EXHIBIT 10.2
EXECUTION COPY
SUPPLY AGREEMENT
BY AND BETWEEN
R. J. REYNOLDS TOBACCO COMPANY
AND
ALCOA FLEXIBLE PACKAGING, LLC.
TABLE OF CONTENTS
PAGE
I. DEFINITIONS AND INTERPRETATION......................................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Interpretation................................................................................ 6
II. RESPONSIBILITIES OF PARTIES............................................................................ 6
2.1 Trem of the Agreement......................................................................... 6
2.2 Exclusivity................................................................................... 6
2.3 Scope of this Agreement....................................................................... 6
2.4 Manufacturing Facilities...................................................................... 7
2.5 Specifications................................................................................ 7
2.6 Contact Personnel............................................................................. 9
2.7 Conferences................................................................................... 9
2.8 Visit at Facilities and Inspection............................................................ 9
2.9 Periodic Forecasts............................................................................ 9
2.10 Purchase Orders and Supply Schedules.......................................................... 10
2.11 Inventory..................................................................................... 10
2.12 Quality....................................................................................... 10
2.13 Supply Activities............................................................................. 10
2.14 Delivery and Shipment; Remedies for Failure to Deliver by Agreed Delivery Dates............... 10
2.15 Contingency Manufacturing Plans; Alternative Source of Supply................................. 12
2.16 Art, Prepress and Engraving................................................................... 12
2.17 Cylinders and Tooling......................................................................... 13
2.18 Capital Expenditures.......................................................................... 13
2.19 Intellectual Property......................................................................... 13
2.20 Sharing of Information........................................................................ 15
2.21 New Products.................................................................................. 16
2.22 Transition Supply Arrangements................................................................ 16
2.23 Destruction of Waste.......................................................................... 17
III. COMMERCIAL TERMS....................................................................................... 17
3.1 Pricing....................................................................................... 17
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TABLE OF CONTENTS
(continued)
PAGE
3.2 Payment Terms................................................................................. 19
3.3 Rejected Products............................................................................. 19
3.4 Audit Rights of RJRT.......................................................................... 20
3.5 Joint Cost Savings Initiatives................................................................ 20
3.6 Insurance..................................................................................... 21
3.7 Additional Services........................................................................... 21
IV. TERMINATION............................................................................................ 21
4.1 Termination................................................................................... 21
4.2 Effect of Termination......................................................................... 22
4.3 Survival...................................................................................... 23
V. CONFIDENTIALITY........................................................................................ 23
5.1 Confidentiality Obligation.................................................................... 23
5.2 Exceptions.................................................................................... 24
5.3 Authorized Disclosure......................................................................... 24
VI. WARRANTIES............................................................................................. 24
6.1 Warranties.................................................................................... 24
6.2 Liability and Damages......................................................................... 25
6.3 Representation of Authority................................................................... 25
6.4 Compliance with Laws.......................................................................... 26
6.5 RJRT's Indemnity Obligations.................................................................. 26
6.6 Supplier's Indemnity Obligations.............................................................. 26
6.7 Supplier for Product.......................................................................... 27
6.8 RJRT's Rights to Intellectual Property........................................................ 27
VII. MISCELLANEOUS.......................................................................................... 27
7.1 Further Assurances............................................................................ 27
7.2 Waiver........................................................................................ 27
7.3 Relationship of Supplier and RJRT............................................................. 28
7.4 Force Majeure................................................................................. 28
7.5 Governing Law................................................................................. 28
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TABLE OF CONTENTS
(continued)
PAGE
7.6 Dispute Resolution............................................................................ 28
7.7 Jurisdiction.................................................................................. 28
7.8 Waiver of Jury Trial.......................................................................... 29
7.9 Severability.................................................................................. 29
7.10 Amendments.................................................................................... 29
7.11 Notices....................................................................................... 29
7.12 Entire Agreement.............................................................................. 30
7.13 Assignment.................................................................................... 30
7.14 Attorney-Client Privilege..................................................................... 30
7.15 Expenses...................................................................................... 31
7.16 Publicity..................................................................................... 31
7.17 No Third Party Beneficiaries.................................................................. 31
7.18 Counterparts.................................................................................. 31
List of Annexes
Excluded Products...................................................................................... Annex A
Included Products...................................................................................... Annex B
Included Products With Qualifications.................................................................. Annex C
Specifications for All Products........................................................................ Annex D
RJRT Product Testing Protocols......................................................................... Annex E
Pricing by SKU......................................................................................... Annex F
Transitional Pricing by SKU............................................................................ Annex G
Supplier's Payment Instructions........................................................................ Annex H
List of Schedules
Forecast Rules......................................................................................... Schedule 2.9
Weekly Call-Out Procedures............................................................................. Schedule 2.10
On Time/In Full Shipment Percentage by Category of Product ............................................ Schedule 2.14(c)
On Time/In Full Shipment Percentage by SKU............................................................. Schedule 2.14(d)
Cost Model ............................................................................................ Schedule 3.1
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SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made and entered into as of
this 2nd day of May, 2005 (the "Effective Date"), by and between R. J. Reynolds
Tobacco Company, a North Carolina corporation ("RJRT") and Alcoa Flexible
Packaging, LLC, a Delaware limited liability company ("Supplier"). RJRT and
Supplier shall be referred to herein individually as a "Party" and collectively
as the "Parties."
RECITALS
A. RJRT is a manufacturer and seller of tobacco products, including
Cigarettes;
B. RJRT is the sole owner of RJR Packaging, LLC ("RJRP"), and RJRT has in
the past obtained certain materials associated with Cigarettes and packaged
Cigarettes from RJRP;
C. Supplier has purchased certain assets of RJRP used in connection with
the manufacturing of flexible packaging products for RJRT; and
D. RJRT and Supplier are entering into this Agreement in connection with
the asset purchase.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, RJRT and Supplier hereby agree as follows:
I. DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. For purposes of this Agreement, the following terms
shall have the meanings ascribed below:
"Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
"Agreement" has the meaning set forth in the introductory paragraph
hereof.
"Art" has the meaning set forth in Section 2.16.
"B&W" means Brown & Williamson Holdings, Inc, formerly known as Brown &
Williamson Tobacco Corporation.
"Call-Out" has the meaning set forth on Schedule 2.10.
"Cigarette" means: (a) any roll of tobacco wrapped in paper or in any
substance not containing tobacco, or (b) any roll of tobacco wrapped in any
substance containing tobacco which, because of its appearance, the type of
tobacco used in the filler, or its packaging or
labeling, is likely to be offered to, or purchased by consumers, as a cigarette
described in the foregoing clause (a).
"Competitor of RJRT" means any entity that: (a) derived any of its
revenues during the calendar year immediately preceding the relevant date from
the sale of any product containing tobacco or (b) any entity that owns, directly
or indirectly (beneficially or of record), more than 50% of the total common
equity or voting stock of an entity described in clause (a) above.
"Competitor of Supplier" means any entity that: (a) derived at least ten
percent (10%) of its revenues during the calendar year immediately preceding the
relevant date from the sale of any tobacco packaging products or (b) any entity
that owns, directly or indirectly (beneficially or of record), more than fifty
percent (50%) of the total common equity or voting stock of an entity described
in clause (a) above.
"Confidential Information" means (a) any proprietary information of a
Party hereto or of a third party with whom such Party has an obligation of
confidence, or (b) any other information or data relating to any aspect of any
research project, work in progress, test, scientific information, technical
information, engineering information, manufacturing information, marketing plan,
business plan, proposal, financial or personnel matter, present or future
product, sales, supplier, customer, employee, investor or business of a Party,
in each case, whether in oral, written, graphic or electronic form.
"Contract Manufacturing Agreements" means the Contract Manufacturing
Agreement, dated as of July 30, 2004, by and between RJRT and BATUS Japan, Inc.,
the Contract Manufacturing Agreement, dated July 30, 2004, by and between RJRT
and B.A.T. (U.K. and Export) Limited, and the Agreement, dated January 1, 2005,
by and between R.J. Reynolds Global Products, Inc. and JT International S.A., as
each may hereafter be amended from time to time.
"Current Facility" has the meaning set forth in Section 2.4
"Damages" has the meaning set forth in Section 6.5(a).
"Disclosing Party" has the meaning set forth in Section 5.1.
"Effective Date" is the date set forth in the introductory paragraph
hereof.
"Excluded Product" means any product item or service noted on Annex A,
Excluded New Products and any other product item or service not included in the
definition of Products.
"Excluded New Product" has the meaning set forth in Section 2.21.
"Force Majeure Event" means, with respect to either Party, causes beyond
the control of such Party, including acts of God, fire, flood, storm,
earthquake, explosion, epidemic, embargo, war, acts of war (whether war be
declared or not), acts of terrorism, insurrection, riot, civil commotion, labor
unrest or strikes affecting third-party suppliers and not within the control of
the subject Party, or acts, omissions or delays in acting by any Governmental
Authority
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(including legislative, administrative, judicial, police or any other official
government acts) not resulting from any breach or delay by such Party.
"Governmental Authority" means any of the following: (a) the government of
the U.S.A. or any foreign country, (b) the government of any state, province,
county, municipality, city, town, or district of the United States or any
foreign country, and any multi-country districts and (c) any ministry, agency,
department, authority, commission, administration, court, magistrate, tribunal,
arbitrator, instrumentality, or political subdivision of, or within the
geographical jurisdiction of, any government described in the foregoing clauses
(a) and (b).
"Included New Product" has the meaning set for in Section 2.21.
"Included Products" means those products listed on Annex B.
"Included Products With Qualifications" means those products listed on
Annex C.
"Intellectual Property" means all (i) information, concepts, ideas,
discoveries, inventions (whether conceived or reduced to practice, and whether
or not patentable), letters patent, applications for patents, patents, patent
disclosures awaiting filing determination, trade names, trade dress, trademarks,
service marks, registrations of trademarks and service marks, applications for
registration of trademarks and service marks, copyrights, registrations of
copyrights, applications for registrations of copyrights, package designs, UPC
codes, logos, slogans, Internet domain names, toll-free numbers, including
licenses of any of the foregoing and work for hire agreements, art supplier
release agreements and artwork agreements; (ii) all Trade Secrets, know-how,
methods, inventions, processes, formulae, Specifications, requirements, samples
of prototypical Cigarettes and Cigarette components, compositions, designs,
databases, software, codes, business plans and strategies, marketing plans,
customer lists, sourcing and supplier information, promotional materials and
associated artwork, graphics, designs, prints, sketches, Art, drawings and
photographs, developments, background technology, computer files comprising all
web sites, tangible property in any form whatsoever embodying such information
and work in process or under development embodying such information; and (iii)
all rights under or in respect of the foregoing including, but not limited to,
rights to sue for and remedies against past, present and future infringements
thereof, and rights of priority and protection of interests therein under the
laws of any jurisdiction worldwide and all tangible embodiments thereof and all
enhancements, derivatives, and improvements thereof.
