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EXHIBIT 10.3
CONFIDENTIAL TREATMENT REQUESTED
AMENDED AND RESTATED
SUPPLY AGREEMENT
This Amended and Restated Supply Agreement, dated October 29, 1992
(this "Agreement"), by and between Sysco Corporation, a Delaware corporation
(hereinafter referred to as "Sysco") and American-Italian Pasta Company, a
Delaware corporation (hereinafter referred to as "AIPC").
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Recitals
1.1 AIPC operates a durum mill and pasta plant in Excelsior Springs,
Missouri (together hereinafter referred to as the "Plant").
1.2 Sysco has marketed and distributed pasta supplied to it by AIPC
pursuant to that certain Supplier Agreement by and between AIPC and Xxxxxxx
Foods Association, predecessor in interest to Sysco, dated August 1, 1986 (as
amended on April 2, 1987, the "Initial Agreement").
1.3 Sysco desires to continue to market and distribute pasta supplied
to its operating companies and divisions ("Operating Companies") by AIPC in
accordance with the terms hereof and AIPC desires to continue to supply pasta to
Sysco for foodservice distribution at a price and in amounts sufficient to
insure Sysco a readily available, cost competitive and high quality source of
pasta in accordance with the terms hereof.
1.4 Sysco proposes to continue to make all Sysco brand pasta sales
opportunities available through it to AIPC in accordance with the terms hereof.
1.5 Sysco and AIPC desire to amend and restate the Initial Agreement as
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, AIPC and Sysco agree
as follows:
* CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. THE
REDACTED MATERIAL HAS BEEN INDICATED WITH AN ASTERISK AND FILED SEPARATELY WITH
THE COMMISSION.
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Purchases and Sales of Products
2.1 Products Purchased. AIPC shall manufacture at the Plant and sell to
Sysco and Sysco shall purchase from AIPC, those pasta products set forth on
Exhibit 2.1 attached hereto (the "Products"). The parties hereto may amend
Exhibit 2.1 from time to time to add or delete Products as mutually acceptable
to Sysco and AIPC. AIPC shall maintain an inventory of Products sufficient to
assure that Sysco's orders hereunder will be supplied in the ordinary course of
business and consistent with past practice under the Initial Agreement.
2.2 Pricing. All Products sold to Sysco hereunder shall be sold at a
price based on Total Cost to be established pursuant to Section 2.2.2 hereof.
For purposes of this Agreement, "Total Cost" means the sum of (i) Raw Materials
Costs, (ii) Packaging Costs, (iii) Direct Labor and Factory Overhead, (iv)
Direct Sales and Marketing Costs, (v) Depreciation and Distribution Costs, and
(vi) Allocable Administration and Financing Costs.
2.2.1 Definitions - The following definitions shall apply in
determining TotalCost:
(a) "Raw Materials Cost" means the actual delivered cost to
AIPC of the ingredients used to manufacture the Products, including but not
limited to semolina, first clear flour, egg powder, spinach powder, tomato
powder and enrichments. The cost of semolina shall be calculated in accordance
with Exhibit 2.2.1(al.
(b) "Packaging Costs" means the actual delivered cost to
AIPC of materials consumed in packaging the Products including packaging film,
bags, cases, boxes, liners, stretch wrap, pallets, ink, glue, tape and slip
sheets.
(c) "Direct Labor and Factory Overhead" means the actual
cost of labor, utilities, supplies and repairs, spare parts, sanitation,
quality control, maintenance, security, uniforms and laundry, plant supervision
and other factory overheads allocable to the manufacture of Products purchased
by Sysco hereunder.
(d) "Direct Sales and Marketing Costs" means (i) actual
expenses of payroll, payroll taxes, fringe benefits and reasonable and
necessary travel and entertainment expenses for the AIPC employees which Sysco
and AIPC mutually agree will be devoting their efforts to selling Products to
Sysco and (ii) all promotional expenses and allowances paid to or on behalf of
Sysco or its Operating Companies for the purpose of promoting the sale of
Products by Sysco to its customers. Direct Sales and Marketing Costs may be
adjusted from time to time by mutual agreement.
(e) "Depreciation and Distribution Costs" means (i) actual
depreciation expenses of AIPC's buildings and improvements, milling equipment,
pasta production and packaging equipment, warehouse equipment and office
furnishings and equipment and (ii) expenses of warehousing Products including
payroll, payroll taxes and fringe benefits for warehouse personnel and
warehouse rent and utility charges, in each case as allocable to Products
purchased by Sysco hereunder.
