average of the monthly [*]
prices
as published by the Chemical Markets Associates, Inc. (CMAI) Global Plastics
& Polymers Market Report, using the first 3 months of the 4 months
immediately preceding the effective date.
| Quarter |
Months
used to Calculate Quarterly
Third-Party Average [*]
Price
|
Effective Date | |||
|
Q1
|
September, October, November | January, 1 | |||
|
Q2
|
December, January, February | April, 1 | |||
|
Q3
|
March, April, May | July, 1 | |||
|
Q4
|
June, July, August | October, 1 | |||
Monthly
prices will be taken from:
Chemical
Markets Associates, Inc. (CMAI) Global Plastics & Polymers Market Report,
Market Statistics
|
Product: [*]
|
|||||
|
Market:
|
North America | ||||
|
Type:
|
Domestic Market (Contract) Extrusion Coating | ||||
|
Unit
Price:
|
Cents/Pound | ||||
| Inco Term: | Delivered | ||||
| Product: [*] | |||||
| Market: | North America | ||||
| Type: | Domestic Market (Contract) Octene Film | ||||
| Unit Price: | Cents/Pound | ||||
| Inco Term: | Delivered |
These
monthly prices will be used without regard to any notations, footnotes,
adjustments or otherwise explaining rational for the published price. In other
words, the price as published will be the price used (i.e. “non-market”
adjustments will apply). If any of the three months are not “closed”, the
average will be calculated using those months of the three that are
closed.
The
[*]
and
[*]
initial
cost per bag and initial CMAI Third-Party Average [*]
Prices
are:
|
Bag
|
[*]
|
[*]
|
weight,
|
[*]
|
CMAI
|
|
size
|
type
|
$/lb
|
pound
|
cost
|
initial
|
|
|
|
|
|
$/bag
|
Cent/lb
|
|
|
|
||||
|
quart
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
quart
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
|
|
||||
|
gallon
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
gallon
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
31
The
Bag - [*] Adjustment example calculation for the [*] and [*] is
given:
Bag
Size:
quart
Fourth
Quarter Price: [*]
$each
|
[*]
|
Third-Party
Average [*]
Price
|
|
[*]
Cost Adjustment
|
|
|
Type
|
|
|
||
|
[*]
|
|
●
Previous quarter [*]
cost subtracted from the previous quarter [*]
cost times the ratio of the new quarter Third-Party Average [*]
Price over the previous quarter Third-Party Average [*]
Price.
|
||
|
|
CMAI
Contract-Market
|
|
|
|
|
|
|
|
||
|
|
PRODUCT
|
[*]
|
|
|
|
|
MARKET
|
North
America
|
|
|
|
|
TYPE
|
Domestic
Market (Contract)
|
|
|
|
|
[*]
|
|
|
|
|
|
UNIT
PRICE
|
Cents/Pound
|
|
Example:
|
|
|
INCO
TERM
|
Delivered
United States
|
|
|
|
|
|
●
Third-Party
Average [*]
Price for Q1= [*]
Cents/Pound
|
||
|
|
|
●
Previous quarter (Q4) Third-Party Average [*]
Price = [*]
Cents/Pound
|
||
|
|
Example:
|
|
●
Previous quarter (Q4) [*]
cost = [*]
$/bag
|
|
|
|
|
|
||
|
|
Quarter:
Q1
|
Cents/Pound
|
|
●
[*]
Adjustment for Q1 = [*]
x
[*]/[*]-[*]=[*]$/bag
|
|
|
September
2007
|
[*]
|
|
|
|
|
October
2007
|
[*]
|
|
|
|
|
November
2007
|
[*]
|
|
|
|
|
|
|
||
|
|
●
Third-Party Average [*]
for Q1 = ([*]+[*]+[*])/3
= [*]
Cents/Pound
|
|
|
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
32
|
[*]
|
Third-Party
Average [*]
Price
|
|
[*]
Cost Adjustment
|
|
|
Type
|
|
|
||
|
[*]
|
|
●
Previous quarter [*]
cost subtracted from the previous quarter [*]
cost times the ratio of the new quarter Third-Party Average [*]
Price over the previous quarter Third-Party Average [*]
Price.
