SUPPLY AGREEMENT
This Agreement is made as of the ____ day of ________, 1999, by and between The
Empire Company, Inc., a Michigan corporation, with a place of business at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "Company") and ▇▇▇▇▇▇▇▇ Challenge Forests
USA Inc., a Delaware corporation, ("FCF").
RECITALS
A. FCF and the Company are parties to a Stock Purchase Agreement dated _______
1999 (the "Stock Purchase Agreement") and to a Shareholders' Agreement dated
_______ 1999 (the "Shareholders' Agreement").
B. The parties wish to establish a consistent customer/supplier relationship
with respect to certain products supplied by FCF and distributed by the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1.
"Confirmation Notice" means a written notice given by FCF to the Company in
response to an Orders List specifying the volume and the grades, profile and
length of the Manufactured Products FCF is willing to supply pursuant to its
supply option.
"Manufactured Product" means the manufactured wood material produced by FCF or
purchased by FCF from other suppliers and sold by the Company and includes
lumber, solid mouldings, raw and primed or painted finger joint mouldings,
boards and other remanufactured products sold and purchased or agreed to be sold
and purchased pursuant to this Agreement and as detailed in Schedule I hereto by
agreement of the parties from time to time hereafter.
"Orders List" means a list of the Manufactured Products required by the Company
detailing:
(i) the type, including grade, profile and length, of the Manufactured
Products required;
(ii) the specifications of each grade of the Manufactured Products;
(iii) the volumes of the grades of the Manufactured Products required;
(iv) the price(s) to be paid by the Company and the payment terms and
delivery requirements therefor;
(v) any other requirements applicable from time to time.
2. SUPPLY OPTION AND PURCHASE COMMITMENT.
2.1 Right to Supply.
During any fiscal year of the Company, whilst this Agreement is in force and
commencing 90 days from the date hereof, FCF shall have the option to supply up
to, and if FCF exercises its option the Company shall purchase from FCF a
monetary amount equal to not less than, fifty percent (50%) of the amount of the
Company's expenditures for the Manufactured Products calculated in the manner
set out in the remainder of this Section 2 and on an aggregate annual basis, not
on an item-by-item basis.
2.2 Notice from the Company.
In order that FCF may exercise the right granted to it under Section 2.1, the
Company shall deliver to FCF from time to time and on a timely basis an Orders
List for the Manufactured Products it requires.
2.3 FCF's Notice.
FCF shall have five (5) working days from the date of receipt of an Orders List
to exercise its right under Section 2.1 by giving a Confirmation Notice to the
Company specifying the Manufactured Products requirements of the Company it has
agreed to supply. The Confirmation Notice shall identify, in respect of each
Manufactured Product specified in the Orders List, the quantity of such
Manufactured Products that FCF has agreed to supply to the Company and the
proposed price at which such Manufactured Products would be supplied. The
parties acknowledge that some items may, as a market necessity, be grouped
together on any given Orders List and may not be broken apart by a Confirmation
Notice specifying some but not all of a grouping.
2.4 Terms and Conditions of Supply.
(a) The Manufactured Products specified in the Confirmation Notice shall be
supplied by FCF on its customary terms of sale, as previously approved by the
Company unless otherwise specified by the Orders List and such terms are
available from another vendor ready and capable of filling the order on a basis
otherwise competitive to FCF.
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(b) The prices at which the Manufactured Products specified in the Confirmation
Notice shall be supplied shall be the prices specified in the Confirmation
Notice or, if such prices are not accepted by the Company, shall be the prices
agreed between FCF and the Company within the five (5) day period provided under
Section 2.3, above. In the event that within the required time FCF and the
Company cannot agree on prices or other terms, including delivery required by
the Company, the Company may purchase the Manufactured Products covered by the
Confirmation Notice from any other vendor on competitive terms not less
favorable overall than those specified by the Confirmation Order, including
price, and such amount shall be considered as though it were not with respect to
a Manufactured Product for purposes of calculating whether the Company has met
its fifty percent (50%) commitment under this Section 2.
2.5 Payment.
Payment for all Manufactured Products supplied by FCF will be made by the
Company within ten (10) working days of delivery of such Manufactured Products
to the Company unless otherwise specified by on the Orders List which has been
accepted by a Confirmation Notice.
2.6 Quantity of Manufactured Products Supplied.
The amount of Manufactured Products that FCF is entitled to supply shall be up
to fifty percent (50%) of the monetary amount specified in an Orders List.
3. FORECASTS.
The Company shall use its reasonable efforts to provide to FCF on the first
business day of each month during the term hereof a rolling 3-month forecast and
a rolling 15-month forecast of its needs for Manufactured Products. Such
forecasts may be amended at any time by the Company and actual purchases may be
higher or lower than such forecasts. The forecasts will not be binding on the
parties in any manner and are only intended as budgeting and manufacturing
capacity planning tools for the convenience of the parties.
4. REPORT; AUDIT.
Within ten (10) business days after the end of each fiscal quarter, the Company
shall provide to FCF a written account of the amount of its total purchases of
Manufactured Products applicable to the required purchases hereunder and of its
purchases pursuant to Section 2.1. FCF shall have reasonable access during
normal business hours to the necessary books of the Company in order to verify
the account submitted by the Company.