(f) "Allocable Administrative Financing Costs" means *
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2.2.2 Pricing Procedures - In accordance with past practice, prior
to the beginning of each Contract Year (as defined in Section 5.1), the parties
will meet to discuss and review all of the components of Total Cost and * the
Total Cost of each Product to be utilized for pricing during that Contract Year
based on the Total Cost of such Product during the Contract Year then ending
except as otherwise provided in Section 2.2.4 regarding allocable
Administrative and Financing Costs. *
Notwithstanding the foregoing, Raw Materials Costs and Packaging
Costs will be adjusted each January 1 during the term hereof to reflect changes
in the components of such costs effective upon written notice of adjustment to
Sysco. In addition, Raw Materials Cost may be adjusted at other times,
effective upon thirty (30) days prior written notice to Sysco, in the event of
* .
2.2.3 Basis of Allocation of Costs - Unless otherwise agreed by
the parties, all AIPC costs under paragraphs (c), (e) and (f) of Section 2.2.1
during any Contract Year will be allocated to the Total Cost of Products
consistent with past practice. * Where no other allocation has been utilized in
the past, such costs will be allocated, unless the parties agree otherwise, to
the Total Cost of Products on a prorata basis *
2.2.4 Maximum Range of Certain Costs - The parties' experience
under the Initial Agreement has been that Allocable Administrative and
Financing Costs have comprised approximately *% of Total Costs. The parties
agree that Allocable Administrative and Financing Costs will be established at
*% of the Total Cost provided that in no event will Allocable Administrative
and Financing Costs be less than * per pound or more than * per pound during
the term of this Agreement or any extension thereof.
2.2.5 Audit Privilege - Sysco shall have the right, at its
expense, to inspect and audit all records of AIPC, including without limitation
supplier's invoices and freight bills, in connection with the performance of
AIPC hereunder and the determination of Total Cost.
2.2.6 Freight - In the calculation of Total Cost, Sysco shall
obtain the benefit of all rights accruing to AIPC under any transportation or
freight agreement, including the rates provided for in any such agreement
covering the shipment of Products from the Plant to other destinations or the
shipment of packaging materials or raw materials to the Plant.
2.2.7 Payment Terms - Sysco shall make payments to AIPC for
Products supplied to Sysco by AIPC within * after receipt of an invoice
therefor.
2.3 Exclusive Supplier to Sysco. Except for sales pursuant to Section
2.5 of this Agreement, during the term hereof AIPC shall not act as a supplier
or seller of pasta or Products to any business other than Sysco in the United
States, Canada and Mexico that operates as, or sells to, institutions (such as
restaurants, hospitals and schools) which provide food for consumption away
from home ("Foodservice Business"). AIPC may sell pasta and/or Products (i) to
a business that sells food at retail (such as Kroger Co. and Safeway) ("Retail
Business") or that sells or distributes products to the Retail Business (such
as Xxxxxxx Foods and Associated Wholesale Grocers) or (ii) to industrial
ingredient food processors who use pasta in their finished product.
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2.4 Exclusive Right to Market Sysco Label Pasta. AIPC shall have the
exclusive right to market Products bearing a Sysco label through Sysco in the
United States, Canada and Mexico, provided that (i) AIPC maintains the quality
of such Products and supplies them at a competitive price (based upon prices
available in long term arrangements and taking into consideration the costs
associated with the multi-colored packaging and box designs which have been
designed by Sysco and AIPC) and (ii) AIPC provides a continuous source of supply
of Products to Sysco, it being understood that in the event of an interruption
in AIPC's production, AIPC shall be permitted to utilize other sources of supply
as approved in writing in advance by Sysco. Nothing in this Section 2.4 shall be
construed as obligating AIPC to sell Products to Sysco at less than the price
provided for in Section 2.2 or to utilize such alternative sources of supply as
approved by Sysco, unless AIPC elects to do so in order to maintain its
exclusive rights under this Section 2.4.
2.5 Direct Sales to Certain Sysco Customers. The parties acknowledge
that certain Foodservice Business customers (including the military,
universities and major restaurant chains) may insist upon purchasing directly
from a manufacturer. In those situations, AIPC shall be permitted to sell
Products directly to such Foodservice Businesses and AIPC shall use Sysco
Operating Companies as AIPC's exclusive agent in connection with such direct
sales. The Operating Companies will be compensated for acting as agent on such
sales by the payment of a fee in the amount of * unless otherwise mutually
agreed by the parties.
