EXHIBIT 10.1
 
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXHANGE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL
TREATMENT FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 under the securities
exchange act of 1934, as amended.
 
[*] INDICATES INFORMATION THAT HAS BEEN OMITTED PURSUANT TO such CONFIDENTIAL
TREATMENT REQUEST and WHICH HAS BEEN FILED UNDER SEPARATE COVER WITH THE
COMMISSION.
 
SUPPLY AND LICENSE AGREEMENT
 
This supply and license agreement (“Agreement”), effective as of January 1, 2008
(the “Effective Date”), is by and between CTI Industries Corporation, having its
principle office located at 22160 N. Pepper Road, Barrington, Illinois 60010
(referred to herein as “Supplier” or “CTI”) and S. C. Johnson & Son, Inc., a
Wisconsin corporation, having its principal office located at 1525 Howe Street,
Racine, Wisconsin 53403.
 
Whereas, Johnson and Supplier have entered into this Agreement to reflect their
mutual understanding of the terms upon which Supplier will manufacture and
supply certain products to Johnson;
 
Whereas, Supplier owns or controls the necessary property, plant and equipment
so as to be able to produce such products;
 
Whereas, Supplier has agreed to grant Johnson the right to convert the
manufacture and supply arrangement described herein to a license arrangement
described herein upon the occurrence of certain events.
 
Now, therefore, the parties agree as follows:
 
1.
DEFINITIONS

 

 
1.1
General. The capitalized terms defined herein shall have the meanings indicated
for purposes of this Agreement. Terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.

 
1.2
“Affiliate” shall mean, with respect to Johnson, any entity controlling or
controlled by Johnson, where control means the power to direct the management
and policies of a party, and with respect to Supplier it shall mean any entity
controlling, controlled by, or under common control with Supplier.

 
1.3
“Contract Year” means any period commencing on July 1 and ending on June 30
thereafter, unless otherwise noted, provided, however, that the first Contract
Year shall be an eighteen month period beginning January 1, 2008 and ending June
30, 2009.

 

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1.4
“Consumer Fields of Use” means all distribution channels of trade where
consumers purchase, direct or indirect, products for ultimate use in the home or
otherwise including but not limited to food, drug, and mass distribution
retailers, do-it-yourself home improvement stores, warehouse clubs, office
supply stores and similar retailers and internet outlets. [*]

 
1.5
“Effective Date” is defined in the first paragraph of this Agreement.

 
1.6
“Johnson License Agreement” shall mean Johnson’s license and right to use, at
Johnson’s option and upon conversion pursuant to Sections 11.4 or 11.7 hereof,
all Licensed Intellectual Property (defined under Section 21), and shall include
the right to sublicense third parties.

 
1.7
“Net Account Revenue” means Johnson’s (including Johnson Affiliates’) gross
sales [*] that utilize any Supplier Patent Rights, to third party retail
customers less any deductions or payments including the following:

   
(A) Supply Chain Logistics Discounts, meaning discounts for ordering full
pallets, trucks, proper order lead times, etc.

   
(B) Supply Chain Channel Discounts, meaning wholesaler or broker discounts or
similar items.

   
(C) Supply Chain Discounts/Markdowns, meaning discounts applied to obsolete
goods in Johnson warehouses to incent secondary market sales.

   
(D) Returns, meaning full case returns including any third party handling fees.

   
(E) Remnants/Spoils, meaning less than full case returns or damaged cases
including any third party handling fees.

   
(F) Cash Discounts, meaning discounts allowed for prompt payment of invoices.

   
(G) Deals, meaning all other trade payments for account specific consumer
promotions, markdowns, volume or growth rebates, display programs, slotting
fees, etc.;

   
provided that, for purposes of this definition only, [*]

     

  1.8 “Product(s)” means the following products, individually or collectively:

 

 
(A)
[*]

 

 
(B)
[*]

 

 
1.9
“Supplier Patent Rights” means those U.S. and foreign patents and patent
applications, currently pending or issued, that are owned, licensed, or
otherwise controlled by Supplier, and that contain any issued valid claim that
reads on the Product(s), including but not limited to those patents listed in
Schedule 1.9, attached hereto, and hereby incorporated herein by reference.

 
1.10
“Term” as used herein shall have the meaning as set forth in Section 3 below.

 
1.11
“Territory” means worldwide.

 
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2.
TERMS OF SALE

 

 
2.1
Supply Commitment. Subject to the terms and conditions of this Agreement, the
Supplier shall manufacture and sell to Johnson and Johnson shall purchase from
Supplier the products listed in Schedule 2.1 ("Product(s)"). Schedule 2.1
contains a list of the Products (“Product List”) and the price adjustment
mechanism(s) for the Products (“Price Adjustment Mechanism(s)”), if any. The
Product List may be amended from time to time by written agreement of the
parties.

 

 
2.2
Purchase Orders. Johnson may place orders in writing, by phone (confirmed in
writing), or by electronic data transmission (“Purchase Order(s)”).

 

 
2.3
Shipments. Shipments are according to Johnson’s delivery schedules and shipping
instructions (“Shipment Terms”) as set forth in Schedule 2.3. The Shipment Terms
apply until changed by Johnson. Delivery schedules shall not materially exceed
the capacity levels and forecasts as provided in Section 6 hereof.

 

 
2.4
Payment Terms. Payment terms for [*] purchases are [*] from the later of (i) the
date of invoice or (ii) acceptance of Product. Payment terms for [*] purchases
are [*] from the shipment date, provided that the goods were received by Johnson
a minimum of [*] prior to the end of such time period and Johnson has not
rejected the goods. In no event shall Johnson be required to make payment before
receipt of Product nor shall invoices be dated prior to the date of shipment.
Johnson does not waive any right it has for adjustment of the amount due to
Supplier by its having paid for the Product. 

 

 
2.5
Designated Purchasers.

 

 
(A)
Johnson may request that Supplier sell Product directly to a third party
purchaser. Under these circumstances, such designated third party purchaser
shall purchase the Product subject to the terms and conditions of this
Agreement. In the event that Supplier determines that a designated third party
purchaser is not performing according to the terms of this Agreement (including
events of late payment), Supplier has the right to cease selling to such third
party purchaser; provided, however, that Supplier shall notify Johnson if a
designated third party purchaser is not performing according to the terms
hereof, and shall allow Johnson at least [*] to attempt to resolve the matter
with the designated third party purchaser before Supplier ceases sales to such
designated third party purchaser.

 

 
(B)
References to Johnson are considered a reference to such third party purchaser
if Johnson has exercised its option to have Product sold to such third party
purchaser. Johnson may change or add third party purchasers at any time upon
written notice to the Supplier.

 

 
2.6
Additional Terms. Acceptance of this Agreement is limited to acceptance of the
terms and conditions contained in this document. Any proposal for additional or
different terms or attempt by Supplier or Johnson to change any of the terms and
conditions of this Agreement is rejected and not of any effect. Additionally, if
any terms of a Purchase Order, invoice or other document exchanged between the
parties related to the purchase of the Product(s) conflicts with the terms of
this Agreement, the terms of this Agreement shall apply.

 
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3.
TERM

 

 
3.1
Initial Term. This Agreement shall commence on the Effective Date and continue
in full force and effect for an initial term ending June 30, 2011 (“Initial
Term”), unless renewed per the terms of Section 3.2 or terminated earlier
pursuant to this Agreement (the Initial Term and any renewal terms shall be
referred to collectively as the “Term”).

 

 
3.2
Renewal Terms. After the Initial Term, this Agreement may be renewed for two
additional terms of two (2) years each. This Agreement shall automatically renew
for a first renewal term of two (2) years (“Automatic First Renewal Term”) [*].
If this Agreement does not automatically renew in accordance with the preceding
sentence, then Johnson shall have the right to unilaterally renew this Agreement
for the first renewal term of two (2) years (“First Renewal Term”) by giving
written notice to Supplier at lease four (4) months prior to the end of the
Initial Term. In addition, provided this Agreement has been renewed for the
Automatic First Renewal Term or First Renewal Term, Johnson shall have the right
to further extend this Agreement for a second renewal term of two (2) years
(“Second Renewal Term”) by giving written notice to Supplier at least four (4)
months prior to the end of the such first renewal term.