|
||
|
|
CMAI
Contract-Market
|
|
|
|
|
|
|
|
||
|
|
PRODUCT
|
[*]
|
|
|
|
|
MARKET
|
North
America
|
|
|
|
|
TYPE
|
Domestic
Market (Contract)
|
|
|
|
|
[*]
|
|
|
|
|
|
UNIT
PRICE
|
Cents/Pound
|
|
Example:
|
|
|
INCO
TERM
|
Delivered
United States
|
|
|
|
|
|
●
Third-Party
Average [*]
Price for Q1= [*]
Cents/Pound
|
||
|
|
|
●
Previous quarter (Q4) Third-Party Average [*]
Price = [*]
Cents/Pound
|
||
|
|
Example:
|
|
●
Previous quarter (Q4) [*]
cost = [*]
$/bag
|
|
|
|
|
|
||
|
|
Quarter:
Q1
|
Cents/Pound
|
|
●
[*]
Adjustment for Q1 = [*]
x
[*]/[*]-[*]
=
[*]
$/bag
|
|
|
September
2007
|
[*]
|
|
|
|
|
October
2007
|
[*]
|
|
|
|
|
November
2007
|
[*]
|
|
|
|
|
|
|
||
|
|
●
Third-Party Average [*]
for Q1 = ([*]+[*]+[*])/3
= [*]
Cents/Pound
|
|
|
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
33
|
Bag
|
[*]
|
[*]
|
CMAI
|
CMAI
|
[*]
Adjustment
|
|
|
size
|
type
|
cost
Q4
|
Q4
|
Q1
|
||
|
|
|
$/bag
|
Cent/lb
|
Cent/lb
|
|
|
|
|
|
|||||
|
quart
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
|
quart
|
[*]
|
[*]
|
[*]
|
[*]
|
[*]
|
|
|
|
|
|||||
|
|
|
adjustment
total
|
[*]
|
|||
|
|
|
Bag
price Q4
|
[*]
|
|||
|
|
|
|||||
|
|
|
|
Bag
price Q1
|
[*]
|
||
Pump
- [*]
and Currency Adjustment
The
pump
price shall be adjusted yearly for [*]
and
currency. The adjustment is determined during November for the effective date
of
January 1. The
currency is the [*]
dollar and the [*]
is [*]
and
[*].
The
[*]
Adjustment of the pump is based on the [*]
costs of
the manufacturer that produces the pump that Supplier purchases. The
[*]
and
currency adjustments to Pump prices are calculated per formulas to be agreed
by
Supplier and Xxxxxxx. Further, all pump price changes will be subject to review
and approval by Xxxxxxx.
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
34
SCHEDULE
2.3
SHIPMENT
AND SHIPPING PAYMENT TERMS
|
Item
|
Shipping
Terms
|
Shipping
Payment Terms
|
|
200263
quart vacuum bag
|
FCA
-
CTI
Industries Corporation
00000
X. Xxxxxx Xxxx
Xxxxxxxxxx,
Xxxxxxxx, XXX
|
Undelivered
Price
Xxxxxxx’x
3rd
party Billing
|
|
200264
gallon vacuum bag
|
FCA
-
CTI
Industries Corporation
00000
X. Xxxxxx Xxxx
Xxxxxxxxxx,
Xxxxxxxx, XXX
|
Undelivered
Price
Xxxxxxx’x
3rd
party Billing
|
|
200261
manual vacuum pump
|
DDP
- Racine, Wisconsin, USA
|
DDP
- Supplier
|
Xxxxxxx’x
Third Party Billing address:
S.
C.
Xxxxxxx & Son, Inc.
TransInternationnal
Co. Inc.
X00
X00000 Xxxxx Xxxxx
Xxxxxxxxx
Xxxxx, XX 00000
35
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
SCHEDULE
3.2
| Size | Price, $/bag (1) | |
| Quart | [*] | |
| Gallon | [*] |
(1)
Total
bag price based on Product Instruction Handbook.
