Exhibit 10.11
SUPPLY AGREEMENT
This Supply Agreement is entered into between the ITW Paslode, Cordless
Tool Group ("Paslode") of Illinois Tool Works Inc., a Delaware
Corporation ("ITW"), and TecStar Illinois Division, an Illinois
corporation ("TecStar"), an affiliate of MGS Enterprises, Inc., a
Wisconsin corporation ("MGS").
The parties have agreed to the following terms in order to increase
efficiencies and reduce costs in the manufacture and supply of plastic
components ("Parts") by TecStar to Paslode, while enabling each party
to independently run its own business in accordance with all safety
rules and applicable laws and regulations:
ARTICLE 1 MANUFACTURING FACILITY LEASE
1.1 Paslode shall lease a 70,000 portion of the 99,040 square foot
building located at 00000 Xxxxx Xxxx xx Xxxxx Xxxx, Xxxxxxxx
("Building") for its own manufacturing facility ("Paslode
Facility") as of July 1, 1999, and shall lease the remaining 29,040
square foot portion of the Building as of October 1, 1999.
1.2 Paslode shall provide TecStar with the 29,040 square foot portion
of the Building for use as a complete plastic injection and blow
molding manufacturing facility ("TecStar Facility") in accordance
with the terms of this Agreement.
Paslode shall be responsible for all tooling costs and shall retain all
ownership rights to tooling and other equipment transferred or loaned
to TecStar for use in the Paslode Facility, the TecStar Facility, or
another facility of TecStar. However, TecStar shall be responsible for
the cost and performance of normal tool maintenance and minor repairs.
ARTICLE 2 TERM AND RELOCATION SCHEDULE
2.1 TecStar may equip and operate the TecStar Facility from October 1,
1999 through September 30, 2004 ("Term"), unless this Agreement is
terminated earlier in accordance with the termination provisions in
Article 6. Unless either party provides the other party with
written notice at least 90 days prior to the end of the initial
Term, this Agreement shall automatically renew for a subsequent
one-year term. Thereafter, this Agreement shall automatically
renew for successive one-year terms unless either party provides
the other party with written notice at least 90 days prior to the
end of the expiring term.
2.2 TecStar shall begin to manufacture Parts for Paslode at its
Germantown, Wisconsin plant upon receipt of tooling therefor from
Paslode.
2.3 Before October 1, 1999, Paslode and TecStar shall execute a written
schedule ("Relocation Schedule") for the relocation by TecStar of
its Parts manufacturing process from Wisconsin to the TecStar
Facility.
ARTICLE 3 TECSTAR OBLIGATIONS AND PRICING
3.1 In return for the use of the TecStar Facility, TecStar shall:
3.1.1 make all necessary arrangements, subject to final
approval by Paslode, and assume full financial responsibility
(except as otherwise specified in Article 4.1), for the remodeling
and equipping of the TecStar Facility, complete with a direct
supply connection to the Paslode Facility, within the period
allocated under the Relocation Schedule;
3.1.2 hire, train, supervise, and maintain a sufficient staff
of qualified employees necessary to meet its obligations to
Paslode under this Agreement and to operate the TecStar Facility
as a facility dedicated to the manufacture of Parts for Paslode in
accordance with all reasonable Paslode operational and safety
rules and all applicable laws and regulations;
3.1.3 maintain the TecStar Facility and equipment therein in
good operational condition, and pay all utility, maintenance, and
operational expenses incurred in running the TecStar Facility;
3.1.4 provide Paslode with reasonable access to the TecStar
Facility and to its equipment and controls in the event of
emergencies, or to avert a safety breach or threat of personal
injury or property damage; and provide access upon prior notice for
reasonable inspection of the premises by Paslode or its lessor;
3.1.5 supply Paslode with Parts which meet all specifications
and reasonable quality standards in accordance with its schedule
requirements; and
3.1.6 discount the price of Parts to Paslode in accordance
with Article 3.2 hereof.
3.2 Part Price Reductions
3.2.1 Upon receipt by TecStar of tooling for a particular
Part, Paslode shall receive the initial Part price as listed on the
attached price schedule ("Price Schedule") for such Part.
3.2.2 Paslode shall receive an additional five percent (5%)
discount off of the Price Schedule prices at the earlier of the
date that TecStar relocates the Parts manufacturing process to the
TecStar Facility, or the applicable date(s) in the Relocation
Schedule.
3.2.3 On an ongoing basis, the parties shall negotiate
additional discounts to Paslode resulting from additional cost
savings realized by TecStar as a result of efficiencies in the
manufacturing and supply process.