 
4.
PRICING

 

 
4.1
Price. The initial price for each Product is set forth in Schedule 2.1.

 

 
4.2
Price Adjustments.

 

 
(A)
Periodic Price Adjustments. [*] For the Renewal Terms, Supplier will provide to
Johnson, at least six months prior to the commencement of the First or Second
Renewal Term (as applicable), the Product price for the first year of the
applicable Renewal Term. [*] 

 

 
(B)
Johnson Requested Change. If Johnson requests a change in the Specifications or
manufacturing process and the change would affect Supplier's conversion cost
and/or materials cost, the parties shall determine the impact, if any, the
change would have on the Product price. If Johnson and Supplier agree on a price
adjustment, the Specification change or manufacturing process change, or both,
will be implemented, and the price change will become effective on the date the
change is implemented.

 

 
(C)
Complete Pricing. The Product prices are complete, and Supplier may not add
charges of any type without Johnson's prior written consent. Examples of charges
that may not be added to the price include, without limitation, shipping,
packaging, labeling, customs duties, taxes, storage, insurance, boxing, overtime
(unless approved by Johnson in advance), and crating costs.

 

 
(D)
Most Favored Pricing. The Supplier represents and warrants to Johnson that the
Product prices are not less favorable than those currently extended by Supplier
to any other person for the same or similar articles supplied in similar
quantities. If permissible under applicable law, Supplier shall immediately
reduce the price to Johnson for the affected Product if Supplier reduces its
price to other persons for the same or similar article for the supply of similar
quantities.

 
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(E)
Resin price adjustments. Product prices shall be subject to resin price
adjustment made effective on the first day of each calendar quarter in
accordance with Schedule 2.1 attached.

 

 
4.3
Shrinkage. Supplier is responsible for all expenses relating to manufacturing
losses and inventory losses until the Product is delivered to and accepted by
Johnson.

 

 
4.4
Cost Savings. Supplier shall use its reasonable commercial efforts to generate
cost savings in the cost of the Products. Cost savings shall be allocated as
follows:

 

 
(A)
Cost savings, which (i) result from Product or Product packaging modifications
or (ii) result from projects initiated jointly or solely by either party and
require no investment by Supplier or (iii) result from a relocation of
production to another Supplier manufacturing facility, will be applied solely to
reduce Product prices upon implementation. If Supplier must invest to achieve
these savings, these savings will (i) first be used to fund the cost of the
investment and (ii) thereafter will be applied solely to reduce Product prices.

 
5.
SPECIFICATIONS

 

 
5.1
Specifications. Johnson has given Supplier copies of the Product Instruction
Handbooks. The Green General Specifications and Guidelines Handbook contains
general specifications for goods being manufactured for Johnson. Specifications
for new products just being launched are in Red Product Instruction Handbooks.
Blue Product Instruction Handbooks cover the specifications for established
products. Yellow Product Instruction Handbooks cover the specifications for
special pack products. These Product Instruction Handbooks contain
Product-related, finished goods, and packaging specifications; manufacturing
instructions, formulas, processing instructions, quality control procedures,
finished goods and component performance tests, Acceptable Quality Limits; and
other information relating to the manufacture of Product (the
“Specification(s)”). Supplier shall not use the Product Instruction Handbooks
for any purpose other than to perform its obligations under this Agreement.
Supplier shall manufacture Product in compliance with the Product Instruction
Handbooks. The Product Instruction Handbooks (including all copies and related
notes) must be returned to Johnson upon Johnson’s request or upon termination of
this Agreement. Upon changes in the Specifications, Johnson will provide amended
Product Instruction Handbooks to Supplier.

 

 
5.2
Changes. Supplier must not change any Specification or manufacturing location
without Johnson’s prior written consent. Johnson shall have the right, but not
the obligation, to change the Specifications, from time to time, upon reasonable
advance written notice to Supplier and, in that case, Johnson and Supplier shall
enter into good faith negotiations to adjust the price in accordance with
Section 4.2(B). For changes to be effective, they must be set forth in a writing
that is signed by the parties and incorporated as an amendment to the
Specifications.

 

 
5.3
Materials. Unless otherwise agreed, Supplier is solely responsible for obtaining
the equipment, materials, components, and services required by Supplier to
manufacture and deliver Product. To the extent not covered by the
Specifications, providers of and specifications for materials and components
must be approved in advance by Johnson. If Johnson has a supplier of raw
material and/or components that could result in a Product cost savings, Johnson
shall have the right to change the Specifications pursuant to Section 5.2 above
to include such material and the designated supplier, subject to the terms of
Section 5.2. In addition, Supplier may use an alternative supplier if approved
in advance and in writing by Johnson. If Supplier fails to obtain Johnson’s
prior written approval, Supplier shall assume any and all responsibility in
accord with Section 12.1 of the Agreement.

 
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6.
MANUFACTURING CAPACITY

 

 
6.1
Capacity. Supplier guarantees sufficient capacity at its production facilities
to manufacture and deliver the quantities [*]. [*] This is not a commitment by
Johnson to purchase any quantity. The minimum criteria for any Contract Year of
this Agreement shall be that Supplier’s service permits Johnson to ship 99% of
its orders using Products to Johnson customers on time and complete.

 

 
6.2
Forecasting.

 

 
(A)
Johnson may provide on-line access for Supplier to Johnson’s production
forecasting system or its equivalent (collectively, “PFS”). This access will
permit Supplier to have current information relating to Johnson’s estimates of
production forecast. Johnson shall provide such other information as Supplier
may reasonably request concerning Johnson’s forecasts. Supplier shall only
access that portion of the PFS system necessary for Supplier to determine
Johnson’s Product needs. All information in the PFS system is highly
confidential and will be treated as Johnson Confidential Information pursuant to
Section 17 below. 

 

 
(B)
If Supplier does not have access to Johnson’s PFS system, Johnson shall provide
non-binding annual forecasts, updated quarterly, and binding written or
electronic data input ("EDI") Purchase Orders. The initial non-binding annual
forecast is attached hereto as Schedule 6.2.

 

 
6.3
No Requirements and No Minimums. This is a not a requirements contract.
Additionally, Johnson does not have to purchase a minimum quantity of Product.
Johnson does not have to use its best efforts to promote and sell the Product,
and Johnson may discontinue or reduce its commercialization effort with respect
to any Product at any time for any reason.

 

 
6.4
Exclusivity. During the Term of this Agreement, Supplier and its Affiliates
shall not directly or indirectly manufacture or sell the Product [*] for or to
anyone other than Johnson, [*] 

 
7.
Brand NAME

 
Supplier acknowledges that Johnson’s Ziploc brand (or another brand designated
by Johnson) will be the primary brand name for the Product. Johnson shall also
select, own and control any sub-brand for the Product.
 
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8.
(INTENTIONALLY OMITTED)

 

9.
ROYALTY PAYMENTS AND REPORTS

 

 
9.1
Conversion to Johnson License Agreement. If this Agreement converts to a Johnson
License Agreement pursuant to Section 11.7 below, the royalty fee payable on
Johnson’s [*] Product Net Account Revenue shall be referred to herein as
“Royalties.”

 

 
9.2
Payment Due Date. Any and all Royalties payable pursuant to Section 11.7 shall
be paid to Supplier at the address set forth on the first page hereof, within
sixty (60) days of the close of each calendar quarter within which the royalties
accrued. All Royalties payable hereunder shall be paid in USD. The royalties
which are to be paid for sales made in non-USD shall be calculated separately
for each month of the calendar quarter by determining the aggregate Net Account
Revenue of Products for that month in local currency, then converting same to
USD using the average of the conversion rates for the first and last business
day of that month as published in the Wall Street Journal (New York edition).
The royalties for each month of the calendar quarter shall be calculated
separately as described, and then added to arrive at the quarterly royalty
payment.

 

 
9.3
Statements. Johnson shall prepare and issue a report for each calendar quarter,
identifying this Agreement and showing (A) total number or amount of Products by
item sold by Johnson and its Affiliate sublicensees, (B) [*] Product Net Account
Revenue, and (C) the royalties accrued during the quarter and payable to
Supplier.