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
36
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
SCHEDULE
6.1
| Product | Product introduction phase | Volume | ||
| Bags (total of 200263 and 200264) | January 1, 2008 to May 15, 2008 | [*] | ||
| Pumps (200261) | December 24, 2007 to March 15, 2008 | [*] | ||
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
37
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
SCHEDULE
6.2
| Year | Bags
Total
of 200263 and 200264
|
||
| 1 | May 15, 2008 to June 30, 2009 | [*] | |
| 2 | July 1, 2009 to June 30, 2010 | [*] | |
| 3 | July 1, 2010 to June 30, 2011 | [*] |
| Year | Pumps
200261
|
||
| 1 | March 16, 2008 to March 15, 2009 (1) | [*] | |
| 2 | March 16, 2009 to March 15, 2010 (1) | [*] | |
| 3 | March 16, 2010 to March 15, 2011 (1) | [*] |
(1)
date
offset due to delivery times from Taiwan
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
38
SCHEDULE
10.4(E)
MANUFACTURING
CODE OF CONDUCT
PURPOSE:
Inherent
in “This We Believe” is a corporate ethic and belief that’ S. C. Xxxxxxx &
Son, Inc. is a company comprised of many different kinds of diverse people
dedicated to fair treatment and equal opportunity for all. We expect our
business partners to share this ethic and to share our commitment to the
promotion of best practices and continuous improvement in employee safety and
health; compensation and benefits; conditions of employment; recognition of
the
rights of individuals; and non-discrimination in all aspects of
employment.
The
Company’s manufacturing operations worldwide will be guided by this statement of
principles and will expect and require its business associates and partners
(collectively the “Manufacturer”) to do so, as well.
THE
STANDARDS:
| 1. | Forced Labor: The manufacturer does not use forced labor in any form - prison, indentured, bonded or otherwise. |
| 2. | Child Labor: The manufacturer does not employ any person below the age of 16 to produce products. Where local standards are higher, no person under the legal minimum age will be employed. |
| 3. | Compensation: The manufacturer provides each employee at least the minimum wage, or the prevailing industry wage, whichever is higher; provides each employee a clear, written accounting for every pay period; and does not deduct from worker pay for disciplinary infractions. |
| 4. | Benefits: The manufacturer provides each employee at least all legally mandated benefits. Benefits vary by country, but may include meals or meal subsidies; transportation or transportation subsidies; other cash allowances; health care; child care; emergency, pregnancy or sick leave; vacation, religious, bereavement or holiday leave; and contributions for social security and other insurance, including life, health and worker’s compensation. |
| 5. | Hours of Work/Overtime: The manufacturer complies with legally mandated work hours; uses overtime only when each employee is fully compensated according to local law; informs each employee at the time of hiring if mandatory overtime is a condition of employment; and, on a regularly scheduled basis, provides one day off in seven, and requires no more than 60 hours of work per week, or complies with local limits if they are lower. |
| 6. | Management of Environment, Safety and Health (XXXX): The manufacturer has written health and safety guidelines, including those applying to employee residential facilities, where applicable; has a factory safety committee; complies with local legally mandated environmental, safety and health standards and Xxxxxxx’x environmental safety and health standards where applicable; provides Personal Protective Equipment (PPE) free of charge, and mandates its use; and complies with all applicable local environmental, safety and health regulations. |
|
7.
|
Immigration/Legally
Qualified to Work: The manufacturer ensures that all of its employees
are
properly documented and legally qualified to work for the manufacturer
in
the country where such employees are providing services as required
under
local immigration and related laws. The manufacturer also ensures
that any
subcontractor it uses to provide goods or services directly or indirectly
to Xxxxxxx meets these same
requirements.
|
|
8.
|
Documentation
and Inspection: The manufacturer maintains on file all documentation
needed to demonstrate compliance with these standards; agrees to
make
these documents available for Xxxxxxx or its designated auditor to
inspect
upon request; and agrees to submit to labor practices audits or
inspections with or without prior
notice.
|
39
SCHEDULE
10.4(F)
BUSINESS
CONDUCT AND ETHICS POLICY
|
I.
|
Background/Objectives
|
||
|
S.
C. Xxxxxxx & Son, Inc. has been guided by certain basic principles
since its founding in 1886. Our commitment to these principles -
embodied
in This
We Believe
-
encourages us to act with integrity at all times with all stakeholder
groups. The intent of this policy is to provide guidance for company
employees in the area of business gifts.
|
|||
|
II.
|
Policy
|
||
|
A.
|
(omitted)
|
||
|
B.
|
(omitted)
|
||
|
C.
|
Gifts
and Entertainment - Cannot Be Accepted
|
||
|
1.
|
Employees
may not accept gifts from outside business associates, regardless
of
value.
If
you receive a gift, you must inform your manager. Unless it would
be
against the company's best interests, it must be returned with an
explanation of the company policy against accepting gifts. (See the
FAQs
for a sample note returning a gift.)
|
||
|
2.
|
In
unusual circumstances, you may believe it is in the best interest
of the
company to accept a gift
from an outside business associate, for example when for cultural
reasons
it could offend the giver if you decline it. In this case, you should
discuss with your manager the appropriate disbursement of the gift,
for
example donating it to charity or distributing it among employees.