"Law" means any statute, law, ordinance, rule or regulation of any
Governmental Authority.
"Measurement Period" has the meaning set forth below under "On Time/In
Full Delivery Percentage."
"Modified Products" means products that, save for minor amendments to
Specifications, have substantially the same technical, physical and performance
characteristics as existing Products.
"New Products" means products not currently required by RJRT, that may
from time to time after the Effective Date be required by RJRT, relating to the
"inner bundle" or "Cigarette
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foil" and "inner frame" components of Cigarette packaging. Modified Products are
not New Products.
"On Time/In Full" is the performance metric used to measure Supplier's
delivery performance under this Agreement to determine if Supplier has shipped
(i) one hundred percent (100%) of the volume of Products ordered by RJRT, (ii)
on the firm delivery date established for each Call-Out in accordance with the
Call-Out Procedures set forth in Schedule 2.10 of this Agreement and (iii) in
accordance with the Specifications and the warranties set forth in Section 6.1
of this Agreement. For purposes of tracking this On Time/In Full performance
metric and producing related periodic reports, each order placed pursuant to a
Call-Out in accordance with the Call-Out Procedures set forth in Schedule 2.10
with respect to each SKU shall be deemed an individual order (an "Order Unit")
and accounted for under the Product category listed on Schedule 2.14(c) relevant
to such SKU.
"On Time/In Full Shipment Percentage" means, with respect to any time
period stated in Section 2.14 (a "Measurement Period"), the percentage of Order
Units ordered pursuant to a Call-Out in accordance with the Call-Out Procedures
set forth in Schedule 2.10, the firm delivery date for which is within such a
Measurement Period and shipped by Supplier On Time/In Full. On Time/In Full
Delivery Percentage shall be measured as follows: [(total number of Order Units
deliverable during the Measurement Period) minus (total number of such Order
Units not shipped by Supplier On Time/In Full)] divided by (total number of
Order Units deliverable during the Measurement Period) times one hundred (100).
Stated formulaically:
Number of Order Units
deliverable during the (-) Number of Order Units not
Measurement Period by shipped On Time/In Full
Supplier
- ----------------------------------------------------- x 100 = On Time/In Full
Delivery Percentage
Number of Order Units deliverable during the
Measurement Period by Supplier
As applied to Section 2.14(c) by way of illustration, if over the applicable
Measurement Period, 83 Order Units for cigarette foil were deliverable by
Supplier and Supplier shipped 59 such orders On Time/In Full, Supplier's On
Time/In Full Shipment Percentage for such Product category during the
Measurement Period would be as follows:
83 (-) 24
--------- x 100 = 71%
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As applied to Section 2.14(d) by way of illustration, if over the applicable
Measurement Period, 35 Order Units were for a specific SKU were deliverable by
Supplier and Supplier shipped 27 such orders On Time/In Full, Supplier's On
Time/In Full Shipment Percentage for such specific SKU during the Measurement
Period would be as follows:
35 (-) 8
-------- x 100 = 77%
35
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"Oracle" has the meaning set forth in Section 2.14(c).
"Order Unit" has the meaning set forth above under "On Time/In Full."
"Party" has the meaning set forth in the introductory paragraph hereof.
"Person" means any firm, corporation, partnership, limited liability
company, joint venture, trust, unincorporated association or organization,
business, enterprise or other entity, any individual and any Governmental
Authority.
"Planning" has the meaning set forth in Schedule 2.9.
"Price" has the meaning set forth in Section 3.1(a).
"Products" means the products listed on Annexes B and C and is intended to
include Modified Products.
"Purchase Order" means any purchase order issued by RJRT to Supplier
relating to the Products, that may include delivery instructions, shipping
instructions, contact personnel, matters including "bill to" and "sold to" and
such other requirements as RJRT may specify or Supplier may reasonably require.
"Receiving Party" has the meaning set forth in Section 5.1.
"RJRP" has the meaning set forth in the Recitals.
"RJRT" has the meaning set forth in the introductory paragraph hereof.
"RJRT Indemnified Party" has the meaning set forth in Section 6.6.
"RJRT Intellectual Property" has the meaning set forth in Section 2.19.
"RJRT's Pre-Existing Intellectual Property" has the meaning set forth in
Section 2.19.
"SKU" with respect to a Product, means a stock keeping unit designation.
"Specifications" means specifications and standards set by RJRT for the
Products, and which are consistent with the specifications and manufacturing
standards met by RJRP immediately prior to the Effective Date, as the same may
be amended in accordance with the procedures set forth in this Agreement.
Specifications relate to the size, shape, dimension, composition, physical
properties, chemical properties, weight, configuration, appearance, indicia,
color and tolerances of the Products. For purposes of this Agreement, changes in
raw material requirements or composition to be used in the manufacture of
Products shall be deemed a change of Specifications.
"Supplier" has the meaning set forth in the introductory paragraph hereof.
"Supplier Facility" has the meaning set forth in Section 2.4.
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"Supplier Indemnified Party" has the meaning set forth in Section 6.5.
"Supplier's Intellectual Property" has the meaning set forth in Section
2.19.
"Term" means the period in which this Agreement is in effect as defined in
Section 2.1.
"Trade Secret" means information and data, including, without limitation,
Specifications, that: (a) derive independent economic value, actual or
potential, from not being generally known to the public or other Persons who can
obtain economic value from their disclosure and use and (b) are the subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
"Transition Supply Agreement" has the meaning set forth in Section
2.14(c).
"United States" means the United States of America and its territories and
possessions.
"Weekly Forecast" has the meaning set forth in Section 2.9.
1.2 Interpretation. (a) When a reference is made in this Agreement to
Articles, Sections, Exhibits, Schedules or Annexes, such reference will be to an
Article or Section of or Exhibit, Schedule or Annex to this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." Unless the context otherwise
requires, (i) "or" is disjunctive but not necessarily exclusive, (ii) words in
the singular include the plural and vice versa, (iii) the use in this Agreement
of a pronoun in reference to a party hereto includes the masculine, feminine or
neuter, as the context may require, and (iv) terms used herein which are defined
in GAAP have the meanings ascribed to them therein. All Schedules, Exhibits and
Annexes hereto will be deemed part of this Agreement and included in any
reference to this Agreement. This Agreement will not be interpreted or construed
to require any Person to take any action, or fail to take any action, if to do
so would violate any applicable Law.
(b) The Parties have participated jointly in negotiating and
drafting this Agreement. In the event that an ambiguity or a question of intent
or interpretation arises, this Agreement will be construed as if drafted jointly
by the parties, and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any provision of this
Agreement.
II. RESPONSIBILITIES OF PARTIES
2.1 Term of the Agreement. This Agreement shall be effective upon the
Effective Date and, unless sooner terminated by either Party pursuant to the
terms and conditions hereof, shall remain in effect until the 7th Anniversary of
the Effective Date (the "Term").
2.2 Exclusivity. During the Term and subject to the limitations contained
in this Agreement, Supplier is hereby appointed the exclusive supplier of RJRT
for the Products. During the Term, subject to and in accordance with the terms
and conditions of this Agreement,
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Supplier shall provide all Products to RJRT, and RJRT shall purchase all of its
Product requirements from Supplier. RJRT shall furnish to Supplier
Specifications for all Products to be manufactured and produced pursuant to this
Agreement.
2.3 Scope of this Agreement. The scope of this Agreement includes Products
to (1) be used by RJRT in the ordinary course of its business in the United
States, including its obligations to provide Products in Puerto Rico (through an
Affiliate), duty free shops in the United States and United States overseas
military installations and (2) satisfy RJRT's obligations pursuant to the
Contract Manufacturing Agreements, in accordance with the terms of those
Contract Manufacturing Agreements, including any required consents.
Notwithstanding the foregoing, except as expressly set forth in the preceding
sentence, nothing herein will obligate RJRT to obtain Products from Supplier for
(1) any of its subsidiaries or Affiliates or (2) any business operations outside
the United States. The manufacture and supply of Excluded Products are not
included in the scope of this Agreement.
2.4 Manufacturing Facilities. Supplier intends to initially manufacture,
or cause to be manufactured, Products at Buildings 200 and 604 which currently
house the packaging business of RJRP (the "Current Facility"). Supplier may
relocate the manufacture of Products under this Agreement to another
manufacturing facility (each, a "Supplier Facility"), in Richmond, Virginia or
Louisville, Kentucky, or in such other location as shall be mutually agreed by
RJRT and Supplier in writing. Supplier shall give RJRT prior written notice of
its intention to effect such a relocation and thereafter keep RJRT reasonably
appraised of the status of such relocation. Supplier shall bear all costs and
expenses (including capital expenditures) incurred in connection with relocating
the manufacturing operations for Products from the Current Facility to the
Supplier Facility. Upon request by RJRT, Supplier will, at Supplier's sole cost
and expense, supply sample Products manufactured in the Supplier Facility in
advance of mass supply for quality testing by RJRT.
2.5 Specifications.
(a) Annex D sets forth the initial Specifications for all Products
to be produced by Supplier for RJRT pursuant to this Agreement.
(b) Changes Proposed by RJRT
(i) In accordance with the procedures stated below in the
following clauses (ii) through (iv), Supplier shall comply with RJRT's
reasonable instructions for any changes in Specifications (the direct
incremental costs of Supplier's evaluation of any such changes, if such
evaluation is necessary, shall be borne by RJRT, subject to RJRT's prior written
approval of the budget for such costs which approval shall not be unreasonably
withheld).
(ii) The Parties shall conduct trials, as appropriate, in
order to evaluate the effect of changes in Specifications upon Products, Product
pricing or the Parties' manufacturing environments (the direct incremental costs
of evaluating and implementing any such changes, other than any resulting
capital expenditures, shall be borne by RJRT).
(iii) Upon completion of the activities set forth in the
foregoing clauses (i) and (ii) to RJRT's satisfaction, RJRT shall provide final
written approval for the
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changed Specifications. Unless otherwise agreed in writing, RJRT shall not be
required to accept any quantity of Products involving such changed
Specifications for which RJRT has not provided such final approval.
