EXCLUSIVE MANUFACTURING AND
SUPPLY AGREEMENT
THIS AGREEMENT made as of December 18, 1998, between THE XXXXXXXXXX
DIVISION OF THE XXXXX GROUP, INC., a Delaware corporation, ("Xxxxxxxxxx") and
CREATIVE EXPRESSIONS GROUP, INC., a Delaware corporation, ("CEG").
W I T N E S S E T H :
WHEREAS, CEG is engaged in the design, promotion, distribution and sale
of disposable party goods, including, without limitation, the Products (as
hereinafter defined); and
WHEREAS, CEG has concurrently herewith sold and transferred to
Xxxxxxxxxx, all of CEG's right, title and interest in and to certain machinery
and equipment heretofore utilized by CEG for the manufacture of the Products;
and
WHEREAS, Xxxxxxxxxx and CEG have determined that they will mutually
benefit from an exclusive manufacturing and distribution relationship pursuant
to which CEG will utilize Xxxxxxxxxx exclusively to manufacture the Products to
CEG's specifications and pursuant to which Xxxxxxxxxx will agree to so
manufacture such Products for sale to CEG, upon and subject to the terms,
covenants and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Xxxxxxxxxx and CEG hereby agree as
follows:
1. Definitions.
(a) "Adjustment Period" shall mean the most current calendar
quarter for which a Purchase Price adjustment is to be made pursuant to Section
4.1(b) hereof.
(b) "Labor Costs" shall mean the contractual hourly labor rates
for the Adjustment Period as set forth in the Collective Bargaining Agreement
covering Xxxxxxxxxx'x hourly workers at Appleton, Wisconsin, as the same may be
amended, extended or replaced.
(c) "Party Goods Market" shall mean the party goods segment of
the disposable consumer goods products market in the Territory.
(d) "Products" shall mean (i) the paper plates, napkins and table
covers listed on a products list initialed by the parties for purposes of
identification; and (ii) such additional disposable consumer goods products as
Xxxxxxxxxx and CEG may from time-to-time agree upon in
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writing.
(e) "Raw Material Costs" with respect to each Product, shall mean
the actual per ton cost for all tissue or plate board, as the case may be,
incurred by Xxxxxxxxxx for the manufacture of such Product during the Adjustment
Period.
(f) "Territory" shall mean the United States and Canada.
2. Purchase and Sale. CEG hereby agrees to purchase from Xxxxxxxxxx, and
Xxxxxxxxxx hereby agrees to manufacture and sell to CEG, all of CEG's
requirements for the Products during the Term.
3. Term. The term of this Agreement (the "Term") shall commence on the
date hereof and continue through the fifth (5th) anniversary of the date of this
Agreement, and continue thereafter from year-to-year unless either party shall
elect to terminate this Agreement by notice given to the other party not less
than ninety (90) days prior to the expiration of the Term, unless sooner
terminated as herein provided.
4. Prices. (a) The initial purchase price for each Product shall be as
set forth on a price list initialed by the parties for purposes of
identification, subject to adjustment in accordance with the provisions of
Section 4(b) hereof (the "Purchase Price").
(b) The parties recognize and agree that approximately seventy
(70%) percent of Xxxxxxxxxx'x manufacturing costs for the Products are based on
Raw Material Costs, and that the remainder of such costs are in all material
respects based on Labor Costs. Therefore, the Purchase Price for each Product
will be adjusted as of April 1, 1999 and as of the first day of each succeeding
calendar quarter during the Term as follows: (i) seventy (70%) percent of the
Purchase Price for such Product shall be adjusted by the percentage change, if
any, in the Raw Material Costs for the immediately preceding calendar quarter;
and (ii) thirty (30%) percent of the Purchase Price for such Product shall be
adjusted by the percentage change, if any, in the Labor Costs for the
immediately preceding calendar quarter. Further, the ratio of Raw Material Costs
to Labor Costs set forth above shall be reviewed on April 1, 1999 and annually
thereafter and adjusted as agreed upon by the parties.