 

 
9.4
Taxes and Other. Johnson shall be responsible for payment of any taxes on the
sale of Products. If any taxes are required to be withheld on the royalties due
under this Agreement, which taxes would be owed by Supplier, Johnson shall pay
such taxes on behalf of Supplier, provide to Supplier a copy of the withholding
tax certificate, and deduct any such payments from the amounts due to Supplier.

 
10.
SUPPLIER REPRESENTATIONS AND WARRANTIES

 

 
10.1
Product Representations and Warranties. The Supplier represents and warrants to
Johnson with respect to each delivery of Product as follows:

 

 
(A)
Product has been manufactured in compliance with the Specifications, is new, and
is free from defects in materials and workmanship and conforms in all respects
to agreed samples. Product is adequately contained, packaged, marked, and
labeled. Product is merchantable and is safe and appropriate for the purpose for
which goods of that kind are normally used and shall be suitable for food
contact applications as defined by the FDA and, for product destined for the
Canadian market, the Canadian equivalent of the FDA Notwithstanding the
foregoing, Supplier shall not be responsible for Product [*] provided that
Supplier fully complies with all of the Quality Control procedures and standards
contained in the Product Instruction Handbook with respect to the inspection and
testing [*]. For the avoidance of any doubt, Supplier shall be responsible for
Product defects caused by Supplier’s breach of any such Quality Control
requirements applicable to the valves and zippers.

 
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(B)
Supplier has conveyed to Johnson good title to the Products, free from any
lawful security interest, lien, or encumbrance.

 

 
(C)
Supplier and Supplier’s facilities comply with all applicable laws relating to
the manufacture, storage and sale of the Product, including import and export
compliance. Johnson may audit Supplier’s compliance with applicable laws, rules,
regulations and the like, including a safety and environmental audit.

 

 
(D)
To Supplier’s best knowledge, neither Products nor Supplier’s methods and means
of manufacturing Products infringe a valid patent, copyright, design right, or
trade secret of a third party.

 

 
(E)
Waste material generated in connection with the production of the Products, as
well as any other products manufactured by Supplier at its facility, has been or
will be disposed of in strict compliance with applicable laws. Upon request,
Supplier shall certify its compliance with such laws.

 

 
(F)
Supplier is authorized to enter into and perform this Agreement and will not
breach any obligations owed to another person by performing this Agreement.

 

 
(G)
Product, Product constituents, and production methodologies comply with all
applicable laws, regulations and government directives, including, but not
limited to the Toxic Substances Control Act.

 

 
10.2.
Patent Representations and Warranties. Supplier represents and warrants to
Johnson with respect to Supplier Patent Rights as follows:

 

 
(A)
Supplier is the owner or exclusive licensee, and otherwise in control of all of
said Supplier Patent Rights, and that all of the associated patents and patent
applications, owned, licensed, or controlled by Supplier within defined Consumer
Fields of Use, are set forth in Schedule 1.9. Furthermore, Supplier represents
and warrants that said Schedule captures all of the patent rights owned,
licensed or otherwise controlled by Supplier that fully cover the subject matter
of Products as defined herein.

 

 
(B)
Supplier has authority to enter into this Agreement and to perform its
obligations under this Agreement and that it has been duly authorized to execute
and to deliver this Agreement.

 

 
(C)
As of the date of signature hereto, and with exception for any specific
disclosures made to Johnson within the prior ninety days by Mr. John Schwan on
behalf of Supplier, Supplier is without knowledge, whether actual or implied, of
any pending or threatened infringement litigation with respect to Supplier
Patent Rights, and furthermore that it has not received any actual notices of
infringement with respect to any of its own manufactured products that may or
could be covered by or related to Supplier Patent Rights.

 

 
(D)
As of the date of signature hereto, and with exception for any specific
disclosures made to Johnson within the prior ninety days by Mr. John Schwan on
behalf of Supplier, Supplier is without actual or implied knowledge of any
patent, any document, or any other information, that would limit the validity of
the Supplier Patent Rights under this Agreement.

 
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(E)
As of the date of signature hereto, and with exception for any specific
disclosures made to Johnson within the prior ninety days by Mr. John Schwan on
behalf of Supplier, Supplier is without knowledge that the practice of the
Supplier Patent Rights is or may be limited by intellectual property rights of
third parties. Moreover, Supplier shall have a continuing obligation to notify
Johnson within thirty days of its receipt of any non-public information that
impacts this warranty and representation.

 

  10.3. Certification. Upon Johnson’s request, Supplier shall provide Johnson
with a warranty certificate certifying compliance with any and all of the
representations and warranties contained in Sections 10.1 and 10.2.

     

 
10.4
Additional Agreements of Supplier.

 

 
(A)
If requested by Johnson, Supplier must participate in Johnson’s Systems Quality
Assurance Program (“SQA Program”) through Johnson’s Systems Quality Assurance
group. If the Supplier produces “Critical Level I” products, as determined by
Johnson, or Products that are used in the manufacture of products regulated by
Good Manufacturing Practices (“GMP”) regulations, as determined by Johnson’s
Regulatory group, Supplier agrees to achieve a rating of 3.0 or higher in each
of the “red” subsystems in the SQA Program, and a rating of 2.5 or higher in
each of the “yellow” subsystems in the SQA Program. Supplier further agrees to
continuously improve in all areas of the SQA Program, with a target of an
overall score of 4.0 or higher.

 

 
(B)
If the Products are regulated or controlled by the United States Food and Drug
Administration (“FDA”) or its Canadian equivalent, Supplier shall maintain
itself in good standing with the FDA and manufacture the Products in compliance
with all Good Manufacturing Practices (“GMPs”) issued by the FDA from time to
time, and all raw materials used in such Products shall be suitable for food
contact applications as defined by the FDA or its Canadian equivalent. Johnson
or its agents shall have the right to audit Supplier’s GMP compliance at any
time.

 

 
(C)
If the Products are registered with or regulated by the United States
Environmental Protection Agency (“EPA”) or Health Canada, Supplier shall
manufacture the Products in compliance with all applicable EPA or Health Canada
rules and regulations, and shall promptly provide to Johnson copies of all
reports, notices, filings and other correspondence with the EPA or Health Canada
and similar state, provincial or local agencies related to the Products,
including, without limitation, “6(a)2” forms. Johnson or its agents shall have
the right to audit Supplier’s EPA or Health Canada compliance at any time.

 

 
(D)
If Supplier’s projected annual sales to Johnson is $1 million to $5 million in
the United States, Supplier agrees to establish a Supplier Diversity procurement
target and agrees to report, on a semi-annual basis, its expenditures for
materials and/or services with certified minority and women-owned businesses
(i.e., certified by an approved third party agency) attributable to Products
made for Johnson in the United States. If Supplier’s projected annual sales to
Johnson exceed $5 million in the United States, Supplier further agrees to
submit a written supplier diversity procurement plan by March 31st of each year.
Johnson does not accept self-certification.

 
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(E)
Supplier acknowledges that it has received, is aware of and has reviewed
Johnson’s Manufacturing Code of Conduct (the “Code”), as amended from time to
time, and agrees to comply with the Code. Further upon request, Supplier agrees
to certify its compliance with the Code to Johnson. Johnson shall have the right
to audit Supplier’s compliance with the Code at any time. The Code is attached
hereto as Schedule 10.4(E).

 

 
(F)
Supplier acknowledges that it has received, is aware of and has reviewed
Johnson’s Business Conduct and Ethics Policy (the “Policy”), as amended from
time to time, and agrees to comply with the Policy. The Policy is attached
hereto as Schedule 10.4(F).

 

 
(G)
Upon Johnson’s request, the parties will meet quarterly to review a “Supplier
Scorecard” as developed by Johnson to track and require improvement, when
necessary, the Supplier’s performance, including, but not limited to, key
metrics such as price, guaranteed cost savings, quality, and service. Supplier
will use reasonable commercial efforts to continually improve its performance on
the metrics listed on the Supplier Scorecard. Supplier will track and report its
performance related to these key metrics.

