EXHIBIT 10.13
EXECUTION COPY
BAKERY PRODUCT SUPPLY AGREEMENT
This Bakery Product Supply Agreement ("Agreement"), dated as of
November 1, 2002, is by and between XXXX FOOD PRODUCTS, INC., an Indiana
corporation ("Supplier") and PANERA, LLC, a Delaware limited liability company
("Buyer").
WHEREAS, Buyer is the owner, operator and franchisor of the retail
bakery-cafe and specialty bread business doing business under the concept names
"Panera Bread" and "Saint Louis Bread Company"; and
WHEREAS, Supplier is a manufacturer of bakery products and has agreed,
upon and subject to the terms and conditions of this Agreement, to manufacture
and supply Product for Buyer's System.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Definitions.
1.1 Defined Terms: In addition to other terms defined herein,
capitalized terms used in this Agreement shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any
Person directly or indirectly controlling,
controlled by, or under common control with
such other Person. For purposes of
determining whether a Person is an
Affiliate, the term "control" shall mean
possession, directly or indirectly, of the
power to direct or cause the direction of
the management and policies of a Person,
whether through ownership of securities, by
virtue of the office held by such Person, by
contract or otherwise.
"Allocated Fixed Overhead" shall mean, for each Reporting Period during
any year of the Term, one fifty-second
(1/52) of the sum of the fixed overhead
expenses stipulated for such year for all
Approved Plants at which Product is
manufactured during such Reporting Period,
computed as described on Schedule "A" and
consisting of the following cost categories:
(1) fixed maintenance costs, (2) fixed
supervision costs, (3) quality assurance
costs, (4) fixed depreciation, (5) taxes and
license fees, (6) insurance, and (7)
Allocated G&A.
"Allocated Freight Costs" shall mean, for each Product Code during any
period, the per Case cost of freight, equal
to: (a) the freight cost per truck from an
Approved Plant to each Distributor's
warehouse (or such other designated
destination) from available quotes for such
freight services as selected by Buyer (or by
Supplier in the absence of such a selection
by Buyer); divided by (b) the agreed-to
number of Cases shipped per truck. Such
freight cost shall include actual allowable
lumper fees and, if no pallet exchange
program is in place, actual allowable pallet
charges. In circumstances where Buyer is in
the process of opening new markets
necessitating the shipment of
inventory to previously unused distribution
centers, Buyer shall pay the actual freight
cost per truck for any LTL (less than full
truckload) shipments until each such new
market is developed sufficiently so as to be
capable of receiving full truckload
deliveries at such distribution centers.
"Allocated G&A " shall mean, for each Reporting Period during
any year of the Term, one fifty-second
(1/52) of the total general and
administrative expense overhead stipulated
for such year. The Allocated G&A for the
first contract year of the Term shall be
$4,177.83 per week.
"Allocated Inventory
Carrying Costs" shall mean, for each Reporting Period during
any year of the Term, the amount obtained by
dividing: (i) the product of 9.069%
multiplied by "Applicable Costs" by (ii)
twenty-six (26). The term "Allocated
Applicable Costs" shall mean Product Direct
Costs plus Allocated Variable Overhead.
"Allocated Nitrogen and
Carbon Dioxide Costs" shall mean, for each Product Code during any
Quarter, the weighted average price of
nitrogen and carbon dioxide per pound
determined in the manner described on
Exhibit "3.2B" multiplied by the per unit
standard usage as described on Schedule "B".
"Allocated Profit" shall mean, for each Product Code, the per
unit profit stipulated and fixed for the
Term as set forth on Schedule "C".
"Allocated Variable
Electricity Costs" shall mean, for each Product Code during any
Quarter, the weighted average price of
electricity per kilowatt hour determined in
the manner described on Exhibit "3.2B"
multiplied by the per unit standard kilowatt
hour usage as described on Schedule "B".
"Allocated Variable Overhead" shall mean, for each Reporting Period during
any year of the Term, for each Product Code,
the sum of the variable overhead expenses
for all Approved Plants at which Product is
manufactured during such Reporting Period,
determined in the manner set forth on
Schedule "B" and consisting of the following
cost categories: (1) Allocated Variable
Electricity Costs, (2) Allocated Nitrogen
and Carbon Dioxide Costs, (3) storage costs,
(4) water and sewer costs, (5) production
supply costs, (6) variable repair and
maintenance costs, (7) variable
depreciation, (8) trucking expenses between
Approved Plants, and (9) variable
supervision costs.
"Approved Plant" shall mean any manufacturing facility of
Supplier approved by Buyer from time to time
during the Term for the manufacture of
Product.
"Xxxx of Materials" shall mean Buyer's xxxx of materials for
each Product Code, including any process
specifications, yield and usage information,
and labor standards. A copy of the Xxxx of
Materials in effect as of the date hereof
for each Product Code is attached as Exhibit
1.1. Such bills of materials, which set
forth the cost structure and Operating
Standards for each Product Code, are subject
to modification by Buyer as provided in
Section 2.3 and Section 4.
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"Billing Freight Allowance" shall mean the estimated per Case freight
allowance established each Quarter for use
in the Product Cost Formula for a Product
Code to a Distributor.
"Buyer's System" shall mean the bakery-cafe retail outlets in
the continental United States owned,
franchised or licensed by Buyer, and the
bakery-cafe retail outlets in the
continental United States operated by other
Persons pursuant to a joint venture or other
arrangement with Buyer in which Buyer holds
not less than a fifty-one percent (51%)
interest.
"Case" shall mean, for each Product Code, the
number of units that are packaged in each
standard case as set forth in the Xxxx of
Materials.
"Direct Labor Costs" shall mean, for each Product Code, the
direct hourly labor costs per unit of
Product Code, as calculated in accordance
with the Operating Standards, structure and
methodology in the Xxxx of Materials based
upon the non-overtime wage rates per
position as set forth in Schedule "D" (such
non-overtime wage rates plus Employee
Benefits not to exceed the Wage and Benefit
Allowance).
"Disaster Recovery Plan" shall mean the disaster recovery plan
referred to in Section 16.6 to be
implemented upon the occurrence of a Force
Majeure Event.
"Distributors" shall mean the distributors designated by
Buyer or members of Buyer's System (whether
independently owned and operated, or part of
Buyer's System), who are authorized pursuant
to Section 7.1 to order and/or receive
Product from Supplier, to perform
preliminary quality checks on Product, to
make payments to Supplier for Product as
invoiced by Supplier pursuant to the terms
of this Agreement, and to distribute Product
to Buyer's System. A current list of
approved Distributors is set forth on
Schedule "E".
"Employee Benefits" shall mean, for each Product Code during any
period of time, the total employee benefit
expense incurred by Supplier to or for the
benefit of the direct labor used to
manufacture such Product, which benefits
shall consist of the benefits described on
Schedule "D" for hourly employees.
"Operating Standards" shall mean the operating and process
specifications of a production line for each
Product Code, based on the engineering
capabilities of the mixing, makeup, freezing
and/or packaging equipment and manufacturing
processes for each such production line, as
well as the standards for raw materials,
waste allowance, scrap, labor and packaging
set forth in the Xxxx of Materials for such
Product Code. Without limiting the
generality of the foregoing, references to
the term Operating Standards includes the
line speeds for each such production line,
based on the specific equipment utilized in
each production line and the most limiting
factor of the mixing, makeup, freezing
and/or packaging processes.
"Person" shall mean an individual, a corporation, a
general partnership, a limited partnership,
a limited liability company, an association,
a trust or any other
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entity or organization, including a
government or political subdivision or an
agency or instrumentality thereof.
"Product" shall mean all bakery goods approved by
Buyer for manufacture by Supplier on
designated production lines at an Approved
Plant, and then supplied directly or
indirectly for resale to Buyer's System.
"Product Code" shall mean an item of Product which is a
specific combination of formulation, unit
size, package size (including number of
units), package type and label, all in
accordance with the Xxxx of Materials, and
to which a specific product code has been
assigned by Buyer for identification
purposes.
"Product Direct Costs" shall mean, for each Product Code during
any Reporting Period, the sum of:
(a) the per unit standard costs of delivered
ingredients, including the cost of flour and
butter determined in accordance with the
provisions of Section 2.4 (at the stipulated
delivered price per unit multiplied by the
standard usage in the Xxxx of Materials),
plus the product obtained by multiplying the
percentage operational variance for
ingredients as set forth on Schedule "F" by
the per unit standard costs of delivered
ingredients; plus
(b) the per unit standard costs of delivered
packaging as set forth in the Xxxx of
Materials (at the stipulated delivered price
per unit multiplied by the standard usage in
the Xxxx of Materials), plus the product
obtained by multiplying the applicable
percentage operational variance for
packaging as set forth on Schedule "F" by
the per unit standard costs of delivered
packaging; plus
(c) the per unit standard costs of Direct
Labor Costs as set forth in the Xxxx of
Materials (at the stipulated cost per unit
multiplied by the standard usage in the Xxxx
of Materials) plus the product obtained by
multiplying the applicable percentage
operational variance for Direct Labor Costs
as set forth on Schedule "F" by the per unit
standard costs of Direct Labor Costs; plus
(d) an allowance for Employee Benefits on a
cost per unit basis determined according to
the methodology set forth on Schedule "D".
Such sum shall be calculated using the
Operating Standards included in the Xxxx of
Materials.
"Quarter" shall mean the three (3) consecutive months
ending on the last Saturday of every April,
July, October and January, during the Term.
"Reporting Period" shall mean one (1) week periods during the
Term, ending at the close of business on
each Saturday.
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"Stipulated Inventory
Carrying Costs" shall mean, for each Reporting Period during
any year of the Term, the amount obtained by
dividing: (i) the product of 9.069%
multiplied by "Stipulated Applicable Costs"
by (ii) twenty-six (26). The term
"Stipulated Applicable Costs" shall mean
Product Direct Costs plus Stipulated
Variable Overhead. The term "Stipulated
Variable Overhead" shall have the same
meaning as "Allocated Variable Overhead"
except substituting therefor the terms
"Stipulated Variable Electricity Costs" for
"Allocated Variable Electricity Costs" and
"Stipulated Nitrogen and Carbon Dioxide
Costs" for "Allocated Nitrogen and Carbon
Dioxide Costs".
"Stipulated Variable
Electricity Costs" shall mean, for each Product Code during any
Quarter, the weighted average price of
electricity per kilowatt hour estimated each
Quarter for use in the Product Cost Formula,
computed consistently with the methodology
described on Exhibit "3.2B" multiplied by
the per unit standard kilowatt hour usage
set forth in the Xxxx of Materials as
described on Schedule "B".
"Stipulated Nitrogen and
Carbon Dioxide Costs" shall mean, for each Product Code during any
Quarter, the weighted average price of
nitrogen and carbon dioxide per pound
estimated each Quarter for use in the
Product Cost Formula, and consistent with
the methodology described on Exhibit "3.2B"
multiplied by the per unit standard usage
set forth in the Xxxx of Materials as
described on Schedule "B".
"Stock-out Shortage" shall mean the inability of a Distributor to
fill an order for Product placed by a member
or members of Buyer's System as a result of
a failure by Supplier to supply Product to
such Distributor. The amount of a Stock-Out
Shortage, for a Product Code, shall equal
the aggregate number of Cases of such
Product Code ordered from the affected
Distributor by a member or members of
Buyer's System less the number of Cases of
such Product Code in the affected
Distributor's inventory at the time of such
order or orders.
"Term" shall mean, unless earlier terminated by
Buyer due to a Supplier Default or by
Supplier due to a Buyer Default or pursuant
to Section 3.7.3, the period during which
Supplier shall be required to manufacture
and supply Product and Buyer shall be
required to purchase, or cause to be
purchased, Product in accordance with the
terms of this Agreement, which shall be for
a period of five (5) years commencing on the
date of this Agreement, and shall be
automatically renewed on a year-to-year
basis thereafter unless notice of
termination by either party is given to the
other party not less than twelve (12) months
prior to termination.