5. Orders, Shipments and Forecasts. CEG shall place its orders
specifying the Products to be purchased hereunder not later than twenty-one (21)
days prior to the date on which such Products are to be shipped. CEG has
provided a yearly usage forecast which CEG shall update semi-annually during the
Term. CEG shall be required to purchase all raw materials specifically relating
to the Products but not to exceed three (3) months of normal demand,
work-in-process and finished goods Products inventory on hand upon the
expiration or sooner termination of the Term and such obligation shall survive.
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6. Delivery, Freight and Title. The Purchase Price shall be the price
F.O.B. CEG's facility at Indianapolis, Indiana, with full freight being at
Xxxxxxxxxx'x sole cost and expense; except, however, that the Purchase Price for
Products manufactured for Target shall be the price F.O.B. Appleton, Wisconsin
and CEG shall have the right to select and contract with the applicable carriers
for such Products. Title to and possession of Products shipped hereunder shall
pass to CEG upon delivery by Xxxxxxxxxx to the carrier or if delivered by
Xxxxxxxxxx, upon delivery to CEG's facility, as the case may be, and such
Products shall be at the risk of CEG from and after the date of such delivery.
7. Taxes. In addition to the Purchase Price, CEG shall pay to Xxxxxxxxxx
an amount equal to all federal, state, or local sales, use, or excise taxes now
or hereafter imposed or payable with respect to the sale and delivery of the
Products sold hereunder ("Taxes").
8. Invoices, Terms of Payment. Invoices setting forth the Purchase Price
and the Taxes with respect thereto shall be forwarded to CEG at the time of
delivery of the Products covered thereby to CEG. Payment shall be in cash, net
thirty (30) days, from the date of such invoices.
9. Separate Sale. Each shipment of Products under this Agreement shall
constitute a separate and distinct sale, and except as otherwise provided in
Section 13 hereof, any default of CEG in specifying, accepting or paying for any
shipment shall not affect Xxxxxxxxxx'x right to insist upon full performance of
the provisions of this Agreement for the full Term.
10. Contingencies. The obligations of each party hereto with respect to
the manufacture, sale, purchase, shipment, delivery and receipt of Products,
shall be suspended to the extent that such party is unable to manufacture, sell,
purchase, ship, deliver or receive Products by reason of strikes, lockouts,
boycott, picketing, riots, civil commotion, sabotage, acts of war, embargoes,
carrier shortage, mechanical failures, prohibition imposed by federal, state or
local authority, fires, accidents, floods or any other event beyond such party's
reasonable control. During any period of shipping suspension, or with respect to
Products with specifications which exceed Xxxxxxxxxx'x technical or other
capabilities, CEG shall have the right to purchase CEG's requirements for the
Products affected thereby, without restriction.
11. Inspections and Claims. Any claim asserted by CEG, for any reason
whatsoever except for quality, shall be made by notice given by CEG to
Xxxxxxxxxx within sixty (60) days after receipt of the material which is the
subject matter of the claim, or such claim shall be deemed to have been waived.
CEG shall also store inside, and set aside such material for inspection by
Xxxxxxxxxx, and shall give Xxxxxxxxxx an opportunity to conduct an adequate
investigation. No claim shall be allowed for defects in quality unless made
within sixty (60) days after shipment nor after the material shipped hereunder
is processed by CEG in any manner. Xxxxxxxxxx shall be deemed to have allowed
each such claim unless Xxxxxxxxxx disputes the same in writing within sixty (60)
days following Xxxxxxxxxx'x receipt of notice of such claim and sets forth in
reasonable detail the basis for such dispute.
