This SUPPLY
AGREEMENT (“ Agreement ”) is entered into as of
May 31, 2005 (the “ Execution Date ”) and
made effective as of September 1, 2005 (the “
Effective Date ”) by and among PVC CONTAINER
CORPORATION, a Delaware corporation (“ Parent
”), Novatec Plastics Corporation, Inc. a Delaware corporation
(“Novatec” and together with Parent, the “
Buyer ”) and POLYONE CORPORATION, an Ohio corporation
(“ Supplier ”).
A. On or
about the Execution Date, Supplier purchased certain assets of the
Buyer pursuant to an Asset Purchase Agreement dated as of
May 13, 2005 (the “ Asset Purchase Agreement
”).
B. As a
result of such acquisition, Supplier manufactures and sells the
polyvinyl chloride compounds listed on Schedule A
attached hereto (each a “ Product ” and
collectively, the “ Products ”).
C. Buyer
desires to purchase the Products from Supplier pursuant to the
terms of this Agreement.
D. Supplier
desires to sell the Products to Buyer pursuant to the terms of this
Agreement.
In consideration
of the covenants and other agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as
follows:
1.
Definitions . The following terms shall have the meanings
set forth below.
“
Agreement ” shall have the meaning set forth in the
first paragraph above.
“ Annual
Forecast ” shall have the meaning set forth in
Section 2(b).
“ Asset
Purchase Agreement ” shall have the meaning set forth in
the recitals.
“ Change
in Control ” shall have the meaning set forth in
Section 8.
“ Closing
Date ” shall have the meaning set forth in
Section 2(e).
“
Confidential Information ” shall have the meaning set
forth in Section 7(a).
“
Contract Year Volume Limit ” shall have the meaning
set forth in Section 2(a).
“
Contract Year ” shall mean each twelve (12) month
period beginning on September 1, 2005 and continuing each
twelve (12) month period thereafter until the end of the Term;
provided , however , that the final Contact Year
shall not be a complete twelve (12) month period but shall
consist of the four month period from September 1, 2009
through December 31, 2009.
“
Effective Date ” shall have the meaning set forth in
the first paragraph above.
“
Execution Date ” shall have the meaning set forth in
the first paragraph above.
“ Force
Majeure Event ” shall have the meaning set forth in
Section 9.
“ Maximum
Product Volume ” shall have the meaning set forth in
Section 2(a).
“
Price ” shall have the meaning set forth in
Section 4(a).
“
Product ” shall have the meaning set forth in the
recitals.
“
Quarterly Forecast ” shall have the meaning set forth
in Section 2(b).
“
Specifications ” shall have the meaning set forth in
Section 2(e).
“
Supplier ” shall have the meaning set forth in the
first paragraph above.
“
Term ” shall have the meaning set forth in
Section 3(a).
“
Transition Plan ” shall have the meaning set forth in
Section 5.
2. Supply
of the Products; Minimum Supply; Exclusivity .
(a)
Obligation to Purchase and Supply; Volume. Commencing on the
Effective Date, and during the Term, Buyer shall purchase from
Supplier, and Supplier shall supply to Buyer, a percentage of
Buyer’s requirements for the Products each Contract Year as
set forth below, provided that, in no event shall Supplier be
obligated to supply more than nine million (9,000,000) pounds of
Product per Contract Year (the “ Maximum Product
Volume ”). Volumes of Products supplied to Buyer by
Supplier shall be based upon Buyer’s requirements for each
Contract Year (the “ Contract Year Volume Limit
”) as follows:
(i) 100%
of Buyer’s Product requirements from September 1, 2005
through August 31, 2007;
(ii) 80%
of Buyer’s Product requirements from September 1, 2007
through August 31, 2008;
(iii) 70%
of Buyer’s Product requirements from September 1, 2008
through August 31, 2009; and
(iv) 50%
of Buyer’s Product requirements from September 1, 2009
through December 31, 2009.
(b)
Reporting . At least sixty (60) days prior to the
beginning of each Contract Year, Buyer shall provide Supplier with
a written, good faith estimate of the aggregate volume of Products
(by Product) that Buyer will require in the next Contract Year (the
“ Annual Forecast ”). Within thirty
(30) days prior to the commencement of each calendar quarter,
Buyer shall provide Supplier with a forecast for the upcoming
quarter of the volume of Products (by Product) for each month (the
“ Quarterly Forecast ”) that Buyer will require
for such quarter.
(c)
Supply . Buyer shall issue purchase orders for the Products
setting forth the specific quantities of each Product to be
supplied by Supplier. Products shall be supplied by Supplier based
on the Specifications and the purchase orders. All purchase order
volumes shall be reasonably consistent with the Annual Forecast and
the most recent Quarterly Forecast. Any purchase order issued in
connection with this Agreement shall be solely for the
parties’ internal accounting and operating
purposes
and to
facilitate payment; in no event shall the terms of any such
purchase order (other than the line items which identify the
specific quantities of each Product to be supplied by Supplier
thereunder) become part of this Agreement or be deemed to have
modified, amended or waived the provisions hereof.
