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EXHIBIT 10.8
PROCUREMENT AGREEMENT
by and between
NEW WORLD PASTA COMPANY
and
XXXXXX MILLING COMPANY
January 28, 1999
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TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................................1
1.1 Procurement Contracts................................2
1.2 Contract Goods.......................................2
1.3 Contract Services....................................2
1.4 Contract Goods Requirements..........................2
1.6 Plant................................................2
1.7 Procurement Services.................................2
ARTICLE 2. PROCUREMENT......................................................3
2.1 Procurement/Quantity.................................3
2.2 Quality Requirements of Individual Purchases.........3
2.3 Procurement of Contract Goods and Contract
Services Supplied by Xxxxxx'x Xxxxx................4
2.4 Permits and Licenses.................................4
2.5 Price................................................4
2.6 Payment..............................................4
2.7 Notice of Flour Requirements.........................4
2.8 Delivery of Contract Goods and Contract Services.....5
2.9 Purchase and Manufacturing Records...................5
2.10 Inspection...........................................5
2.11 Force Majeure........................................5
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2.12 Fee for Procurement Services.........................5
ARTICLE 3. RESPECTIVE RIGHTS, TERMINATION AND TRANSFER......................6
3.1 Term.................................................6
3.2 Breach of Obligations/Termination by NWP.............6
3.3 Termination by Xxxxxx................................6
3.4 Indemnification by NWP...............................6
3.5 Indemnification by Xxxxxx............................7
ARTICLE 4. GENERAL PROVISIONS...............................................7
4.1 Governing Law........................................7
4.2 Notices..............................................7
4.3 Terms of Sale........................................8
4.4 Breach of Agreement..................................8
4.5 Confidentiality......................................8
4.6 Arbitration..........................................8
4.7 Binding Effect and Assignment........................8
4.8 Severability.........................................9
4.9 Counterparts.........................................9
4.10 Integration..........................................9
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LIST OF EXHIBITS
Exhibit A - Specifications
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PROCUREMENT AGREEMENT
THIS PROCUREMENT AGREEMENT ("Agreement") is made and entered into
effective as of the 28th day of January, 1999, by and among XXXXXX MILLING
COMPANY, a Minnesota corporation ("Xxxxxx"), and NEW WORLD PASTA COMPANY f/k/a
HERSHEY PASTA MANUFACTURING COMPANY, a Delaware corporation ("NWP"). RECITALS
A. NWP is in the business of manufacturing distributing and selling dry
pasta and egg noodles (the "Business").
B. NWP needs to purchase substantial quantities of semolina and durum
wheat flours for use in its Business.
C. NWP owns and operates manufacturing plants in Fresno, CA, Kansas City,
KS, Omaha, NE, Lebanon, PA, Winchester, VA, and Louisville, KY ("Plant" and
"Plants").
X. Xxxxxx and NWP (as successor in interest to Hershey Pasta & Grocery
Group, a division of Hershey Foods Corporation) are parties to certain Mill
Agreements (as defined below) concerning the production and supply of semolina
and durum flour to NWP.
E. Pursuant to the Mill Agreements, NWP is required to buy and Xxxxxx is
required to supply Flour to NWP primarily for NWP's Fresno, CA, Winchester, VA,
and Lebanon, PA Plants.
X. Xxxxxx has constructed and is operating a flour mill in Fresno, CA (the
"Fresno Mill") and a flour mill in Winchester, VA (the "Winchester Mill")
(collectively, the "Xxxxx") for the purpose of satisfying its obligations under
the Mill Agreements.
X. Xxxxxx is willing to assist NWP in the procurement of semolina, durum,
and milling, processing, transportation and other services reasonably necessary
for NWP to have an adequate supply of semolina and durum wheat flours for NWP's
production of pasta and egg noodles and NWP desires to have Xxxxxx assist NWP in
such procurements.
Now therefore, in consideration of the forgoing recitals which are
incorporated herein by reference and the mutual covenants and agreements herein
contained, and intending to be legally bound, it is agreed by and between the
parties hereto as follows:
ARTICLE 1.
DEFINITIONS
For the purposes of this Agreement, the following definitions shall have
the meanings set forth below:
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1.1 Procurement Contracts. The term "Procurement Contract" or "Procurement
Contracts" means any contract entered into by Xxxxxx either directly or
indirectly on behalf of or for the benefit of NWP pursuant to this Agreement.
1.2 Contract Goods. The term "Contract Goods" shall mean collectively
semolina and durum wheat flours, other wheat products and other ingredients,
e.g. calcium, enrichment and other flour additives requested by NWP used by NWP
to manufacture pasta and egg noodles other than Contract Goods provided by
Xxxxxx pursuant to the Mill Agreements while such Mill Agreements are in effect.