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12. Xxxxxxxxxx'x Warranty. Xxxxxxxxxx warrants that the Products
delivered hereunder shall be merchantable, comply with CEG's Product
specifications and otherwise be of standard grade and quality as described in
TAPPI standards. XXXXXXXXXX SHALL NOT BE LIABLE FOR ANY BREACH OF SUCH WARRANTY
IN ANY AMOUNT IN EXCESS OF THE PRICE OF THE PARTICULAR PRODUCTS WITH RESPECT TO
WHICH SUCH BREACH OCCURS. IN NO EVENT SHALL CEG BE ENTITLED TO MAKE ANY CLAIM TO
RECOVER FOR LOSS OF CONTENTS OR FOR SPECIAL OR CONSEQUENTIAL DAMAGES WHICH CEG
HEREBY EXPRESSLY WAIVES. XXXXXXXXXX DOES NOT WARRANT FITNESS FOR ANY PARTICULAR
PURPOSE OR MAKE ANY OTHER WARRANTY EXPRESSED OR IMPLIED WITH RESPECT TO THE
PRODUCTS DELIVERED HEREUNDER.
13. Default. In the event of a breach of this Agreement by either CEG or
Xxxxxxxxxx, as the case may be, which shall not be cured within fifteen (15)
days following the defaulting party's receipt of notice of such default from the
non-defaulting party, the non-defaulting party, at its option may (a) without
affecting in any way the obligation of either party in respect of further
shipment hereunder, regard such shipment as a separate and independent sale on
the terms and conditions applicable hereunder, or (b) terminate this Agreement
as regards further shipments and if CEG shall be the defaulting party,
Xxxxxxxxxx may in such event declare the obligations of CEG for all Products
shipped due forthwith, but the defaulting party shall remain liable to the
non-defaulting party for all losses and damages sustained by reason of such
breach.
14. Bankruptcy, Receivership, etc. In the event of the adjudication of
either party as bankrupt, or of the appointment of a receiver for either party
which shall remain undischarged for forty-five (45) days after such appointment,
or of the making by either party of an assignment for the benefit of creditors,
the other party shall have the right to terminate this Agreement forthwith but
without waiving thereby its right to recover any losses and damages to which it
may be entitled.
15. Non-Compete. Xxxxxxxxxx agrees that during the Term, it will not
compete with CEG in those market segments of the Party Goods Market accounting
for not less than sixty (60%) percent of CEG's aggregate Product sales during
calendar year 1998.
16. Trademarks and Copyrights.
(a) Products and their labels and packaging under this Agreement
may bear, as CEG may direct, CEG trademarks, corporate logo and copyright
notice. Xxxxxxxxxx'x use of CEG trademarks, corporate logo and designs (whether
or not copyrighted) shall be limited to Products and their labels and packaging
manufactured or sold to CEG under this Agreement, and upon the expiration or
sooner termination of this Agreement, Xxxxxxxxxx shall not use any CEG designs
(whether or not copyrighted) or any CEG trademark, corporate logo or any other
marks confusingly similar thereto except to the extent necessary to complete
ensembles, if any, work-in-process inventory and packaging for such inventory on
hand at such time.
(b) Except as expressly provided in Section 16(a) above, this
Agreement in no
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way creates or conveys a license or permission of any kind for Xxxxxxxxxx to use
CEG trademarks, corporate logo, copyrights or designs, and expressly prohibits
the unauthorized use of CEG trademarks, corporate logo, copyrights or designs.
(c) Xxxxxxxxxx shall not at any time contest or claim rights in
CEG trademarks, corporate logo or designs (whether or not copyrighted), or cause
or permit any other person or entity to do anything that may tend to disparage,
confuse or lessen the significance of any CEG trademarks, corporate logo or
designs. Xxxxxxxxxx will not avail itself of the name of CEG in any of
Xxxxxxxxxx'x promotional or advertising literature, or otherwise assert
affiliation with CEG or any of its subsidiaries without prior written permission
of CEG.
17. Independent Contractor. CEG acknowledges that it is an independent
business acting as an independent contractor. Nothing in this Agreement or in
the course of dealing of the parties shall be construed to create between the
parties hereto a relationship as partners, joint venturers, or as authorizing
either party to obligate the other in any manner.