(iv) Supplier shall accept and acknowledge all changed
Specifications for which RJRT has provided final approval to Supplier, unless
Supplier has demonstrated to RJRT's reasonable satisfaction that it cannot meet
such changed Specifications. If RJRT and Supplier disagree as to Supplier
capability or capacity to meet the changed Specifications, Supplier and RJRT
shall negotiate in good faith to resolve the controversy in accordance with the
procedures set forth in Section 7.6. If (i) RJRT and Supplier still cannot agree
after following such procedures or (ii) RJRT accepts Supplier's claim that it
cannot meet the changed Specification, the products affected by such changed
Specifications will be deemed to be Excluded New Products, and RJRT will be
entitled to have such Excluded New Products manufactured by a third party
supplier selected by RJRT.
(v) Should mutually agreed changes to Specifications require
Product pricing changes, Supplier and RJRT shall negotiate the applicable
pricing changes (both increases and decreases) based on the documented effects
of the Specification changes on Supplier's direct incremental costs.
(c) Changes Proposed by Supplier.
(i) Supplier shall inform RJRT in writing of changes in
Supplier's manufacturing operations proposed at any time during the Term which
are anticipated to have an effect upon or require modifications to
Specifications or upon Supplier's ability to produce the projected volumes of
Products anticipated to be ordered by RJRT (the costs of evaluating and
implementing any such changes shall be borne by Supplier). Supplier shall
provide sufficient advance notice of such proposed changes in manufacturing
operations so as to allow RJRT commercially reasonable time to evaluate and test
the effects of the associated Specification changes on the Products and the
Products' consumer acceptability and in no event shall any such change in
Supplier's manufacturing operations be implemented without RJRT's prior written
consent.
(ii) Supplier and RJRT shall conduct trials, as appropriate,
in order to evaluate the effect of the proposed changes in Specifications upon
Products, Product pricing or the Parties' manufacturing environments and the
Products' consumer acceptability (the costs associated with such trials shall be
borne by Supplier, including the costs of sampling and consumer testing
reasonably determined to be necessary by RJRT, subject to Supplier's prior
written approval of the budget for such costs which approval shall not be
unreasonably withheld or delayed). The applicable trial, sampling and consumer
testing methodologies will be determined by mutual agreement of the Parties in
accordance with RJRT's Product Testing Protocols attached hereto as Annex E.
(iii) Upon completion of the activities set forth in the
foregoing clauses (i) and (ii) to RJRT's satisfaction, RJRT shall provide final
written approval for the changed Specifications. Unless otherwise agreed in
writing, RJRT shall not be required to accept any quantity of Products for which
RJRT has not provided such final approval.
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(iv) Supplier shall accept and acknowledge in writing all
changed Specifications for which RJRT has provided final approval to Supplier.
(v) Should mutually agreed changes to Specifications require
Product pricing changes, Supplier and RJRT shall negotiate the applicable
pricing changes (both increases and decreases) based on the documented effects
of the Specification changes on Supplier's direct incremental costs.
2.6 Contact Personnel. Promptly after the Effective Date, each of Supplier
and RJRT shall designate primary contact individuals for purposes of this
Agreement. Those individuals shall have responsibility for communicating and
receiving information regarding all matters that are relevant pursuant to the
relationship between Supplier and RJRT in accordance with this Agreement.
Supplier and RJRT shall promptly notify the other if there is a change in the
designation of any contact individual.
2.7 Conferences. Representatives of Supplier and RJRT shall conduct such
conferences (by video, teleconference or in person) as they deem necessary to
discuss with one another the Products, quality control procedures, and any other
matters relating to the activities involving the supply of Products to RJRT by
Supplier. All issues identified during such conferences shall be evaluated,
addressed and remedied as promptly as commercially practicable.
2.8 Visit at Facilities and Inspection. (a) Representatives of RJRT may,
upon reasonable notice and at times reasonably acceptable to Supplier, visit the
facilities at which the Products are manufactured. RJRT shall bear its own
expenses with regard to any such visit. If requested by RJRT, Supplier shall
cause the individuals responsible for manufacture of Products pursuant to this
Agreement to be available for meetings at the facilities where such individuals
are employed at times reasonably requested by RJRT. RJRT's inspection rights
shall include the inspection of the inventory of Products maintained by
Supplier, Supplier's manufacturing facilities and processes relating to the
Products, Supplier's quality control procedures relating to the Products, and
all materials used in the manufacturing and packaging of the Products.
(b) During any such visit, RJRT shall be responsible for ensuring
that its representatives abide by all of Supplier's rules and regulations with
regard to safety, security, personnel matters, computer use and computer network
use while at Supplier's facilities, to the extent such rules and regulations
have been clearly communicated to RJRT at or in advance of such visit. RJRT
shall inform its representatives that have access to Supplier's premises of
their obligations under this Agreement. RJRT shall be responsible for ensuring
that its representatives and visitors refrain from engaging in any conduct that
materially interferes with Supplier's business or operations.
2.9 Periodic Forecasts. RJRT shall provide Supplier, on a weekly basis,
with a rolling thirteen (13) week forecast (by SKU) (the "Weekly Forecast")
providing projections for volumes of the various Products for which RJRT expects
to place Call-Out Orders during the period covered by such forecasts. Except to
the extent specifically set forth in Schedule 2.9, any and all such forecasts
supplied will be non-binding and will be supplied for purposes of general
planning of capacity and inventories. Although RJRT shall use reasonable
business judgment to provide
9
an accurate Weekly Forecast, RJRT shall not in any way be responsible for
guaranteeing the accuracy of any such forecast or precluded from changing any
such forecast. RJRT and Supplier shall cooperate in resolving any issues that
are created as a result of forecast inaccuracies.
2.10 Purchase Orders and Supply Schedules. RJRT shall place a blanket
Purchase Order with Supplier at least annually for Products that RJRT desires to
order. RJRT shall provide (or reference) to Supplier the Specifications for each
of the Products ordered pursuant to a Purchase Order. Supplier shall schedule
supply of Products based on the Weekly Forecast provided by RJRT, Purchase
Orders placed by RJRT and the Call-Out Procedures set forth on Schedule 2.10.
2.11 Inventory. (a) Supplier will be responsible for managing and
maintaining sufficient raw material inventory to supply the Products in
accordance with the Weekly Forecast and any outstanding Purchase Order. If
requested by RJRT, Supplier agrees to hold any inventory of Products produced by
Supplier in accordance with the procedures set forth on Schedule 2.10, for up to
thirty (30) days, at which point all such inventory will be shipped to RJRT.
(b) RJRT will have no obligation to purchase any Product produced by
Supplier in excess of outstanding Purchase Orders and Supplier will bear the
costs of any such excess supply.
(c) Supplier and RJRT will mutually review excess and/or obsolete
inventory quarterly to determine its disposition.
2.12 Quality. Supplier is responsible for providing Products meeting
RJRT's Specifications. Any Products not meeting the Specifications for such
Products may be rejected by RJRT in accordance with the procedures set forth in
Section 3.3.
2.13 Supply Activities. (a) Supplier shall acknowledge receipt of each
weekly Call-Out in writing in accordance with the procedures set forth on
Schedule 2.10.
(b) If, after having followed the procedures set forth on Schedule
2.10, all or part of any Call-Out order placed by RJRT in accordance with such
procedures, is not fulfilled by Supplier, RJRT shall be entitled, but not
obligated, to cover any shortfall resulting from such breach by Supplier by
obtaining such Products from any third-party supplier of its choosing.
2.14 Delivery and Shipment; Remedies for Failure to Deliver by Agreed
Delivery Dates.
(a) Shipping Instructions. Following the manufacture of Products,
Supplier shall effect delivery of all Products by the delivery date(s) required
by the relevant Purchase Orders or the agreed firm delivery date(s) (if modified
pursuant to Section 2.13). Supplier shall ship Products on a first in/first out
basis as determined by the date of manufacture and shall ship and deliver
Products in the manner prescribed in any instructions that RJRT furnishes;
provided, that all Products must be shipped using shipping terms that require
Supplier to control the Products until delivered to the carrier chosen by RJRT.
No carrier may be used by Supplier for shipment of the manufactured Products
other than a carrier chosen by RJRT, unless otherwise
10
specified in writing by RJRT. The shipping of Products under this Agreement
shall be FOB Supplier's Facility (INCOTERMS 2000). For the avoidance of doubt,
risk of loss to Products shall pass to RJRT once the Products are delivered to
the carrier chosen by RJRT. Subject to the limitations set forth in Section
3.3(c) with respect to rejected Products, RJRT shall pay all costs, including
insurance costs, relating to the shipment and delivery of Products.
(b) Packing. Supplier shall be responsible for packing of the
Products for shipment in accordance with RJRT's directions. Such packing shall
be adequate to prevent any damage to and/or deterioration of Products under
normal transport conditions.
(c) Material Breach of Contract for Failure to Meet Required On
Time/In Full Shipment Percentage.
(i) If, (A) during any rolling two hundred seventy (270) days
or one hundred twenty (120) consecutive days during the term (the "Transition
Period") of the Supply Agreement (the "Transition Supply Agreement") of even
date herewith by and between the Supplier and Oracle Flexible Packaging, Inc.
("Oracle") or (B) during any rolling one hundred eighty (180) days or any
consecutive ninety (90) days following the Transition Period and through the end
of the Term, Supplier fails to maintain the On Time/In Full Shipment Percentages
set forth on Schedule 2.14(c), by category of Product, as ordered by RJRT under
this Agreement, such failure shall constitute a material breach of this
Agreement by Supplier, entitling (but not requiring) RJRT to terminate the
entire Agreement for cause without allowing the cure period provided for other
material breaches of contract as provided in Section 4.1(b). For purposes of
this Section 2.14(c), the aggregate On Time/In Full Shipment Percentage for each
category of Product shall be calculated by averaging the On Time/In Full
Shipment Percentage of each SKU relating to, or contained in, such category of
Product.
(ii) Supplier is responsible for meeting or exceeding the
levels of service and performance established in this Section 2.14(c) and shall
maintain at all times during the Term the necessary capacity to fulfill its
obligations hereunder.
(iii) RJRT must invoke its termination rights by written
notice to Supplier within ninety (90) calendar days of the accrual of such right
or such right of termination shall be deemed waived with respect to the
applicable material breach. Furthermore, after notice of termination is given,
the termination of this Agreement shall become effective six (6) months from the
date of RJRT's notice or such longer period as is set forth in such notice.
During such period, this Agreement shall remain in full force and effect,
including Supplier's obligation to continue to manufacture Products pursuant to
Purchase Orders placed RJRT, if any.
(d) Partial Termination for Failure to Meet Required On Time/In Full
Shipment Percentage with Respect to a Specific Product.