If the
gift is worth more than nominal value, your manager must involve
the
officer responsible for your division to confirm the
decision.
|
||
|
3.
|
You
may not accept entertainment, including meals, from an outside business
associate, regardless of value.
If
you are invited to participate in a meal or entertainment and it
is of
nominal value, you may participate but must pay your own way and
expense
the cost. If that is not possible at the time, you must ask to be
provided
with an invoice after the event that can be paid by SCJ. If you are
invited to participate in a meal or entertainment that is above nominal
value (for example a golf outing), you must get written approval
before
attending from two levels of your management, at least one of which
is an
officer of the company. If the event is unanticipated and you cannot
get
prior approval, if you choose to attend you must pay your own way
and it
will be up to your two levels of management to decide if it should
be
expensed.
|
||
|
III.
|
Interpretation
of the Policy
|
||
|
The
Summary and the Frequently Asked Questions (FAQs) below are integral
parts
of the policy. Employees must comply with all requirements stated
in both
the sections above, the Summary and the FAQs.
|
|||
A. Policy
Summary
(omitted)
B.
Frequently
Asked Questions
40
|
FAQs
about Terms
|
|
Q:
What is the definition of a “gift?”
A:
Any item of monetary value.
|
|
Q:
What is the definition of “entertainment?”
A:
Any meals or events of monetary value, including, golf, tennis or
other
sports outings; hunting, fishing or similar trips; musical, theatrical
or
other performances. Charity events for which a fee is charged for
attendance are also considered entertainment.
|
|
Q:
What is the definition of “business associates?”
A:
Business associates are people outside the company with whom the
company
is doing business or is considering doing business. It includes actual
and
potential Suppliers, customers and others, such as advertising agencies,
banks, contractors, law firms, accounting firms, consultants of all
kinds
and government agencies.
|
|
Q:
What is the definition of “nominal value?”
A:
“Nominal value” is defined as US$100 or one percent of your base salary -
whichever is less. If, however, a General Manager wishes to establish
a
lower definition of “nominal value” that is more appropriate for the local
economic situation, he or she must work with SCJ’s Regional Lead Lawyer in
that area.
|
|
FAQs
about Accepting Gifts
|
|
Q:
May I accept a business meal or outing/entertainment
event?
A:
You may participate in a meal or outing/entertainment event with
a
business associate if it is of nominal value. However, you must pay
your
own way and expense the cost. If you are unable to pay your share,
ask to
be provided with an invoice for your portion after the event, so
it can be
paid by SCJ. If the event is above nominal value, you can still
participate following the process above, but must also get approval
before
attending from two levels of management, at least one of which is
an
officer of the company.
|
|
Q:
What if I am attending a conference or seminar at which dinners or
entertainment (for example, a golf outing) are a part, or “gifts” such as
notebooks, pens, etc. are given?
A:
As long as your payment for the conference or seminar included the
meals,
entertainment or gifts, and you expense this on your expense report,
you
may take part in the dinners and outings or keep items given out
at the
event. If the entertainment or gifts are not part of that payment,
they
must be handled like any other entertainment or gifts under this
policy.
|
|
Q:
What if I don’t know if the gift or entertainment is of nominal
value?
A:
If you are unsure, assume it is above nominal value and discuss with
your
manager.
|
|
Q:
May a member of my family receive a gift or entertainment from a
business
associate?
A:
No. This policy applies to employees as well as any member of your
family.
If you feel there is some reason for an exception, discuss it with
your
manager.
|
41
SCHEDULE
10.4(H) - Part 1
SECURITY
MEASURES
PHYSICAL
AND PROCEDURAL FOR SUPPLIERS & SERVICE PROVIDERS
S.
C.
Xxxxxxx & Son, Inc. (SCJ) participates in the Customs-Trade Partnership
Against Terrorism (C-TPAT) program. The purpose of this document is to establish
security measures for SCJ non-U.S. based Suppliers, manufacturers, and
transportation providers. SCJ will work with its business partners to ensure
that pertinent security measures are in place and adhered to throughout its
supply chain.