"Vendor" shall include, when such term is used to
refer to ingredient and/or packaging
vendors, the distribution and/or freight
system that delivered such ingredients
and/or packaging to an Approved Plant.
"Wage and Benefit Allowance" shall mean, at any time for each job
classification: (1) the actual regular,
non-overtime wage rates for those positions,
and Employee Benefits, listed
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on Schedule "D", respectively (excluding:
(a) workers compensation, (b) medical and
dental benefits, other than medical and
dental expenses associated with worker
compensation claims, and (c) state and
federal mandated taxes and charges, such as
the FICA tax base, medicare and unemployment
borne by Supplier solely as a result of any
government-mandated increase in the wage
base or tax rate used for the computation of
such charges ("Government Mandated
Charges")) as of the date of this Agreement;
plus a percentage increase of such actual
regular, non-overtime wage rates and
Employee Benefits equal to the percentage
increase in the Consumer Price Index from
the date of this Agreement plus five (5)
percentage points; plus (2) workers
compensation equal to four and two-tenths
percent (4.2%) of the sum of: (i) Direct
Labor Costs plus (ii) the product obtained
by multiplying the applicable percentage
operational variance for Direct Labor Costs
as set forth on Schedule "F" by the per unit
standard costs of Direct Labor Costs; plus
(3) medical and dental benefits (excluding
medical and dental benefits, other than
medical and dental expenses associated with
worker compensation claims) plus an amount
not in excess of twenty-five percent (25%)
of the prior years' medical and dental
costs; plus (4) Government Mandated Charges.
As used herein, the term "Consumer Price
Index" shall mean the "Consumer Price Index
for Urban Wage Earners and Clerical Workers,
U.S. City Average, All Items (1982-84=100)"
published by the Bureau of Labor Statistics
of the United States Department of Labor
(or, if such index is not available, any
comparable successor or substitute index,
appropriately adjusted, which is designated
by Buyer and approved by Supplier). As of
the last day of September, 2002, the
Consumer Price Index was 177.0.
1.2 Other Defined Terms. In addition to terms defined in the Recitals
to this Agreement and Section 1.1, the following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
---- -------
"Allocated Applicable Costs" 1.1 (see "Allocated Inventory
Carrying Costs")
7"Arbitrator" 3.2.6
"Association" 22.
"Buyer Default" 16.3
"Buyer's Cancellation Fee" 16.4
"Competitor" 14.5
"Consumer Price Index" 1.1 (see "Wage and Benefit Allowance")
"Disclosing Party" 14.1
"Force Majeure Event" 16.6
"FOB Plant Billing Price Per Case" 3.1
"Government Mandated Charges" 1.1 (see "Wage and Benefit Allowance")
"Invoice Price" 3.1
"Independent Operators" 7.3
"Product Cost" .. 3.2.1
"Product Cost Formula" 3.2.1
"Product Development Project" 4.2
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"Proprietary Information" 14.1
"Protected Signature Product" 14.5
"Quarterly Reconciliation Report" 3.2(b)
"Receiving Party" 14.1
"Resolution Period" 3.2.6
"Shortage Fee" 5.2(b)
"Status Conference" 3.2.6
"Stipulated Applicable Costs" 1.1 (see "Stipulated Inventory
Carrying Costs")
"Structural Savings Project" 4.5
"Supplier's Cancellation Fee" 16.2
"Supplier Default" 16.1
"Weekly Reconciliation Report" 3.2(b)
2. Manufacture and Supply of Product.
2.1 Supply Requirements. Upon and subject to the terms and conditions
of this Agreement, during the Term, Supplier shall: (a) manufacture and supply
Product in such quantities as may be required by each Distributor and/or member
of Buyer's System to enable each of them to meet the Product requirements and
inventory needs of Buyer's System; and (b) manufacture and supply Product in
such quantities as may be required by each Distributor to maintain an adequate
level of Product inventory as provided in this Agreement.
2.2 Exclusivity. So long as Supplier timely supplies Product in
accordance with the required recipes, formulas, processes, Operating Standards
and Product specifications, and in the quantities required by each Distributor
and Buyer, Buyer shall purchase from Supplier (through its Distributors) one
hundred percent (100%) of its Product requirements for Buyer's bakery-cafe
outlets in the continental United States for all Product which is not
manufactured by Buyer or any Affiliate of Buyer, and Buyer shall use its
reasonable best efforts, subject to applicable law, to direct the bakery-cafe
outlets that are a part of Buyer's System to purchase from Supplier (through its
Distributors) one hundred percent (100%) of their Product requirements for all
Product which is not manufactured by Buyer or any Affiliate of Buyer.
2.3 Specifications and Packaging. Supplier shall manufacture Product in
accordance with Buyer's recipes, formulas, and Product specifications as set
forth in the current Bills of Materials, Operating Standards and other documents
listed on Schedule 2.3, as such requirements may be modified by Buyer upon
reasonable prior notice from time to time during the Term in accordance with
Section 4. Product shall be packaged in the manner prescribed by the
Distributors and Buyer. Notwithstanding anything to the contrary contained
herein, Supplier shall be entitled to alter any Operating Standards if such an
alteration is required to comply with good manufacturing practices as set forth
in the regulations promulgated by the U.S. Food and Drug Administration (Current
Good Manufacturing Practices in Manufacturing, Packing, or Holding Human Food,
21 C.F.R 110 (1997)), as such regulations may be amended from time to time,
including, without limitation, alterations to prevent microbial contamination.
Supplier shall provide Buyer prompt notice of any alteration, which shall be
prior notice to the extent practicable.
2.4 Supplier's Purchasing Duties; Vendors.
(a) Supplier shall use its reasonable best efforts to assist
Buyer in obtaining the most favorable available prices for raw materials and
packaging, including without limitation, flour and butter.
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Buyer shall have the right to approve all Vendors. To the extent that raw
materials and packaging are purchased by Supplier from Vendors approved by
Buyer, the cost of such raw materials and packaging shall not constitute a
failure to satisfy Supplier's obligations under this Section 2.4 Anything to the
contrary herein notwithstanding, Supplier shall not change any Vendors without
the prior consent of Buyer, which consent shall not be unreasonably withheld.
Grounds for Supplier to propose terminating a Vendor shall include, but not be
limited to, the failure of such Vendor to supply sufficient quantities of any
item purchased by Supplier from the Vendor on a timely basis and/or according to
required specifications. Supplier shall not enter into any formal or informal
arrangement or understanding with any Vendor (regardless of whether such Vendor
is an Affiliate of Supplier) by which Supplier receives, directly or indirectly,
any rebate, discount or other consideration, unless such arrangement or
understanding is fully disclosed to Buyer and the value of such rebate, discount
or other consideration is applied to reduce Product Direct Costs pursuant to
this Agreement. The foregoing notwithstanding, Supplier shall be permitted to
retain (but with prior disclosure to Buyer): (1) standard discounts offered by
Vendors generally to their customers for early payment of up to two percent
(2%); and (2) rebates offered to Supplier by Vendors for the year-over-year
growth in volume of purchases by Supplier (on a company-wide basis, i.e., for
all of Supplier's customers, including Buyer), such rebates not to exceed two
percent (2%) of such aggregated dollar growth.
(b) Without limiting the generality of the foregoing, the cost for
flour and/or butter shall be determined either: (1) as selected by Buyer from
time to time after consultation with and advice from Supplier from available
contracts for flour and butter for such period of time; or (2) using the
methodology selected by Buyer for purchasing flour and/or butter for a period of
time determined by Buyer (for example, but without limitation, through purchases
on the spot markets).
2.5 Payment. Supplier shall invoice each Distributor for Product on
payment terms that Supplier establishes for each Distributor which are stated on
each invoice and communicated in advance to Distributor and which do not affect
the determination and adjustment of the Invoice Price (as defined below).
Supplier shall notify and consult with Buyer immediately if, at any time, it
gives consideration to or contemplates changing the payment terms for any
Distributor, and Supplier shall further provide Buyer with a copy of any
communication or correspondence to any Distributor which could lead to a change
in payment terms consistent with Supplier's credit policies and procedures.
Supplier shall provide Buyer with a copy of each invoice (or an invoice register
in such form as Buyer may approve in advance) at the time it provides such
invoice to a Distributor. Title to Product and risk of loss shall pass to a
Distributor or Independent Operator (as defined in Section 7.3), as the case may
be, when Product is physically received by such Distributor or Independent
Operator.
2.6 Inventory Management.
(a) Supplier shall work with each Distributor to assure that
adequate levels of inventory are maintained at each Distributor's warehouses as
specified by Distributor and/or Buyer from time to time during the Term. In
connection with the foregoing, Supplier shall take all action that may be
necessary to avoid foreseen inventory shortages (for example, shipping
additional Product by air express freight when Supplier ships fewer Cases of
Product than were ordered by a Distributor). Any additional cost or expense in
connection with such required actions shall be borne by the party substantially
responsible for such foreseen shortage. Regardless of whether the party
substantially responsible for such foreseen shortage has been finally
determined, Supplier shall not delay, postpone or fail to take any such required
action pending a determination of responsibility.
(b) Buyer shall require each Distributor to meet at least the
following standards with respect to lead times, order minimums and change
orders. Each order from a Distributor, (which shall consist of one or more full
truckloads, except in the case of shipments to distribution centers where LTL
shipments are permitted by this Agreement) shall be manufactured, shipped and
received at the applicable
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distribution center within fourteen (14) days from the date that such order was
received by Supplier. In addition, Supplier shall not be required to process
change orders: (1) otherwise required hereunder if the practical effect of such
change orders would result in the circumvention of the normal lead time
standards established hereunder and Supplier promptly notifies Buyer of the
circumstances surrounding such change orders; or (2) received from a Distributor
upon less than seven (7) days notice; provided, however, that Supplier shall use
its commercially reasonable best efforts, consistent with its production
schedules and plant capacities, to accommodate change orders received with less
than seven (7) days notice. Supplier shall also meet the standards of each
Distributor as set forth on Schedule 2.6, or as otherwise reasonably agreed-to
between Distributor and Supplier, relating to: (1) Product shelf-life; (2)
outside packaging and labeling; (3) hold harmless agreements; and (4) insurance,
additional insureds and the provision of certificates of insurance.
3. Pricing and Periodic Updates, Reconciliation and Adjustments.
3.1 Invoice Price Per Case.
(a) Supplier will charge each Distributor an Invoice Price per Case
of Product as follows. The Invoice Price for Product shipped pursuant to this
Agreement shall be invoiced by Product Code, and shall be expressed in dollars
per Case. The "Invoice Price" for each Case of Product shipped to each
Distributor shall equal, for each Product Code, the sum of the FOB Plant Billing
Price Per Case plus the Billing Freight Allowance. As used herein, the "FOB
Plant Billing Price Per Case" for each Product Code, shall mean such amount as
may be fixed by Buyer from time to time during the Term. Buyer may adjust the
FOB Plant Billing Price Per Case from time to time in its discretion upon not
less than thirty (30) days prior notice to Supplier. Supplier shall include the
Billing Freight Allowance invoiced to each Distributor as a separate line item
on each Invoice.
(b) The Invoice Price, the cost updates for each Reporting Period,
the cost reconciliation's for each Quarter and the annual cost adjustments shall
be determined in the manner as set forth in this Section 3 consistent with the
Weekly Reconciliation Report and the Quarterly Reconciliation Report outline
accompanying each of the Weekly Reconciliation Report and Quarterly
Reconciliation Report spreadsheets referred to in Section 3.2; provided,
however, that in the event of any inconsistency between such calculation and
computation outlines and spreadsheets and any Section of this Agreement, the
text in such Section shall at all times control. All requests for credit from
Buyer's System for failure to meet Product specifications shall be processed
directly through Supplier. Buyer and Supplier shall mutually agree upon
reasonable administrative procedures for processing of any credit requests.