(i) If, (A) during any rolling two hundred seventy (270) days
or one hundred twenty (120) consecutive days during the Transition Period or (B)
during any rolling one hundred eighty (180) days or any consecutive ninety (90)
days, for the period commencing on the first date after the Transition Period
and continuing through the end of the Term, Supplier fails to maintain the On
Time/In Full Shipment Percentage set forth on Schedule 2.14(d), on an
11
SKU by SKU basis, as ordered by RJRT pursuant to this Agreement, such failure
shall constitute a material breach of this Agreement by Supplier with respect to
such SKU entitling (but not requiring) RJRT to terminate this Agreement with
respect to such SKU only, for cause, without allowing the cure period provided
for other material breaches of contract as provided in Section 4.1(b).
(ii) Supplier is responsible for meeting or exceeding the
levels of service and performance established in this Section 2.14(d) and shall
maintain at all times during the Term the necessary capacity to fulfill its
obligations hereunder.
(e) RJRT must invoke this partial termination right by written
notice to Supplier within ninety (90) calendar days of the accrual of such right
or such right of termination shall be deemed waived with respect to such breach.
Furthermore, after notice of partial termination is given, such partial
termination will become effective with respect to the terminated Product on the
date set forth in RJRT's notice. During such period, this Agreement shall remain
in full force and effect with respect to such terminated Product, including
Supplier's obligation to continue to manufacture the terminated Product pursuant
to Purchase Orders placed by RJRT, if any.
(f) Nothing in this Section 2.14 or otherwise in this Agreement
shall limit RJRT's right to seek, in addition to the remedies provided in
Section 6.2, equitable relief in the event of a breach by Supplier of its
obligations under this Agreement, including protective orders, injunctive relief
and specific performance.
2.15 Contingency Manufacturing Plans; Alternative Source of Supply.
(a) On or prior to the Effective Date, Supplier shall provide to
RJRT a written copy of the contingency manufacturing plans prepared by Supplier
to ensure that Products can be manufactured and supplied to RJRT in accordance
with this Agreement should Supplier suffer a loss or damage to its manufacturing
facilities or any other interruption to, or interference with, Supplier's
ability to comply with its obligations under this Agreement. Supplier's
contingent manufacturing plans may include utilization of other manufacturing
facilities of Supplier. During the Term of this Agreement, Supplier shall notify
RJRT in writing of any changes to the contingency manufacturing plans delivered
in connection with the preceding sentence. No changes to the contingency
manufacturing plans will be implemented by Supplier, unless Supplier has
consulted with RJRT and amended its changes to the contingency manufacturing
plans to take into account or otherwise address the reasonable modifications,
demands or suggestions of RJRT.
(b) If during the Term of this Agreement, Supplier becomes unable to
provide Product to RJRT in the volumes requested by RJRT, then Supplier may
purchase Products from a third party producer previously identified by RJRT as
an acceptable replacement. In the event Supplier elects to satisfy its
obligations under this Agreement through such a third party purchase, pricing to
RJRT for such third party-purchased Products shall be based on the pricing
matrix set forth on Annex F, and such third party-purchased Products shall be
deemed volume ordered by RJRT from Supplier pursuant to this Agreement. This
Agreement covers supply of Products regardless of where such Products are
manufactured.
12
2.16 Art, Prepress and Engraving. The cost of all artwork design and
layout and engraving requested by RJRT will be borne by RJRT. RJRT, pursuant to
the terms of Section 2.19, will be the sole owner of all artwork, prepress and
engraving, including all Intellectual Property relating thereto, manufactured or
supplied pursuant to this Agreement or related to RJRT ("Art").
2.17 Cylinders and Tooling. (a) Supplier shall purchase, at its expense,
cylinders and embossing/cutting dies required in connection with the manufacture
of the Products.
(b) If RJRT initiates a specification change that requires changes
to printing cylinders, plates and/or tooling, the direct incremental costs
associated with such change in Specification will be borne by RJRT.
(c) The costs of replacement of any cylinders, plates and tools in
the ordinary cause of business resulting from wear and tear and/or damage will
be borne by Supplier.
(d) Supplier shall own all embossing/cutting dies and cylinder
cores.
(e) RJRT shall own the image carrier and engraving of the engraved
cylinders used in the manufacture and supply of the Products, unless otherwise
agreed in writing by the Parties.
(f) Supplier shall not use the image carriers or engraving of the
engraved cylinders for any purpose other than the manufacture or supply of the
Products, without the prior written consent of RJRT.
2.18 Capital Expenditures. All costs related to capital expenditures shall
be borne by Supplier. Unless otherwise agreed to in writing in advance, RJRT
will not finance or share in the cost of any capital expenditures incurred by
Supplier in connection with the supply of Products pursuant to this Agreement.
2.19 Intellectual Property. (a) Title to all Intellectual Property owned,
developed or conceived by RJRT prior to the effective date of this Agreement
shall remain the sole property of RJRT ("RJRT's Pre-Existing Intellectual
Property"). Title to all Intellectual Property owned, developed or conceived by
Supplier prior to the effective date of this Agreement shall remain the sole
property of Supplier ("Supplier's Pre-Existing Intellectual Property).
Intellectual Property conceived or reduced to practice under this Agreement by
RJRT, or by Supplier which uses RJRT's Pre-Existing Intellectual Property or
RJRT's Confidential Information, shall belong to RJRT ("RJRT Intellectual
Property"). Intellectual Property conceived or reduced to practice under this
Agreement by Supplier, or by RJRT which uses Supplier's Pre-Existing
Intellectual Property or Supplier's Confidential Information, shall belong to
Supplier ("Supplier's Intellectual Property"). Intellectual Property conceived
of and reduced to practice with input by both parties shall be the property of
the party that pays for the reduction of that concept or idea to practice
("Jointly Created Intellectual Property"). The party which approaches the other
party with the idea for creating the Jointly Created Intellectual Property, or
otherwise proposes a project the result of which is Jointly Created Intellectual
Property, shall have the option of deciding whether or not it will pay for its
reduction to practice. Jointly Created Intellectual Property for which RJRT pays
for the reduction to practice shall be considered RJRT Intellectual
13
Property for purposes of this Section 2.19. Jointly Created Intellectual
Property for which Supplier pays for the reduction to practice shall be
considered Supplier's Intellectual Property for purposes of this Section 2.19.
(b) All RJRT Intellectual Property shall be owned solely by RJRT and
shall not be used by Supplier for other customers without the prior written
approval of RJRT; provided, however, RJRT hereby grants to Supplier a
non-exclusive, perpetual, royalty-free license to use all Jointly Created
Intellectual Property for which the Supplier came up with the original idea, but
which is owned by RJRT, provided, however, that during the term of this
Agreement Supplier may not use any of the Jointly Created Intellectual Property
licensed to it pursuant to this provision to manufacture or supply Products to a
Competitor of RJRT. Upon its respective conception, reduction to practice,
fixation in a tangible medium of expression or other making, an item of such
RJRT Intellectual Property and all worldwide right, title and interest in and to
that RJRT Intellectual Property, including all common law, statutory, treaty and
convention rights, shall immediately become and forever remain the sole property
of RJRT without any further act or deed being required and without any
additional consideration from RJRT to Supplier, and Supplier hereby irrevocably
assigns to RJRT, and RJRT hereby accepts, all such RJRT Intellectual Property
and all such worldwide right, title and interest. Supplier shall execute, or
cause its employees, agents, representatives or third party consultants to
execute, all such assignments and other documentation deemed reasonably
necessary by RJRT to effectuate this assignment and the intent of this Section.
Without limiting the foregoing:
(i) all such RJRT Intellectual Property which constitutes
patentable subject matter shall be, and hereby is irrevocably assigned to RJRT
by this Agreement, together with all patent rights with respect to such work or
work product. Supplier shall execute and deliver or shall cause Supplier
employees, agents, representatives or third party consultants to execute and
deliver any applications, assignments or other instruments and papers necessary
to secure United States or foreign letters patent or the renewal or continuation
thereof and to transfer to RJRT all right, title and interest in such RJRT
Intellectual Property, or the renewal or continuation thereof. Any such further
applications, assignments, documents or other instruments shall be prepared by
RJRT at RJRT's expense;
(ii) all such RJRT Intellectual Property which constitutes
copyrightable subject matter under the copyright laws of the United States
shall, from the inception of creation, be deemed to be a "work made for hire"
under the United States copyright laws and all right, title and interest in and
to such copyrightable works shall vest in RJRT. RJRT shall have the exclusive
rights to copyright such works in its name as the sole author and owner thereof
and to secure any and all renewals and extensions of such copyright throughout
the world. In the event that any copyrightable work which is created by Supplier
or Supplier's employees, agents, representatives or third party consultants in
the course of performing its duties for RJRT is determined not to be a "work
made for hire" under the United States copyright laws, this Agreement shall
operate as an irrevocable assignment by Supplier to RJRT of the copyright in and
to such copyrightable work, including all right, title and interest therein, in
perpetuity. Supplier will execute all documents that RJRT may reasonably request
in order to assist RJRT in perfecting the rights granted to RJRT in and to said
copyrightable works. Any such further applications, assignments, documents or
other instruments shall be prepared by RJRT at RJRT's expense. Supplier hereby
waives and agrees not to assert any moral rights or
14
similar rights under the laws of any jurisdiction with respect to such
copyrightable subject matter.
(c) All Supplier Intellectual Property shall be owned solely by
Supplier and shall not be used by RJRT without the prior written approval of
Supplier; provided, however, that Supplier shall have deemed to approve the use
of Supplier Intellectual Property in the event Supplier is in material breach of
its obligations hereunder or Supplier's obligations are required to be covered
pursuant to the terms of this Agreement; and, provided further, however,
Supplier hereby grants to RJRT a non-exclusive, perpetual, royalty-free license
to use all Jointly Created Intellectual Property for which RJRT came up with the
original idea, but which is owned by Supplier, provided, however, that during
the term of this Agreement RJRT may not use any of the Jointly Created
Intellectual Property licensed to it pursuant to this provision at any facility
owned or operated by a competitor of Supplier. Upon its respective conception,
reduction to practice, fixation in a tangible medium of expression or other
making, an item of such Supplier Intellectual Property and all worldwide right,
title and interest in and to that Supplier Intellectual Property, including all
common law, statutory, treaty and convention rights, shall immediately become
and forever remain the sole property of Supplier without any further act or deed
being required and without any additional consideration from Supplier to RJRT,
and RJRT hereby irrevocably assigns to Supplier, and Supplier hereby accepts,
all such Supplier Intellectual Property and all such worldwide right, title and
interest. RJRT shall execute, or cause its employees, agents, representatives or
third party consultants to execute, all such assignments and other documentation
deemed reasonably necessary by Supplier to effectuate this assignment and the
intent of this Section. Without limiting the foregoing:
(i) all such Supplier Intellectual Property which constitutes
patentable subject matter shall be, and hereby is irrevocably assigned to
Supplier by this Agreement, together with all patent rights with respect to such
work or work product. RJRT shall execute and deliver or shall cause RJRT
employees, agents, representatives or third party consultants to execute and
deliver any applications, assignments or other instruments and papers necessary
to secure United States or foreign letters patent or the renewal or continuation
thereof and to transfer to Supplier all right, title and interest in such
Supplier Intellectual Property, or the renewal or continuation thereof. Any such
further applications, assignments, documents or other instruments shall be
prepared by Supplier at Supplier's expense;
(ii) all such Supplier Intellectual Property which constitutes
copyrightable subject matter under the copyright laws of the United States, and
all right, title and interest in and to such copyrightable works shall vest in
Supplier. Supplier shall have the exclusive rights to copyright such works in
its name as the sole author and owner thereof and to secure any and all renewals
and extensions of such copyright throughout the world. RJRT will execute all
documents that Supplier may reasonably request in order to assist Supplier in
perfecting the rights granted to Supplier in and to said copyrightable works.