Contract Goods shall not include eggs, coloring, flavoring, packing, advertising
or related items.
1.3 Contract Services. The term "Contract Services" shall mean
collectively contracts for milling of durum wheat or other services including,
but not limited to, transportation, storage, testing, contract production of
wheat, execution of futures and hedging contracts, and other related services as
agreed to from time to time between the parties other than Contract Services
provided by Xxxxxx pursuant to the Mill Agreements.
1.4 Contract Goods Requirements. "Contract Goods Requirements" shall mean
the Contract Goods needs of the Plants as ordered by NWP from time to time as
provided herein.
1.5 Mill Agreements. "Mill Agreements" that certain Mill Agreement dated
January 28, 1999, between Xxxxxx and NWP which agreement superseded that certain
Amended and Restated Mill Agreement between Hershey Pasta & Grocery Group and
Xxxxxx dated July 29, 1998, and that certain Amended and Restated Mill Agreement
between Hershey Pasta & Grocery Group and Xxxxxx dated March, 1998, as amended
First Amendment thereto dated January 28, 1999 which was assigned to and assumed
by NWP.
1.6 Plant. The term "Plant" or "Plants" shall mean NWP's pasta production
facilities located anywhere in North America currently existing or hereafter
acquired or built.
1.7 Procurement Services. The term "Procurement Services" means the
services and activities to be provided by Xxxxxx pursuant to this Agreement
including but not limited the procurement of Contract Goods and Contract
Services.
1.8 Semolina. The flour produced from durum wheat which meets NWP
specifications. It is recognized that there is a Standard of Identity for
semolina promulgated by the U.S. Food and Drug Administration.
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ARTICLE 2.
PROCUREMENT
2.1 Procurement/Quantity. During the term of this Agreement and subject to
the further terms of this Agreement, Xxxxxx agrees to provide Procurement
Services to procure for the benefit of NWP Contract Goods and Contract Services
which NWP shall require during the Term to fulfill its Contract Goods
Requirements for the operation of its Business. NWP agrees to procure all such
Contract Goods and Contract Services during the Term exclusively through Xxxxxx
for so long as Xxxxxx is not in breach of its material obligations under this
Agreement. The Procurement Services shall include not only the direct
procurement in the name of Xxxxxx of Contract Goods, but shall also include the
procurement for and in the name of NWP with the consent of NWP. Such Contract
Goods shall be procured by Xxxxxx on such terms and conditions as Xxxxxx and NWP
shall agree to from time to time in the exercise of their reasonable business
judgment after giving due consideration of the Contract Goods Requirements as
communicated from time to time by NWP to Xxxxxx in writing.
2.2 Quality Requirements of Individual Purchases.
2.2.1 The Contract Goods procured by Xxxxxx for and in the name of
NWP pursuant to this Agreement shall be of a quality in accordance with
the specifications set forth in Exhibit A (the "Specification"). The
Specifications shall be changed if required by law or regulation or at
NWP's election. If NWP elects to change the specifications for Contract
Goods, it shall give Xxxxxx at least thirty (30) days prior written
notice. Such change shall apply only to Contract Goods purchased after the
change in the Specification for which Procurement Contracts have not been
entered into prior to the date on which Xxxxxx receives written notice of
such changes. If any change in the specifications results in increased
costs to Xxxxxx in providing Contract Goods and such cost increase is
documented by records kept in the ordinary course of business, then Xxxxxx
shall negotiate notify NWP of such increased costs as soon as practicable
after they become known to Xxxxxx.
2.2.2 The Contract Goods and Contract Services procured by Xxxxxx
for the benefit of NWP under the terms of this Agreement shall also
conform to all applicable federal, state and local laws and regulations.
2.2.3 Xxxxxx shall by contract, require all millers providing
Contract Goods and Contract Services to manufacture such Contract Goods in
accordance with good manufacturing practices and to maintain its mill and
related facilities in a sanitary, food grade status.
2.2.4 NWP may reject any Contract Goods which fail to comply with
the provisions of this Section and all contracts pertaining to the supply
of such Contract Goods shall require the supplier to retrieve, as
necessary, all such non-conforming Contract Goods and bear all costs and
expenses associated with such non-conforming Contract Goods, including but
not
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limited to, reimbursement to NWP for any costs involved in handling or
processing such Contract Goods, retrieval of such Contract Goods, costs
and expenses incurred by NWP in connection with the handling of
work-in-process or finished goods utilizing such non-conforming Contract
Goods. Costs and expenses incurred in connection with Contract Goods shall
be borne by Xxxxxx only to the extent NWP can reasonably demonstrate that
the problem with the finished goods arose from Xxxxxx'x willful or
negligent failure to comply its obligations under this Article. Xxxxxx
shall be responsible for handling all claims against suppliers of Contract
Goods and Contract Services.