Physical
Security:
All
buildings should be constructed of materials which resist unlawful entry and
protect against outside intrusion. Physical security should include:
|
·
|
Adequate
locking devices for external and internal doors, windows, gates and
fences.
|
|
·
|
Adequate
lighting provided inside and outside the facility to include parking
areas.
|
|
·
|
Segregation
and marking of international, domestic, high-value, and dangerous
goods
cargo, while in the shipping or receiving
stage.
|
|
·
|
Use
of physical barriers to limit access to storage containers and
buildings.
|
|
·
|
As
appropriate, the use of closed-circuit TV (CCTV)
monitoring.
|
|
·
|
As
appropriate, the use of intrusion detection systems.
|
|
·
|
Separate
parking area for private vehicles separate from the shipping, loading
dock, and cargo areas.
|
|
·
|
Having
internal/external communications systems in place to contact internal
security personnel or local law enforcement police.
|
Access
Controls:
Unauthorized
access to facilities should be prohibited. Access control must be maintained
at
all entrances and exits to the site and/or buildings. Controls should include:
|
·
|
The
positive identification of all employees, visitors, and vendors.
|
|
·
|
Procedures
for challenging unauthorized/unidentified persons.
|
|
·
|
Signage
stating that all visitors are required to register with the security
staff.
|
It
is encouraged that facilities with a work force larger than 25, use a photo
identification card system. All facilities shall require employees to wear
a
company-issued identification card in a visible location. Visitors and contract
workers must be registered and issued a temporary identification card.
Registration logs should consist of the following minimum information: printed
name; date of visit; time of visit; person to be seen; purpose of visit; who
party is representing; and, time of departure. Registration logs should be
maintained a minimum of three years
Communications:
Security
operations will have at least one two-way radio per guard post. The radio should
have sufficient power to provide strong transmission signals throughout the
site. The Security Supervisor will have a cellular telephone or pager for
contact by on-duty guard force personnel or the site manager after his or her
normal shift hours.
42
Procedural
Security:
Procedures
should be in place to protect against unmanifested material being introduced
onto the facility. Security controls should include:
|
·
|
Having
designated, trained personnel to supervise the introduction/removal
of
cargo.
|
|
·
|
Seven-point
inspection of each container will be performed before loading the
container. The carrier will inspect the container when picking up
to
deliver to the SCJ facility or co-packer. Container seals will be
handled
per the seal handling procedures (as published separately). Containers
will be inspected by the carrier when dropping the trailers. The
warehouse
personnel unloading the containers will inspect the container when
unloading and notify of any problems or
issues.
|
|
·
|
Properly
marked, weighed, counted, and documented cargo/cargo equipment verified
against manifest documents.
|
|
·
|
Procedures
for verifying seals on containers, trailers, and railcars.
|
|
·
|
Procedures
for detecting and reporting shortages and overages.
|
|
·
|
Procedures
to notify Customs and other law enforcement agencies in cases where
anomalies or illegal activities are detected or suspected by the
company.
|
|
·
|
Deliveries
(including mail) -- periodic screening of packages shall be conducted.
Suspected breaches of the delivery or suspicious packages should
be
reported immediately to security for resolution. Once notified, Security
shall notify U.S. Customs and Border Protection (CBP) or the appropriate
agency.
|
At
each
location, the Security Staff will have the following records, logs, or
information readily available to all shift personnel:
|
·
|
Corporate
emergency contact list
|
|
·
|
Security
Supervisor after-hours contact information
|
|
·
|
Facility
emergency contact list
|
|
·
|
Key
list (keys and proximity cards issued to the guard
force)
|
|
·
|
Property
Pass Authorization and Exemption List
|
|
·
|
Property
Pass file system (file to maintain copies of Property
Passes)
|
|
·
|
Pass
Down log (log to pass important information from one shift to
another)
|
|
·
|
Visitor
Registration Log
|
|
·
|
Employee
Temporary and Contractor Employee Badge Log
|
Transport
Unit Controls:
Transport
Unit Security
Transport
unit integrity must be maintained to protect against the introduction of
unauthorized materials and/or persons. At point of stuffing, procedures must
be
in place to properly seal and maintain the integrity of the shipping containers
(see attached cargo-sealing document). A high-security seal must be affixed
to
all loaded containers bound for the U.S. All seals must meet or exceed the
current PAS ISO 17712 standards for high-security seals.
43
Transport
Unit Inspection
Procedures
must be in place to verify the physical integrity of the transport unit prior
to
stuffing, to include the reliability of the locking mechanisms of the doors.