3.2 Periodic Updates, Reconciliation and Adjustments.
(a) The final cost of Product delivered to each Distributor for
distribution to Buyer's System shall be determined by reference to the Product
Cost Formula, as defined in Section 3.2.1, using data obtained from updates
which shall be posted regularly to the Xxxx of Materials costing system (using
Buyer's FMS (Food Management System) computer software, or any substitute or
replacement software program designated from time to time by Buyer). Buyer shall
provide Supplier with its FMS computer software or such other software that
Buyer requires Supplier to utilize, and shall also provide training in its use
to the appropriate employees of Supplier at no cost to Supplier. Such updates
and final cost of Product shall be determined at the times and in the manner
described below:
(1) Weekly. At the end of each Reporting Period, material
costs for ingredients and packaging and, if applicable, fuel surcharges for
trucking expenses between Approved Plants, shall be updated and computed in the
Product Cost Formula to determine the net difference for the week then-ended
between
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the Invoice Prices and the Product Costs determined by the Product Cost Formula,
all as specified in greater detail in Section 3.2.2.
(2) Quarterly. At the end of each Quarter, the Product Cost
Formula and the methodology described in Schedule "A" for computing Allocated
Fixed Overhead and Allocated Inventory Carrying Costs shall be used to process
updates for and reconcile the difference in the Product Cost Formula, for the
Quarter then-ended, between: (i) stipulated and allocated costs for certain
elements of Allocated Variable Overhead; (ii) stipulated and Allocated Inventory
Carrying Costs, (iii) the Billing Freight Allowance and the Allocated Freight
Allowance; and (iv) stipulated and allocated costs for the fixed depreciation
component of Allocated Fixed Overhead;, all as specified in greater detail in
Section 3.2.3.
(3) Annually. At the end of each contract year, the Product
Cost Formula shall be used to process updates for and reconcile the difference
in the Product Cost Formula, for the year then-ended, between certain elements
of the Allocated Variable Overhead. In addition, annual adjustments for certain
elements of the Allocated Variable Overhead, Direct Labor Costs, the Allocated
G&A and tax and license fee components of the Allocated Fixed Overhead shall be
posted to the cost components of the Xxxx of Materials costing system for the
next succeeding contract year. Each annual update and reconciliation shall be
made as specified in greater detail in Section 3.2.4 and Section 3.2.5.
(b) Each cost update and reconciliation coming due following each
Reporting Period in accordance with this Section 3.2 shall be reported by
Supplier in a summary report (the "Weekly Reconciliation Report") substantially
in the form attached hereto as Exhibit 3.2A delivered to Buyer within ten (10)
business days after the end of each such Reporting Period; except in the case of
a Reporting Period ending at the end of each Quarter, in which case the Weekly
Reconciliation Report for such Reporting Period, together with a separate
quarterly summary report (the "Quarterly Reconciliation Report") substantially
in the form attached hereto as Exhibit 3.2B, shall be delivered to Buyer within
twenty (20) business days after the end of each such Reporting Period. Supplier
shall also provide to Buyer each Reporting Period, for each Product Code, the
Xxxx of Materials and such other supporting documentation as may reasonably be
requested by Buyer to audit and verify the computation of the net adjustment due
to or from Supplier.
3.2.1 Definitions. The "Product Cost Formula" shall mean, for each
Product Code, the formula for determining the delivered cost for each unit of
Product in connection with each weekly, quarterly and annual reconciliation
specified in Section 3.2.2, Section 3.2.3 and Section 3.2.4, expressed when
computed as the Product Cost per unit. The "Product Cost" per unit shall equal
the sum of:
(1) the Product Direct Costs; plus
(2) the Allocated Variable Overhead for such
Product Code as set forth on Schedule
"B"; plus
(3) the Allocated Inventory Carrying Costs
for such Product Code; plus
(4) the Allocated Profit for such Product
Code as set forth on Schedule "C"; plus.
(5) the result obtained by dividing the
Billing Freight Allowance by the number
of standard units of Product in a Case.
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3.2.2 Weekly Updates to Product Cost Formula and Reconciliation.
(a) Material costs of Product ingredients and packaging shall be
updated weekly. At the end of each Reporting Period, the Product Cost Formula
for each Product Code shall be updated with the most recent actual delivered
material costs (or weighted average costs, if available) for Product ingredients
and packaging incurred by Supplier for the week then ended and the Product Cost
Formula shall be recomputed. In addition, in the event that Supplier's trucking
expenses between Approved Plants become subject to fuel surcharges, the actual
amount of such surcharges paid by Supplier shall constitute an adjustment to the
trucking expense element of Allocated Variable Overhead for the Reporting Period
in which such surcharges were paid.
(b) The net aggregate difference, for each Product Code, between
the Invoice Price per Case minus the sum of: (i) the Product Cost per Case,
multiplied by the number of Cases shipped during such week; plus (ii) the
Allocated Fixed Overhead, shall be paid (if a positive number) or invoiced (if a
negative number) to Buyer by Supplier within ten (10) business days after the
end of each Reporting Period. Any invoice to Buyer shall be paid within ten (10)
business days after receiving such invoice.
3.2.3 Quarterly Updates to Product Cost Formula, Allocated Variable
Overhead, and Allocated Fixed Overhead, and Reconciliation.
(a) The following components of the Product Cost Formula and
Allocated Fixed Overhead shall be updated and reconciled at the end of each
Quarter for the Product Cost Formula during the next succeeding Quarter as set
forth in this Section 3.2.3: (i) certain elements of Allocated Variable Overhead
in Section 3.2.3(b), (ii) Allocated Inventory Carrying Costs reconciled in
Section 3.2.3(c), (iii) Billing Freight Allowance in Section 3.2.3(d), and (iv)
the fixed depreciation component of Allocated Fixed Overhead in Section
3.2.3(e),. The net total amount computed and reported on the Quarterly
Reconciliation Report as set forth in this Section 3.2.3 shall be paid (if a
positive number) or invoiced (if a negative number) to Buyer by Supplier within
twenty (20) business days after the end of the Reporting Period coinciding with
end of such Quarter.
(b) Certain elements of Allocated Variable Overhead shall be
reconciled at the end of each Quarter as follows. The total, for all Product
Codes, of the net positive or negative difference (expressed in dollars per
unit) between the sum of: (i) Stipulated Variable Electricity Costs, plus (ii)
Stipulated Nitrogen and Carbon Dioxide Costs for the Quarter then-ended minus
the sum of: (x) Allocated Variable Electricity Costs for such Quarter, plus (y)
Allocated Nitrogen and Carbon Dioxide Costs, such difference multiplied by the
total number of units shipped during such Quarter, shall be computed and
reported on the Quarterly Reconciliation Report. The Allocated Variable
Electricity Costs and the Allocated Nitrogen and Carbon Dioxide Costs shall then
be updated in Allocated Variable Overhead as the Stipulated Variable Electricity
Costs and the Stipulated Nitrogen and Carbon Dioxide Costs, respectively, in the
immediately succeeding Quarter, with such adjustments as may mutually be
agreed-to between Buyer and Supplier based on anticipated changes in such cost
elements for the upcoming Quarter.
(c) The total, for all Product Codes, of the net positive or
negative difference (expressed in dollars per unit) between Stipulated Inventory
Carrying Costs at the beginning of the Quarter minus Allocated Inventory
Carrying Costs at the end of the Quarter, such difference multiplied by the
total number of units shipped during such Quarter, shall be computed and
reported on the Quarterly Reconciliation Report.
(d) The total, for all Product Codes, of the net positive or
negative difference for all Distributors (expressed in dollars per unit) between
the Billing Freight Allowance for each such Distributor minus the Allocated
Freight Costs, multiplied by the total number of units shipped to each such
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Distributor during such Quarter, shall be computed and reported on the Quarterly
Reconciliation Report. The Allocated Freight Costs for the Quarter then-ended
shall then be updated in the Product Cost Formula as the new Billing Freight
Allowance for the immediately next succeeding Quarter. The Allocated Freight
Costs for the Quarter then-ended shall be updated in the Product Cost Formula as
the new Billing Freight Allowance for the immediately next succeeding Quarter.
(e) At the end of each Quarter, any depreciation for new capital
equipment deemed placed "in-service" during such Quarter as provided in Schedule
"A" but not included in the Allocated Fixed Overhead established at the
beginning of such Quarter shall be computed and reported on the Quarterly
Reconciliation Report. The fixed depreciation component of Allocated Fixed
Overhead shall then be updated for the immediately next succeeding Quarter to
include all such new capital equipment.
3.2.4 Annual Updates to Product Cost Formula and Reconciliation.
(a) The allowance for Employee Benefits at the end of such year
shall be updated in the Product Cost Formula as the new allowance for Employee
Benefits in the Product Direct Costs component of the Product Cost Formula for
the immediately next succeeding contract year.
(b) The Direct Labor Costs component of the Product Cost Formula
shall be updated not more than once per contract year on a date to be determined
by Supplier. At the end of the Reporting Period coinciding with such date, the
then-current Direct Labor Costs shall be updated in the Product Cost Formula as
the new Direct Labor Costs in Product Direct Costs.
(c) In addition to the foregoing annual reconciliation and
updates to the Product Cost Formula, the following elements of the Allocated
Variable Overhead shall be updated (but not reconciled) annually, at the end of
the Reporting Period in which the anniversary date of this Agreement occurs, in
the Product Cost Formula for the next succeeding contract year in the manner set
forth in Schedule "B": (i) storage costs, and (ii) water and sewer costs.
3.2.5 Annual Updates to Allocated Fixed Overhead and Allocated
Inventory Carrying Costs, and Reconciliation.
(a) Annually, at the end of the Reporting Period in which the
anniversary date of this Agreement occurs, the positive or negative difference
between the sum of: (i) the taxes and license fees included in Allocated Fixed
Overhead for the contract year then-ended, plus (ii) insurance stipulated for
such year minus the sum of (x) the actual taxes and license fees paid or
incurred by Supplier for such contract year, plus (y) Supplier's actual
insurance expense for such year, shall be computed and reported on the Quarterly
Reconciliation Report for the last Quarter of each contract year. The net total
amount computed and reported on the Quarterly Reconciliation Report as set forth
in this Section 3.2.5, and in Sections 3.2.3 and 3.2.4, shall be paid (if a
positive number) or invoiced (if a negative number) to Buyer by Supplier within
twenty (20) business days after the end of the Reporting Period coinciding with
end of such year. The taxes and license fees included in Allocated Fixed
Overhead shall then be updated in Allocated Fixed Overhead for the upcoming year
of the Term as mutually agreed-upon between Buyer and Supplier, based on changes
or anticipated changes in tax law or applicable production assets utilized or to
be utilized by Supplier in manufacturing Product for the upcoming year.
(b) Annually, at the end of the Reporting Period in which the
anniversary date of this Agreement occurs, the then-current Allocated G&A for
such contract year shall be updated as the new Allocated G&A for the immediately
next succeeding contract year to an amount mutually agreed-upon by Supplier and
Buyer, such amount to be determined taking into account the specific general and
administrative activities required for Supplier to properly administer
Supplier's responsibilities contemplated by this
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Agreement in light of the volume of production reasonably anticipated for the
upcoming year. Unless otherwise agreed by the parties, the updated amount for
Allocated G&A shall not exceed one hundred ten percent (110%) of the
then-current Allocated G&A for the contract year then-ending.
(c) In addition to the foregoing, the following elements of
Allocated Fixed Overhead shall be updated (but not reconciled) annually, at the
end of the Reporting Period in which the anniversary date of this Agreement
occurs, for the next succeeding contract year in the manner set forth in
Schedule "A": (i) fixed maintenance costs, (ii) supervision costs, and (iii)
quality assurance costs.
