Exhibit 10.1
SUPPLIER AGREEMENT
     This Supplier Agreement (this “Agreement”) executed this 20th day of
February, 2008, but effective for all purposes as of April 1, 2008, is by and
between Orchids Paper Products Company, a Delaware corporation (“Orchids”), and
Dixie Pulp & Paper, Inc., an Alabama business corporation (“Dixie”).
W-I-T-N-E-S-S-E-T-H:
     WHEREAS, Orchids is a manufacturer of certain products (“Products”) at its
Pryor, Oklahoma facility; and
     WHEREAS, Orchids requires certain secondary fiber in order to manufacture
the Products; and
     WHEREAS, Dixie has the ability to provide Orchids with such secondary
fiber; and
     WHEREAS, Orchids and Dixie desire to enter into this Agreement so that
Dixie will provide all secondary fiber materials needed by Orchids at its Pryor,
Oklahoma facility, subject to the terms and conditions of this Agreement.
     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Orchids and Dixie hereby agree as follows:
     1. Scope of Agreement
     1.1 Supplier of Goods and Services. Subject to the terms and conditions of
this Agreement, Dixie hereby agrees to provide to Orchids, and Orchids agrees to
purchase from Dixie, one hundred percent (100%) of the secondary fiber required
by Orchids, except for “broke” from Orchids converting plants, in its production
of the Products (hereinafter, “Fiber”).
     1.2 Ancillary Services Provided by Dixie. Dixie agrees to provide Orchids
with the following ancillary services during the term of this Agreement:
     1.2.1 Regular communication and coordination with the contact person
designated by Orchids for purposes of efficiently carrying out the provisions of
this Agreement.
     1.2.2 Management and coordination of all inbound freight associated with
the purchase of Fiber from Dixie.

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     1.2.3 Periodically meet with Orchids to discuss and review the performance
of each party to this Agreement.
     1.2.4 Use reasonable efforts to establish an Internet program whereby
Orchids can monitor the status of orders made hereunder, such program sometimes
hereinafter referred to as “Dixie Link”.
     1.2.5 Develop through Dixie Link real time access to shipping and receiving
records and work with Orchids’ accounting and IT departments to develop a daily
invoice download, along with other information needed.
     1.2.6 If reasonably practical, coordinate with Orchids’ freight department
in an effort to utilize backhauls for finished goods.
     2. Nature of Relationship. During the term of this Agreement, the parties
intend to establish a working relationship for the purchase and supply of Fiber
in order to achieve timely deliveries, quality products and economically
attractive pricing. Orchids will look to Dixie as its exclusive supplier of
Fiber and Dixie will use its best efforts to make available capacity to meet
Orchids’ needs. Notwithstanding the foregoing terminology or any other provision
contained in this Agreement to the contrary, Orchids and Dixie do not intend or
desire for this Agreement or their actions hereunder to be interpreted as
creating a partnership or similar association.
     3. Term. The original term of this Agreement shall be for a period of five
(5) years commencing on April 1, 2008 and ending on March 31, 2013 (the
“Original Termination Date”). Unless either party has notified the other, in
writing, at least ninety (90) days prior to April 1 of each year (the
“Anniversary Date”) of its intention not to extend this Agreement at the end of
its current term, the Original Termination Date shall be automatically extended
for one (1) additional year so as to restore the original term of five
(5) years. If either party notifies the other, in writing, at least ninety
(90) days prior to the Anniversary Date of its intention not to extend this
Agreement, then this Agreement shall terminate at the end of its then applicable
current or extended term.
     4. Exclusivity.
     4.1 Orchids and Dixie agree that during the term of this Agreement, Dixie
shall be the sole and exclusive supplier of Fiber for Orchids at its Pryor,
Oklahoma facility.
     4.2 Orchids agrees to communicate in writing to various sellers of
secondary fiber that “Orchids and Dixie have entered into a long-term exclusive
supply agreement,” which communication will include Orchids sending a letter in
substantially the form of Exhibit A attached hereto and made a part hereof.