A
seven-point inspection process is recommended for all containers as
follows:
|
·
|
Front
wall
|
|
·
|
Left
side
|
|
·
|
Right
side
|
|
·
|
Floor
|
|
·
|
Ceiling/Roof
|
|
·
|
Inside/outside
doors
|
|
·
|
Outside/undercarriage
|
Transport
Unit Seals
Written
procedures must stipulate how seals are to be controlled and affixed to loaded
transport units. This includes procedures for recognizing and reporting
compromised seals and transport units to CBP or to the appropriate foreign
authority. Only designated employees should distribute transport unit seals
for
integrity purposes.
Transport
Unit Storage
Unattended
&/or unloaded transport units used for international shipments must be
stored in a secure area to prevent unauthorized access and/or manipulation.
One
recommended manner can include the creation of “bull pens” with six-foot high
chain link fencing, with locked gates for the parking of those transport
units.
Confidential
Information:
The
Company shall take steps to ensure that information which it deems confidential
will be protected from unauthorized use or disclosure.
Parking
Lots:
Parking
of employee and visitors shall be permitted only in authorized spaces and away
from the shipping and receiving docks. The parking of transport units, either
loaded or empty, will be within a designated area, which is under surveillance
of the security staff. Loaded, parked transport units will display a complete
seal.
Exterior
Lighting:
Facilities
are encouraged to use lighting as a deterrent to criminal activity. It is
recommended that areas such as the transport unit storage, shipping and
receiving docks, parking lots and access control points, should have lighting
of
a minimum of one foot candle.
Personnel
Security:
Each
company shall conduct employment screening and interviewing of prospective
employees to include background checks and application verifications. These
background checks shall include, where allowed by local laws, verification
of
claimed education, verification of claimed employment history, criminal
conviction history check, credit verification, verification of Social Security
number or similar local national identifier.
44
Personnel
Termination Procedures:
Working
with Human Resources, written procedures shall be issued which provide
guidelines for the termination of employees and the recovery of company property
including ID cards, keys and computer peripherals.
Education
and Training Awareness:
A
security awareness program will be provided to employees and contractors engaged
in the receiving and shipping of any transport unit. This training shall
include: recognizing internal conspiracies; maintaining cargo integrity;
determining and addressing unauthorized access; the verification and retention
of shipping documents; and procedures for seal locking. These programs are
designed to encourage active employee participation in security controls.
45
SCHEDULE
10.4(H) - Part 2
Recommended
C-TPAT Cargo Sealing Policy & Procedure
for
Transport Units
Scope
This
document establishes the recommended procedures for affixing mechanical seals
to
cargo-loaded transport units (i.e. containers, trucks, etc.) by foreign
Suppliers of S. C. Xxxxxxx & Son, Inc., as well as the control, inventory
and accountability of those seals. To receive full consideration and benefits
of
the Customs-Trade Partnership Against Terrorism (C-TPAT) joint
government-industry initiative, SCJ is requesting its foreign shippers to ensure
the security and integrity of their cargo by adhering to more stringent
guidelines as outlined in this document for the use and control of seals used
to
secure cargo containers and trucks.
Background
U.S.
Customs’ organizations and trade entities worldwide use seals to ensure the
integrity of containerized or truckload cargo while moving from point to point
within the supply chain. U.S. Customs and Border Protection (CBP) verify the
integrity of these seals upon arrival in the United States. With the concerns
and need for increased security, the quality and integrity of the seal is
critical to the process of preventing the use of cargo trailers or trucks as
vehicles to import illicit materials and contraband, including Weapons of Mass
Destruction and other terrorist devices into the U.S.
Terms
and Definitions of High-Security Seals
For
the
purpose of this document, high-security seals are considered those seals that
are constructed and manufactured of material such as metal or metal cable,
with
the intent to delay intrusion. They generally must be removed with quality
bolt
cutters or cable cutters. They require inspection to indicate whether tampering
has occurred or entry has been attempted.
All
seals
must meet the standards, specifications and identification requirements of
19CFR24, 13a(a), (b), and (c). These specifications are elaborated on in ISO/PAS
17712. Seals shall be identified by unique marks and numbers that are readily
legible; markings intended for unique identification of the seal shall be
considered permanent. Any modification of markings shall require irreversible
physical, chemical, heat or other destruction of the security seal.
