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Note: SMC Corp. (Sales Agent) contracted with Lockjaw, LLC (Manufacturer) for the exclusive sale and distribution of Manufacturer's products in Western Europe. Under the agreement, Sales Agent was to place orders and make payment within 30 days from the date of the B/L. After completion of 27 orders, Manufacturer notified Sales Agent that it had to make payment before Manufacturer shipped the goods. Subsequently, Manufacturer terminated the Sales and Distribution Agreement.

Sales Agent sued for a declaration that the agreement was binding and enforceable and moved for a preliminary injunction to prevent Manufacturer from terminating the Sales and Distribution Agreement. The United States District Court for the Northern District of Illinois, Eastern Division, Castillo, J., enjoined Manufacturer from terminating the agreement.

The court observed that Manufacturer's actions evidenced "a lack of good faith." Recognizing that Manufacturer was entitled to adequate assurance of performance, the court noted that Sales Agent had "given assurances of future payment by offering to provide letters of credit or depositing the full amount of payment with this Court, or other third party, at the time the orders are placed" but required that Sales Agent "obtain a letter of credit for any orders placed and also to post an injunction bond, thus minimizing the risk of harm to [Manufacturer] of being wrongfully enjoined." It observed that this procedure would ensure "payment of all orders placed with [Manufacturer] while this litigation is pending."

[JEB/jmf]

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