 
 

 
(H)
If Supplier is importing or transporting imported products to Johnson or
Johnson’s designated third party purchaser into the U.S. or Puerto Rico, and
Supplier is eligible to become certified under the Customs - Trade Partnership
Against Terrorism (“C-TPAT”) program, Supplier will become C-TPAT certified and
comply with the C-TPAT requirements. If Supplier is not eligible to become
C-TPAT certified, Supplier will comply with Johnson's security measures, a copy
of which is attached in Schedule 10.4(H). Supplier will provide its
certification number or evidence of its membership in C-TPAT, or proof of its
compliance with Johnson’s security measures, whichever is applicable. Johnson
may audit Supplier's compliance at any time upon reasonable notice. 

 
 

 
(I)
Union of Orthodox Jewish Congregations of America. At the request of Johnson,
Supplier will support the obtaining of Orthodox Union (OU) certification for the
production line that manufactures Products. Thereafter Supplier shall maintain
Kosher compliance on all production lines that manufacture OU certified product
for Johnson. The Orthodox Union’s (OU) Rabbinic field representatives shall have
the right to perform Kosher inspections of these lines at any time. Johnson or
its agents shall have the right to be present for such audits.

 
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11.
TERMINATION/CONVERSION OF AGREEMENT

 

 
11.1
Termination. Johnson may withdraw any Product(s) or all Products from this
Agreement (the latter withdrawal of the entire Product portfolio being deemed to
be tantamount to a termination of this Agreement) or terminate this Agreement in
its entirety, at any time during the Initial Term, Automatic First Renewal Term
or any other Renewal Term at its sole discretion by giving at least one hundred
twenty (120) days written notice. In the event Johnson withdraws a Product
during the Initial Term, the Automatic First Renewal Term or, if there is no
Automatic First Renewal Term then the First Renewal Term, at its discretion
pursuant to this Section 11.1, then Johnson shall have no further right to sell
or distribute the applicable withdrawn Product hereunder as of the Product
withdrawal date and, further, Johnson shall not be entitled to exercise its
conversion and option rights pursuant to Section 11.7. In the event Johnson
terminates this Agreement in its entirety prior to the end of the Initial Term,
the Automatic First Renewal Term or, if there is no Automatic First Renewal
Term, the First Renewal Term at its discretion pursuant to this Section 11.1, or
if the Initial Term shall expire without automatic renewal for an Automatic
First Renewal Term or without a renewal at the election of Johnson for a First
Renewal Term, then Johnson shall have no further right to sell or distribute the
Products as of the date of termination and, further, Johnson shall not be
entitled to exercise its conversion and option rights pursuant to Section 11.7.
In the event Johnson withdraws any Product or terminates this Agreement at its
discretion pursuant to this Section 11.1 for effect (a) at the earlier of the
last day of (i) the Automatic First Renewal Term (if applicable) or (ii) the
First Renewal Term, or (b) if Johnson shall have renewed this Agreement for a
Second Renewal Term, any time after the earlier of the dates specified in
subpart (a), then Johnson shall have the right to convert this Agreement to a
Johnson License Agreement pursuant to the conversion and option rights in
Section 11.7 below. In the event the Automatic First Renewal Term or the First
Renewal Term, if any, shall expire without renewal for a Second Renewal Term,
then Johnson shall have the right to convert this Agreement to a Johnson License
Agreement pursuant to the conversion and option rights in Section 11.7 below.
Furthermore, in the event Johnson terminates this Agreement at any time pursuant
to Section 11.2, then Johnson shall have the right to convert this Agreement to
a Johnson License Agreement pursuant to the conversion and option rights in
Section 11.7 below.

 

 
11.2
Termination for Breach. Johnson or Supplier may terminate this Agreement,
subject to Johnson’s right to convert this Agreement to a Johnson License
Agreement pursuant to the conversion and option rights in Section 11.7, upon the
other party’s breach of its obligations under this Agreement by giving at least
sixty (60) days written notice, which describes the reason for the termination.
This Agreement will terminate, subject to Johnson’s right to convert this
Agreement to a Johnson License Agreement pursuant to the conversion and option
rights in Section 11.7, unless the party receiving the notice cures or remedies
the situation supporting termination within the sixty (60) day notice period.
Supplier shall not have the right to cure the breach if the breach relates to
Supplier’s warranties and representations set forth in Section 10.1 hereof and
such breach results in a Product recall or a government regulatory action or
proceeding concerning the Product.

 

 
11.3
Bankruptcy. If Supplier makes any assignment of assets or business for the
benefit of creditors, or if a trustee or receiver is appointed to administer or
conduct Supplier’s affairs or business, or if it is adjudged in any legal action
to be either a voluntary or involuntary bankrupt, the obligations of Johnson and
the rights and privileges of Supplier under this Agreement shall be deemed to
have become a Johnson License Agreement (as defined in Section 11.7) immediately
prior to such assignment, appointment of trustee or receiver, or bankruptcy
without Johnson giving any notice or taking any legal action.

 
11

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11.4
Automatic Grant of License Rights. If any Johnson forecast issued pursuant to
Section 6.2 hereof states a forecasted annual volume (as updated quarterly) [*]
for any reason, then Johnson shall automatically be granted a Johnson License
Agreement. Such Johnson License Agreement shall supplement and be in addition to
this Supply Agreement, shall be on the same terms as the Johnson License
Agreement described in Section 11.7 except that the license shall be a sole
non-exclusive royalty free license only during the term of this Agreement, and
Johnson shall have the right to manufacture, market and sell [*] or any improved
[*] or any similar product to meet budgeted or actual volume requirements in
excess of the lesser of the following volumes [*] (ii) Supplier’s actual [*]
production capacity. Johnson’s use of a third party contract manufacturer shall
be subject to Supplier’s approval, which approval shall not be unreasonably
withheld.

 

 
11.5
Change in Control. If a controlling interest in Supplier is transferred to a
third party, then Supplier must immediately notify Johnson of such transaction.
In that event, Johnson shall have the right to convert this Agreement to a fully
paid-up royalty free Johnson License Agreement pursuant to Section 11.7 below
provided that (i) the third party is a competitor of Johnson in one or more
product categories within one or more of Johnson’s ten largest markets, or (ii)
Johnson reasonably believes the third party does not meet its requirements for a
supplier of product.

 

 
11.6
Assignment. If this Agreement and the rights and obligations hereunder are
assigned by Supplier to a third party pursuant to Section 23.4 below, then
Supplier must immediately notify Johnson of such transaction. In that event
Johnson shall have the right to convert this Agreement to a Johnson License
Agreement pursuant to Section 11.7 below provided that (i) the third party is a
competitor of Johnson in one or more product categories in one or more of
Johnson’s ten largest markets, or (ii) Johnson reasonably believes the third
party does not meet its requirements for a supplier of product.

 

 
11.7
Johnson’s Conversion and Option Rights. Notwithstanding anything else herein,
(a) upon termination of this Agreement by Johnson (i) at the end of the
Automatic First Renewal Term or the end of the First Renewal Term, if there is
no Automatic Renewal Term, or at any time thereafter pursuant to Section 11.1,
or (ii) at any time during the Term hereof pursuant to Section 11.2, (b) in the
event the Automatic First Renewal Term or the First Renewal Term, if any, shall
expire without renewal of this Agreement for a Second Renewal Term, or (c) upon
the occurrence of an event described in Sections 11.5 or 11.6 hereof, then
Johnson shall have the right to convert this Agreement to a Johnson License
Agreement on written notice to Supplier. In addition, this Agreement shall
automatically convert to a Johnson License Agreement upon the occurrence of an
event described in Section 11.3. The Johnson License Agreement shall be on the
same terms and conditions as set forth in this Agreement, except (A) the Johnson
License Agreement shall include the grant to Johnson of the non-exclusive right
and license to use any and all Licensed Intellectual Property to manufacture, or
have manufactured the Product, any improved or modified Product, or any
substantially similar product anywhere in the world, and to market, import,
distribute and sell Product or any improved or modified Product anywhere in the
Territory, (B) the royalty rate for the Johnson License Agreement shall be [*]
of Net Account Revenue payable to Supplier provided that the royalty will cease
upon the expiration of the last Supplier Patent Right, (C) the Term of the
Johnson License Agreement shall be indefinite, and (D) the Johnson License
Agreement shall include the right to sublicense third parties. Upon conversion
to a Johnson License Agreement, Supplier will promptly disclose all Licensed
Intellectual Property to Johnson. All grants pursuant to this Section 11.7 shall
include the right on the part of Johnson to make or have made the Product by
Johnson, a Johnson Affiliate or a third party contractor.