(d)
Purchase Orders; Transportation; Title . Supplier shall
arrange for shipment of Products to Buyer based on the lead times
set forth in Schedule B attached hereto (which
Schedule B is subject to change during the Term
pursuant to the normal business practices of Supplier). Title to
and risk of loss for Products shall pass from Supplier to Buyer
upon Supplier’s delivery of the Products to the carrier
selected by Supplier at Supplier’s plant.
(e)
Specifications . Products sold to Buyer pursuant to this
Agreement shall be manufactured in accordance with the recipes and
specifications for each Product as set forth in
Schedule A (the “ Specifications ”),
which were provided to Supplier by Buyer and used in Buyer’s
business prior to the closing of the Asset Purchase Agreement (the
“ Closing Date ”).
(a)
Term . Subject to the provisions of Section 3(b) and
Section 8, the term of this Agreement shall be the fifty-two
(52) month period beginning on the Effective Date and ending
December 31, 2009 (the “ Term
”).
(b)
Termination . This Agreement, and any rights granted
hereunder, may be terminated in whole or in part at any time as
follows:
(i) by
the mutual written consent of Supplier and Buyer effective on a
date determined by the mutual agreement of the parties;
(ii) by
either Supplier or Buyer effective sixty (60) days after
giving written notice to the other party if such other party is in
material breach or default of any term or condition of this
Agreement and such material breach or default remains uncured at
the end of such sixty (60) day period; or
(iii) by
Supplier upon a Change in Control pursuant to Section 8
below.
(c)
Effect of Termination . Any termination of this Agreement
shall be without prejudice to any other remedies that Supplier or
Buyer may have against the other arising out of any breach or
default and shall not affect any rights or obligations of Supplier
or Buyer arising under this Agreement prior to such
termination.
(a)
Initial Price . During the Term, the initial price for each
of the Products shall be as follows (each as shall be adjusted from
time to time pursuant to the provisions of Section 4(b) below, a
“ Price ”): GP Bottle — $0.78; GP
Bottle-UV — $.081; and FDA Bottle — $0.79. The Price
reflects bulk delivered pricing. An additional $0.015 per pound
will be charged for each Product packaged in gaylord boxes.
Additionally, if Buyer orders less than a truckload of Product,
there will be an additional upcharge pursuant to the provisions of
Schedule B attached hereto (which
Schedule B is subject to change during the Term
pursuant to the normal business practices of Supplier). The Price
shall be in effect for May 2005 and June 2005, and will
be the starting point for indexed Price movements beginning on
July 1, 2005. Prices set forth in this Agreement are based
solely on the Specifications for each Product. Product prices for
volumes requested by Buyer in excess of the Maximum Product Volume
shall be negotiated
separately from
this Agreement. Pricing for products that use specifications
substantially different than the Specifications used in the
Buyer’s business prior to the Closing Date shall be
negotiated separately from this Agreement.
(b)
Price Formula Adjustments . Commencing July 1, 2005,
the Price for Product shall be adjusted upward or downward by 85%
of the price movement published by Chemical Data Inc. for GP
suspension resin (the “ CDI ”) in the prior two
calendar months. By way of example, if the CDI increases $0.01 per
pound in May 2005 from the CDI in April 2005, then the
July 2005 GP Bottle Price shall be $0.7885 per pound,
calculated as follows: $0.01 price increase between the prices in
April and May x 85% = $0.0085; $0.0085 + $0.078 (the initial price
for a GP Bottle as shown in Section 4(a)) = $0.7885 per
pound.
(c)
Payment Terms . Payment to Supplier for Products shipped to
Buyer shall be made in U.S. dollars within forty-five
(45) days of the date of Supplier’s invoice. Buyer will
receive a discount equal to 1% of the total amount invoiced if
Supplier receives payment for Products in Buyer’s lockbox
within ten days after the date of the invoice submitted by Supplier
to Buyer.
5. Toll
Manufacturing . At Seller’s request, Buyer shall toll
manufacture some of the Products listed on Schedule A
for Supplier for the period commencing September 1, 2005 and
continuing up to but no longer than December 31, 2005. Buyer
and Supplier shall use their good faith efforts to ensure the
provision to Supplier of the Products requested by Supplier
pursuant to this Section 5.
6.
Warranty; Limitation of Warranties .
(a)
Warranty . Supplier hereby warrants to Buyer that all of the
Products shall conform to the Specifications set forth on
Schedule A and shall be free from all defects in
material and workmanship.
(b)
No Other Warranties . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN THIS AGREEMENT, SUPPLIER MAKES NO WARRANTY, EXPRESS OR IMPLIED,
OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY WARRA
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