5.   Procedure for Purchase Requests and Purchase Orders.

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     5.1 Purchase Requests. No later than 10 days prior to the first day of the
month to which the request relates, Orchids shall submit a request to Dixie for
its anticipated Fiber needs for the next calendar month. Dixie shall not be
required to supply a grade of Fiber differing from that supplied during the
previous month unless and until Dixie shall have received at least sixty
(60) days prior written notice of such grade change. Dixie will make every
effort to minimize the development period for new grades.
     5.2 Price Recommendation. Dixie shall respond (five (5) days prior to the
end of month) to each request for Fiber needs with a price recommendation for
Orchids approval. This recommendation will be based on the previous month’s
market.
     5.3 Purchase Order. Orchids will then set the price and a specific Purchase
Order (two (2) days prior to the end of the month) for Fiber, showing quantity
and pricing.
     5.4 Governing Terms and Conditions. The terms and conditions set forth in
this Agreement are intended to govern the relationship between the parties
hereto and hereunder. Terms and conditions contained in any standard forms or
documents used by either party, including request, Purchase Order forms or
otherwise are hereby excluded.
     6. Delivery, and Payment Terms.
     6.1 Freight.
     6.1.1 Deliveries. Dixie agrees to manage and coordinate all inbound scrap
freight.
     6.1.2 Freight Charges. Prices for freight charges related to delivery of
Fiber to Orchids under this Agreement will be set by Dixie and Orchids will
reimburse Dixie for all freight.
     6.1.3 Notification to Dixie of Receiving Weights. All receiving weights on
shipments to Orchids Pryor, Oklahoma facility shall be delivered by facsimile
transmission to Dixie within twenty-four (24) hours of receipt of the material.
     6.2 Payment Terms. Dixie will provide Orchids billing for all Fiber costs,
applicable freight and shipping charges. Payment shall be net thirty (30) days
from date of shipment in connection with each Purchase Order. Payments shall be
considered delinquent if payment is not received within said thirty (30) day
period.

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     6.3 Withhold Delivery. In the event payment is not received by Dixie within
thirty (30) days from the date of shipment as provided in paragraph 6.2 above,
then after ten (10) days written notice from Dixie to Orchids, Dixie may
withhold further delivery of Fiber to Orchids until delinquent payments, if any,
are made in full.
     6.4 Quarterly Reports. During the term of this Agreement, Dixie will track
the weighted average shipping point price [*], for various grades and various
regions. In addition, Dixie will track actual freight costs for its delivery of
Fiber pursuant to this Agreement [*]. Dixie will prepare and deliver to Orchids
quarterly reports comparing the actual Fiber and freight costs [*], in
substantially the form as the example attached hereto as Exhibit B and
incorporated herein by reference. To the extent that the description of the
reports and calculations described herein are ambiguous, contrary to or
inconsistent with the example attached hereto as Exhibit B, the example shall
prevail over the written description contained herein. The quarterly reports
shall be delivered to Orchids no later than five (5) business days following the
end of each calendar quarter, beginning the fourth quarter 2008. In addition,
such quarterly reports shall be submitted with a one (1) month lag. For example,
the first quarter report will provide information for January and February only,
the second quarter report will provide information for March through May, the
third quarter report will provide information for June through August and the
fourth quarter report will provide information for September through November.
The first annual report will contain nine (9) months of data. The actual
year-end data will be furnished annually no later than the end of the first
calendar quarter.
     6.5 Savings. It is anticipated that Dixie will reduce Orchids total
delivered weighted average price for Fiber and freight below Orchids’ average
price for comparable Fiber and freight [*]. As shown on Exhibit B attached
hereto, it is expected that Orchids will save, on all tons of Fiber purchased
from Dixie each year, a minimum of [*]. If, in any year, the actual savings to
Orchids exceeds the above referenced “expected” savings, all or any portion of
such excess will be used by Dixie in future years to offset any deficiency in
actual savings compared to expected savings. [*].
     7. Inventory. Dixie agrees that it will maintain a minimum of [*] days
supply of Fiber [*]. For purposes of this paragraph, Orchids’ [*] day supply
shall be an amount equal to the product of [*] multiplied by Orchids’ average
daily usage of Fiber during the calendar month immediately preceding the month
in which such calculation is performed. Dixie shall be deemed to have satisfied
its obligation to inventory a [*] day supply of Fiber so long as an amount at
least equal to such [*] day supply is, in the aggregate, on hand at an Orchids
facility and/or a warehouse owned or leased by Dixie. Without limiting the
foregoing, Orchids agrees to make available on-site storage in Pryor, Oklahoma,
an amount of space sufficient to store a [*] day supply of Fiber. In the event
that (i) Orchids accepted the price recommended by Dixie pursuant to paragraph
5.2 above, (ii) Dixie shall fail to maintain a [*] day inventory of Fiber as
required above, and (iii) as a result, [*], Dixie agrees to [*]. In the event
that (i) Orchids did not accept the