3.2.6 Delivery and Review of Quarterly Reconciliation Report and Weekly
Reconciliation Reports. Within twenty (20) business days after the end of each
Quarter, Supplier shall provide to Buyer a proposed Quarterly Reconciliation
Report for the Quarter, together with the Weekly Reconciliation Report for the
Reporting Period coinciding with the end of such Quarter. Buyer shall have ten
(10) business days to review the proposed Quarterly Reconciliation Report for
each Quarter and the Weekly Reconciliation Report for the Reporting Period
coinciding with the end of such Quarter after its receipt of such reports. Buyer
and Supplier shall convene an in-person meeting or conference call (each, a
"Status Conference") at a mutually convenient time and location to review the
Quarterly Reconciliation Report and all of the Weekly Reconciliation Reports for
the Quarter then-ended, and discuss the status of manufacturing operations,
ongoing or proposed projects and other matters of interest to either party. If
Buyer is unable to reconcile or disputes any item included in any of the
Quarterly Reconciliation Reports or Weekly Reconciliation Reports, or the
computation of any amounts due to or from Supplier (regardless of whether any
such amounts have been received or paid), it shall notify Supplier within such
ten (10) business day period of any such items it is unable to reconcile or
which it disputes. The foregoing notwithstanding, the failure by Buyer to
dispute or question any item within such ten (10) business day period shall not
constitute a waiver by Buyer or Supplier of the right to subsequently dispute or
question such item; provided, however, that any such dispute or question by
Buyer or Supplier shall be asserted not later than the conclusion of the Status
Conference for the Quarter immediately following the Quarter pertaining to such
dispute or question, or shall be thereafter (absent fraud, misrepresentation,
inaccuracy or omission in such reporting by Supplier) be deemed irrevocably
waived. Supplier and Buyer shall attempt diligently in good faith to reconcile
any differences and to resolve by mutual agreement any items in dispute within
twenty (20) business days (the "Resolution Period") following such notification
by Buyer. If any of the items in dispute are not resolved within the Resolution
Period, either party thereafter shall have the right to submit the disputed
items for resolution to an arbitrator mutually agreed upon by the parties (the
"Arbitrator") in accordance with Section 22, whose decision shall be final and
binding on the parties, and when made, shall be deemed to be an agreement
between Supplier and Buyer on the issues so determined. The expense of the
Arbitrator shall be borne equally by Buyer and Supplier. Any net final
adjustment due to or from Supplier for any Quarter resulting from the review of
the proposed Quarterly Reconciliation Report for the Quarter or the Weekly
Reconciliation Report for the Reporting Period coinciding with the end of such
Quarter shall be paid by or to Buyer within the later of: twenty (20) business
days after the ten (10) business day review provided for above, or its final
determination if a dispute or question is raised within such ten (10) business
day review; provided , however, that any amounts not in dispute shall be paid by
the earlier of such dates.
4. Production Modifications; New Product Development.
4.1 Prior Approval of All Changes. Subject to Section 2.3, Supplier
shall not change any specifications, recipes, formulas, or processes related to
Product without Buyer's prior written approval. Buyer shall have the right to
audit and approve in advance all changes to standard costs reflected in the
Bills of Materials, including but not limited to, changes in formulae,
processes, ingredients, xxxxxxx per line, line speeds and yields, structural
waste, and units per Case (including any change to a Xxxx of Materials whereby
an operating variance is reclassified into ongoing direct cost).
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4.2 New Product Development
4.2.1 Initiation of a Product Development Project. From time to time
during the Term, Buyer shall have the right to develop and introduce additional
Product items or make modifications to existing Product recipes, formulas,
specifications and preparation procedures which, in either case, require
expenditures by Supplier in order to manufacture such additional Product or to
implement such modifications. Such expenditures may include amounts which are
classified in accordance with generally accepted accounting principles as
capital expenditures and/or non-capital expenditures. Amounts classified as
capital expenditures shall be governed by Section 4.2.3(c) and Section 4.4.
Amounts classified as non-capital expenditures shall be governed by Section 4.3.
Each such project shall be referred to herein as a "Product Development Project"
(and shall not be governed by the provisions of Section 4.5 relating to
Structural Savings Projects). Any additional or modified Product developed
pursuant to a Product Development Project may either be developed in addition to
or may replace one or more then-existing Product Codes. Prior to implementing
any Product Development Project, Buyer and Supplier shall develop a mutually
agreeable budget and timetable for the project and, if applicable, shall provide
for the sharing of rights to any Proprietary Information jointly developed in
the course of such project upon such terms as are mutually-agreed upon in a
written agreement entered into pursuant to Section 14.3.
4.2.2 Supplier Support of Buyer R&D. Supplier shall provide
commercially reasonable manufacturing support for Buyer's product research and
development activities, and shall work diligently with Buyer to develop a budget
for and to implement each Product Development Project. Supplier and Buyer shall
mutually agree on the time that Supplier may begin to invoice Distributors for
the production of any additional or modified Product items and to include any
such additional or modified Product in the cost update, reconciliation and
adjustment process of Section 3 using the Product Cost Formula. In connection
therewith, Supplier's manufacturing support for Buyer's research and development
shall continue at least from the production of Product bench samples through
initial manufacturing (but not including market test production runs) before the
commencement of any such invoicing and cost update, reconciliation and
adjustment procedures.
4.2.3 New Product Cost Formula. The Product Cost for Product
manufactured pursuant to a Product Development Project shall be determined in
the same manner set forth in Section 3.2.1, and consistent with the following
principles:
(a) Product Direct Costs. Supplier and Buyer shall mutually agree
on a operational variance percentage for the per unit standard costs for
delivered ingredients and Direct Labor Costs, which shall be developed using the
same methodology used for determining such operational variance for existing
Products, and which shall not exceed in each case the highest percentage
variance for Product manufactured by Supplier in the same product category if a
comparable Product category then exists.
(b) Allocated Fixed Overhead and Allocated Variable Overhead.
Supplier and Buyer shall mutually agree on the fixed and variable overhead
allocations, which shall be developed using the same methodology used for
determining such Allocated Fixed Overhead and Allocated Variable Overhead for
existing Products, and which if a comparable Product category then exists, shall
be based on the average fixed and variable overhead allocations for Product
manufactured by Supplier in such Product category.
(c) Allocated Profit. Allocated Profit for Product manufactured
pursuant to a Product Development Project shall mean the product obtained by
multiplying the Product Direct Costs for such Product determined pursuant to
this Section 4.2.3 (excluding Allocated Profit) by eleven and one-quarter
percent (11.25%).
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4.2.4 Alternative Sources. If Buyer does not reach agreement with
Supplier on those matters required by this Section 4 to be mutually agreed upon
in connection with a Product Development Project after good faith attempts by
Buyer to reach such agreements, Buyer shall be permitted to implement such
Product Development Project with third parties.
4.3 Non-Capital Expenditures for Product Development Projects. Supplier
shall be responsible for scaling up, and implementing any manufacturing and
supply changes required in connection with any Product Development Project. The
actual direct, incremental expenses incurred as a result of any Product
Development Project, consisting of material, packaging, direct hourly labor
shall be allocated as follows:
(a) If the total amount of such expenses for a single project do
not exceed Fifteen Thousand Dollars ($15,000), Supplier shall pay the total
amount of such expenses; provided , however, that Supplier shall not be
obligated to incur more than Fifty Thousand Dollars ($50,000) of such expenses,
in the aggregate, during any one (1) year of the Term.
(b) If the total amount of such expenses exceed Fifteen Thousand
Dollars ($15,000) per project or if the annual Fifty Thousand Dollar ($50,000)
limit in Section 4.3(a) has been exceeded, Buyer shall pay the total amount of
such excess.
4.4 Capital Expenses. Supplier shall be responsible for all capital
expenses incurred or required to be incurred in connection with its supply
responsibilities and duties under this Agreement, including, without limitation,
capital expenses for capacity expansion to fulfill the Product requirements of
Buyer's System as provided in this Agreement. Any capital expenses incurred in
connection with an agreed-to Product Development Project shall be governed by
the provisions of Section 4.2.3(c); provided, however, that in the event that
the implementation of a Product Development Project requires the purchase of
capital equipment which would be used solely and exclusively for the manufacture
of Product for Buyer's System, Buyer and Supplier shall discuss the possibility
of some form of contribution by Buyer toward such capital expense and/or an
increase in the Allocated Profit specified in Section 4.2.3(c), in each case,
upon such terms and conditions as shall be mutually agreed to between Buyer and
Supplier. Any capital expenses incurred in connection with an agreed-to
Structural Savings Project shall be governed by the provisions of Section
4.5(a).
4.5 Structural Savings Projects.
(a) From time to time during the Term, Supplier and Buyer may
provide each other with recommendations for improving the efficiency of the
manufacturing and supply processes and for reducing costs (each, a "Structural
Savings Project"). Any provision hereof to the contrary notwithstanding: (i) any
project designated as a Structural Savings Project shall not be treated as a
Product Development Project governed by Section 4.2 and Section 4.3; and (ii)
any program implemented for the purpose of managing any ingredients or packaging
costs (including, but not limited to, flour and butter costs) shall not be
governed by this Section 4.5. Buyer and Supplier shall mutually determine which,
if any, proposed Structural Savings Project are to be implemented on a
project-by-project basis, and shall work together to implement such mutually
agreed-upon Structural Savings Project and, if applicable, shall provide for the
sharing of rights to any Proprietary Information jointly developed in the course
of such project upon such terms as are mutually-agreed upon in a written
agreement entered into pursuant to Section 14.3. Each Structural Savings Project
may involve expenditures which are classified in accordance with generally
accepted accounting principles as capital expenditures and/or non-capital
expenditures. All such expenditures (whether capital or non-capital) shall be
allocated as mutually agreed-upon by the parties, consistent with the following
principles: Reductions in costs resulting from changes in Operating Standards
shall be initially (and temporarily) shared between Buyer and Supplier by their
mutual agreement to phase-in appropriate reductions to Product Direct Costs in
the applicable Bills of Materials resulting from the Structural Savings Project.
Buyer and Supplier shall mutually determine the amount of cost savings to be
included in Product Direct Costs and the time
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during which such cost savings shall be realized, commencing upon a mutually
agreed-upon implementation date of the project. After such agreed-upon phase-in
period, the reduction in Product Direct Costs shall be permanent.
(b) The foregoing and any other provision of this Agreement to the
contrary notwithstanding, if Supplier undertakes any project affecting standard
equipment running rates, efficiency and/or xxxxxxx requirements or any other
element upon which the Bills of Materials for any Product Code is based
(including, by way of illustration and without limitation, modification of
machine speeds or the engineering capability of any equipment) which is not
otherwise a part of any Structural Savings Project mutually agreed-to by Buyer
pursuant to this Section 4.5, the cost structure for the appropriate Bills of
Materials for the Product Direct Costs shall be modified effective as of the
date that such project is implemented to reflect any improvement in the
Operating Standards resulting from the implementation of such Structural Savings
Project, without any allocation of expense to Buyer (including, without
limitation, scaling-up expenses for labor, scrap, waste or otherwise associated
with the implementation of such project). Nothing contained in this Section 4.5
shall release Supplier from its obligation under this Agreement to notify and
obtain the prior consent of Buyer before undertaking any Structural Savings
Project.
4.6 Discontinued Product. Any provision of this Section 4 to the
contrary notwithstanding, if Buyer discontinues any Product Code, Buyer shall
purchase, or cause to be purchased, Supplier's entire inventory of such
discontinued manufactured Product and any ingredients and packaging made
obsolete by the discontinuation of such a Product Code, all at Supplier's actual
cost; provided, however, that Buyer shall not be obligated to purchase such
obsolete inventories or ingredients or packaging in excess of twenty-five
percent (25%) of the volume of such ingredients or packaging which has been
consumed or used by Supplier in manufacturing such discontinued Product Code
during the twelve (12) months immediately preceding its discontinuance. The
foregoing notwithstanding, if Supplier has purchased or committed to purchase
(at the direction of or with the mutual agreement of Buyer) packaging in
quantities greater than the foregoing twenty-five percent (25%) annual limit,
Buyer shall purchase all such good and useable packaging which is unique to
Buyer's Product and not otherwise useable by Supplier.