2.6 Sysco Orders; Billing. Sysco, on behalf of the Operating
Companies, shall order directly from AIPC for all purchases hereunder. Such
orders shall be placed at least * business days prior to the requested shipment
date during the first Contract Year, * business days prior to the requested
shipment date during the second Contract Year, * business days during the third
Contract Year and * business days during the fourth Contract Year and
thereafter during the term of this Agreement or any extension thereof. Sysco
may, for special orders, request a shorter delivery date, and AIPC will use
reasonable, good faith efforts to meet such special delivery date(s). Billing
by AIPC shall be directly to Sysco, irrespective of which Operating Company is
the recipient of the respective order(s).
2.7 Labeling. AIPC agrees to use such labeling on the pasta ordered by
Sysco as are supplied to AIPC by Sysco or obtained by AIPC in accordance with
the instructions and guidelines of Sysco.
2.8 Purchase of Pasta Not Manufactured by AIPC. At the current time,
AIPC does not manufacture certain types of pasta such as * and * ("Other
Pasta"). Sysco will permit AIPC to purchase Other Pasta for resale to Sysco
under the Sysco label. AIPC will have the exclusive right to market Other Pasta
bearing a Sysco label through Sysco in the United States, Canada and Mexico,
provided that (1) the quality of Other Pasta is acceptable to Sysco in its
reasonable judgement and (2) AIPC is willing to sell Other Pasta to Sysco at a
price which is comparable to a price for Other Pasta of similar quality and
packaging and in similar quantities as is available to Sysco from one or more
third parties. The price for Other Pasta shall be established from time to
time. The provisions of this Agreement other than Sections 2.2.1, 2.2.2, 2.2.3,
2.2.4 and 2.4 shall apply to purchases of Other Pasta.
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Marketing and Promotion
3.1 Marketing and Promotional Activities of Sysco. Sysco shall use
reasonable, good faith efforts to sell Products and Other Pasta to Sysco's
existing Foodservice Business customers in the United States, Canada and Mexico
in accordance with necessary and appropriate marketing and promotional
practices. Subject to Sections 3.2 and 3.3 hereof, Sysco shall bear all
expenses incurred in connection with all such marketing and promotional
activities engaged in by Sysco.
3.2 Marketing and Promotional Activities of AIPC. AIPC shall continue
to cooperate with Sysco in developing Sysco's pasta marketing program in the
United States, Canada and Mexico. AIPC and Sysco shall agree in writing upon
the level of sales, marketing and promotional activities and expenses to be
provided by AIPC and included in Direct Sales and Marketing Costs.
3.3 Special Promotional Activities. The parties agree that, within
thirty (30) days following the commencement of each calendar quarter during the
term hereof, AIPC will contribute to Sysco an amount equal to * per pound of
the prior calendar quarter's gross tonnage of Products and Other Pasta sold by
AIPC to Sysco hereunder which shall be used by Sysco solely to promote the sale
of Products and Other Pasta by Sysco and its Operating Companies.
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Warranties, Covenants and Agreements
4.1 Warranty as to Purchased Products. AIPC warrants that each Product
will meet the specifications for such Product set forth in Exhibit 4.1. If AIPC
supplies Other Pasta to Sysco pursuant to Section 2.8 of this Agreement, AIPC
warrants that Other Pasta will meet the mutually agreed specifications for such
pasta. AIPC further warrants that the Products and Other Pasta delivered to
Sysco hereunder, as of the date of delivery to the Operating Company (a) will
not be adulterated or misbranded within the meaning of the Federal Food, Drug
and Cosmetic Act (the "Act"), (b) will not be an article which cannot be
introduced into interstate commerce under the provisions of Section 404 and 505
of the Act, and (c) will be in material compliance with all applicable federal,
state and local laws.
4.2 Covenants.
4.2.1 Compliance with Laws - AIPC agrees that its Plant shall be
operated in material compliance with all applicable codes, laws, statutes,
regulations and ordinances, whether federal, state or local including, without
limitation, all environmental, health or safety laws. AIPC will promptly notify
Sysco of any notices or proceedings arising out of the nonconformity or
noncompliance with respect to any matters addressed in this Section 4.2.1 and
AIPC will promptly cure or have dismissed with prejudice any such actions or
proceedings to Sysco's reasonable satisfaction.
4.2.2 Permits and Licenses - During the term of this Agreement,
AIPC agrees to maintain in place all permits and licenses reasonably necessary
for the operation by AIPC of the Plant and shall otherwise comply with any and
all laws, ordinances, rules and regulations of any
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governmental unit or agency having jurisdiction related in any way to the use
or occupancy of the Plant by AIPC, including, without limitation, the United
States Department of Agriculture.