 
12

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11.8
Effect of Termination. Upon termination, Supplier shall promptly stop all work
and observe Johnson’s instructions regarding work in process.

 
12.
DEFECTIVE PRODUCT

 

 
12.1
Remedies for Defective Product. Supplier shall promptly replace or correct
defects in any Product, which Johnson reasonably deems is not or may not be in
compliance with the Specifications or poses a health and/or safety risk (in any
such case, a “Defective Product”), without expense to Johnson. If Supplier does
not promptly correct defects or replace Defective Products, Johnson may notify
Supplier and make the corrections or replace the Product itself or from a
third-party supplier and charge Supplier for all costs and expenses incurred by
Johnson in doing so.

 

 
12.2
Inspection. The inspection, test, acceptance, or use of Product does not affect
any of Supplier's obligations to Johnson. Representations and warranties survive
inspection, test, acceptance, and use of Product. Supplier's representations and
warranties run to Johnson, its successors, and assigns.

 
13.
EQUIPMENT, MOLDS AND TOOLING

 

 
13.1
Equipment.

 

 
(A)
Supplier Equipment. From time to time, Johnson may request that Supplier
purchase and place specific equipment at the Supplier’s facility for the sole
purpose of producing the Products (the “Supplier Equipment”), and Supplier
agrees to comply with such request(s). Supplier shall not use the Supplier
Equipment for any purpose other than for production of the Products, unless
Johnson has provided its prior written approval, and if such approval is given
then Johnson will be credited for Supplier Equipment amortization at a rate to
be agreed as part of the approval process. The Supplier Equipment is listed in
Schedule 13.1 attached hereto, which will be reviewed and updated annually, if
necessary, no later than February 15 of each year. Schedule 13.1 also describes,
for each item of Supplier Equipment, the amortization schedule for purposes of
determining Johnson’s Supplier Equipment purchase rights and obligations and
Supplier’s sale obligations in the event of a withdrawal, termination or
conversion of this Agreement, as further described in Section 13.3 below.

 

 
(B)
Johnson Equipment. Johnson may directly or indirectly purchase certain
production equipment for use by the Supplier at Supplier’s facility for the sole
purpose of producing the Products (“Johnson Equipment”). Supplier shall not use
the Johnson Equipment for any other purpose. The Johnson Equipment is listed on
Schedule 13.2 attached hereto, which shall be reviewed and updated annually, if
necessary, no later than February 15 of each year. Supplier shall mark the
Johnson Equipment as being owned by Johnson in a highly visible location on or
adjacent to the Johnson Equipment, in a manner acceptable to Johnson. Supplier
shall keep the Johnson Equipment free of any liens, encumbrances or other rights
of third parties.

 
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(C)
Risk of Loss. Supplier shall bear the entire risk of loss, damage, theft, or
destruction to the Supplier Equipment and Johnson Equipment (collectively the
“Equipment”). In addition, Supplier shall carry and maintain, at all times and
at its expense, physical damage insurance providing “all risks” coverage for the
Equipment and public liability and property damage insurance in an amount levied
upon the possession or use of the Equipment.

 

 
(D)
Taxes and Fees. Supplier shall pay all fees, taxes and governmental charges
imposed or levied upon the possession or use of the Equipment.

 

 
(E)
Care of Equipment/Indemnification. Supplier shall, at its expense, keep the
Equipment in good condition and working order and shall make all necessary
adjustments, repairs, services and replacements in a manner consistent with
prudent industry practice and subject to Johnson’s approval, from time to time.
Supplier shall defend, hold harmless and indemnify Johnson from and against any
damage (including incidental and consequential damages), expense (including
reasonable attorney’s fees), loss, claim, demand, or liability resulting from or
arising out of the use of the Johnson Equipment by Supplier, including but not
limited to any personal injury, wrongful death or other claims.

 

 
(F)
Personal Property. Supplier shall ensure that the Equipment remains personal
property even though it may be installed on real property. Supplier shall, at
its expense, comply with all laws, rules, regulations, requirements, orders and
guidelines applying to the Equipment and its use (including, but not limited to,
all requirements for safe operation of the Equipment), maintenance, repair,
condition, storage and operation. Supplier shall not use the Equipment for any
function not intended by its manufacturer, or operate the Equipment with any
materials that do not meet the specifications of its manufacturer. Supplier
shall keep all Equipment free of liens, claims and encumbrances.

 

 
13.2
Molds and Tooling. The following governs all molds and tooling, if any, used by
the Supplier to make Products:

 

 
(A)
Supplier shall manufacture or have manufactured all molds and tooling required
to manufacture the Products. The method by which the cost of the molds or
tooling is funded is provided in Schedule 13.1.

 

 
(B)
In the event new molds or tooling are required due to normal wear, or the molds
or tooling become obsolete, Supplier shall replace such molds or tooling. The
method by which the cost of the molds or tooling is funded is provided in
Schedule 13.1.

 
(C) The provisions of Section 13.1 also apply to all molds and tooling.
 

 
13.3
Johnson’s Right to Purchase. Johnson shall have the right (and in some instances
shall have the obligation) to purchase, and Supplier shall have the obligation
to sell, all or any of the Supplier Equipment, molds, or tooling pursuant to the
terms and conditions set forth in Schedule 13.1 attached hereto. Johnson’s
purchase price for such Supplier Equipment, molds, or tooling is set forth in
Schedule 13.1. In that case, Supplier will promptly cooperate with Johnson to
transfer and deliver such equipment to Johnson.

 
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14.
INVENTORY

 

 
14.1
Seasonal Carry-Over or Slow-Moving Inventory. Johnson shall reimburse Supplier
for raw material or component inventory carrying costs for seasonal carry-over
or slow-moving inventory. Seasonal carry-over or slow-moving inventory is
defined as inventory purchased by Supplier under a Purchase Order for the
exclusive use in the Products which is not anticipated to be needed in the next
one hundred twenty (120) days of production and is not obsolete. Seasonal
carry-over or slow-moving inventory does not include materials or components
otherwise usable by Supplier or purchased without Johnson’s approval or under a
Purchase Order. Carrying costs shall mean the cost of warehousing, using a
third-party warehouse, and interest expense at Supplier’s Borrowing Rates.
Payment of such costs will commence thirty (30) days after the number of turns
specified in the Price Template for the affected Product, or as otherwise
agreed, and will discontinue when production begins again for the Product.  

 

 
14.2
Closing Inventories. Supplier may rely upon Purchase Orders to purchase the
materials and components necessary to assure the supply of Products. If Johnson
terminates the Agreement, Johnson shall purchase Supplier's inventory of
materials and components at Supplier’s cost, but only to the extent the
inventory is dedicated solely to the manufacture of Product and was purchased to
supply Product under a Purchase Order. Johnson shall purchase finished Product
that was produced in good faith against a Purchase Order at the price in effect
as of the termination date. If Johnson decides not to purchase finished Product
on the termination date, Johnson will purchase the finished Product within six
(6) months after the termination date if Johnson pays Supplier a reasonable,
mutually agreed upon monthly carrying cost. Upon termination, Supplier shall
cancel (if possible) open purchase orders for materials and components. Supplier
shall assign non-cancelable orders to Johnson.

     

   
All requests that Johnson purchase finished Products, materials or components
pursuant to this Section 14.2 must be made by Supplier in writing within ninety
(90) days after the later to occur of (a) notification by Johnson that such
finished Products, materials or components are obsolete, or (b) (i) in the case
of obsolete finished Products, the last manufacture by Supplier of such finished
Products or (ii) in the case of obsolete materials or components, the last use
of such materials or components by Supplier in the manufacture of Products.