Any such further applications, assignments, documents or other instruments shall
be prepared by Supplier at Supplier's expense. RJRT hereby waives and agrees not
to assert any moral rights or similar rights under the laws of any jurisdiction
with respect to such copyrightable subject matter.
2.20 Sharing of Information. Supplier and RJRT shall cooperate with one
another (and relevant third Persons) in order to ensure that each is provided
with relevant information
15
regarding the physical and chemical properties (including toxicological
information) of raw materials, equipment, process conditions, processes or
treatment conditions that Supplier may employ when producing Products for RJRT.
In the event Supplier's performance of its obligation set forth in the preceding
sentence is limited by confidentiality obligations owed to a non-affiliated
third-party, Supplier shall use its reasonable best efforts to assist RJRT in
obtaining such information directly from such third-party, subject, if
necessary, to execution by RJRT of a reasonable confidentiality agreement. If
requested by RJRT, Supplier shall provide samples of raw materials, at the times
and in the amounts requested, to RJRT or an Affiliate designee of RJRT for
testing and evaluation. Any change to raw material, equipment
(routine/preventive maintenance and ordinary wear and tear excepted), processes,
process conditions, or treatment conditions that Supplier may employ when
producing Products for RJRT must be approved by RJRT prior to implementation of
the change by Supplier.
2.21 New Products.
(a) Upon establishing its need for any New Product, RJRT shall
determine in good faith (i) whether such New Product is within Supplier's
then-existing manufacturing capacity and capability and (ii) whether Supplier's
pricing of such New Products is competitive taking into account, among other
things, such factors as the pricing of current Products manufactured by
Supplier.
(b) New Products that (i) are determined by RJRT to be within
Supplier's then-existing manufacturing capacity and capability and (ii) for
which Supplier's pricing is determined by RJRT to be competitive, pursuant to
Section 2.21(a) above, shall be Included Products ("Included New Products").
(c) New Products that (i) are determined by RJRT not to be within
Supplier's then-existing manufacturing capacity and capability or (ii) for which
Supplier's pricing is determined by RJRT not to be competitive, pursuant to
Section 2.21(a) above shall be Excluded Products ("Excluded New Products") and
give rise to the Supplier's right of negotiation set forth in Section 2.21(d)
below.
(d) Notwithstanding anything herein to the contrary, RJRT may at any
time solicit proposals from any third party for the supply of Excluded New
Products. Within 30 days of receiving notice from RJRT that it is soliciting
proposals for the supply of an Excluded New Product, Supplier may submit a
proposal containing terms (including, without limitation, pricing) under which
Supplier proposes to supply such Excluded New Product to RJRT. The conditions,
other than the timing, for submission of a proposal by Supplier will be no less
favorable than the conditions, other than timing, imposed on third parties
submitting proposals for such Excluded New Product. If Supplier submits a
proposal to supply an Excluded New Product, the Parties will negotiate in good
faith to reach an agreement with respect to the supply of such Excluded New
Product by Supplier, provided, however, that in no event shall RJRT be required
to accept any terms from Supplier with respect to the supply of an Excluded New
Product. Notwithstanding anything herein to the contrary, Supplier shall have
the right, but not the obligation, to agree to supply the Excluded New Products
to RJRT on terms and conditions that are at least as favorable to RJRT as the
terms of the best proposal received by RJRT from a third party. If RJRT and
Supplier agree to the supply of an Excluded New Product, in accordance
16
with this Section 2.21(d), such Excluded New Product will be deemed to be an
Included Product for purposes of this Agreement, immediately upon the
effectiveness of such agreement.
2.22 Transition Supply Arrangements.
(a) RJRT acknowledges that, pursuant to the terms of the Transition
Supply Agreement, during the Transition Period, Oracle will fulfill certain of
Supplier's obligations relating to the supply of the Products.
(b) Supplier hereby agrees that RJRT is an intended third-party
beneficiary under the Transition Supply Agreement with the same rights to take
action, including, without limitation, to inspect, audit and consult with Oracle
as RJRT has with respect to Supplier under the terms of this Agreement. RJRT
shall be entitled, without the consent of Supplier, to initiate, or join
Supplier in, any dispute, action, claim or proceeding against Oracle for breach
of Oracle's obligations under the Transition Supply Agreement, to enforce the
provisions of the Transition Supply Agreement and to pursue any remedies or
claims with respect to any breach thereof. Supplier hereby covenants that the
provisions of this Section 2.22(b) shall be specifically reflected in the
Transition Supply Agreement.
(c) Supplier shall promptly notify RJRT in writing when and to the
extent Supplier terminates all or any portion of Oracle's obligations to supply
Products under the Transition Supply Agreement and in no event shall such notice
be made later than thirty (30) days prior to the date on which Oracle is
scheduled to cease the supply of such Products. Such notice shall identify
specifically those Products which Oracle shall no longer produce on Supplier's
behalf. The Parties hereby agree that during the Transition Period unless
otherwise notified in writing by Supplier in accordance with the preceding
sentence, RJRT shall be deemed to have fulfilled its obligations to Supplier
under this Agreement if RJRT delivers any deliverables under this Agreement,
including payment and notice, to Oracle instead of and not in addition to,
Supplier.
(d) Except as set forth in clause (c) above, Supplier agrees not to
amend, waive or terminate any of its rights under the Transition Supply
Agreement without the prior written consent of RJRT.
(e) Nothing herein or in the Transition Supply Agreement shall
relieve Supplier of (i) any liability under this Agreement, which it agrees will
be joint and several with the liability of Oracle and which shall be a
continuing obligation of Supplier during the Transition Period or (ii) its
obligations under this Agreement, including its obligation to initiate
contingency manufacturing plans as set forth in Section 2.15.
(f) Notwithstanding anything in Section 3.1 to the contrary, so long
as Oracle shall supply "inner bundle" or "Cigarette foil" to RJRT on behalf of
Supplier in accordance with this Section 2.22, the Price of such Products shall
not be adjusted, except to reflect changes in Oracle's costs related to board
and ink, if applicable. In the event of an increase in the cost of board or ink
in relation to "inner bundle" or "Cigarette foil," during such time, Supplier
will provide, or cause Oracle to provide to RJRT, documentation evidencing the
changes resulting in such Price increase and the impact of such changes on
Oracle's direct incremental costs. Subject
17
to the foregoing, all other cost increases shall be borne solely by Oracle and
shall not result in a price adjustment with respect to any Products. Any
adjustments made in accordance with Section 2.22 and resulting in a Price
decrease shall be passed through to RJRT as promptly as practicable and will be
reflected in the first invoice following the effectiveness of such downward
adjustment.
(g) RJRT acknowledges and agrees that Supplier shall have the
right to assign to Oracle, and Oracle shall have the right to enforce,
Supplier's rights to indemnification set forth in Section 6.5.
2.23 Destruction of Waste. Supplier hereby agrees that prior to removal
from the facility at which Products are being manufactured, all excess materials
used in the manufacture of the Products, all non-conforming Products, all
Products not delivered to RJRT and all returned or rejected Products
constituting waste shall be destroyed, by shredding or otherwise, or, if
destruction is not commercially feasible, shall be altered in a manner that will
not result in the use of such material or Product in counterfeit products.
Supplier shall deliver to RJRT a certification of compliance with this Section
2.21 upon the reasonable request of RJRT which shall not be made more often than
once during each fiscal quarter during the Term.
III. COMMERCIAL TERMS
3.1 Pricing.
(a) Annex F details the base price (the "Price") of each Product
by SKU.
(b) Subject to the limitations contained in Section 3.1(d) below,
the Price may be adjusted upward or downward, as follows:
(i) with respect to costs of paper, board and aluminum foil
conversion used to manufacture and produce the Products, and subject to the
provisions of Section 3.1(c) below, such adjustments will be made in accordance
with the cost model attached hereto as Schedule 3.1.
(ii) with respect to costs of inks, solvents and adhesive
used to manufacture and produce the Products, and subject to the provisions of
Section 3.1(c) below, such adjustments will be made in accordance with the cost
model attached hereto as Schedule 3.1.
(iii) with respect to cost of aluminum ingot used to
manufacture and produce the Products, and subject to the provisions of Section
3.1(c) below, such adjustments will be made in accordance with the cost model
attached hereto as Schedule 3.1.
(iv) with respect to non-material costs, such adjustments
will be made annually, solely to the extent they are a direct result of:
(A) duties and excise taxes applicable to imported
materials; and
18
(B) exchange rate fluctuation having an impact on the
costs of imported materials.
and, in each case set forth above, proportionately such that any increase or
decrease in such costs shall be reflected pro rata on the Price.
(c) Subject to Section 2.5 relating to changes in Specifications,
after reasonable consultation with Supplier, RJRT shall (i) identify and approve
any and all suppliers of board and paper raw materials used to manufacture and
produce the Products, (ii) determine the specifications relating to such board
and paper raw materials and (iii) negotiate with such suppliers the price of
such board and paper raw materials, resulting in RJRT's exclusive control over
the input costs of such materials. Specifically, any and all rebates obtained by
RJRT from such suppliers shall be for the exclusive benefit of RJRT. Supplier
shall be solely responsible for identifying any other raw materials suppliers,
determining the specifications for any such other raw materials and negotiating
with such suppliers. Supplier must maintain records related to all raw materials
utilized in the manufacture and supply of the Products.