5. Duty to Supply.
5.1 Reliability. Supplier recognizes the importance of a reliable
source of supply of Product to Buyer's System. Subject to the terms of this
Agreement, Supplier shall manufacture and supply one hundred percent (100%) of
the Product requirements of Buyer's System by maintaining adequate inventory
levels of Product with each Distributor. Buyer shall provide Supplier with at
least three (3) months advance notice of any special promotions or other events
that would reasonably be expected to materially affect the demand for and the
need for additional Product.
5.2 Failure to Supply. In the event that:
(a) Supplier fails to supply the members of Buyer's System with
their respective Product requirements and such failure is not attributable to an
act or failure to act by Buyer, a Distributor or a member of Buyer's System,
then Buyer shall have the right to purchase Product from sources other than
Supplier to the extent Supplier, in Buyer's reasonable judgment, is unable to
supply the required quantities of such Product, provided that Buyer gives
Supplier prior or contemporaneous notice thereof; and
(b) Supplier fails to supply Product (other than additional or
modified Product as contemplated by Section 4 in its first ninety (90) days of
supply by Supplier) and such failure results in a Stock-out Shortage, then
Supplier shall pay to Buyer an amount equal to the then-current full retail
price of each Case of such undelivered Product less the Invoice Price of each
Case of such undelivered Product (the
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"Shortage Fee"); provided, however, that no Shortage Fee shall be payable to
Buyer if: (i) the Stock-out Shortage is due to a failure by a Distributor to
order timely such Product in sufficient quantities or to take timely delivery of
such Product or provide Supplier with accurate information regarding inventory
management; or (ii) the Stock-out Shortage is due to a failure to provide notice
to Supplier required by Section 2.3 or Section 5.1; or (iii) the cumulative
amount of Stock-out Shortages in any Quarter is less than one-half of one
percent (0.5%) (or such greater percentage applicable to Stock-Out Shortages in
any distribution contract between Buyer and any Approved Distributor) of the
total number of Cases of all Product Codes shipped by such Distributor to
Buyer's System in such Quarter. The Shortage Fee payable hereunder shall
constitute liquidated damages and Supplier shall not be liable to Buyer, the
Distributors or members of Buyer's System for any other damages, so long as the
events described in this Section 5.2 do not otherwise constitute a Supplier
Default pursuant to Section 16.1.
6. Place of Manufacture. Supplier shall manufacture all Product only at Approved
Plants and supply all Product from Approved Plants, provided , however, that
Supplier may manufacture Product at facilities other than an Approved Plant and
supply Product from facilities other than an Approved Plant if: (i) Supplier
obtains Buyer's prior written approval; and (ii) Buyer is provided the same
access to such other facilities and such other facilities' employees and books
and records as Buyer has with respect to any Approved Plant. Buyer's approval or
disapproval shall be based upon the impact the new facility is expected to have
upon Product, including, among other things, its quality and consistency, and
the Invoice Price and adjustments thereto (including freight), and the
distribution requirements of Buyer's System.
7. Distributors.
7.1 Supplier's Rights. Each Distributor and Independent Operator (as
defined in Section 7.3) shall be, at all times, creditworthy and reasonably
satisfactory to Supplier. Supplier shall immediately communicate with Buyer
regarding any issues or problems (regardless of whether concerning ordering,
shipping, payment or otherwise) that Supplier may experience from time to time
with any Distributor or Independent Operator, and shall provide Buyer with
copies of all written communications sent to or received from a Distributor or
Independent Operator concerning any such issues or problems simultaneously upon
such delivery or receipt. Supplier shall be entitled to suspend supply of
Product to any Distributor or Independent Operator upon as much prior written
notice (specifying the reasons for such proposed suspension) as is reasonably
practical to Buyer if Supplier, in its sole discretion, determines such
Distributor or Independent Operator is not creditworthy or has failed to perform
in a commercially reasonable manner. Whenever possible, Supplier shall first
give a defaulting Distributor or Independent Operator a reasonable opportunity
to avoid suspension by curing its default and providing Supplier with reasonable
adequate assurance of future performance. The foregoing notwithstanding, if
Supplier has not previously communicated to Buyer (either verbally or in
writing) the existence of any issues or problems with a Distributor or
Independent Operator, Supplier shall provide not less than thirty (30) days
prior notice to Buyer before suspending supply of Product, unless Supplier in
good faith determines that there exists extraordinary circumstances justifying
such suspension (which extraordinary circumstances shall be specifically
identified in writing to Buyer in Supplier's notice of such suspension). If the
sole reason for such suspension is the creditworthiness of a Distributor or
Independent Operator, Buyer may avoid the suspension by providing to Supplier a
guarantee of the performance of such Distributor or Independent Operator in
substantially the form provided in Exhibit 7.1. Subject to Section 7.2, Buyer
shall have the right to replace a suspended Distributor with an alternate
Distributor. In case of suspension or pending suspension of supply of Product to
a Distributor or an Independent Operator, Supplier shall cooperate with Buyer
and Buyer's System to avoid any disruption of supply to Buyer's System.
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7.2 Appointment. If Buyer desires to appoint a new or alternate
Distributor, Buyer shall submit the name and business address of such proposed
Distributor to Supplier along with such other information as Supplier may
reasonably request. Supplier shall thereafter have thirty (30) calendar days in
which to approve or disapprove the appointment of such Person as a Distributor.
If Supplier disapproves the appointment, Supplier shall provide Buyer with
notice of the reason or reasons for such disapproval within such thirty (30) day
period, and if the sole reason for disapproval is the creditworthiness of such
Distributor then Buyer may, at Buyer's sole discretion, obtain immediate
approval of such Distributor by providing to Supplier a guarantee of the
performance of such Distributor in substantially the form provided in Exhibit
7.1. If Supplier fails to provide Buyer with notice of disapproval within such
thirty (30) day period, then Supplier shall be deemed to have approved the
appointment of such Person as a Distributor.
7.3 Direct Distribution. Certain members of Buyer's System
("Independent Operators") may, with Buyer's approval, purchase Product through
Buyer without using a Distributor. Supplier shall supply Product to such
Independent Operators designated by Buyer on terms and conditions to be
negotiated and agreed upon between such Independent Operators and Buyer, and on
payment terms to be determined in accordance with Supplier's credit policy.
8. Quality Assurance.
8.1 Inspection. Upon demand, Buyer shall have the right, without prior
notice and during operating hours, to inspect any Approved Plant (and all other
facilities where Product is manufactured) and to observe the Product
manufacturing process. Buyer shall also have the right, upon reasonable notice,
to escort its franchisees (and such other Persons as are approved by Supplier)
through any Approved Plant during operating hours to observe the Product
manufacturing process.
8.2 Quality Assurance Program. Buyer shall establish with Supplier a
mutually acceptable quality assurance program, which program shall, among other
things, provide Buyer's management with reasonable and meaningful access to
Supplier and its employees in charge of Product. Buyer shall have the right, at
its sole option and expense, to station a part-time or full-time quality
assurance representative at any Approved Plant who shall have the authority to
accept or reject Product prior to its shipment. Product may only be rejected if
it fails to comply with the Product specifications provided to Supplier. Any
quality assurance representative shall, at all times, be reasonably acceptable
to Supplier. Neither the presence of a quality assurance representative at any
Approved Plant on behalf of Buyer, nor the failure of such representative to
reject Product prior to shipment, shall in any way modify Buyer's rights under
this Agreement or under applicable law or Supplier's obligations to manufacture
and ship Product according to Product specifications pursuant to Section 2.3.
9. Representations and Warranties of Supplier. Supplier represents and warrants
to Buyer that:
9.1 Organization and Good Standing. Supplier has been duly organized
and is existing as a corporation in good standing under the laws of the State of
Indiana, and is qualified and in good standing as a foreign corporation in the
States of Kentucky and Michigan, with full corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
9.2 Supplier Organization. Supplier has provided to Buyer a copy of the
Dun & Bradstreet report on its business, and other financial information of
Supplier requested by Buyer, certified by the Treasurer of Supplier to be
materially true and correct with respect to financial information contained
therein, a copy of which is attached hereto as Exhibit 9.2.
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9.3 Execution and Delivery. All consents, approvals, authorizations and
orders necessary for the execution, delivery and performance by Supplier of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Supplier, has been
duly executed and delivered by Supplier, and constitutes the legal, valid and
binding obligation of Supplier enforceable against Supplier in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
9.4 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the corporate or other charter or bylaws of Supplier or (ii)
conflict with, or result (immediately or upon the giving of notice or the
passage of time or both) in a breach or any violation of or any default under,
or give rise to a right of modification, termination, cancellation or
acceleration of any obligation or to a loss of a benefit under, any agreement,
mortgage, indenture, lease, instrument, permit, concession, franchise, license
or other agreement, or any statute, or any order, writ, injunction or decree of
any court, governmental body or agency or instrumentality thereof, or any
arbitrator having jurisdiction over Supplier or any of its assets, to which
Supplier is a party or to which its properties or assets may be bound, other
than such conflicts, violations or defaults or possible modifications,
terminations, cancellations or accelerations which individually or in the
aggregate do not and will not have a material adverse effect on Supplier or its
ability to consummate the transactions contemplated hereby.
9.5 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Supplier, threatened
against or affecting Supplier or its respective properties, assets or
businesses, nor, to the knowledge of Supplier, does any basis therefor exist and
Supplier is not in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or of any governmental
agency or instrumentality (whether domestic or foreign) which, in each case,
would materially impact upon Supplier's obligations hereunder or Supplier's
ability to perform its obligations hereunder.
9.6 Disclosure. No representation or warranty of the Supplier in this
Agreement and no information contained in any Exhibit, Schedule or other writing
delivered by Supplier pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Supplier after due inquiry, there is no fact that Supplier has not
disclosed to Buyer in writing that materially adversely affects, nor insofar as
Supplier can now foresee, will materially adversely affect Supplier's ability to
perform fully this Agreement.
9.7 Fees, Expenses and Commissions. Supplier has taken no action and
has entered into no agreement, understanding or other arrangement that would
obligate Supplier or Buyer to pay any broker's or finder's fee or any other
similar fee or commission to any agent, broker, investment banker or other firm
or person in connection with any of the transactions contemplated by this
Agreement.
10. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Supplier that:
10.1 Organization and Good Standing. Buyer has been duly organized and
is existing as a limited liability company in good standing under the laws of
the State of Delaware, with full corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
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10.2 Buyer Organization. Buyer has provided to Supplier copies of its
most recent Forms 10-K and 10-Q filed with the Securities and Exchange
Commission.
10.3 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by Buyer of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Buyer, has been duly
executed and delivered by Buyer and constitutes the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
10.4 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the Certificate of Formation or any operating agreement of
Buyer, in each case as amended, or (ii) conflict with, or result (immediately or
upon the giving of notice or the passage of time or both) in a breach or any
violation of or any default under, or give rise to a right of modification,
termination, cancellation or acceleration of any obligation or to a loss of a
benefit under, any agreement, mortgage, indenture, lease, instrument, permit,
concession, franchise, license or other agreement, or any statute, or any order,
writ, injunction or decree of any court, governmental body or agency or
instrumentality thereof, or any arbitrator having jurisdiction over Buyer or any
of its assets, to which Buyer is a party or by which its properties or assets
may be bound, other than such conflicts, violations or defaults or possible
modifications, terminations, cancellations or accelerations which individually
or in the aggregate do not and will not have a material adverse effect on Buyer
or its ability to consummate the transactions contemplated hereby.
10.5 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Buyer, threatened
against or affecting Buyer or its properties, assets or businesses, nor, to the
knowledge of Buyer, does any basis therefor exist and Buyer is not in default
with respect to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
domestic or foreign) which, in each case, would materially impact upon Buyer's
obligations hereunder or Buyer's ability to perform its obligations hereunder.
10.6 Disclosure. No representation or warranty of the Buyer in this
Agreement and no information contained in any Schedule or other writing
delivered by Buyer pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Buyer after due inquiry, there is no fact that Buyer has not
disclosed to Supplier in writing that materially adversely affects, nor insofar
as Buyer can now foresee, will materially adversely affect Buyer's ability to
perform fully this Agreement.