2.3 Procurement of Contract Goods and Contract Services Supplied by
Xxxxxx'x Xxxxx. Xxxxxx may procure Contract Goods and Contract Services from
Xxxxxx'x xxxxx provided however, that the price to be paid by NWP for such
Contract Goods shall not exceed the cost at which goods of similar kind, quality
and timeliness may be procured from sources other than Xxxxxx'x Xxxxx FOB NWP's
Plant or Plants. Nothing contained in this Section shall affect the terms on
which Xxxxxx supplies Contract Goods and/or Contract Services to NWP's Plants in
Winchester, VA, Fresno, CA and Lebanon, OH pursuant to the terms of the Mill
Agreements.
2.4 Permits and Licenses. Xxxxxx shall acquire and maintain all material
licenses and permits required for the procurement of the Contract Goods and
Contract Services and shall require all suppliers of Contract Goods and Contract
Services to acquire and maintain all material licenses and permits required for
handling, processing and production of the Contract Goods or Contract Services.
NWP shall exercise reasonable commercial judgment in obtaining and maintaining
necessary and material licenses and permits for the operation of the Plant.
2.5 Price. Xxxxxx shall use reasonable commercial efforts to procure the
Contract Goods and Contract Services [Confidential Treatment Requested by New
World Pasta Company].
2.6 Payment. Payment terms for Contract Goods and Contract Services
procured pursuant to this Agreement shall be on the same terms as required or
permitted by the suppliers or as otherwise agreed upon between the parties. NWP
shall timely pay for all Contract Goods and Contract Services procured for NWP
by Xxxxxx pursuant to this Agreement. Payment shall be made either to Xxxxxx or
the supplier of the Contract Goods and Contract Services as Xxxxxx and NWP shall
agree from time to time.
2.7 Notice of Flour Requirements. On or before the 20th day of each month,
or other schedule that the parties agree upon, NWP shall use reasonable efforts
to give a nonbinding delivery schedule to Xxxxxx, in writing or by telephone,
forecasting the type and quantity of Contract Goods and Contract Services which
NWP shall require at each Plant. Xxxxxx shall use reasonable commercial efforts
to procure Contract Goods and Contract Services in accordance with NWP's actual
order. The parties recognize that sales of pasta products in which the Contract
Goods and Contract Services will be utilized are seasonal in nature. Therefore,
NWP cannot plan or predict with certainty its need for Contract Goods. Such
forecast by NWP, therefore, shall not be binding on NWP with respect to the
amount of Contract Goods which are actually ordered.
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2.8 Delivery of Contract Goods and Contract Services. Xxxxxx shall use
reasonable commercial efforts to cause all Procurement Contracts for the
delivery of Contract Goods and Contract Services procured by Xxxxxx pursuant
hereto to require the delivery of Contract Goods and Contract Services to NWP at
such times as shall be ordered by NWP.
2.9 Purchase and Manufacturing Records. Xxxxxx shall keep complete, true
and accurate records and accounts with respect to all matters and inputs
affecting the procurement of Contract Goods and Contract Services, including but
not limited to, records with respect to purchasing and transporting of Contract
Goods and Contract Services, such records to be kept in accordance with
generally accepted accounting principles applied on a consistent basis from year
to year. NWP or its representatives shall have the right to audit such records
and accounts after reasonable prior notice to Xxxxxx, and Xxxxxx shall provide
NWP with monthly statements of such matters in such form as shall be reasonably
requested by NWP.
2.10 Inspection. Each Procurement Contract pertaining to the procurement
of Contract Goods and Contract Services shall afford Xxxxxx and NWP with
reasonable access to all production facilities providing or supplying Contract
Goods and Contract Services at any time during operating hours after reasonable
notification by NWP or Xxxxxx. Xxxxxx and NWP shall promptly notify the other of
the results of any and all of their respective inspections of any such
facilities. Each Procurement Contract for Contract Goods and Contract Services
shall require such supplier to provide to Xxxxxx and NWP the result of any
inspections by any regulatory or industry authority. Further, each Procurement
Contract shall require the supplier to immediately notify Xxxxxx and NWP of any
deficiencies, sanitation or quality problems in incoming grain, operations or
Contract Goods identified by Xxxxxx, regulatory authorities or any third party.