18. Indemnification.
(a) Subject to the limitations contained in Section 12 hereof,
Xxxxxxxxxx hereby agrees to indemnify and hold CEG harmless from and against any
and all damages, losses, deficiencies, actions, demands, judgments, costs and
expenses (including reasonable attorneys' fees) of or against CEG to the extent
resulting from (i) the breach of any warranty or the nonfulfillment of any
undertaking, warranty, covenant or agreement on the part of Xxxxxxxxxx contained
herein; (ii) a defect in any of the Products; or (iii) except with respect to a
claim for which Xxxxxxxxxx is entitled to indemnification pursuant to clause
(ii) of Section 18(b) hereof, any claim by a third party that the Products
infringe upon the rights of such party.
(b) CEG hereby agrees to indemnify and hold Xxxxxxxxxx harmless
from and against any and all damages, losses, deficiencies, actions, demands,
judgments, costs and expenses (including reasonable attorneys' fees) of or
against Xxxxxxxxxx to the extent resulting from (i) the nonfulfillment of any
undertaking, covenant or agreement on the part of CEG contained herein; or (ii)
any claim by a third party that Xxxxxxxxxx'x use of any trademark, corporate
logo or Product design pursuant to Section 16 hereof, infringes upon the rights
of such party.
19. Confidentiality. The parties mutually agree that all information and
documentation made available or disclosed to each other as a result of this
Agreement, shall be received and treated by each other as confidential and such
information shall be maintained on a restricted basis. The parties agree not to
disclose to third parties any such information regarding each other's
operations, business, marketing strategies or finances. CEG and Xxxxxxxxxx each
acknowledge that the other may possess certain trade secrets or other
intellectual property regarding its manufacturing processes for the Products and
agrees to strictly maintain the confidentiality thereof. The above provisions
shall not apply to information which (a) is or becomes publicly available
through no fault of the receiving party (b) was in the receiving party's
possession as shown by written records prior to
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disclosure hereunder or (c) is received from a third party with right to
disclose and without any obligation on the receiving party to maintain such
information in confidence.
20. Notices. Any notice, consent, approval or election authorized or
required by this Agreement shall be effective only if in writing and sent by
United States registered or certified mail, return receipt requested, addressed
to the other party at the following address or to such other address as either
party shall designate by notice to the other.
If to Hoffmaster: The Xxxxx Group, Inc.
Hoffmaster Division
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
President
If to CEG: Creative Expressions Group, Inc.
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxx XxXxxx
Vice President and General Manager
Notices shall be deemed received on the third business day following the mailing
thereof in the manner set forth above.
21. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in Oshkosh,
Wisconsin (or in such other place as the parties may mutually agree) in
accordance with the laws or regulations then obtaining of the American
Arbitration Association, and judgment upon the award rendered may be entered in
any court, state or federal, having jurisdiction.
(INTENTIONALLY LEFT BLANK)
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22. Miscellaneous. This Agreement shall be governed by the laws of the
State of Wisconsin, contains the entire agreement of the parties hereto with
respect to the subject matter hereof, may not be amended or modified in any
manner except by written instrument executed and delivered by duly authorized
officers of each party hereto, and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither party shall have the right to assign this
Agreement without obtaining the other party's prior consent thereto in each
instance.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: THE XXXXX GROUP, INC.
/s/Xxxxxx X. Xxxxxxxx By: /s/Xxxxxx Xxxxxxxxx
--------------------- --------------------
Xxxxxx X. Xxxxxxxx Xxxxxx Xxxxxxxxx
Secretary President
ATTEST: CREATIVE EXPRESSIONS GROUP, INC.
/s/Xxxxxx X. Xxxxxxxx By: /s/Xxx XxXxxx
--------------------- --------------
Xxxxxx X. Xxxxxxxx Xxx XxXxxx
Secretary Vice President and General Manager
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