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price recommended by Dixie pursuant to paragraph 5.2 above, (ii) Dixie shall
fail to maintain a [*] day inventory of Fiber as required above, and (iii) as a
result, [*], Dixie agrees to [*].
     8. Quality and Standards.
     8.1 Except as otherwise provided in this Agreement, the terms, conditions
and specifications of the Institute of Scrap Recycling Industries, Inc. for
paper stock: domestic transactions, as amended from time to time, shall be
incorporated herein by reference. This guideline states that basic to the
success of any buyer-seller relationship is an atmosphere of “good faith” and
gives the following underlying principles as necessary:
     8.1.1 Seller (Dixie) must use due diligence to ascertain that shipments
consist of properly packed paper stock and that the shipment is made during the
period specified.
     8.1.2 Arbitrary rejections, deductions and cancellations by the buyer
(Orchids) are counter to acceptable good trade practice.
     8.1.3 Seller (Dixie ) shall deliver the quality of paper stock agreed upon
but shall not be responsible for its use or the paper or paperboard manufactured
therefrom.
     8.2 Orchids required specifications and quality requirements will be
established by Orchids.
     8.3 Dixie agrees to supply Orchids only with grades and sources of waste
paper that have been approved by Orchids.
     8.4 Dixie agrees to change sourcing of a particular grade of waste paper or
source of waste paper if either materially affects the yield or the efficiencies
of the paper machines.
     9. Limitation of Liability. Except as otherwise provided in this Agreement,
in no event shall Dixie be liable for any consequential, incidental, indirect or
special damages of any kind whatsoever in connection with this Agreement or any
Purchase Order placed hereunder.
     10. Confidentiality. During the term of this Agreement, Dixie and Orchids
will be exposed to and have access to important confidential and proprietary
information of each other, such as financial data, pricing, rates, suppliers,
customers, and various other trade secrets which are confidential in nature and
are referred to collectively as “confidential information”. Dixie and Orchids
agree that with regard to any correspondence, documents, lists or other printed
information exchanged between the

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parties or their respective affiliates, agents or representatives, the party
sending such material shall designate the same as confidential information by
clearly marking the words “Confidential”, “Proprietary” or any similar mark on
the appropriate material(s). Notwithstanding the foregoing, the parties
acknowledge and agree that the exchange of any information regarding price,
rates, customers, and suppliers shall be considered confidential information.
Dixie and Orchids, respectively, agree not to disclose any of the confidential
information of the other party nor to make any use of the confidential
information received except for the sole purpose of complying with the terms of
this Agreement. Any confidential information which may be furnished to Orchids
and Dixie, respectively, or their respective affiliates, directors, officers,
employees, counsel, accountants, or agents, shall be retained on a confidential
basis according to the terms of this Agreement. Notwithstanding any provisions
of this Agreement to the contrary, Orchids and Dixie, respectively, agree that
any confidential information received from the other party shall only be
disclosed to their employees, officers, directors, agents, or advisors
(including without limitation attorneys, accountants, consultants, and financial
advisors) with a “need to know”, unless the prior written consent of the other
party is obtained. In addition, Orchids and Dixie agree to keep the terms of
this Agreement confidential to the extent permitted by the rules and regulations
of the Securities and Exchange Commission.
     11. Notices. Any notices hereunder shall be in writing and shall be deemed
effectively given with delivered in person or when sent by facsimile
transmission or registered mail to the address of the other party designated
below or at such different address as such party may hereafter designate by
notice:

         
 
  Dixie Pulp & Paper, Inc.    
 