10.7 Fees, Expenses and Commissions. Buyer has taken no action and has
entered into no agreement, understanding or other arrangement that would
obligate Buyer or Supplier to pay any broker's or finder's fee or other similar
fee or commission to any agent, broker, investment banker or other firm or
person in connection with any of the transactions contemplated by this
Agreement.
11. Additional Covenants of Supplier. In addition to the other obligations of
Supplier under this Agreement, Supplier covenants that during the Term
(including any extensions or renewals thereof, unless expressly provided
otherwise):
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11.1 Product. Except as provided herein, during the Term and for one
(1) year thereafter, Supplier shall not, either directly or indirectly, or
through any Affiliate of Supplier, (i) supply any Product or any substitute for
Product to any bakery-cafe included in Buyer's System or (ii) invest in, own,
manage, operate, finance, control, advise, render services to or guarantee the
obligations of any Person engaged in or planning to become engaged in the supply
any Product or any substitute for Product to any bakery-cafe included in Buyer's
System.
11.2 Operations; Compliance with Standards and Law . Subject to the
provisions of this Agreement, Supplier shall operate each Approved Plant (and
all other facilities that manufacture Product which are approved by Buyer) and
manufacture Product in accordance with good manufacturing practices and
manufacture and supply Product in accordance with the recipes, formulas,
processes, and Product specifications (including as to Vendors) established by
Buyer and in accordance with all applicable laws, rules and regulations,
statutes, ordinances, regulations, orders and bylaws.
11.3 Distributor Obligations. Subject to Section 7, Supplier shall not
terminate its obligation to supply Buyer's System nor shall Supplier withhold
delivery of Product from any non-defaulting member of Buyer's System or any
non-defaulting Distributor due to nonpayment or other default by a Distributor
or a member of Buyer's System.
11.4 Ownership of the Approved Plants. Without limiting Buyer's rights
pursuant to Section 16, during the Term, if Supplier shall sell, transfer or
license any part of any Approved Plant or enter into any agreement or
arrangement that would have the effect of transferring operational control of
any Approved Plant to a third party, Supplier shall cause such third party to
assume, for the benefit of Buyer, all obligations of Supplier hereunder.
11.5 Efficiency of Operation. Subject to Buyer's right to designate
Vendors and processes, Supplier shall use its reasonable best efforts to operate
each Approved Plant at optimal efficiency and to perform its other
responsibilities hereunder, including, without limitation, purchasing raw
materials, contracting for labor and arranging for freight in an efficient, cost
effective and professional manner.
11.6 Cooperation with Inspections. Supplier shall cooperate with Buyer
in any investigation or inspection by any governmental agency or by Buyer
relating to any Approved Plant or Product which involves health, safety or
product liability issues.
11.7. Non-Solicitation. Supplier shall not, directly or indirectly,
during the Term and, so long as this Agreement is not terminated by Supplier as
a result of a Buyer Default, for six (6) months thereafter, hire, retain or
attempt to hire or retain any employee, agent, consultant, or independent
contractor of Buyer or in any way interfere with the relationship between Buyer
and any such Persons, unless the Buyer's relationship with such Person has been
terminated by Buyer, or Buyer consents thereto in writing in advance.
12. Additional Covenants of Buyer. In addition to the other obligations of Buyer
under this Agreement, Buyer covenants that during the Term (including any
extensions or renewals thereof, unless expressly provided otherwise):
12.1 Compliance with Standards and Law . Buyer shall comply with all
applicable laws, rules and regulations, statutes, ordinances, regulations,
orders and bylaws, including, without limitation, antitrust and franchise laws.
12.2 Distributor Obligations. Buyer shall not terminate its obligation
to purchase, or cause to be purchased, Product from Supplier due to nonpayment
or other default by a Distributor.
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12.3 Transfer of Interest.
(a) If Buyer shall enter into any agreement or arrangement that
would have the effect of transferring operational control of Buyer or Buyer's
System to a third party, Buyer shall cause such third party to assume, for the
benefit of Supplier, all obligations of Buyer or Buyer's System, as the case may
be, hereunder; provided, however, that in the case of any such agreement or
arrangement with those Persons listed on Schedule 12.3, both Buyer and Supplier
shall have the right to terminate this Agreement (and such third party shall not
be required to assume any obligations of Buyer or Buyer's System hereunder) upon
not less than four (4) months prior written notice. Such notice of termination
shall be given within thirty (30) days after Buyer notifies Supplier of its
intent to enter into such agreement or arrangement. In the event that Supplier
notifies Buyer that it elects to terminate this Agreement after receiving
Buyer's notice of its intent to enter into such agreement or arrangement, Buyer
shall have thirty (30) days after receipt of Supplier's notice to withdraw its
notice of intent to enter into such agreement or arrangement, in which case this
Agreement shall not terminate and shall continue as if Buyer had not delivered
such notice to Supplier. Any notice delivered by Buyer or Supplier pursuant to
this Section 12.3 shall not constitute a Buyer Default or Supplier Default,
respectively.
(b) In the event that operational control of Buyer or Buyer's
System is transferred to a third-party after notice of termination is provided
pursuant to Section 12.3(a) and prior to the expiration of such four (4) month
notice period, then Supplier shall have the right to limit the inspection rights
provided in Section 8.1 and to take such other commercially reasonable measures
to protect its Proprietary Information so long as it otherwise satisfies its
obligations under this Agreement.
12.4 Product Usage. Buyer shall use its best efforts to provide
Supplier with timely information with respect to Product usage.
12.5 Cooperation with Inspections. Buyer shall cooperate with Supplier
in any investigation or inspection by any governmental agency or by Supplier
relating to any Approved Plant or Product which involves health, safety or
product liability issues.
12.6 Non-Solicitation. Buyer shall not, directly or indirectly, during
the Term and, so long as this Agreement is not terminated by Buyer as a result
of a Supplier Default, for six (6) months thereafter, hire, retain or attempt to
hire or retain any employee, agent, consultant, or independent contractor of
Supplier or in any way interfere with the relationship between Buyer and any
such Persons, unless the Supplier's relationship with such Person has been
terminated by Supplier, or Supplier consents thereto in writing in advance.
13. Insurance. During the Term (and any extension thereof), Supplier shall be
required to obtain and maintain insurance policies, in the amounts set forth on
Schedule 13. With respect to the Commercial General Liability and Umbrella
policies, Buyer shall be named as an additional insured. During the Term and
(any extension thereof), Buyer shall obtain and maintain insurance policies, in
the amounts set forth on Schedule 13. With respect to the Commercial General
Liability and Umbrella policies, Supplier shall be named as additional insureds.
All insurance policies required by this Section 13 shall be obtained from
recognized insurance carriers with an A.M. Best rating of "A-" or better.
Supplier and Buyer shall provide evidence of all such insurance to the other
with certificates issued at least annually, and whenever there is a change in
insurance carrier.
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14. Confidentiality/Ownership.
14.1 Proprietary Information. As used in this Agreement, the term
"Proprietary Information" shall mean any knowledge or information, written or
oral, which relates in any manner to the respective businesses of Buyer and
Supplier which is confidential and proprietary information of the Disclosing
Party (as defined below), whether disclosed prior to, on or after the date of
this Agreement, including, without limitation, the recipes, formulas,
specifications, manufacturing processes, preparation procedures, financial
information, equipment, marketing methods, demographic and trade information,
customer profiles and preferences, costs, development plans, products and
production techniques and all related trade secrets and proprietary information
treated as such by the Disclosing Party, whether by course of conduct, by letter
or report, or by the use of an appropriate stamp or legend designating such
information to be confidential or proprietary. As used herein, the term
"Disclosing Party" shall mean the party to this Agreement which discloses or
makes available Proprietary Information to the Receiving Party, and the term
"Receiving Party" shall mean the party to this Agreement to whom Proprietary
Information is disclosed or made available by the Disclosing Party.
14.2 Restrictions on Use. The Receiving Party shall hold all
Proprietary Information in confidence, shall use such Proprietary Information
only for the benefit of the Disclosing Party and disclose such Proprietary
Information only to the Receiving Party's officers, directors, employees and
agents in order to assist the Receiving Party in performing its obligations
under this Agreement. The Receiving Party shall not disclose Proprietary
Information to any other Person, provided, however, the Receiving Party may
disclose Proprietary Information to a corporate Affiliate of the Receiving Party
if such Affiliate first agrees in writing with the Disclosing Party to be bound
by the covenants contained in this Agreement with respect to the use and
nondisclosure of Proprietary Information.
14.3 Ownership. Except as otherwise provided in Section 14.4, ownership
of all Proprietary Information relating to all recipes, formulas,
specifications, manufacturing processes or preparation procedures, demographic
and trade information, customer profiles and preferences, costs, development
plans, products and production techniques and any other trade secrets and
information used to make Product (including, without limitation, information
related to the cost of Product) shall remain solely the property of Buyer,
regardless of whether developed or modified by Buyer or Supplier, subject to the
following:
(a) Supplier shall retain all rights of any such Proprietary
Information owned by Supplier pursuant to Section 14.4 if Supplier first secures
from Buyer a written agreement confirming Supplier's ownership and licensing or
otherwise granting Buyer such rights in such Proprietary Information as shall be
mutually agreed-upon between Supplier and Buyer prior to disclosing such
Proprietary Information to Buyer.
(b) In the case of a Product Development Project or a Structural
Savings Project in which Supplier and Buyer jointly develop any such Proprietary
Information, Supplier shall have those rights specified in any mutually
agreed-upon written agreement entered into at or prior to the time that any such
project is undertaken which provides for the joint ownership of any such jointly
developed Proprietary Information; provided, however, that even in the absence
of such written agreement, Supplier shall retain the right to utilize any
jointly developed manufacturing processes for manufacturing activities not
otherwise prohibited by this Agreement.
In manufacturing bakery products other than pursuant to this Agreement, Supplier
shall use product codes and product names for product which are separate and
distinct from those used for Product manufactured for Buyer.
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14.4 Exceptions. The obligations and prohibitions set forth in this
Section 14 shall not apply to any Proprietary Information that is required to be
disclosed by applicable law or that is shown, by preexisting documentary
evidence or other reliable evidence, to be information: (i) that was known by
the Receiving Party prior to the exchange of information in contemplation of
this Agreement; (ii) entered into the public domain other than through the act
of the Receiving Party; (iii) is independently developed by the Receiving Party;
or (iv) is rightfully received by the Receiving Party from a third party who is
not obligated to the Disclosing Party to keep such information confidential. The
obligations of Supplier pursuant to this Section 14 are in addition to, and
shall not supercede, any other obligations of Supplier to Buyer under any other
confidentiality agreement between Buyer and Supplier.
14.5 Protected Signature Product; Competitors. If Buyer licenses to
Supplier the right (A) to manufacture and sell any Product to any Person other
than to a Distributor or to Buyer's System or (B) to use any processes or
procedures used in the manufacture of any Product for the manufacture and sale
of any products to any Person other than to a Distributor or to Buyer's System,
then Supplier shall, in any event, be prohibited from: (i) using Buyer's
trademarks, trade names, trade secrets and trade dress; and (ii) selling to any
third-party any "Protected Signature Product," which is set forth on Schedule
14.5(A). In addition, Supplier shall not manufacture any dough product on any of
the production lines used for the manufacture of Product at any Approved Plant
to any Competitor. As used in this Section 14.5 only, the term "Approved Plant"
shall exclude any plant designated as an Approved Plant solely for the purpose
of implementing the Disaster Recovery Plan referred to in Section 16.6. For the
purpose of this Section 14.5, the term "Competitor" shall mean any of the retail
operations conducted in the continental United States listed on Schedule
14.5(B). Nothing contained herein shall prevent Supplier from selling any baked,
par-baked or pre-proofed bakery products to any Competitor or other customer of
Supplier, so long as: (1) such bakery products are materially different in
formulation from any Product manufactured by Supplier for Buyer hereunder, and
(2) Supplier agrees to manufacture Buyer's own baked, par-baked or pre-proofed
bakery products which are introduced by Buyer as additional Product pursuant to
the terms of this Agreement.