3.2.4 Paslode shall receive price reductions, and TecStar
shall receive price increases, as a result of raw material cost
decreases and increases, respectively. The price increase or
decrease shall equal the change in material cost per pound
multiplied by the weight in pounds of the Part as specified on the
Price Schedule.
3.3 For any month that TecStar fails to meet its contractual
obligations to Paslode under 3.1.5 above, TecStar shall either
(1) provide Paslode with alternately sourced Parts which are
acceptable to Paslode in its reasonable judgment, or (2) pay any
excess costs incurred by Paslode in obtaining alternate Parts from
another supplier.
ARTICLE 4 PASLODE OBLIGATIONS
4.1 Paslode shall arrange for and pay the reasonable costs of the
following changes to the TecStar Facility:
4.1.1 upgrade the existing electrical service from 800 to
1,200 Amps.;
4.1.2 provide a new 2,000 Amp. electrical service;
4.1.3 upgrade the factory lighting per TecStar's
specifications (not including lighting for office use) for
approximately 25,000 square feet;
4.1.4 paint the walls and ceilings in the factory area;
4.1.5 complete the demising wall between the Paslode Facility
and the TecStar Facility with drywall and fire-rated plywood
installation; and
4.1.6 install one male and one female bathroom.
4.2 Paslode shall provide TecStar employees regular access to the
Paslode Facility lunchroom and parking lot, and reasonable access
upon request to other accommodations such as laboratories and
conference rooms.
4.3 Paslode shall provide TecStar with reasonable access to the Paslode
Facility and to its equipment and controls in the event of
emergencies, or to avert a safety breach or threat of personal
injury or property damage.
4.4 Paslode shall issue a purchase order known as a Partner-Supplier
Agreement (which may be revised by Paslode annually or more
frequently by agreement with TecStar) containing an estimated
annual use and a price per Part based on quantity, in accordance
with previous sections of this Agreement. In addition, near the
end of every month, Paslode will supply a rolling Estimate of
Monthly Use for the next three months. Paslode will issue Releases
to TecStar for small batches of usage for one to two weeks, or as
otherwise agreed to, as Parts are actually consumed in the assembly
process by Paslode. TecStar shall hold appropriate quantities of
stock for these Releases.
4.5 If, as a result of Paslode business fluctuations, total Releases of
Parts by Paslode over any three month period fall below the
Estimated Annual Use quantities by more than 30%, the parties shall
negotiate and agree to institute one or more changes on a temporary
basis such as the following examples to increase efficiencies and
save costs:
4.5.1 Permit TecStar move some of its production of Parts to
another TecStar facility on a temporary basis.
4.5.2 Permit TecStar to produce products for other customers
in the TecStar Facility.
4.6 Paslode shall pay all TecStar invoices on a bi-monthly, net 15 day
basis.
ARTICLE 5 INDEMNIFICATION AND INSURANCE
5.1 Paslode and TecStar shall each indemnify, defend and hold harmless
the other from and against all costs, expenses, attorneys fees,
damages, claims, penalties and other liabilities ("Claims") to the
extent resulting from the negligence or willful misconduct of an
employee or agent of the indemnifying party. However, TecStar
shall indemnify, defend, and hold harmless Paslode from and against
all Claims by its employees and agents for injuries or damages
suffered on or at the Building, the Paslode Facility, or the
TecStar Facility, regardless of cause.
5.2 TecStar shall indemnify, defend, and hold harmless Paslode from and
against all Claims related to damage to the Building, the Paslode
Facility, or the TecStar Facility, and related claims for personal
injury or death, due to actions or omissions attributable to
TecStar, and all Claims to the extent resulting from TecStar's
failure to comply with any applicable law, regulation, or provision
of this Agreement.
5.3 TecStar shall maintain insurance policies with reputable insurers
in amounts adequate to reasonably cover its business obligations
and exposures, with coverages including products liability,
casualty, comprehensive general liability, personal property
replacement, workers compensation and employers liability; TecStar
shall name Paslode as an additional insured and provide Paslode
with a certificate of insurance prior to October 1, 1999 and
thereafter annually and upon reasonable request.
ARTICLE 6 TERMINATION
6.1 The parties may terminate this Agreement early by written
agreement.
6.2 Either party may terminate this Agreement for any reason upon 180
days prior written notice to the other party.
6.3 Either party may terminate this Agreement immediately by written
notice upon the occurrence of any of the following events of
default by the other party:
6.3.1 a default by a party of any of its obligations under
this Agreement which is not cured within 30 days of written notice
thereof by the other party;
6.3.2 a party or its parent corporation becoming insolvent or
bankrupt or making an assignment for the benefit of creditors or
being subject for 60 days to the appointment of a trustee or
receiver for the major part of its property, or instituting or
having instituted for 60 days bankruptcy, reorganization,
liquidation, insolvency, or similar proceedings;
6.3.3 failure of a party to take prompt, reasonable action
following written request by the other party to resolve issues
which present safety problems, employee disputes which materially
affect the other party's ability to conduct its business, or
potential violations of applicable law or regulations.