      Orchids Paper Products Company
 
       
 
  Attn: David Hudson, Jr.        Attn: Keith R. Schroeder
 
  If by U.S. Mail:        If by U.S. Mail:
   
     P. O. Box 20204                 4826 Hunt Street
 
    Tuscaloosa, AL 35402              Pryor, OK 74361
 
  Fax: (205) 759-2606        Fax: (918) 825-6239
 
       
 
  If by Express Courier:   If by Express Courier:
 
     101 Marina Drive     4826 Hunt Street
 
     Tuscaloosa, AL 35406     Pryor, OK 74361

     12. Miscellaneous.
     12.1 Neither the failure nor delay on the part of either party to exercise
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege.

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     12.2 This Agreement shall be deemed to be a contract made under the laws of
the State of Oklahoma and for all purposes shall be governed by the laws of that
state.
     12.3 The language in all parts of this Agreement shall in all cases be
construed simply, according to its fair meaning and not strictly for or against
any of the parties hereto. Without limitation, there shall be no presumption
against any party on the ground that such party was responsible for drafting
this Agreement or any part thereof.
     12.4. The obligations of the parties under this Agreement (other than the
obligation to make payments) shall be suspended to the extent a party is
hindered or prevented from complying therewith because of labor disturbances
(including strikes or lockouts), war, acts of God, earthquakes, fires, storms,
accidents, governmental regulations, failure of vendors or suppliers or any
other cause whatsoever beyond a party’s control. For so long as such
circumstances prevail, the party whose performance is delayed or hindered shall
continue to use all commercially reasonable efforts to recommence performance
without delay.
     12.5 This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
     12.6 APPLICABLE LAW WAIVER OF JURY TRIAL AND CONSENT TO JURISDICTION/VENUE.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF OKLAHOMA. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT THAT IT OR ITS RESPECTIVE SUCCESSORS OR ASSIGNS
MAY HAVE TO A TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY INSTRUMENTS
OR DOCUMENTS CONTEMPLATED THEREBY TO BE EXECUTED IN CONJUNCTION THEREWITH, OR IN
CONJUNCTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES. REGARDLESS OF ANY PLACE TO WHICH
EITHER PARTY MAY MAINTAIN ITS LEGAL DOMICILE OR RESIDENCE, TO THE FULL EXTENT
PERMITTED BY LAW, EACH PARTY HEREBY CONSENTS THAT SUIT MAY BE INSTITUTED IN THE
CIRCUIT COURT (OR, IF NONE, IN A COMPARABLE COURT HAVING JURISDICTION) OF MAYES
COUNTY, OKLAHOMA AND HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF SUCH
COURT (IN PERSONAM, OR OTHERWISE) AND WAIVES ANY AND ALL JURISDICTIONAL DEFENSES
THAT IT MAY HAVE TO THE INSTITUTION OF SUCH AN ACTION IN SUCH COURT.

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     12.7 Any dispute, controversy or claim arising out of or related to this
Agreement, or the breach thereof, whether during or after the term hereof, which
cannot be amicably resolved by the parties within twenty (20) days of the
written request of one of them shall be, upon the written demand of either
party, finally resolved by compulsory arbitration under the then current
Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
strictly in accordance with the terms of this Agreement and the substantive law
of the State of Oklahoma. Unless otherwise agreed, the arbitral tribunal shall
consist of three independent arbitrators, each chosen by mutual agreement of the
parties. In the event the parties are unable to agree on three independent
arbitrators, then each will instead designate one “party-appointed” arbitrator
from the AAA National Roster of Commercial Arbitrators, and these two
party-appointed arbitrators will appoint a third “neutral” arbitrator from the
AAA National Roster of Commercial Arbitrators, in accordance with
Section R-13(c) of the AAA’s Commercial Arbitration Rules in effect on the date
of this Agreement. Unless otherwise agreed, the arbitration shall be held in
Tulsa, Oklahoma. The parties expressly agree that (i) injunctive relief may be
granted by the arbitrators, (ii) exemplary or punitive damages may not be
granted, and (iii) judgment on the award entered by the arbitral tribunal may be
entered in any court having jurisdiction. Each party will pay one-half of the
aggregate fees of the arbitrators.
     IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their duly authorized representatives on the date first written above.

                      DIXIE PULP & PAPER, INC.    
 
               
 
  By:                          
 
               
 
      Name:        
 
         
 
   
 
               
 
      Title:        
 
         
 
   
 
                    ORCHIDS PAPER PRODUCTS COMPANY    
 
               
 
  By:                                   Keith R. Schroeder             Chief
Financial Officer