 

 
14.3
Obsolescence. Johnson shall purchase from Supplier at Supplier’s cost any
materials or components purchased in good faith against a Purchase Order that
are made obsolete by a Johnson-approved change in the Specifications if Supplier
cannot use the materials or components to manufacture other products or, if
compatible with the other products, the materials or components are in excess of
Supplier's 120-day requirement when aggregated with other stocks on hand or on
order. Johnson shall purchase finished Product that becomes obsolete as a result
of reformulation, relabeling, or repackaging if the Product was originally
produced in good faith against a Purchase Order. Johnson shall purchase Product
at the price in effect on the date of the Purchase Order against which such
Product was manufactured.

 

 
14.4
Purchase Condition. Johnson’s obligation to purchase materials, components, or
finished Product under this Section 14 does not apply to materials, components,
or Product not in compliance with applicable Specifications.

 
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15.
INDEMNIFICATION

 

 
15.1
Supplier Indemnification.

 

 
(A)
Supplier shall defend, hold harmless, and indemnify Johnson from and against any
damage (including incidental and consequential damages), expense (including
reasonable attorney’s fees), loss, lawsuit, claim, demand, or liability to the
extent such results from or arises out of (i) any omission, misrepresentation,
negligence, or breach of this Agreement by Supplier; (ii) any allegation against
Supplier that Supplier’s manufacturing methods or equipment infringe upon, or
constitute the misappropriation of, the patent or other intellectual property
rights of any third party; (iii) any allegation against Johnson that Johnson’s
use or sale of any Product, because manufactured using Supplier Patent Rights or
Licensed Intellectual Property, infringes upon, or constitutes the
misappropriation of, the intellectual property rights of any third party; (iv)
any allegation that the materials or components used without the authorization
of Johnson to manufacture and deliver Products infringe upon, or constitute the
misappropriation of, the patent or other intellectual property rights of any
third party; or (v) any allegation that the materials or components used without
the authorization of Johnson to manufacture and deliver Products caused any
injuries or damages.

 

 
(B)
Supplier shall defend, indemnify and hold Johnson harmless from and against any
damage (including incidental and consequential damages), expense (including
reasonable attorney’s fees), loss, lawsuit, claim, demand, or liability arising
out of bodily injury (including death), property damage, and personal injury, to
the extent such results from or arises out of Supplier’s use or possession of
the Equipment.

 

 
(C)
Supplier also hereby agrees to defend, hold harmless, and indemnify Johnson
against any and all third party liability, claims, actions, suits, and expenses,
and any other damages incurred by a third party or Johnson arising out of
Johnson’s use of Supplier’s Patent Rights.

 

 
15.2
Johnson Indemnification. Johnson shall defend, indemnify and hold Supplier
harmless from and against any damage (including incidental and consequential
damages), expense (including reasonable attorney's fees), loss, lawsuit, claim,
demand, or liability arising out of bodily injury (including death), property
damage, or personal injury to the extent such arises out of (i) Johnson’s breach
of this Agreement or (ii) Johnson’s production and sale of Products pursuant to
a Johnson License Agreement.

 

 
15.3
Notice. The parties shall promptly notify each other in writing of the
institution of any suit, claim, demand, or proceeding with respect to which a
party may be entitled to indemnification.

 

 
15.4
Insurance. Supplier shall carry insurance during the term of this Agreement and
for at least two years thereafter as follows:

 

 
(A)
Workers Compensation and Employers Liability as required by law, and

 
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(B)
Comprehensive General Liability Insurance, which includes, without limitation,
bodily injury liability, personal injury liability, property damage liability,
products liability, and completed operations liability coverage.

 

 
15.5
Insurance Amounts. Supplier’s insurance must have total limits of at least US$10
million for each occurrence, combined single limit for bodily injury and
property damage, including personal injury liability, products liability,
contractual liability, and completed operations liability. Supplier shall name
Johnson as an “additional named insured” on the insurance policies.

 

 
15.6
Certificate of Insurance. Within thirty (30) days after execution of this
Agreement, Supplier shall provide to Johnson a Certificate of Insurance showing
Supplier, the issuing insurance company, the type of insurance, the policy
number, the effective date, the expiration date, and the limits of liability.
The insurance must provide for at least thirty (30) days written notice to the
parties regarding cancellation or material change in the insurance.

 
16.
INSPECTIONS AND RECORDS

 

 
16.1
Right to Inspect. Johnson may, during regular business hours access any of
Supplier’s premises to examine (i) Supplier’s records relating to its
performance under this Agreement, and (ii) materials, components, manufacturing
facilities, procedures, and Product in any state of production or delivery.
Johnson’s inspection of Product (or its election not to inspect) does not
operate as a waiver of Johnson’s right to reject and return Product under
Section 12.

 

 
16.2
Retention of Records. Supplier shall maintain books and records relating to this
Agreement for at least three (3) years.

 

 
16.3
Retain Samples. Supplier shall maintain retain samples and manufacturing records
related to any Product for at least three (3) years after such Product has been
de-listed by Johnson.

 

 
16.4
Financial Statements. Supplier shall give Johnson a copy of its (i) annual
report if it is a public company or (ii) audited financial statements if it is a
privately-owned company.

 

 
16.5
Audits. Supplier shall carry out regular (at least once every six (6) months)
and diligent audits of its manufacturing and supply chain processes and
procedures and record keeping to ensure it is complying with the terms of this
Agreement. Johnson shall have the right, but not the obligation, to require
Supplier to carry out further audits in addition to the regular audits referred
to above.

 
17.
CONFIDENTIALITY

 

 
17.1
Definition. "Confidential Information" means any information disclosed by
Johnson relating to its products or business. Confidential Information may be
disclosed in oral, written, visual, or physical form by Johnson employees or by
other persons disclosing under Johnson authorization. Information will not be
considered Confidential Information if it can be shown to have been:

 
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(A)
Rightfully in Supplier’s possession prior to the date of Johnson's disclosure to
Supplier,

 

 
(B)
Available to the public prior to the date of Johnson's disclosure to Supplier or
to have become available to the public after Johnson's disclosure without any
unauthorized act or omission by Supplier,

 

 
(C)
Disclosed to Supplier without restriction by a third party who had a right to
disclose and was not under an obligation of confidence to Johnson, or

 

 
(D)
Independently developed by Supplier by a person having no access to the
Confidential Information.

 
Confidential Information will not be deemed to be generally available to the
public or in Supplier’s possession merely because it may be embraced by a more
general disclosure or merely because it may be derived from combinations of
disclosures generally available to the public or in Supplier’s possession.

 
17.2
Confidentiality Obligation. Supplier shall not disclose any Confidential
Information to any third party or use or reproduce any Confidential Information
for any purpose other than to carry out its obligations under the Agreement.
Supplier will disclose Confidential Information only to its employees who have a
need to know. However, Supplier may disclose Confidential Information in
compliance with applicable law or an order of a court of competent jurisdiction
if Supplier gives Johnson prompt, advance notice of its need to disclose and
cooperates with Johnson in an effort to narrow or avoid such disclosure, obtain
any available protective order, or the like. Supplier agrees not to use any
reference to Johnson or its products or trademarks, including, but not limited
to, its logos, in Supplier’s advertising, web page, or other materials given or
exposed to third parties without Johnson's express prior written permission
granted by a Johnson officer. Notwithstanding anything else herein, Johnson
acknowledges and agrees that Supplier must comply with certain SEC disclosure
requirements, and may include reference to Johnson and this Agreement in
documents filed with the SEC and related disclosure materials. Supplier shall
redact from such disclosures any confidential business information to be extent
permitted by the SEC. Supplier shall provide Johnson with an advance copy of any
such SEC filings that include a reference to Johnson or this Agreement.

 

 
17.3
Return of Confidential Information. Johnson may request the return of the
Confidential Information at any time. If Johnson makes that request, Supplier
will promptly comply, returning to Johnson any and all written or physical
embodiments of the Confidential Information that are then in Supplier’s
possession or control, including all physical or electronic copies.