15. Opportunities/Conflicts of Interest. Except as otherwise set forth in this
Agreement: (i) neither party shall have any rights in or to the business
activities of the other party, nor to the income or profits derived therefrom;
(ii) neither party shall be obligated to offer any investment or other business
opportunity to the other party; and (iii) neither party shall have any duty,
fiduciary or otherwise, to afford the other party any opportunity to participate
in such activities.
16. Default/Termination.
16.1 Supplier Default. In addition to any other rights or remedies
available to Buyer at law or in equity, the obligations to purchase Product
under this Agreement may be terminated by Buyer if any one or more of the
following events occur (each a "Supplier Default"):
(a) If Supplier files a petition for adjudication as a bankrupt,
for reorganization or for an arrangement under any bankruptcy or insolvency law,
or if any involuntary petition under such law is filed against Supplier and is
not dismissed within thirty (30) days thereafter; then, so long as any such
event is continuing, Buyer may by notice in writing to Supplier terminate its
obligations to purchase all or a portion of Product forthwith;
(b) If Supplier makes an assignment of all or substantially all of
its assets for the benefit of creditors, or if Supplier's interest under this
Agreement shall be taken upon execution;
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(c) If Supplier fails to perform any material covenant or material
obligation including, but not limited to, the payment of any amounts due to
Buyer; provided, however, that no termination shall be made hereunder unless and
until Buyer gives Supplier notice of such failure to perform and Supplier has
not cured such failure within thirty (30) days after its receipt of such notice,
or ten (10) days in the case of failure to make payment of any amounts due to
Buyer; or
(d) There is a change of ownership or control of Supplier or
Supplier transfers its interest in any Approved Plant to a third party (in
either case, other than to an Affiliate of Supplier); provided, however, that
if, and only if, Supplier provides Buyer with at least six (6) months prior
written notice of such change of ownership or control or transfer (which written
notice shall be a joint written notice signed by Buyer and the proposed
transferee certifying that Supplier and the proposed transferred have entered
into a binding agreement for such change of ownership or control or transfer),
Buyer's exclusive remedy upon the occurrence of such an event in the absence of
Buyer's prior written consent to any such event (and without limiting Buyer's
remedies in the event of any other Supplier Default) shall be limited to the
right to terminate this Agreement.
16.2 Reservation of Rights; Cancellation Fee. In the event of a
Supplier Default, which, if subject to cure, is not cured within the time
provided in this Agreement, then no rights or remedies otherwise available to
the parties upon such termination shall be deemed surrendered, except as
otherwise provided in the case of a Supplier Default under Section 16.1(d). In
addition to all other rights and remedies granted herein to either party, and in
addition to all other rights and remedies each party may have at law, in equity
or otherwise, in the event that if this Agreement is terminated due to Supplier
Default (excluding a Supplier Default under Section 16.1(d) if the proviso
therein is applicable), Supplier shall pay to Buyer a cancellation fee (the "
Supplier's Cancellation Fee") in an amount equal to One Million Dollars
($1,000,000) per year for each year remaining in the first four (4) years of the
Term, pro rated for any partial such year remaining in the Term upon the
effective date of termination. If Buyer elects to terminate due to a Supplier
Default, then Supplier's Cancellation Fee shall be payable to Buyer in full
within thirty (30) days following the effective date of termination.
16.3 Buyer Default. In addition to any other rights or remedies
available to Supplier at law or in equity, the obligations to manufacture and
supply Product under this Agreement may be terminated by Supplier if any one or
more of the following events occur (each a "Buyer Default"):
(a) Buyer files a petition for adjudication as a bankrupt, for
reorganization or for an arrangement under any bankruptcy or insolvency law, or
if any involuntary petition under such law is filed against Buyer and is not
dismissed within thirty (30) days thereafter; then, so long as any such event is
continuing, Supplier may by notice in writing to Buyer terminate its obligations
to manufacture or supply all or a portion of Product forthwith;
(b) Buyer makes an assignment of all or substantially all of its
assets for the benefit of creditors, or if Buyer's interest under this Agreement
shall be taken upon execution; or
(c) Buyer fails to perform any material covenant or material
obligation including, but not limited to, the payment of any amounts due to
Supplier from Buyer; provided, however, that no termination may be made
hereunder unless and until Supplier gives Buyer written notice of such failure
to perform and Buyer has not cured such failure within thirty (30) days after
its receipt of such notice, or ten (10) days in the case of failure to make
payment of any amounts due to Supplier.
16.4 Reservation of Rights. In the event of a Buyer Default, which, if
subject to cure, is not cured within the time provided in this Agreement, then
no rights or remedies otherwise available to the parties
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upon such termination shall be deemed surrendered. In addition to all other
rights and remedies granted herein to either party, and in addition to all other
rights and remedies each party may have at law, in equity or otherwise, in the
event that if this Agreement is terminated due to Buyer Default, Buyer shall pay
to Supplier a cancellation fee (the "Buyer's Cancellation Fee") in an amount
equal to Two Hundred Fifty Thousand Dollars ($250,000) per year for each year
remaining in the first four (4) years of the Term, pro rated for any partial
such year remaining in the Term upon the effective date of termination. If
Supplier elects to terminate due to a Buyer Default, then Buyer's Cancellation
Fee shall be payable to Supplier in full within thirty (30) days following the
effective date of termination.
16.5 Effect of Termination.
(a) Termination of this Agreement, whether by lapse of time,
mutual consent, operation of law, exercise of right of termination or otherwise
shall not affect the ownership interests in the respective Proprietary
Information, proprietary rights and other rights of the parties, but shall only
affect any obligations of the parties to continue to cooperate in the
manufacturing, supply and purchase of Product.
(b) Upon termination of this Agreement by lapse of time or mutual
consent, Supplier shall complete the manufacture and supply of Product to fill
any outstanding orders that are deliverable within thirty (30) days of such
termination and Buyer shall purchase, or cause to be purchased, such Product.
(c) Notwithstanding any termination of this Agreement, all
provisions regarding: (i) the sharing of costs between the parties; (ii) the
ownership, non-use, or protection of Proprietary Information; (iii)
indemnification, (iv) representations of the parties being true as of the time
made; and (v) any obligations of either party to the other contained herein
which, by their nature, should reasonably extend beyond the termination of any
regular ongoing business relationship between the parties as contemplated by
this Agreement, shall survive such termination.
(d) In the event that a notice of intended termination is given by
either party (irrespective of whether such notice is based upon the occurrence
or existence of a Supplier Default, a Buyer Default or otherwise), Buyer and
Supplier shall thereafter develop and implement a transition plan prior to the
termination date of the Term in which the manufacture of Product by Supplier is
phased-out and transitioned to a new supplier in an orderly manner over not more
than a four (4) month period. As part of such transition plan, Buyer shall agree
to purchase one hundred percent (100%) of all good, saleable, non-obsolete and
useable finished goods inventory manufactured by Supplier (consistent with
then-current shelf life requirements and other Product specifications). In
addition, Buyer shall agree to purchase, at Supplier's actual cost, any
ingredients and packaging that are specific and unique to the manufacture of
Buyer's Products (including any contracts for such ingredients and packaging
that are purchased on a long-term basis); provided, however, that Buyer shall
not be obligated to purchase such ingredients or packaging in excess of
twenty-five percent (25%) of the volume of such ingredients or packaging which
has been consumed or used by Supplier in manufacturing Product during the twelve
(12) months immediately preceding the termination date. The foregoing
notwithstanding, if Supplier has purchased or committed to purchase (at the
direction of or with the mutual agreement of Buyer) packaging in quantities
greater than the foregoing twenty-five percent (25%) annual limit, Buyer shall
purchase all such good and useable packaging which is unique to Buyer's Product
and not otherwise useable by Supplier..
16.6 Force Majeure. Neither a Supplier Default nor a Buyer Default
shall be deemed to have occurred if either party is prevented or delayed from
fulfilling any terms or provisions of this Agreement by reason of any disaster
resulting from an act of nature or terrorist event (each, a "Force Majeure
Event"). Upon the occurrence of a Force Majeure Event, Buyer and Supplier shall
cooperate to the extent necessary to minimize any disruption of supply to
Buyer's System, including, without limitation, implementing the Disaster
Recovery Plan set forth in Exhibit 16.6 to the extent necessary or appropriate.
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17. Information and Audit Rights of Buyer.
17.1 Books and Records. Supplier shall maintain, in accordance with
generally accepted accounting principles consistently applied, accurate and
complete books and records with respect to all Product Direct Costs, including
all categories of information comprising Product Direct Costs, and freight costs
relating to Product.
17.2 Rights to Audit; Rights to Inspect. Upon reasonable prior notice,
Buyer shall have the right, during normal business hours, to inspect and audit
the books and records of Supplier relating solely to the calculation of Product
Cost and adjustments thereto.
17.3 Certain Information. Upon Buyer's written request, Supplier shall
provide information in its control concerning the manufacturing and supply of
Product, including, without limitation, copies of purchase and supply agreements
with vendors, sources of raw materials used in Product and information on
Supplier's maintenance of confidential information relating to Buyer.
18. Remedies. The relationship between Supplier and Buyer, which is reflected in
this Agreement, is special and unique and has a value which cannot be readily
measured in monetary terms. Therefore, in the event of any breach or threatened
breach by either party, the other party shall be entitled to seek both legal and
equitable relief, including, without limitation, temporary, preliminary and
permanent injunctive relief, to restrain such breach or threatened breach and to
mandate compliance with the terms set forth herein. All rights and remedies of
either party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
19. Indemnification. Supplier will at all times indemnify, defend and hold
harmless Buyer, the members of Buyer's System and each of their Affiliates from
and against any and all claims, damages, liabilities, costs and expenses,
including reasonable counsel fees, arising out of (i) any Supplier Default or
failure by Supplier to perform its obligations hereunder; and (ii) the supply of
Product by Supplier that is not in compliance with the Product specifications.
Buyer will at all times indemnify, defend and hold harmless Supplier from and
against any and all claims, damages, liabilities, costs and expenses, including
reasonable counsel fees, arising out of (i) any Buyer Default or failure by
Buyer to perform its obligations hereunder; (ii) any claim for infringement or
violation with any patent or trade secret of any third party, to the extent such
claim is attributable to use by Supplier of the recipes, formulae, processes and
specifications provided to Supplier by Buyer; and (iii) any claim or action by
any third-party alleging infringement or violation of, or conflict with, any
trademarks, tradenames or trade dress, to the extent such claim or action is
attributable to the use of such trademarks, tradenames or trade dress used in
accordance with Buyer's specifications. Prompt written notice of any claim or
litigation hereunder shall be given to either party, as the case may be, by the
other party. The indemnifying party shall have the right to control the defense
of the claim at its expense. The indemnified party shall have the right, but not
the obligation, to participate in the defense of any claim. There shall be no
settlement of any claim to which an indemnity relates without the prior written
consent of the indemnitor, which consent shall not be unreasonably withheld or
delayed. If a third party brings an action against either party and there is a
dispute between Buyer and Supplier as to who is responsible for defending such
action, then, until such dispute is resolved, Buyer and Supplier shall cooperate
so as not to jeopardize the defense of such action.
- 27 - EXECUTION COPY
20. Relationship of Parties. Supplier and Buyer are each independent
contractors. Nothing herein contained shall be construed to place Supplier and
Buyer in the relationship of principal and agent, master and servant, partners,
joint venturers, and, except as otherwise set forth in this Agreement, neither
party shall have, expressly or by implication, the power to represent itself as
having any authority to make contracts in the name of or binding upon the other,
or to obligate or bind the other in any manner whatsoever.