4.2.3 Repairs and Operation - AIPC agrees to operate the Plant in
a commercially reasonable manner, to keep the Plant in good repair in
accordance with reasonable standards of operation and good manufacturing
practices of the United States Food and Drug Administration.
4.2.4 Inspections - Upon reasonable notice to AIPC, Sysco's
employees and representatives shall have the right of full access to the Plant
during normal business hours during the term of this Agreement.
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Term of Agreement
5.1 Initial Term. Subject to the provisions of Article 5 hereof, this
Agreement shall become effective on July 1, 1993, and expire June 30, 1997. The
period from July 1, 1993 through June 30, 1994, and each successive twelve (12)
month period during the term hereof (as it may be extended) is hereinafter
referred to as a "Contract Year".
5.2 Termination in Event of Default or Bankruptcy. Either party may
terminate this Agreement, prior to the expiration of the term hereof, upon
(i)the other party's failure to cure any default hereunder within ninety
(90)days of receipt of written notification of such defaults or (ii) the filing
of any petition in bankruptcy or the commencement of any proceeding relating to
the relief or readjustment of indebtedness, either through reorganization or
otherwise, by or against the other party.
5.3 Termination by Sysco. This Agreement may be terminated by Sysco
upon substantial casualty to or condemnation of the Plant.
5.4 Extension of Term. Sysco shall have the option to extend the term
of this Agreement for three (3) successive terms of three (3) Contract Years
each, upon six (6) months written notice prior to the expiration of the then
current term, subject to the condition that Sysco does not knowingly manipulate
the volume of purchases by Sysco under this Agreement in the third Contract
Year of the then current term to less than the average volume of purchases
during the first two Contract Years of the then current term.
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Indemnification and Insurance
6.1 Indemnification by AIPC. AIPC shall defend, indemnify and hold
harmless Sysco, the Operating Companies and their respective employees,
officers, directors and customers (individually an "Indemnitee") from all
actions, suits, claims and proceedings ("Claims"), and any judgments, damages,
fines, costs and expenses, including reasonable attorneys' fees resulting
therefrom (and Indemnitee shall notify AIPC promptly of the service of process
or receipt of actual notice of any Claim):
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6.1.1 brought or commenced by federal, state or local governmental
authorities against any Indemnitee alleging that any Products or Other Pasta
sold by AIPC to or on the order of Sysco or an Operating Company hereunder did
not, as of the date of delivery, meet the representations set forth in Section
4.1 above; or
6.1.2 brought or commenced by any person or entity against any
Indemnitee for recovery of damages for the injury, illness and/or death of any
person or damage to property, in either case, arising out of or alleged to have
arisen out of (i) the delivery, sale, resale, use or consumption of any
Products or Other Pasta delivered to Sysco hereunder, or (ii) the negligent
acts or omissions of AIPC; provided, however, that AIPC's indemnification
obligations hereunder shall not apply to the extent that Claims are caused by
the negligence of an Indemnitee.
6.2 Indemnification by Sysco. Sysco shall defend, indemnify and hold
harmless AIPC and its employees, officers and directors from and against any
and all claims and liabilities, including costs, expenses and reasonable
attorneys fees incurred in connection with the defense of any such claims,
arising out of (i) Sysco's marketing efforts pursuant hereto, or (ii) the
misuse or adulteration of any Pasta or Other Products by Sysco or an Operating
Company.
6.3 Insurance. AIPC shall maintain in effect insurance coverage with
reputable insurance companies covering worker's compensation and employers'
liability, automobile liability, comprehensive general liability, including
product liability and excess liability, all with limits described in Exhibit
6.3. AIPC shall furnish a certificate evidencing the obligation of its
insurance carriers not to cancel or materially amend such policies without
thirty (30) days prior written notice to Sysco. In addition, Sysco shall be
named as an additional insured with respect to the comprehensive general
product, automobile and excess liability coverages specified herein using the
Insurance Services Office form CG 2026.
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Assignment
7.1 Assignment. This Agreement shall not be assignable by AIPC or Sysco
without the written consent of the other party, including any assignment by
operation of law occurring as the result of any foreclosure of the Plant or any
material component thereof by any person having a security interest or mortgage
therein, and any attempted assignment in violation of this provision shall be
void and unenforceable.
7.2 Binding Effect. Subject to Section 7.1, this Agreement and the
rights and obligations of the parties hereto shall be binding upon and shall
insure to the benefit of such parties and their successors and permitted
assigns.
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Miscellaneous
8.1 Entire Agreement. This instrument constitutes the entire agreement
between AIPC and Sysco and it expressly supersedes all other prior oral or
written negotiations, agreements,
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understandings or course of conduct between the parties with respect to the
subject matter hereof including, without limitation, the Initial Agreement.