Container/Truck
Physical Integrity Inspection
Prior
to
loading a container or truck, the physical integrity of the unit must be
inspected prior to stuffing. A seven-point inspection process is recommended
for
all containers as follows:
|
·
|
Front
wall
|
|
·
|
Left
side
|
|
·
|
Right
side
|
|
·
|
Floor
|
|
·
|
Ceiling/Roof
|
|
·
|
Inside/outside
doors
|
|
·
|
Outside/undercarriage
|
46
Seal
Acquisition and Control Responsibility
Suppliers
are responsible for acquiring seals from legitimate manufacturers. CBP and
SCJ
do not endorse any particular seal manufacturer or product. There are
organizations, however, such as the International Seal Manufacturers Association
that can provide guidance for Suppliers looking for seal manufacturers offering
ISO/PAS 17712 high-security seals. Accountability procedures should be in place
to minimize the risk of compromising seal integrity and use of the seals by
unauthorized entities.
For
all SC Xxxxxxx shipments:
|
1.
|
All
seals must meet or exceed the standards of ISO/PAS 17712 for high-security
seals.
|
|
2.
|
Seals
should be kept in a locked and secure location, and only a limited
number
of designated individuals should have access to the seals and the
responsibility for their
distribution.
|
|
3.
|
The
seal number and related information for each shipment must be recorded
in
the Outbound Container/Truckload Seal Log (see attached example).
This
includes shipment date, BOL number, carrier, container/trailer number,
name of the individual who affixed the seal and signature, etc. The
seal
number affixed to the container/trailer should be verified to match
the
seal number indicated on the BOL/manifest. This will provide CBP
personnel
with a method of verifying legitimate
seals.
|
|
4.
|
Seal
information and related shipping documentation should be retained
by the
shipper for a period of five years and be readily available for possible
audit.
|
|
5.
|
If
it is determined that any seals are missing, the incident should
be
reported to your security personnel for
investigation.
|
|
6.
|
If
it appears that a container or truck has been tampered with, contact
your
security personnel immediately, who will then contact CBP for assistance
with next steps.
|
Example
of Outbound Container/Trailer Seal Log:
|
Outbound
Container/Trailer Seal Log
|
|
Shipment
Date MM/DD/YY
|
Seal
Number
|
BOL
Number
|
Carrier
|
Container/Trailer
Number
|
Shipper/Packer’s
Printed Name & Signature
|
47
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
|
SCHEDULE
13.1
|
||||||
|
Supplier
Bag Line
|
||||||
|
Equipment
|
Number
|
cost
each, $
|
cost
total, $
|
|||
|
Bag
System
|
[*]
|
[*]
|
[*]
|
|||
|
Valve
Applicators
|
[*]
|
[*]
|
[*]
|
|||
|
[*]
|
[*]
|
[*]
|
[*]
|
|||
|
Bag
Code System
|
[*]
|
[*]
|
[*]
|
|||
|
Total
|
[*]
|
[*]
|
||||
|
Each
Bag Line consists of a Bag System, Valve Applicators, [*]
and Bag Code System.
|
||||||
|
Supplier
shall purchase the Bag Line equipment.
|
||||||
|
Depreciation
of all Bag Line equipment is based on [*]
bags
(total quart and gallon).
|
||||||
|
Depreciation
is [*]
$/bag.
|
||||||
|
Each
Bag Line shall be fully depreciated based on the purchase of [*]
bags.
|
||||||
|
Each
Bag Line shall be fully depreciated sequentially, beginning with
Bag Line
#1.
|
||||||
|
At
the end of the depreciation term ([*]
bags),
the depreciation ([*]/bag)
price component will be removed from the price of the Bag.
|
||||||
|
If
this Supply Agreement terminates or expires for any reason other
than
pursuant toSections
11.2, 11.3, 11.5, or 11.6,
whether or not accompanied by a conversion of this Supply Agreement
to a
Xxxxxxx License Agreement, Supplier shall transfer and deliver to
Xxxxxxx
good and valid title to Supplier Bag Lines 1, 2 and 3, free and clear
of
all liens, encumbrances and security interests. In consideration
therefore, Xxxxxxx’x purchase price for such Supplier Bag Line Equipment
will be the Supplier Bag Line Equipment cost, less depreciation,
of such
three Bag Lines. If the three Supplier Bag Lines have been fully
depreciated, at the rate above, then the purchase price shall be
[*]
for all three Bag Lines. In addition, in the event of any such expiration
or termination of this Supply Agreement, when accompanied by a conversion
of this Supply Agreement to a Xxxxxxx License Agreement, Xxxxxxx
may
purchase, upon written notice to Supplier, all or any of the remaining
three Bag Lines for a purchase price equal to the cost of the three
Bag
Lines less depreciation (as above) or one hundred dollars if the
three Bag
Lines are fully depreciated. In that case, Supplier shall transfer
good
and valid title for such three Bag Lines to Xxxxxxx, free and clear
of all
liens, encumbrances and security interests. Supplier warrants and
represents that all Supplier Bag Lines sold to Xxxxxxx hereunder
will be
at original operating condition, reasonable wear excepted.