2.11 Force Majeure. Xxxxxx and NWP shall be excused from performance of
the purchase and supply provisions of this Article II by reason of circumstances
beyond their control, including, but not limited to, acts of God, disaster,
fire, floods, the elements, lockouts, strikes, embargoes, governmental acts,
wars (declared or undeclared) and riots. The party experiencing such force
majeure shall provide prompt notice to the other party and its performance shall
be excused during the existence of such force majeure. The party experiencing
such force majeure shall use its best efforts to remove, rectify or correct such
force majeure and if the force majeure extends for longer than eighteen (18)
months, the other party shall have the option of terminating this Agreement upon
written notice. Nothing contained herein shall impose any liability on Xxxxxx
for any failure of any supplier of Contract Goods to satisfy the its obligations
under any contract to provide Contract Goods.
2.12 Fee for Procurement Services. In consideration of the Procurement
Services provided by Xxxxxx, NWP shall pay Xxxxxx a minimum annual [Confidential
Treatment Requested by New World Pasta Company]. Such fees shall be paid by NWP
within thirty (30) business days after NWP's receipt from Xxxxxx of Xxxxxx'x
invoice for such fees and expenses. The Minimum Fee shall be increased on each
anniversary of this Agreement [Confidential Treatment Requested by New
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World Pasta Company]. Further, within ninety days after each anniversary of the
date hereof (or at the election of the parties, each calendar year) the parties
shall adjust the Minimum Fee [Confidential Treatment Requested by New World
Pasta Company].
ARTICLE 3.
RESPECTIVE RIGHTS, TERMINATION AND TRANSFER
3.1 Term. The Initial Term of this Agreement shall expire on [Confidential
Treatment Requested by New World Pasta Company]. On or before [Confidential
Treatment Requested by New World Pasta Company], and on or before [Confidential
Treatment Requested by New World Pasta Company] of each year thereafter, either
party may deliver notice to the other that such party has elected to terminate
this Agreement effect as of following December 31. Absence such notice this
Agreement shall continue from year to year until terminated as provided herein.
3.2 Breach of Obligations/Termination by NWP. Failure of Xxxxxx to comply
with any of its obligations or conditions herein contained, shall be a default
and shall entitle NWP to give Xxxxxx written notice to cure such default. If any
such default is not cured within thirty (30) days after receipt of such written
notice, NWP shall be entitled to terminate this Agreement by giving written
notice to take effect immediately.
3.3 Termination by Xxxxxx. Failure of NWP to comply with any of its
obligations or conditions herein contained, or in any Procurement Contract for
the Contract Goods or Contract Services procured under this Agreement,
including, but not limited to failure to purchase or pay for Contract Goods,
shall be a default and shall entitle Xxxxxx to give NWP written notice to cure
such default. If any such default is not cured within thirty (30) days after
receipt of such written notice, Xxxxxx shall be entitled to terminate this
Agreement by giving written notice to take effect thirty (30) days after such
notice.
3.4 Indemnification by NWP. NWP shall indemnify, defend and hold Xxxxxx,
its officers, directors, employees and agents harmless from any and all claims,
liabilities, losses, judgments, costs, injuries, damages, deficiencies and
expenses incurred by Xxxxxx (including reasonable attorneys' fees), in
connection with, arising out of, resulting from or related or incident to any
breach or non-fulfillment of any covenant or agreement of NWP under this
Agreement.
3.5 Indemnification by Xxxxxx. Xxxxxx shall indemnify, defend and hold
NWP, its officers, directors, employees and agents harmless from any and all
claims, liabilities, losses, judgments, costs, injuries, damages, deficiencies
and expenses incurred by NWP (including reasonable attorneys' fees), in
connection with, arising out of, resulting from or related or incident to
Xxxxxx'x breach or non-fulfillment of any covenant or agreement of Xxxxxx under
this Agreement.
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ARTICLE 4.
GENERAL PROVISIONS
4.1 Governing Law. The parties hereto acknowledge that this Agreement was
made under, and shall be governed by the laws of the State of Minnesota without
regard to such state's rules regarding conflicts of laws.