8.2 Amendment. This Agreement shall not be amended, altered or changed
except by a written instrument executed by the parties hereto or their
permitted assignees, if any.
8.3 Waiver. Any waiver by either party hereto of an obligation on the
part of the other party shall be ineffective unless in writing and shall not be
deemed to be a waiver of any other future obligation or performance.
8.4 Severability. In the event that any provision hereof is found by a
court of competent jurisdiction to be unenforceable, such unenforceability
shall not affect the binding nature of the balance of the Agreement and the
remaining provisions shall be given effect, to the extent possible, as if the
unenforceable provision had not been included herein.
8.5 Governing Law. This Agreement and the rights and obligations of
the parties hereunder, shall be construed in accordance with the law of the
State of Delaware.
8.6 Notices. The notices to be given hereunder shall be given in
writing, by (i) certified mail, postage prepaid, (ii) by reputable overnight
courier service, (iii) by facsimile transmission, or (iv) personal delivery,
and addressed in each case as follows, or to such other address as the parties
may designate by written notice under this Section 8.6:
If to Sysco: Sysco Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
ATTN: Senior Vice President - Procurement
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Copy to:
Sysco Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
ATTN: General Counsel
Telephone: (000) 000-0000
Telefax: (000) 000-0000
If to AIPC: American-Italian Pasta Company
0000 Xxxxxxx Xxx
Xxxxxxxxx Xxxxxxx, XX 00000
ATTN: President
Telephone: (000) 000-0000
Telefax: (000) 000-0000
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Notices shall be effective (i) three (3) days after deposit in the mail if given
by certified mail, (ii) the next business day following deposit with a courier
if given by courier, (iii) when received if given by facsimile transmission or
personal delivery.
8.7 Force Majeure. Subject to Section 2.4 hereof, the obligations of
the parties hereto, and of their permitted assigns, except the obligation to
pay monies when due, shall be subject to all acts of God; riots, insurrections;
federal and state laws, orders, rules and regulations; interference by civil,
military or naval authorities; governmental actions; accidents; storms, fire or
other casualty; and other similar events of force majeure which are beyond the
reasonable control of the party obligated to perform, and such performance
obligation shall be suspended during the period of such force majeure; provided
that any such force majeure shall not operate to extend the term hereof. If
force majeure extends for more than * , then either party may terminate this
Agreement.
8.8 Relationship of Parties. Nothing in this Agreement shall be deemed
or construed by the parties or by any third parties as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller.
8.9 Past Practice. Whenever this Agreement refers to "past practice"
as in references to treatment consistent with past practice, such reference is
to the past practice of the parties under the Initial Agreement.
8.10 Dispute Resolution. Except as provided below, any and all
disputes arising out of this Agreement shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, provided that the parties agree that a single arbitrator shall be
used in any such arbitration. Judgement upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
The provisions of this Section 8.10 shall not apply to (i)
product liability claims, losses or damages and/or (ii) claims, liabilities,
losses or damages arising out of personal injury and physical damage to
property suffered by either party and their respective directors, officers,
employees or agents or by any other person.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
SYSCO CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxx X. Xxxxxxxxxxx
Executive Vice President -
Procurement
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And: /s/ Xxxxxxx X. Xxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxx
Senior Vice President -
Procurement
AMERICAN-ITALIAN PASTA COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
President and CEO
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SYSCO
December 13, 1996
Xx. Xxxxxxx Xxxxxxx
President & Chief Executive Officer
American Italian Pasta Company
0000 Xxxxxxx Xxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Dear Xxx:
In accordance with Section 5.4 of the Amended and Restated Supply Agreement
dated, October 29, 1992 (the "Agreement"), SYSCO Corporation hereby executes its
option to extend the Agreement for a period of 3 years. The extension will begin
on July 1, 1997, and will run through June 30, 2000. We believe that the
Agreement has served both SYSCO and AIPC well over the years and see no reason
to make any substantive changes at this time.
We understand that AIPC will prepare and forward for our approval an Amended
Exhibit 2.1, containing an updated product listing. Any additional amendments to
the Agreement that become necessary over time will be handled through addendums
as they have in the past.
I know that you believe as I do that there is still significant growth for SYSCO
brands in food service pasta. We look forward to working with AIPC to capture a
larger share of the pasta market.
Sincerely,
s/W. Xxxxxxx Xxxxx
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W. Xxxxxxx Xxxxx
Vice President of Merchandising, Grocery Products
cc: Xxxxxxx X. Xxxxxxxxxx