|
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
48
If
this
Supply Agreement terminates and/or converts to a Xxxxxxx License Agreement
pursuant to Sections 11.2,
11.3, 11.5, or 11.6
(and
Section
11.7
as
applicable to any such conversion), then Xxxxxxx may purchase all or any
of the
Supplier Bag Line Equipment upon written notice to Supplier. Upon Xxxxxxx’x
election to purchase any or all of such Equipment, Supplier shall transfer
and
deliver to Xxxxxxx good and valid title to such Equipment free and clear
of all
liens, encumbrances and security interests. In consideration therefore,
Xxxxxxx’x purchase price for such Equipment will be the Bag Line cost,
identified above, less depreciation at the rate described above, or a nominal
price of [*]
if the
cost has been completely depreciated. Supplier warrants and represents that
all
such Supplier Bag Lines sold to Xxxxxxx hereunder will be at original operating
condition, reasonable wear excepted.
|
Pump
Molds
|
Number
|
cost
each, $
|
cost
total, $
|
|||
|
[*]
|
[*]
|
[*]
|
[*]
|
|||
|
[*]
|
[*]
|
[*]
|
[*]
|
|||
|
Cap
(pin half)
|
[*]
|
[*]
|
[*]
|
|||
|
Cap
(pin insert half)
|
[*]
|
[*]
|
[*]
|
|||
|
[*]
|
[*]
|
0.00
|
0.00
|
|||
|
Rubber
Adapter
|
[*]
|
[*]
|
[*]
|
|||
|
Rubber
Adapter
|
[*]
|
0.00
|
0.00
|
|||
|
Total
|
[*]
|
|||||
|
Supplier
shall purchase the Pump Molds.
|
||||||
|
Supplier
shall bear the cost of maintaining and replacing the
molds.
|
||||||
|
Depreciation
of all Pump Molds is based on [*]
pumps.
|
||||||
|
At
the end of the depreciation period, the depreciation ([*]/Pump)
will be removed from the price of each
Pump.
|
||||||
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
49
If
the
Supply Agreement terminates or expires for any reason other than pursuant to
Section
11.2, 11.3, 11.5,
or
11.6,
whether
or not accompanied by a conversion of this Supply Agreement to a Xxxxxxx License
Agreement, Xxxxxxx shall pay [*],
less
all depreciation on the Pump Molds at the rate above, to purchase the Pump
Molds
excluding the [*], and Supplier shall transfer and deliver to
Xxxxxxx good and valid title to the Pump Molds, free and clear of all liens,
encumbrances and security interests. If the Pump Molds have been fully
depreciated, at the rate above, then the purchase price shall be one hundred
dollars for all Pump Molds. Supplier warrants and represents that the Pump
Molds
will be in original operating condition, reasonable wear excepted.
If
this Supply Agreement terminates and/or converts to a
Xxxxxxx License Agreement pursuant to Sections
11.2, 11.3, 11.5, or 11.6
(and
Section
11.7
as
applicable to any such conversion), then Xxxxxxx may purchase all or any of
the
Pump Molds upon written notice to Supplier. Upon Xxxxxxx’x election to purchase
any or all of such Pump Molds, Supplier shall transfer and deliver to Xxxxxxx
good and valid title to such Pump Molds free and clear of all liens,
encumbrances and security interests. In consideration therefore, Xxxxxxx’x
purchase price for such Molds will be the Pump Mold cost, identified above,
less
depreciation at the rate described above, or a nominal fee of [*]
if
the
cost has been completed depreciated. Supplier warrants and represents that
the
Pump Molds will be in original operating condition,
reasonable wear excepted.
CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT ASTERICK [*] DENOTE
OMISSIONS.
50
SCHEDULE
13.2
Xxxxxxx
Equipment
There
is
no Xxxxxxx Equipment at Supplier's facility
51