 

 
17.4
Time Limitation. The confidentiality obligations in this Section 17 remain in
effect for a period of three (3) years following termination of this Agreement,
except that information identified by Johnson as strictly confidential will be
maintained in confidence as long as it is confidential as defined under Section
17.1.

 

 
17.5
Additional Obligation. The obligations in this Section 17 do not abrogate, and
are in addition to, any prior confidentiality agreements entered into between
Supplier and Johnson.

 
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18.
FORCE MAJEURE

 

 
18.1
Force Majeure.

 

 
(A)
Johnson Excuse. Johnson may delay delivery of Products occasioned by causes
beyond its control. Supplier shall hold delayed Products at Johnson’s direction
and shall deliver the Products when the cause for the delay ends. Johnson is
responsible only for Supplier's direct additional costs in holding the Products
or delaying performance of this Agreement at Johnson's request.

 

 
(B)
Supplier Excuse. Supplier will be excused if delivery is delayed by the
occurrence of unforeseen or unforeseeable events or by causes beyond its
control, provided Supplier promptly notifies Johnson of the events and gives
Johnson a revised delivery schedule. If a delay exceeds thirty (30) days from
the original delivery date, Johnson may cancel the affected Purchase Order and
convert this Agreement to the Johnson License Agreement pursuant to Section 11.4
above in order to manufacture or have manufactured that quantity of Product
contained in Johnson’s cancelled Purchase Orders. Johnson shall be entitled to
pre-qualify its own production line or that of a third party in order to prepare
for such an event. If Supplier's production is only partially restricted or
delayed, Supplier shall use its best efforts to accommodate Johnson's
requirements and shall give unfilled Johnson Purchase Orders preference and
priority over those of other customers that were placed after Johnson's Purchase
Orders.

 
19.
DISPUTE RESOLUTION

 

 
19.1
Dispute. Any dispute arising out of or relating to this Agreement, except for
disputes involving or arising out of third-party claims described in Section 15,
(“Dispute”) shall be resolved in accordance with the procedures specified in
this Section 19, which shall be the sole and exclusive procedures for the
resolution of any such disputes.

 

 
19.2
Non-binding Negotiation. The parties shall attempt in good faith to resolve any
Dispute promptly by negotiation between executives who have authority to settle
the controversy and who are at a higher level of management than the persons
with direct responsibility for administration of this Agreement. Any party may
give the other party written notice of any Dispute not resolved in the normal
course of business. Within twenty (20) business days after delivery of the
notice, the receiving party shall submit to the other a written response. The
notice and the response shall include (a) a statement of such party’s position
and a summary of arguments supporting that position, and (b) the name and title
of the executive who will represent that party and of any other person who will
accompany the executive. Within ten (10) business days after delivery of the
responding party’s response, the executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the Dispute. All reasonable requests for
information made by one party to the other will be honored. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.

 

 
19.3
Non-binding Mediation. If a Dispute has not been resolved by negotiation within
thirty (30) days of the disputing party’s notice, or if the parties fail to meet
within twenty (20) days, one or both parties may request in writing to settle
the dispute by mediation under the then current CPR Model Mediation Procedure
for Business Disputes. Unless otherwise agreed, the parties will select a
mediator from the CPR Panel of Neutrals and shall notify CPR to initiate the
selection process. Unless otherwise agreed, mediation shall take place in
Milwaukee, Wisconsin.

 
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  19.4 Arbitration.

 

 
(A)
If a Dispute is not resolved by a non-binding procedure as provided herein
within sixty (60) days of the delivery of the original notice, one or both of
the parties may request in writing that it be settled by arbitration in
accordance with the then current CPR Non-Administered Arbitration Rules by a
sole arbitrator mutually acceptable to the parties provided, however, that if
either party will not participate in a non-binding procedure, the other may
initiate arbitration before expiration of the above period. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. §1-26, and any
court having jurisdiction thereof may enter judgment upon the award rendered by
the arbitrator. The place of arbitration shall be Milwaukee, Wisconsin. The
arbitrator is empowered to award damages as provided in this Agreement.

 

 
(B)
The parties recognize that a party may need a preliminary remedy or other
assistance of a court in aid of arbitration hereunder. The parties hereby
consent to the jurisdiction of the courts in Wisconsin with respect to any
application for preliminary injunctive relief or other assistance in connection
with any arbitration hereunder and for entry of judgment with respect to the
award of the arbitrator.

 

 
(C)
The statute of limitations of Wisconsin applicable to the commencement of a
lawsuit shall apply to the commencement of an arbitration hereunder, except that
no defenses shall be available based upon the passage of time during any
negotiation called for by the preceding paragraphs of this Section 19.

 

 
(D)
Each party shall be responsible for its own arbitration costs, including
attorney fees.

 

 
19.5
Performance Pending Dispute. During the pendency of any Dispute under this
Section 19, the parties shall continue to perform all of their respective
obligations under this Agreement unless one party has terminated this Agreement
under Section 11. The obligations under this Section 19 may survive termination
at the sole discretion of the party terminating the Agreement under Section 11.

 
20.
INDEPENDENT CONTRACTOR

 

 
20.1
Independent Contractor. The parties are independent contractors. This Agreement
does not create a partnership, joint venture, employer-employee,
principle-agent, or any similar relationship between the parties. Neither party
has the right or authority to assume or create obligations or responsibilities,
express or implied, on behalf of the other and neither may bind the other in any
manner or thing whatsoever.

 
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21.
INTELLECTUAL PROPERTY

 
21.1 Definitions.
 

 
(A)
"Intellectual Property (IP)" shall mean any invention (whether patentable or not
and including, but not limited to, apparatuses, procedures, and designs),
together with any data, writings subject to copyright, any patent, patent
application, trademark, trade name, trade secret, service mark, drawing,
formula, method of treatment, processing technique, or other intellectual
property, and any secret know-how.

 

 
(B)
“Project Intellectual Property” shall mean Intellectual Property relating to the
Product, which includes any Improvements as defined herein below, whether
invented solely by Supplier (also sometimes referred to in this Section 21 as
“CTI”), solely by Johnson, or jointly by Supplier and Johnson under this
Agreement, but shall not include any of Johnson’s or Supplier’s pre-Agreement
Intellectual Property, the latter constituting Background Intellectual Property,
as defined herein below (except for that portion of Supplier’s Background
Intellectual Property which comprises Supplier Patent Rights or Johnson's Patent
Rights, each as defined above, and as specifically identified in current
Schedule 1.9).

 

 
(C)
“Improvements” shall mean any and all contributions to Project Intellectual
Property under this Agreement, [*].

 

 
(D)
“Background Intellectual Property” shall mean all Intellectual Property owned
respectively by Supplier or Johnson prior to this Agreement, but not including
Intellectual Property created under said separate Term Sheet.

 

 
(E)
“Licensed Intellectual Property” shall mean the subset of Supplier's Background
Intellectual Property (including all of Supplier’s Patent Rights identified in
Schedule 1.9) which is necessary for Johnson's manufacture and sale of the
Product, any improved or modified Product or any substantially similar product
in the event that Johnson converts this Agreement to a Johnson License Agreement
pursuant to Sections 11.4 or 11.7 hereof.

 
(F) [*].
 
21.2 Rights to Intellectual Property.
 

  (A)
No disclosure of Confidential Information will be deemed by implication or
otherwise to vest in Supplier any ownership rights in any of Johnson's
Intellectual Property, Project Intellectual Property, or Background Intellectual
Property. In addition, no disclosure of Confidential Information, or any grant
of rights to Johnson by Supplier hereunder will be deemed by implication or
otherwise to vest in Johnson any ownership rights in any of Supplier’s
Background Intellectual Property. Notwithstanding any of the foregoing, Supplier
is hereby granted a limited license to use Johnson's Project Intellectual
Property to the limited extent required to perform its obligations under this
Agreement.

 
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(B)
Except as may be otherwise provided under this Agreement, each party shall
continue to solely own its respective Background Intellectual Property, and
nothing in this Agreement, apart from any actual grant a license, shall be
construed as a grant by one party of a license to the other party of any
Background Intellectual Property owned by the one party as of the date of this
Agreement.

 

 
(C)
[*].