4.2 Notices. Notices under this Agreement shall be in writing and may be
delivered by hand or sent by mail, courier or facsimile. Notices by mail shall
be sent by United States registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed delivered five (5) days after date of
mailing. Notices sent by facsimile shall be deemed given on the date
transmitted; provided that (i) the sender receives a written confirmation to
verify the transmission, and (ii) the sender also delivers a copy of the notice
to the other party by overnight courier. Notices sent by a courier shall be
deemed delivered on the date of receipt or the date delivery is refused by the
intended recipient as evidenced by the courier's records. Notices shall be sent
to the parties at the addresses set forth below, or at such other addresses or
persons as the party may from time to time designate by written notice to the
other party:
If to Xxxxxx: Xxxxxx Milling Company
000 Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: President
With a copy to: Xxxxxxx X. Xxxx, Esquire
Xxxxxx Xxxxxxx Xxxxxx & Brand
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
If to NWP: New World Pasta Company
P. O. Xxx 000
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
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With a copy to: New World Pasta Company
X.X. Xxx 000
Xxxxxxx, XX 00000
Attention: General Counsel
VP of Corporate Development and
Administration
4.3 Terms of Sale. Except as otherwise provided in this Agreement or in
any particular contract for the purchase and delivery of any particular quantity
of Contract Goods, all sales of Contract Goods shall be governed by the Uniform
Commercial Code.
4.4 Breach of Agreement. In the event of any breach of this Agreement, the
non- breaching party may avail itself of any remedies afforded it by law, except
as otherwise provided in Section 2.09 or Section 4.07 of this Agreement which
shall govern in the event of any conflict with other provisions of this
Agreement.
4.5 Confidentiality. Both Xxxxxx and NWP hereby agree not to disclose,
without the other parties' consent, to any third party (except financial
institutions or professional personnel such as lawyers, accountants, and the
like who are employed by the party hereto or as may be required or advisable to
comply with law) the specific provisions of this Agreement.
4.6 Arbitration. In the event the parties are unable to agree upon the
pricing of any products hereunder, the amount due for any delivery, or the
quality of any delivery they shall identify a third party who shall determine
such amount, and whose determination shall be binding upon the parties hereto,
and further provided that if Xxxxxx and NWP shall be unable to agree upon the
identity of such third party, said determination shall be made by a board of
arbitration in accordance with the rules and regulations of the American
Arbitration Association, and held in Minneapolis, Minnesota. The cost of said
arbitration shall be divided between the parties so that the losing party shall
pay to the prevailing party a portion of the cost of the prevailing party's
attorneys' fees and costs which shall be equal to a percentage determined by
dividing (i) the value of the award to the prevailing party by (ii) the amount
of the prevailing party's claim in the arbitration. The decision of the
arbitrators shall be final and binding and entitled to recognition and
enforcement by the courts of the United States and by the courts of all states
of the United States.
4.7 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, their successors and assigns. It
is recognized that NWP's willingness to enter this Agreement is based in part on
its reliance on Xxxxxx' practices and reputation and that, therefore, subject to
other applicable provisions of this Agreement, this Agreement can only be
assigned, sold, or disposed of by Xxxxxx by contract, by operation of law,
merger or otherwise only after the Initial Term and only to a party that meets
all of the following criteria:
4.7.1 it is not a party that has an interest, either directly or
indirectly, in any pasta manufacturing or marketing activity other than
NWP which is either a material part of such
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party's business or is in the dry pasta business (for example, this
provision would not include a company such as Con Agra based on its
current business);
4.7.2 it is a party that is financially capable of assuming all
obligations of operating the Mill and performance of this Agreement; and
4.7.3 it is a party that has significant experience and involvement
in all aspects of the operation of a durum wheat mill, including
purchasing durum Wheat and processing durum wheat into semolina and other
flour products; and NWP may assign and/or transfer all or any part of its
rights under this Agreement provided such assignment/transfer is in
connection with NWP's assignment/transfer of the Plant.
4.8 Severability. The determination that any portion or provision of this
Agreement is invalid or enforceable shall not affect the remaining portions or
provisions hereof, unless such determination of invalidity relates to the
essence or essential terms of this Agreement, in which event the entire
Agreement shall become null and void.
4.9 Counterparts. This Agreement may be executed in two or more
counterparts and all counterparts so executed shall for all purposes constitute
one agreement, binding on all the parties hereto, notwithstanding that all
parties shall not have executed the same counterpart.
4.10 Integration. This Agreement represents the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings of the parties with respect to the subject matter
hereof but specifically does not supersede the Mill Agreements which shall
continue in effect in accordance with their respective terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
NEW WORLD PASTA COMPANY
By: /s/ C. Xxxxxx Xxxxxxx
-------------------------------------
Name: C. Xxxxxx Xxxxxxx
Title: Chairman, Chief Executive Officer
and Director
XXXXXX MILLING COMPANY
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, President and
Chief Executive Officer
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