(d) (i) At least thirty (30) days prior to the effectiveness of
a Price adjustment in accordance with Section 3.1(b) resulting in a Price
increase, Supplier will notify RJRT in writing and supply documentation
evidencing the changes resulting in each Price adjustment and the impact of such
changes on Supplier's direct incremental costs. Except for Price increases
effective immediately with respect to Supplier and which shall be effective
immediately with respect to RJRT, any adjustment in accordance with this Section
3.1(d)(i) will be effective in Supplier's first invoice following the
notification period set forth in the preceding sentence.
(ii) All adjustments resulting in a Price decrease shall be
passed through to RJRT as promptly as practicable and will be reflected in
Supplier's first invoice following the effectiveness of such downward
adjustment.
(e) All other cost increases shall be borne solely by Supplier and
shall not result in a Price adjustment with respect to any Product, provided
that RJRT will consider in good faith cost adjustments in the event of a
significant increase in costs affecting supply of Products hereunder other than
those identified in Section 3.1(b), if and when any such significant increases
occur and following delivery by Supplier of sufficient documentation evidencing
the impact of such increases on its costs of supplying the Products. Without
limiting the generality of the foregoing, no Price adjustment shall result from
any inflationary effects on non-material costs, and Supplier will be responsible
for year-over-year productivity gains to counteract any such inflationary
effects.
(f) Notwithstanding the provisions of Section 3.1(a), the Price of
each product by SKU shall be as set forth in Annex G for a period beginning on
the Effective Date and ending, with respect to each such SKU, on the earlier of
(i) six (6) months from the Effective Date or (ii) the date on which Supplier
ceases the manufacture of any Product identified by such SKU at the Current
Facility. Supplier shall give written notice to RJRT five (5) business days in
advance of such transfer of manufacture or production of any such Product from
the Current Facility to the Supplier Facility.
19
3.2 Payment Terms. Supplier shall deliver an invoice to RJRT for the
payment of Products manufactured by Supplier pursuant to any Purchase Order
simultaneously with the shipment of such Products. Each invoice shall be payable
by RJRT no later than 30 days after receipt by RJRT of such Products or three
(3) days following the documented shipment date if shipment of the Product is
delayed for more than three (3) days through no fault of Supplier, provided,
however, that RJRT shall receive a 1% discount on the invoiced amounts for
payments made within ten (10) days after the receipt by RJRT of the Products.
All payments by RJRT to Supplier shall be made by wire transfer of funds to
Supplier's bank account as specified from time to time in writing by Supplier.
Supplier's current payment instructions are set forth in Annex H of this
Agreement. Payments by RJRT to Supplier in accordance with this Section 3.2 are
without prejudice to any claims or other rights RJRT may have for any reason
whatsoever, and any liability of Supplier for breach of this Agreement shall not
be terminated or reduced by reason of such payment.
3.3 Rejected Products. (a) Supplier shall ensure that the Products it
manufactures for RJRT comply with the Specifications. RJRT may reject any
Product, within one hundred twenty (120) days of the delivery date of such
Product, that does not comply with the Specifications for such Product. In such
case, RJRT's written notice of rejection to Supplier shall state in commercially
reasonable detail the Products which RJRT deems non-compliant, the Purchase
Order pursuant to which those Products were manufactured and the Specification
defects.
(b) Within ten (10) business days of receipt of a notice of
rejection, Supplier may contest such rejection and provide documentation or
other evidence demonstrating that the rejected Products comply with the
Specifications. Supplier and RJRT shall negotiate in good faith to resolve the
controversy in accordance with the procedures set forth in Section 7.6.
(c) Supplier will replace, or, if replacement is not commercially
feasible, reimburse RJRT for, any properly rejected Products, at no cost to
RJRT, in a time period reasonably appropriate under the circumstances and no
more than ten (10) days after receipt thereof or the final resolution of any
disagreement in accordance with Section 3.3(b) above. Supplier shall bear any
and all shipping and handling costs incurred in connection with the delivery of
such replacement Products and the return of any rejected Products.
Notwithstanding anything to the contrary, this Section 3.3 is subject to the
warranties and provision relating to liability and damages set forth in Section
6.1 and 6.2.
(d) Non-complying and non-salvageable Products returned to
Supplier shall be destroyed by Supplier within thirty (30) days of receipt
thereof and Supplier will provide reasonably acceptable evidence of such
destruction to RJRT.
3.4 Audit Rights of RJRT. (a) Supplier shall maintain accurate and
complete records including, but not limited to, correspondence, instructions,
receipts, quality assurances records, Specifications, Purchase Orders, raw
material procurement records, warehousing records and cost data, export records,
transportation records and cost data, other manufacturing cost records and data,
and similar documents and data relating to RJRT's order and receipt of Products
from Supplier and Supplier's supply and delivery of Products for RJRT. Supplier
shall keep such records in sufficient detail to enable RJRT to evaluate,
determine or verify raw materials inventories, process conditions and quality
controls for Products supplied pursuant to each
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Purchase Order. RJRT shall have the right to review and audit Supplier's records
relating to projected and actual Product cost increases or decreases derived
from changes in Specifications made pursuant to the procedures set forth above
in Section 2.5.
(b) Supplier shall keep such records for a period of time as
determined by its normal document retention policies, but in any event not less
than eighteen (18) months after the date of the transaction to which those
records relate, or longer if required by law. Supplier shall, to the extent
permitted by law, permit RJRT to examine Supplier's records and its facilities
from time to time (during regular business hours and upon not less than ten (10)
business days written notice) to the extent necessary for RJRT to make the
foregoing evaluations, determinations and verifications, and such examination
shall be made at the expense of RJRT either by its employees (or those of its
Affiliates) or by an independent registered public accounting firm appointed by
RJRT (at RJRT's expense) which shall report to RJRT on matters associated with
such examination.
3.5 Joint Cost Savings Initiatives. The Parties hereto will work
cooperatively on a project by project basis to identify and implement
incremental savings initiatives, including the employment of new technology, to
further reduce costs. Without prejudice to the provisions of Section 2.18, the
allocation of any such expenditures and incremental costs savings as between the
Parties will be agreed to by the Parties.
3.6 Insurance. Supplier shall maintain insurance with financially sound
and reputable insurers covering inventory required to be maintained in
accordance with this Agreement and any and all Products in the Supplier's
custody in an amount no less than $3 million and against such risks as are
normally insured against in the same general area by companies engaged in the
same or a similar business. Such insurance shall provide that no cancellation or
material change in coverage shall be effective until 30 days' written notice
thereof has been provided to RJRT. Supplier shall promptly provide RJRT with
certificates of insurance as proof that all such insurance maintained by the
Supplier, is placed with such insurance companies, in such amounts, against such
risks and in such form as is customary in the same general area by or for
companies engaged in the same or similar businesses and constituting similarly
situated insureds, together with evidence that such insurance, and all policies
with respect thereto, otherwise satisfies the requirements of this Section.
3.7 Additional Services. Upon the written request by RJRT, Supplier may,
at Supplier's sole discretion, provide additional services to RJRT. Supplier and
RJRT shall negotiate in good faith towards separate agreement setting forth the
terms and conditions by which Supplier shall provide any such services for RJRT,
and by which RJRT shall pay Supplier for such services.
IV. TERMINATION
4.1 Termination.
(a) Mutual. This Agreement may be terminated by the mutual written
agreement of the Parties.
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(b) By Either Party. Either Party may terminate this Agreement at
any time upon written notice to the other if:
(i) the other Party makes a filing for voluntary bankruptcy
or a petition for involuntary bankruptcy of the other Party is not dismissed
within sixty (60) calendar days of its filing, in which case, the termination
shall become effective immediately upon notice of termination or at such later
date as is specified in the termination notice;
(ii) the other Party ceases to pay its debts as they mature
in the ordinary course of business, or makes an assignment for the benefit of
its creditors, in which case the termination shall become effective immediately
upon the delivery of the notice of termination or at such later date as is
specified in the termination notice;
(iii) a receiver is appointed for the other Party or its
property, in which case the termination shall become effective immediately upon
the delivery of the notice of termination or at such later date as is specified
in the termination notice;
(iv) the other Party is in breach of any material term of
this Agreement and the breaching Party fails to cure such breach within thirty
(30) calendar days of receipt of notice of breach from the other Party, or if
such breach is not reasonably capable of cure within such thirty (30) calendar
day period, such breaching Party fails to cure the breach within ninety (90)
calendar days of receipt of notice of breach from the other Party provided that
the terminating Party must invoke its rights of termination under this Section
4.1(b)(iv) by providing written notice to the breaching Party within thirty (30)
calendar days of the accrual of such right or such right of termination shall be
waived with respect to the applicable material breach and further provided that
after notice of such termination is given, the termination of the Agreement
shall become effective six (6) months from the date of the termination notice or
such longer period of time as my be set forth in such notice. During such
period, this Agreement shall remain in full force and effect.
(c) By RJRT.
(i) RJRT shall have the right, but not the obligation, to
terminate this Agreement for cause as provided in Section 2.14.
(ii) RJRT shall have the right, but not the obligation, to
terminate this Agreement upon the occurrence of a Force Majeure Event with
respect to Supplier, if Supplier is unable to perform its obligations hereunder,
including its obligation to implement contingency manufacturing plans as set
forth in Section 2.15, for a period in excess of ninety (90) days, provided,
however, that, during the period not exceeding one hundred eighty (180) days, in
which Supplier is unable to perform its obligations hereunder as a result of a
Force Majeure Event, if Supplier fails to satisfy its obligations under this
Agreement through a third party purchase in accordance with Section 2.15
promptly after the occurrence of such Force Majeure Event, RJRT shall be
entitled, but not obligated, to cover any shortfall in Products required by RJRT
under this Agreement by obtaining such Products from a third global party
supplier selected by RJRT. The reasonable costs incurred by RJRT in obtaining
such replacement Products and any positive difference in price paid by RJRT for
such replacement Products over
22
the Price set forth on Annex F, as the same may be adjusted in accordance with
the terms of this Agreement, shall be borne by Supplier, and such replacement
Products from Supplier, shall be deemed volume ordered by RJRT pursuant to this
Agreement.
(iii) RJRT shall have the right, but not the obligation, to
terminate this Agreement, at any time, upon the sale of a majority of the
outstanding capital stock of Supplier or all or substantially all of the assets
of Supplier to a Competitor of RJRT.
(iv) RJRT shall have the right, but not the obligation, to
terminate this Agreement if Supplier fails to use its commercially reasonable
efforts to attempt to hire within one (1) year of the Effective Date, 66
individuals employed by Oracle who were employees of RJRP on the Effective Date.