 

 
(D)
The spirit of this Agreement shall be one of open collaboration. Upon completion
of any development work hereunder, both Supplier and Johnson shall provide the
other with details of fruits of all results, including documentation (electronic
and hard copies) and any tangible materials associated therewith so that
compliance with terms of this Agreement may be fully met. Each party shall
promptly disclose, in writing to the other, all Project Intellectual Property
made, developed, or conceived which arises out of work conducted pursuant to
this Agreement, said separate Term Sheet, or out of any Confidential Information
provided to one party by the other.

 

 
(E)
Supplier shall continue to be responsible for its own Background Intellectual
Property, and shall pay all maintenance fees due and payable on said subset of
Supplier's Background Intellectual Property under which Johnson is licensed
hereunder. Supplier agrees to cooperate with Johnson in the perfection of
Johnson’s rights to Project Intellectual Property, including any required
assistance in the preparation and execution of all documents (including patent
applications, assignments, and updates or additions to Schedule 1.9, of any and
all patent rights), in a timely manner.

 

 
(F)
Johnson will have the sole right to determine when and if it is appropriate to
prosecute patent infringement by others within Johnson’s Consumer Fields of Use
concerning Project Intellectual Property. In the event of any such prosecution
of patent infringement, Johnson shall have the absolute right to control all
aspects of such prosecution and Supplier hereby agrees to become an
indispensable party to any lawsuit brought by Johnson. Johnson will pay the
costs of such prosecution. However, with respect to any patent infringement that
occurs within CTI’s Fields of Use, Supplier shall be free to pursue any patent
infringement actions against third parties.

 

 
(G)
The parties' obligations and rights under said Term Sheet will survive any early
termination of this Agreement. Moreover, in the event of discrepancy between
said Term Sheet and this Agreement, said Term Sheet shall be controlling and
shall govern.

 

 
(H)
In the event of termination and conversion of this Agreement to a Johnson
License Agreement pursuant to Section 11.7 hereof, then Johnson shall have a
non-exclusive license to Supplier’s Background Intellectual Property to
manufacture, have manufactured, distribute and sell the Product, any improved or
modified product, and any substantially similar product.

 
22

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  21.3
Assistance by CTI. CTI shall provide all reasonable assistance to Johnson to
effectuate the requirements of this Section 21, including, but not limited to,
providing all necessary information and executing all necessary documents
requested by Johnson.

 
22.
REGULATORY COMPLIANCE

 
As and when requested by Johnson in writing, Supplier shall promptly provide
Johnson with all information necessary for Johnson to comply with all legal and
regulatory requirements relating to the Products or any products in which the
Products are to be incorporated, including, without limitation, the
registration, packaging, labeling and provision of safety information (e.g.,
material safety data sheet) in all countries where products incorporating the
Products are sold from time to time. Johnson may disclose such information as
required by applicable law.

23.
MISCELLANEOUS

 

 
23.1
Governing Law. This Agreement and the relationship of the parties hereunder is
governed by and interpreted in accordance with the internal laws of the State of
Wisconsin without regard to its principles of conflict of laws.

     

 
23.2
Survivability. The claims of either party for indemnification or breach of
warranty under this Agreement, as well as Sections 10, 11, 12, 13, 14, 15, 16,
17, 18, 19, 20 and 21 shall survive termination of this Agreement.

 

 
23.3
Modification. This Agreement is not modified or supplemented by any agreement or
representation that is not contained in this document. Modifications or
supplements to the Agreement must be agreed to in writing and signed by the
parties.

 

 
23.4
Assignment. The rights and duties under this Agreement are not assignable or
delegable by either party without the other party's prior written consent,
except that Johnson may assign or delegate this Agreement, or any portion
thereof, to a Johnson Affiliate without Supplier’s consent and Supplier may
assign this Agreement to a third party purchaser of all or substantially all of
its business (including all assets related to the performance of this
Agreement).

 

 
23.5
Time of the Essence. Time and punctual performance are of the essence.

 

 
23.6
Waiver. Waiver by either party of nonperformance or any breach of this Agreement
does not constitute a waiver of any subsequent nonperformance or other breach of
the same or any other provision.

 

 
23.7
Notices. Notices must be in writing and must be sent to the recipient at the
address set forth at the beginning of this Agreement. Either party may change
the address to which notice must be given by written notice to the other party.
Notices are effective upon receipt or 10 days after sending, whichever comes
first, if the notice is sent by an overnight delivery service or if mailed
postage prepaid, certified or registered mail, return receipt requested.

 

 
23.8
Severability. If any provision of this Agreement is held to be invalid, the
validity of the remainder of the Agreement will not be affected, and the rights
and obligations of the parties will be construed and enforced as if the
Agreement did not contain the invalid provision. The provisions of this
Agreement are severable.

 
23

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23.9
Entire Agreement. This Agreement and the documents referred to herein constitute
the entire agreement between the parties relating to the subject matter of this
Agreement. It supersedes any other agreement between the parties relating to
this subject matter. It does not in any way alter, affect, or set forth the
terms of a contractual relationship between the parties relating to a subject
matter other than that set forth in this Agreement.

 

 
23.10
UN Convention. The United Nations Convention on Contracts for the International
Sale of Goods shall not apply to this Agreement.

 

 
23.11
No Rule of Strict Construction. The parties chose the language used in this
Agreement to express their mutual intent. No rule of strict construction is to
be applied against either party.

 

 
23.12
Section Headings. The section headings in this Agreement are inserted for
convenience only and are in no way to be construed as part of this Agreement or
as a limitation or enlargement of the scope or meaning of the particular section
to which it refers and shall not affect the interpretation of any provisions of
this Agreement.

 

 
23.13
Schedules and Exhibits. All schedules and exhibits referred to herein are
intended to be and hereby are specifically made a part of this Agreement.

 
 

Signed:                
CTI Industries Corporation
 
S. C. Johnson & Son, Inc.
         
By:
/s/ John Schwan   By:
/s/ Victor J. Puente
Name: 
John Schwan  
Name:
Victor J. Puente
Date:
February 1, 2008  
Date:
February 1, 2008

 
24

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SCHEDULE 1.9

[*]
 
 
 
 
 
 

 

25

--------------------------------------------------------------------------------

SCHEDULE 2.1

[*]
 
 
 
 
 
 
 
 
26

--------------------------------------------------------------------------------

 
SCHEDULE 2.3

SHIPMENT AND SHIPPING PAYMENT TERMS

Item
Shipping Terms
Shipping Payment Terms
[*]
FCA -
CTI Industries Corporation
22160 N. Pepper Road
Barrington, Illinois, USA
Undelivered Price
Johnson’s 3rd party Billing
[*]
FCA -
CTI Industries Corporation
22160 N. Pepper Road
Barrington, Illinois, USA
Undelivered Price
Johnson’s 3rd party Billing
[*]
DDP - Racine, Wisconsin, USA
DDP - Supplier

Johnson’s Third Party Billing address:

S. C. Johnson & Son, Inc.
TransInternationnal Co. Inc.
N93 W16288 Megal Drive
Menomonee Falls, WI 53051

27

--------------------------------------------------------------------------------

SCHEDULE 3.2

 [*]
 
 
28

--------------------------------------------------------------------------------

SCHEDULE 6.1

[*]
 
 
 
 
29

--------------------------------------------------------------------------------

SCHEDULE 6.2

[*]

 
30

--------------------------------------------------------------------------------

SCHEDULE 10.4(E)

MANUFACTURING CODE OF CONDUCT

[*]
 
 
31

--------------------------------------------------------------------------------

 
SCHEDULE 10.4(F)

BUSINESS CONDUCT AND ETHICS POLICY

[*]
 
 
32

--------------------------------------------------------------------------------

 
SCHEDULE 10.4(H) - Part 1

[*]

33

--------------------------------------------------------------------------------

SCHEDULE 10.4(H) - Part 2

[*]

 
34

--------------------------------------------------------------------------------

 

 
SCHEDULE 13.1

 
 
[*]
 
 
 
35

--------------------------------------------------------------------------------

 
SCHEDULE 13.2

[*]

 
 
 
36

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