5. FAILURE TO MEET PURCHASE COMMITMENT.
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In the event that the Company shall have failed to purchase a monetary amount
equal to that portion of the amount FCF is entitled to supply under Section 2,
the shortfall shall be added to and become part of the purchase commitment in
the immediately succeeding year or year(s).
6. TERM.
This Agreement shall commence on the date hereof and remain in effect until FCF
no longer owns at least one-third (1/3) of the capital stock of the Company or
unless earlier terminated pursuant to Section 8, below.
7. WARRANTY.
7.1 Included. FCF hereby warrants that the Manufactured Products supplied
hereunder shall be of good workmanship and material and shall conform to the
Company's quality product and packaging specifications.
7.2 Excluded. Except as expressly set forth in this Agreement or any
documentation for any specific order, FCF makes no other warranties, express or
implied, by operation of law, including, but not limited to, IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
8. TERMINATION.
8.1 The Company or FCF may terminate this Agreement immediately if:
(a) the other party is in breach of this Agreement and fails to remedy
such breach within thirty (30) days' notice thereof; or
(b) in relation to the other party:
(i) a petition is filed for its winding up, whether voluntary or
otherwise, or a notice is issued to summon a meeting at which it is
proposed to pass a resolution for the purposes of winding up that
party; or
(ii) a receiver, receiver and manager, statutory manager or similar
officer is appointed; or
(iii) a provisional liquidator is appointed or a composition or
arrangement is made with its creditors or any class of creditors.
8.2 The expiration or earlier termination of this Agreement shall be without
prejudice to the rights and obligations of the parties prior to such expiration
or earlier termination becoming effective.
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9. WAIVERS.
The failure by either party at any time to require performance by the other
party of any responsibility or obligation under this Agreement shall in no way
affect the party's right to require such performance at any time thereafter; nor
shall the waiver by such party of a breach of any provision of this Agreement
constitute a waiver of any succeeding breach of the same or any other provision
nor constitute a waiver of the responsibility or obligation itself.
10. BINDING AGREEMENT.
This Agreement shall be binding upon the parties and shall inure to the benefit
of their respective successors or assigns.
11. RELATIONSHIP OF PARTIES.
It is mutually agreed that an independent contractor relationship shall be, and
is, established by this Agreement and that the Company shall perform its
obligations hereunder as an independent contractor and not as an agent, servant,
or employee of FCF.
12. NOTICES.
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized express courier delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
▇▇▇▇▇▇▇▇ Challenge Forests USA Inc.:
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: 64 9 571 9870
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: 64 9 571 9970
The Company:
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇ ▇▇▇ ▇▇▇▇
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with a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ PLLC
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: ▇▇▇ ▇▇▇ ▇▇▇▇
13. GOVERNING LAW.
This Agreement shall be governed by and construed according to the laws of the
State of Michigan without regard to conflicts of laws principles. If any
provision of this Agreement contravenes any applicable law, then such provision
shall be deemed reformed or deleted, but only to the extent necessary to comply
with any such applicable law, and the remaining provisions of this Agreement
shall remain in full force and effect.
14. USE OF WORDS.
The Section headings used herein are for convenience only and shall not be
construed to modify, supplement or otherwise affect the terms hereof. The use of
words in the singular shall be interpreted to be in the plural when appropriate
and vice versa. The use of terms of the masculine gender shall be interpreted to
include the feminine gender when appropriate.
15. ENTIRE AGREEMENT AND MODIFICATION.
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Letter of Intent between ▇▇▇▇▇▇▇▇ Challenge
Forests Limited and ▇▇▇▇▇▇▇ dated 6 August 1999 and signed by ▇▇▇▇▇▇▇ on 9
August 1999) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
16. FORCE MAJEURE.
In the event that either of the Company or FCF is prevented from performing
their obligations under this Agreement by reason of an action of any
governmental authority, national disaster, war, strike or material casualty loss
which is beyond the reasonable control of the party claiming excuse from
responsibility, then the obligations of the parties hereunder shall be reduced
pro rata for the period of time that failure to perform is so prevented. Notice
shall be sent as soon as is reasonably practicable at the beginning of the event
with respect to which a party is claiming the right to reduce obligations
hereunder and again within five (5) days after such event no longer prevents
performance. Receipt of such notice by the other party shall entitle the
claiming party to the reduced obligations provided for hereunder commencing five
(5) days before the date of delivery of such notice
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and ending upon the date that the claimed event ceases to prevent performance by
such party.
17. ASSIGNMENT.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other party, which will not be unreasonably withheld,
except that FCF may assign any of its rights under this Agreement to any
Affiliate of FCF which is not a direct competitor of the Company.
18. CROSS-DEFAULT.
The parties agree that any default or Breach by a party hereto under or of
either the Stock Purchase Agreement or the Shareholders' Agreement, which
default or Breach continues for more than the applicable cure period, if any,
with respect thereto, shall constitute a default or Breach by that party of this
Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
FCF: The Company:
By: By:
-------------------------------- -------------------------------------
Director ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
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