4.2 Effect of Termination.
(a) Actions by Supplier. Upon the effective date of termination of
this Agreement, Supplier shall:
(i) deliver to RJRT or its designee all raw materials,
finished Products, and/or specialized manufacturing equipment that have been, or
must be, paid for by RJRT in accordance with this Agreement;
(ii) execute all documents and take all actions reasonably
necessary to enable RJRT to carry out its obligations to customers, and use
commercially reasonable efforts to cooperate with RJRT in making the necessary
transition to another supplier of Products;
(iii) use commercially reasonable efforts to cooperate with
RJRT in the preparation of a final accounting; and
(iv) cease supply of Products, except as Supplier and RJRT
may agree in writing.
(b) Actions by RJRT. Upon the effective date of termination of
this Agreement, RJRT shall promptly pay Supplier for Products in accordance with
the terms of this Agreement, together with any other amounts that are due and
owing by RJRT to Supplier. RJRT also shall promptly pay Supplier for such unique
raw materials, in amounts consistent with the relevant Weekly Forecast, that
Supplier has purchased to produce Products for RJRT and such raw materials shall
be shipped to RJRT or its designee at RJRT's expense.
(c) Subject to the provisions of Section 4.2, if either RJRT or
Supplier choose to terminate this Agreement as provided in this Article IV, this
Agreement will be of no further force and effect, and except as set forth in
Section 4.3, there will be no liability or obligation on the part of either
Party to the other. Termination of this Agreement does not impair or extinguish
any accrued right, obligation or liability that a Party hereto may have under
this Agreement at the time it is terminated.
4.3 Survival. The provisions of Article V and Sections 3.4,4.1(c)(ii),
4.2, 5.1 6.2, 6.5, 6.6 and 6.8 will continue in effect after expiration or
termination of this Agreement.
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V. CONFIDENTIALITY
5.1 Confidentiality Obligation. During the Term of this Agreement and
for a period of five (5) years thereafter, Supplier and RJRT, each a "Receiving
Party" shall maintain in confidence all Confidential Information disclosed to it
by the other Party, as a "Disclosing Party." Notwithstanding the foregoing,
subject to Section 5.2, Supplier and RJRT's respective obligations of
confidentiality with respect to the other Party's Trade Secrets, including the
Specifications, shall be perpetual. Unless otherwise agreed in writing, neither
Supplier nor RJRT will use, disclose or grant the use of such Confidential
Information except as expressly authorized by this Agreement. To the extent that
disclosure is authorized by this Agreement, the Receiving Party shall obtain
prior agreement from its employees, representatives and contracting parties to
whom disclosure is to be made to hold in confidence and not make use of such
information for any purpose other than those purposes permitted by this
Agreement. Supplier and RJRT, as a Receiving Party, will use at least the same
standard of care (but not less than a reasonable standard of care) as it uses to
protect its own proprietary and Trade Secret information to ensure that such
employees, representatives and contracting parties do not disclose or make any
unauthorized use of such Confidential Information. Supplier and RJRT, as a
Receiving Party, will promptly notify the other upon discovery of any
unauthorized use or disclosure of the Confidential Information. The Receiving
Party shall be responsible to the Disclosing Party for any loss of Confidential
Information of the Disclosing Party or breach of the provisions of this Section
5.1 by any employee, representative or contracting party of the Receiving Party.
5.2 Exceptions. The confidentiality obligations set forth in Section 5.1
will not apply to the extent that it can be established by the Receiving Party
by competent proof that such Confidential Information:
(a) was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of receipt from the Disclosing Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its receipt from the Disclosing Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the Receiving Party in breach of this Agreement;
(d) was received by the Receiving Party, other than under an
obligation of confidentiality, by a third Person lawfully in possession of the
information; or
(e) was independently developed by the Receiving Party, without
reference or access to any Confidential Information of the Disclosing Party.
5.3 Authorized Disclosure.
(a) In the event that a Receiving Party or any of its Affiliates
are requested pursuant to, or are required by, applicable law, regulation or
legal process, including in connection with filing or prosecuting any patent
application, to disclose any of the Confidential
24
Information, the Receiving Party will promptly notify the Disclosing Party and
otherwise cooperate with the Disclosing Party so that the Disclosing Party may
seek a protective order or other appropriate remedy or, in the Disclosing Party
's sole discretion, waive compliance with the terms of this Section 5.3. In the
event that no such protective order or other remedy is obtained, or that the
Disclosing Party does not waive compliance with the terms of this Section 5.3,
the Receiving Party will furnish only that portion of the Confidential
Information which it is advised by counsel is legally required and will exercise
all reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded the Confidential Information.
(b) Supplier may, solely on a need-to-know basis, disclose to
Oracle such Confidential Information as may be necessary for Oracle to perform
its obligations under a supply agreement with Supplier, provided that, prior to
the receipt of any Confidential Information in accordance with this Section
5.3(b), Oracle shall have agreed in writing to comply with all confidentiality
obligations imposed on Supplier hereunder as if Oracle were a Party to this
Agreement.
VI. WARRANTIES
6.1 Warranties. SUPPLIER WARRANTS THAT PRODUCTS MANUFACTURED AND
PACKAGED PURSUANT TO THIS AGREEMENT SHALL BE FREE FROM DEFECTS IN MATERIALS AND
WORKMANSHIP AND SUCH PRODUCTS SHALL BE MANUFACTURED, PACKAGED AND SHIPPED IN
CONFORMITY WITH THE APPLICABLE SPECIFICATIONS AND THE PACKAGING AND SHIPPING
REQUIREMENTS OF THIS AGREEMENT.
6.2 Liability and Damages. (a) Each party shall be liable to the other
party for damages resulting from a breach of its obligations under this
Agreement.
(b) Without prejudice to Section 4.1(b)(iv), Supplier's liability
to RJRT hereunder shall be limited to the (i) replacement or reimbursement of
any non-conforming Products plus (ii) direct damages, claims, losses, suits,
proceedings, costs and expenses resulting from such non-conformance up to a
limit, in the case of this Section 6.2(b)(ii) only, of hundred thousand dollars
($200,000) per occurrence not to exceed an aggregate of one million dollars
($1,000,000) per year over the term of this agreement. Notwithstanding the
foregoing, nothing herein shall be deemed to limit Supplier's indemnification
obligations set forth in Section 6.6.
(c) Without prejudice to Section 4.1(b)(iv), RJRT's liability to
Supplier for failure to pay any amount due hereunder shall be limited to any
unpaid amounts owed to Supplier for conforming Products shipped by Supplier.
RJRT's liability to Supplier with respect to any termination of this Agreement
in material breach of this Agreement, shall be limited to direct damages (which
shall not include lost profits) incurred by Supplier in an aggregate amount not
to exceed one million dollars ($1,000,000) per year for each year of the Term
remaining at the time of such termination. Notwithstanding the foregoing,
nothing herein shall be deemed to limit RJRT's indemnification obligations set
forth in Section 6.5.
6.3 Representation of Authority. Each of Supplier and RJRT hereby
represents and warrants to the other that:
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(a) it is duly incorporated, is validly existing and is in good
standing under the laws of its jurisdiction or incorporation;
(b) it has all requisite corporate power to carry on its business
as now conducted, and is duly qualified to do business and is in good standing
as a foreign entity in each other jurisdiction where the ownership or operation
of its assets or the conduct of its business requires such qualification, except
where the failure to have such authority or to be so qualified or be in good
standing, as the case may be, would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on it or materially
impair or delay its ability to satisfy its obligations under this Agreement;
(c) it has the requisite corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;
(d) the execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder have been authorized by all
respective corporate action; and
(e) that this Agreement has been duly authorized, executed and
delivered by it and, assuming the due authorization, execution and delivery of
this Agreement by the other party hereto, constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms.
6.4 Compliance with Laws. In performance of their respective obligations
under this Agreement, Supplier and RJRT shall comply with, and shall ensure that
their respective employees and Affiliates shall comply with, all laws,
regulations, agreements, licenses and consents applicable to or otherwise
relating to the subject matter of this Agreement. Without limitation to the
foregoing, Supplier and RJRT represent and warrant that they shall not transfer,
provide, resell, export, re-export, distribute, or dispose of any Product or
component thereof or any related technology or technical data, directly or
indirectly, without first obtaining all necessary written consents, permits and
authorizations and completing such formalities as may be required by any
applicable laws, rules and regulations.
6.5 RJRT's Indemnity Obligations.
(a) In General. RJRT, severally, will indemnify, defend and hold
harmless Supplier, its Affiliates and their respective current and former
officers, directors, employees, representatives and agents (each a "Supplier
Indemnified Party") from and against any and all losses, damages, claims,
liabilities, demands, assessments, judgments, settlements, compromises and
related costs and expenses (including without limitation reasonable attorneys'
fees and costs) (collectively, "Damages") resulting from demands, actions, suits
or proceedings initiated by any third-Person (including any Governmental
Authority) and arising out of:
(i) A material breach by RJRT of its respective obligations
under this Agreement; or
(ii) The marketing, advertising, distribution or sale by RJRT
of any Products manufactured under this Agreement for RJRT, including any
Damages which relate to any claimed adverse health effects or health risks
relating to the use of such Products.
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(b) Exceptions. Notwithstanding Section 6.5(a), RJRT shall not be
required to indemnify any Supplier Indemnified Party for any portion of Damages
to which such Supplier Indemnified Party may become subject to the extent (but
only to the extent) they relate to, result from or arise out of:
(i) The failure of Supplier to comply with its obligations
under this Agreement; or
(ii) The negligence or willful misconduct or willful failure
to act of Supplier.
(c) Notice. Supplier shall give RJRT prompt written notice of any
claim or suit that may be brought directly against Supplier or any other
Supplier Indemnified Party by a third-Person for which Supplier may seek
indemnification, and RJRT shall thereafter be entitled to employ counsel,
control the defense of, and settle or compromise, such claim or suit.
6.6 Supplier's Indemnity Obligations.
(a) In General. Subject to Section 6.1, Supplier will indemnify,
defend and hold harmless RJRT, and their respective current and former officers,
directors, employees, representatives and agents (each an "RJRT Indemnified
Party") from and against all Damages resulting from demands, actions, suits, or
proceedings initiated by any third-Person (including any Governmental Authority)
and arising out of material breach of the obligations of Supplier under this
Agreement including, but not limited to, Supplier's failure to produce Products
meeting the required Specifications and/or to comply with the packaging and
shipment requirements of this Agreement, as described in Section 2.14.