6.4 In the event of a termination by Paslode under 6.2 within the
initial Term, Paslode shall pay TecStar:
6.4.1 the prorated cost of the air conditioning installation
(prorated over the entire initial Term);
6.4.2 the prorated cost of TecStar's remaining financial
obligations or capital costs of the blow molding machines and
related equipment, after which Paslode shall have full ownership
rights therein to continue to use or to sell such equipment to
third parties; and
6.4.3 the reasonable costs of removal and relocation to
Germantown, Wisconsin (or another location approximately the same
distance from Green Oaks, Illinois) of capital equipment not being
purchased by Paslode under 6.4.2.
6.5 In the event of a termination of this Agreement under Article 6.1,
or by TecStar under Article 6.2, or at the normal expiration of the
Term if the parties do not renew this Agreement, TecStar shall
remove its property and equipment and remediate the property to the
reasonable satisfaction of Paslode, unless Paslode elects to take
over operation of the TecStar Facility and to compensate TecStar in
accordance with Article 6.7.
6.6 In the event of a termination of this Agreement due to an event of
default by or attributable to TecStar, Paslode may, in addition to
pursuing any and all of its remedies and rights at law or in
equity, require TecStar to immediately relinquish the TecStar
Facility and, at Paslode's option elect to either (a) take over
operation of the TecStar Facility, (b) require TecStar to remove
its property and equipment and remediate the property to the
reasonable satisfaction of Paslode, or (c) remove the TecStar
property and equipment and remediate the property at TecStar's cost
and expense.
6.7 If Paslode elects to take over operation of the TecStar Facility
under 6.5 or 6.6(a), Paslode may continue to operate the existing
TecStar Facility while the parties negotiate a reasonable
compensation to TecStar for its equipment.
6.8 Paslode may terminate this Agreement immediately by written notice
to TecStar upon the occurrence of a change in control of TecStar or
MGS.
ARTICLE 7 GOVERNING LAW AND DISPUTE RESOLUTION
7.1 This Agreement and the legal relations between the parties shall be
governed by the laws of the State of Illinois, without giving
effect to the principles of conflict of laws.
7.2 The parties agree to attempt in good faith to amicably resolve any
dispute arising under this Agreement, or, upon the failure of such
resolution, to submit the dispute to final and binding arbitration
in Chicago, Illinois.
ARTICLE 8 MISCELLANEOUS
8.1 Amendment and Assignment: This Agreement may only be amended by
written agreement executed by the parties, and may not be assigned
by one party without the prior written agreement of the other party.
8.2 Entire Agreement: This Agreement constitutes the entire agreement
between the parties and supersedes any prior oral and written
agreements and understandings between the parties with respect to
the subject matter hereof.
8.3 Counterparts: This Agreement may be signed in several counterparts,
each of which shall be deemed an original.
8.4 Binding Effect: This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns.
8.5 Waiver: Either party may by written notice to the other party
waive performance of any obligations of the other party.
8.6 Force Majeure: The performance of either party shall be excused to
the extent caused by an event beyond the reasonable control and
without fault or negligence of the party, including without
limitation acts of God, actions by governmental authority, fires,
floods, explosions, riots, wars, sabotage, or labor problems (other
than those involving the party's own employees).
ARTICLE 9 NOTICES
All notices and other communications required to be given hereunder
shall be in writing and shall be deemed to have been given when
delivered in person or transmitted by facsimile (with delivery
confirmation received), or on the delivery date shown on the receipt
for overnight delivery service, registered or certified mail, if
addressed to the party as indicated below, or to such other address as
the party shall later specify in accordance with this Article.
The parties have executed this Agreement as of the ____ day of
September, 1999.
ITW PASLODE, CORDLESS TOOL GROUP TECSTAR ILLINOIS DIVISION
By: XXXXXX X. XXXXXXXX By: XXXX X. XXXXXXX
XXXXXX X. XXXXXXXX XXXX X. XXXXXXX
(Name) (Name)
GENERAL MANAGER PRESIDENT AND CEO
(Title) (Title)
Address for Notices: Address for Notices:
000 XXXXXX XXXX XXXXX X000 N11707 MAPLE ROAD
XX XXX 0000 XXX 0000
XXXXXX XXXXX, XX 00000-0000 XXXXXXXXXX, XX 00000-0000
Facsimile #: 000-000-0000 Facsimile #: 000-000-0000