(b) Exceptions. Notwithstanding anything set forth in Section
6.6(a), Supplier shall not be required to indemnify any RJRT Indemnified Party
for any portion of Damages to which such RJRT Indemnified Party may become
subject, to the extent (but only to the extent) they relate to, result from or
arise out of:
(i) The failure of RJRT to comply with their respective
obligations under this Agreement; or
(ii) The negligence or willful misconduct or willful failure
to act of RJRT.
(c) Notice. RJRT shall give Supplier prompt written notice of any
claim or suit that may be brought directly against RJRT or any other RJRT
Indemnified Party by a third Person for which RJRT may seek indemnification, and
Supplier shall thereafter be entitled to employ counsel, control the defense of,
and settle or compromise, such claim or suit.
6.7 Supplier for Product. RJRT represents and warrants that as of the
Effective Date, it has not entered into any agreement with any third Person that
obligates RJRT to purchase any Product subject to this Agreement from any third
Person.
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6.8 RJRT's Rights to Intellectual Property. RJRT represents and warrants
that it (or its Affiliates) have the right to use all Intellectual Property
associated with the Products manufactured for it under this Agreement. Supplier
shall obtain no rights with respect to Intellectual Property owned by RJRT or
its Affiliates as a result of this Agreement.
VII. MISCELLANEOUS
7.1 Further Assurances. Each Party agrees to enter into or execute, or
procure the entering into or execution, of such agreements, assignments or
further assurances, or do such other acts as the other Party may reasonably
request to carry out the terms and conditions of this Agreement. Further,
Purchase Orders issued by RJRT under this Agreement shall provide that such
Purchase Orders are issued pursuant to, and governed by, the terms and
conditions of this Agreement.
7.2 Waiver. No waiver by either Supplier or RJRT of any of the
provisions of this Agreement will be effective unless explicitly set forth in
writing and executed by that entity. Any waiver by either Supplier or RJRT of a
breach of this Agreement will not operate or be construed as a waiver of any
subsequent breach.
7.3 Relationship of Supplier and RJRT. Supplier and RJRT shall be and
shall remain independent contractors as to each other, and this Agreement shall
not be construed as establishing a general agency, employment, partnership, or
joint venture relationship between them. Neither Supplier nor RJRT shall have
the authority to make any statements, representations or commitments of any kind
(whether express or implied), or to take any action, which shall be binding on
the other or create any liability or obligation on behalf of the other, without
the prior written authorization of the entity to be bound.
7.4 Force Majeure. (a) Except as specifically provided elsewhere in this
Agreement, neither Party shall be liable for loss, injury, delay, damage or
other casualty suffered by such Party due to any inability to perform any
obligation hereunder, and neither Party shall be deemed to have defaulted under
or breached this Agreement for failure or delay in fulfilling or performing any
term or provision of this Agreement (other than payment of monies due), when
such failure or delay is caused by or results from a Force Majeure Event with
respect to such Party, it being further specified that nothing set forth in this
Section 7.4 shall relieve Supplier of its obligation to initiate its contingency
manufacturing plans as set forth in Section 2.15.
(b) At the request of the non-affected Party, the affected Party
shall provide such supporting documentation as may reasonably be required to
support its Force Majeure claim, and shall provide detailed progress reports to
the other Party as the same may be reasonably requested by the non-affected
Party describing actions taken to remedy consequences of the Force Majeure
event.
7.5 Governing Law. This Agreement and the legal relations among the
signatories hereto will be governed by and construed in accordance with the
substantive laws of the State of North Carolina, without giving effect to the
principles of conflict of laws thereof.
7.6 Dispute Resolution. To the extent that controversies arising from
this Agreement cannot be resolved by the respective personnel of Supplier and
RJRT responsible for the
28
administration of this Agreement, Supplier and RJRT shall attempt in good faith
to resolve any such dispute. Supplier or RJRT may give the other entity written
notice of any dispute which has not been resolved in the ordinary course of
business. Within ten (10) calendar days of receipt of such notice, the receiving
entity shall submit a written response to such notice. The notice and response
shall include: (a) a detailed description of the dispute; (b) a statement of the
entity's position which respect to such dispute; and (c) the name and title of
the senior executive officer who will negotiate on behalf of such entity. Within
fifteen (15) calendar days of delivery of the initial notice, or within a time
mutually agreed by Supplier and RJRT, the designated senior executive officers
will meet or otherwise confer in an attempt to resolve the dispute. Such
negotiations shall continue either until the controversy is resolved or until
one of the entities initiates judicial action as set forth in Section 7.7.
During the negotiation process, all reasonable requests for information and
documents from one entity to the other shall be honored.
7.7 Jurisdiction.
(a) The parties hereby agree that any suit, action or proceeding
(a "Proceeding") seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the United States District
Court for the Southern District of New York.
(b) The parties hereto further agree to waive, to the fullest
extent permitted by law, the defense of any inconvenient forum to the
maintenance of such suit, action or proceeding in any such New York proceeding,
and agree to waive, to the fullest extent it may legally and effectively do so
any objection which it may now or hereafter have to venue of any such Proceeding
in the United States District Court for the Southern District of New York. In
addition, the parties to this Agreement consent to submit themselves to the
personal jurisdiction of the United States District Court for the Southern
District of New York (and of the appropriate appellate courts therefrom) and
agree that they will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court. The parties to this
Agreement agree that process in any such Proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court.
7.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.9 Severability. If any provision of this Agreement shall be held to be
invalid or unlawful, the same shall be deemed to be deleted from this Agreement,
but this Agreement shall remain in full force and effect as if the deleted
provision had never been contained in it. The Parties shall negotiate in good
faith as to the terms of a mutually acceptable and satisfactory provision in
place of any deleted provision, and if such terms shall be agreed, this
Agreement shall be amended accordingly.
7.10 Amendments. This Agreement (including the Schedules and Annexes
hereto) may be amended, or any term hereof modified, only by a written
instrument duly executed by the
29
Parties hereto. In the event of any conflict between this Agreement and the
terms of a Purchase Order, the terms of this Agreement shall govern.
7.11 Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given upon the earliest of (a) delivery in
person, (b) dispatch by electronic facsimile transfer (confirmed in writing by
courier service as in (c) simultaneously dispatched) or (c) one business day
after having been dispatched by a nationally recognized overnight courier
service, in any such case to the appropriate party at the address specified
below:
If to Supplier, to:
Alcoa Flexible Packaging, LLC
6603 West Broad Street
Richmond, Virginia 23230
Facsimile No.: (703) 738-1699
Attention: Bimal A. Kalvani - President
with a copy to:
Alcoa Flexible Packaging, LLC
6603 West Broad Street
Richmond, Virginia 23230
Facsimile No.: (866) 451-8948
Attention: Lawrence M. Tuskey - Counsel
If to RJRT, to:
R. J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, North Carolina 27102-2866
Facsimile No.: (336) 741-0974
Attention: Vice President-Procurement
with a copy to
R. J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, North Carolina 27102-2866
Facsimile No.: (336) 741-2998
Attention: General Counsel
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.12 Entire Agreement. This Agreement (including the Schedules and
Annexes hereto), together with any Purchase Order issued hereunder, contains the
entire agreement and understanding between Supplier and RJRT regarding the
subject matter hereof, and supercedes
30
(i) the Supply Agreement by and between Supplier and Brown and Williamson
Tobacco, dated June 3, 2003, (ii) the Supply Agreement by and between Supplier
and British American Tobacco, dated January 20, 2004, and (iii) any standard or
boilerplate terms that may be contained in any document issued by Supplier or
otherwise issued by or to either party in connection with this Agreement.
7.13 Assignment. This Agreement shall be binding upon and inure to the
benefit of Supplier and RJRT and their respective legal successors and assigns.
This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligation hereunder be assigned,
subcontracted, licensed or transferred by Supplier or RJRT without the other
entity's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that Supplier and RJRT may,
without the other entity's prior consent, assign its respective rights and
obligations hereunder to a wholly owned subsidiary or entity under common
control with such assigning entity through 100% ownership of the equity
interests therein. Any permitted assignee shall assume all the rights and
obligations of its assignor under this Agreement. Any assignment in violation of
the foregoing shall be null and void.
7.14 Attorney-Client Privilege. The Parties hereto acknowledge that all
attorney-client privileged communications occurring prior to the Effective Date
between RJRT and RJRP were for the benefit of RJRT. Accordingly, only RJRT has
the right to waive such privileged communications and Supplier shall not have
the right to compel disclosure of such attorney-client privileged communication
without the prior written consent of RJRT.
7.15 Expenses. Except as expressly provided otherwise in this Agreement
or by any other written agreement of the Parties, each Party will bear its own
expense, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by it, incurred in connection with this Agreement or any other
agreements provided for herein or entered into in connection herewith.
7.16 Publicity. Neither Party shall publish or issue any news release or
other public announcement, written or oral, or otherwise make any disclosure
relating to the existence or terms of or performance under this Agreement
without the prior written approval of the other Party, excepts as may otherwise
be required by law.
7.17 No Third Party Beneficiaries. This Agreement is not intended to and
shall not be construed to give any Person, including any employee or former
employee, any interest or rights (including, without limitation, any third-party
beneficiary rights) with respect to or in connection with any agreement or
provision contained herein or contemplated hereby; provided, however,
notwithstanding the foregoing, (a) for the term of the Transition Period and for
a period of 90 days thereafter (but only for the purpose of providing additional
time to assert any claim that arose during the term of the Transition Period),
and (b) to the extent that Oracle is the supplier during the Transition Period
of Products that are the subject of a claim, Oracle shall be deemed an intended
third party beneficiary of RJRT's obligations and Supplier's rights under
Sections 2.5, 2.8, 2.9, 2.10, 2.13, 2.14, 2.16, 2.17, 3.1 (to the extent related
to Prices during the Transition Period only), 3.2, 3.3, 3.4, 4.2, 5.1, 5.3, 6.2,
6.7, 7.5, 7.6, 7.7 and 7.8 of this Agreement.
31
7.18 Counterparts. This Agreement and any amendment may be executed in
multiple counterparts, each of which is an original and all which constitute one
agreement or amendment, as the case may be, notwithstanding that all of the
Parties are not signatories to the original or the same counterpart, or that
signature pages from different counterparts are combined, and the signature of
any Party to any counterpart is a signature to and may be appended to any other
counterpart.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives effective as of the Effective Date.
ALCOA FLEXIBLE PACKAGING, LLC
By: /s/ Bimal A. Kalvani
----------------------------------
Name: Bimal A. Kalvani
Title: President
R. J. REYNOLDS TOBACCO COMPANY
By: /s/ Thomas R. Adams
----------------------------------
Name: Thomas R. Adams
Title: Senior Vice President and
Chief Accounting Officer
[Signature page for Alcoa Supply Agreement]