21. Consents; Notices. Unless otherwise specifically set forth herein, any
notice, consent or approval of a party shall be in writing and given by
telecopier and original posted first class mail, postage prepaid, within two (2)
business days thereafter; or by certified or registered mail with an
acknowledgment of receipt, postage prepaid, return receipt requested; or by a
reputable private courier, such as Federal Express, which provides evidence of
receipt as a part of its delivery service, and addressed as follows:
If to Buyer: Panera, LLC
0000 Xxxxxxx Xx.
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Chief Financial Officer
telecopier (000) 000-0000
with copy to: Xxxxx X. Xxxxxxxx, Esq.
Husch & Eppenberger, LLC
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000
telecopier (000) 000-0000
If to Supplier: Xxxx Food Products, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: President
telecopier (000) 000-0000
or to such other address as may be designated in writing by either party from
time to time in accordance herewith, and shall be deemed delivered two (2)
business days following delivery by hand, by private courier or when so
telecopied and five (5) business days following proper dispatch by certified or
registered mail. A business day is any Monday through Friday on which first
class mail is delivered.
22. Arbitration of Certain Disputes. Unless otherwise agreed to between Buyer
and Supplier, if a dispute arises under this Agreement under Section 3.2, the
parties shall submit their dispute to arbitration under the jurisdiction and in
accordance with the rules of the American Arbitration Association (the
"Association") located in St. Louis,
Missouri or at any other mutually agreeable
location. The parties shall be bound by the decision of the arbitrator(s).
Notwithstanding the foregoing, the arbitrator(s) shall not have the authority to
modify any express provision of this Agreement. Moreover, and notwithstanding
the provisions of this Section 22 or anything else to the contrary contained in
this Agreement, each party shall have the right to seek injunctive or equitable
relief in a court of competent jurisdiction in addition to or in lieu of its
rights pursuant to this section. The foregoing notwithstanding, any dispute that
arises under this Agreement, with the
- 28 - EXECUTION COPY
exception of Section 3.2 of this Agreement, shall be resolved in a court of law
in accordance with the provisions of Section 24.
23. Assignees and Third Parties. Subject to Buyer's rights in Section 16, this
Agreement may be assigned by Supplier to a third party which acquires all or
substantially all of the assets of Supplier or any Approved Plant which agrees
to be assume and be bound by this Agreement. This Agreement may be assigned by
Buyer to an entity which acquires all or substantially all of Buyer's retail
bakery-cafe outlets and which agrees to assume and be bound by this Agreement as
provided in Section 12.3.
24. Choice of Law.
24.1 Applicable Law and Service. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Missouri,
as applicable to agreements executed and entirely performed in said State. Each
party hereto irrevocably consents to the service of any and all process in any
action or proceeding arising out of or relating to this Agreement by the mailing
of copies of such process to their addresses specified in this Agreement (or
such other address established by them for notice purposes in the manner
prescribed herein).
24.2 Jurisdiction. Without limiting or impairing the parties' agreement
to submit disputes to arbitration as provided in this Agreement, each party
hereto irrevocably: (a) submits to the non-exclusive jurisdiction of the United
States District Court for the Eastern District of
Missouri (or, if subject
matter jurisdiction in that court is not available, in any state court located
within the County of St. Louis,
Missouri) over any dispute arising out of or
relating to this Agreement or any agreement or instrument contemplated hereby or
entered into in connection herewith or any of the transactions contemplated
hereby or thereby; and (b) agrees that all claims in respect of such dispute or
proceeding may be heard and determined in such courts; and (c) waives, to the
fullest extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum in connection therewith. THE PARTIES HERETO
WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING SEEKING ENFORCEMENT OF SUCH PARTY'S RIGHTS UNDER THIS AGREEMENT.
25. Attorneys' Fees. If any action or proceeding is brought to enforce or
interpret any provision of this Agreement then, in addition to any other relief
to which the prevailing party may be entitled, the prevailing party shall be
entitled to recover its reasonable costs and attorneys' fees.
26. Severability. If any term or provision of this Agreement is determined by a
court of competent jurisdiction to be invalid illegal or incapable of being
enforced by any law or public policy, all other terms or provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to the other parties.
27. Modification; Waivers. This Agreement (including the Schedules and Exhibits
hereto) may be modified or amended only with the written consent of each party
hereto. No party hereto shall be released from its obligations hereunder without
the written consent of all of the other parties. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party against whom such waiver is to be asserted. Except as otherwise
specifically
- 29 - EXECUTION COPY
provided herein, no delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder
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 hereunder.
28. Headings. The headings of the articles, sections and other subdivisions of
this Agreement are for convenient reference only. They shall not be used in any
way to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
29. Succession. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and other legal
representatives and, to the extent that any assignment hereof is permitted
hereunder, their assignees.
30. Counterparts. This Agreement may be executed in counterparts. Each
counterpart, including a signature page executed by each of the parties hereto,
shall be an original counterpart of this Agreement, but all of such counterparts
together shall constitute one (1) instrument.
31. Additional Documents. Each party agrees to provide any additional documents
reasonably requested by the other party in order to carry out the purpose and
intent of this Agreement.
32. Approvals; Consents. Unless otherwise specifically set forth herein, the
approvals and consents that are required or permitted herein shall not be
unreasonably withheld or delayed.
33. Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto) contains the full and complete undertaking and agreement between Buyer
and Supplier with respect to the within subject matter, and supersedes all other
agreements between Buyer and Supplier, whether written or oral, except any
confidentiality agreements between the parties, which shall, to the extent such
agreements do not contradict the terms of this Agreement, continue in effect.
34. Joint Negotiation. Each party has been represented by counsel of its choice
in negotiating this Agreement. This Agreement shall therefore be deemed to have
been negotiated and prepared at the joint request, direction and construction of
the parties, at arm's length, with the advice and participation of counsel, and
will be interpreted in accordance with its terms without favor to any party.
- 30 - EXECUTION COPY
THE AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have set their hands to this
Agreement as a sealed instrument and have delivered this Agreement as of the day
and year first above written.
XXXX FOOD PRODUCTS, INC.,
an Indiana corporation
By:
-------------------------------------
Xxxxxx X. Xxxxx
President and CEO
By:
-------------------------------------
Xxxx X. Xxxxx
Vice President
By:
-------------------------------------
Xxxxx X.Xxxxxxxx
Chief Financial Officer
PANERA, LLC,
a Delaware limited liability company
By:
-------------------------------------
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
By:
-------------------------------------
Xxxx X. Xxxxxxx
Chief Supply Chain Officer
- 31 - EXECUTION COPY
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule "A" Allocated Fixed Overhead
Schedule "B" Allocated Variable Overhead
Schedule "C" Allocated Profit
Schedule "D" Employee Benefits and
Wage Rates Per Position and
Schedule "E" Approved Distributors
Schedule "F" Operational Variance
Schedule 2.3 Other Documents Establishing
Manufacturing Requirements
Schedule 2.6 Distributor Requirements for
Shelf Life, Packaging/Labeling,
Hold Harmless and Insurance
Schedule 12.3 Xxxx Competitors
Schedule 13 Insurance Requirements
Schedule 14.5(A) Protected Signature Product
Schedule 14.5(B) Panera Competitors
EXHIBITS
Exhibit 1.1 Xxxx of Materials
as of date of Agreement
Exhibit 3.2A Form of Weekly Reconciliation Report
Exhibit 3.2B Form of Quarterly Reconciliation Report
Exhibit 7.1 Form of Buyer Guaranty
for Distributor
Exhibit 9.2 Certified Financial Information
of Supplier
Exhibit 16.6 Disaster Recovery Plan
- 32 - EXECUTION COPY
SCHEDULE "A"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
ALLOCATED FIXED OVERHEAD
1. FIXED MAINTENANCE COSTS
For the Crown Point plant only, a fixed annual amount of $182,000 for
contract year 1. The fixed amount shall be updated annually by a mutually-
agreed amount based upon changes for such costs anticipated during the
upcoming year, such updated fixed amount not to exceed an increase of five
percent (5%) from the then-current fixed amount.
This fixed annual amount shall be paid in 52 equal weekly installments
pursuant to Section 3.2, and is not reconciled against actually incurred
maintenance costs.
2. FIXED SUPERVISION COSTS
For the Crown Point plant, supervision costs shall be fixed at:
Contract years 1-2: $64,890 per year
Contract years 3-4: $136,431 per year
Contract years 5+: $215,305 per year
In addition to the foregoing, fixed supervision costs are subject to an
additional annual adjustment not to exceed five percent (5%) of the
then-current annual amount to compensate only for increases in wages. Note:
The supervisions costs listed above include benefits and taxes at 44.2% of
wages for the contract Term.
This fixed annual amount shall be paid in 52 equal weekly installments
pursuant to Section 3.2, and shall not be reconciled against actually
incurred supervision costs.
3. QUALITY ASSURANCE COSTS
For the Crown Point plant, quality assurance costs shall be fixed at:
Contract years 1-2: $51,046 per year
Contract years 3+: $107,324 per year
For the Louisville plant, quality assurance costs shall be fixed at $50,470
per year for the contract Term.
In addition to the foregoing, supervision costs are subject to an
additional annual adjustment not to exceed five percent (5%) of the
then-current annual amount to compensate only for increases in wages. Note:
The quality assurance costs listed above include benefits and taxes at
44.2% of wages for the contract Term.
This fixed annual amount shall be paid in 52 equal weekly installments
pursuant to Section 3.2, and shall not be reconciled against actually
incurred quality assurance costs.
EXECUTION COPY
SCHEDULE "A"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 2 OF 2
4. FIXED DEPRECIATION
Depreciation shall be fixed initially at $322,019 for contract year 1. This
fixed annual amount shall be paid in 52 equal weekly installments pursuant
to Section 3.2. At the beginning of each succeeding quarter, this amount
shall be updated and reconciled against any mutually agreed-upon new
capital equipment purchases during the preceding quarter as provided in
Section 3.2.3.
The date upon which new capital equipment shall be deemed "in-service" for
the purpose of being included in the fixed depreciation computation shall
be the date when Supplier pays for all or part of such equipment (including
any deposit). New capital equipment (excluding any holding freezer) shall
be depreciated over sixty (60) months on a "straight-line" basis. Any new
holding freezer shall be depreciated over one hundred twenty (120) months
on a "straight-line" basis.
5. TAXES AND LICENSE FEES
Taxes and license fees shall be fixed at $87,287 for contract year 1. This
fixed annual amount shall be paid in 52 equal weekly installments pursuant
to Section 3.2. At the beginning of each contract year, this amount shall
be updated and reconciled as provided in Section 3.2.5.
The amount of Supplier's taxes and licenses chargeable to Buyer shall be a
pro-rata amount of Supplier's taxes and licenses, based on the percentage
that Buyer's production from each Approved Plant bears to Supplier's total
production from each Approved Plant.
6. INSURANCE
Insurance shall be fixed at $19,771 for contract year 1. This fixed annual
amount shall be paid in 52 equal weekly installments pursuant to Section
3.2. At the beginning of each contract year, this amount shall be updated
and reconciled as provided in Section 3.2.5. Based on Supplier's historical
data, insurance costs are projected to increase ten percent (10%) per year.
The amount of Supplier's insurance chargeable to Buyer shall be a pro-rata
amount of Supplier's insurance, based on the percentage that Buyer's
production from each Approved Plant bears to Supplier's total production
from each Approved Plant.
7. ALLOCATED G&A
Allocated G&A shall be fixed at $217,247 for contract year 1. This fixed
annual amount shall be paid in 52 equal weekly installments pursuant to
Section 3.2. At the beginning of each contract year, this amount shall be
updated (but not reconciled) as provided in Section 3.2.5.
EXECUTION COPY
SCHEDULE "B"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
ALLOCATED VARIABLE OVERHEAD
1. ALLOCATED VARIABLE ELECTRICITY COSTS
Electricity costs shall be set at the following constant usage rates for
the contract Term:
A. For production activity at the Crown Point plant: .1263 KwH per pound
of product.
B. For the holding freezer at the Crown Point plant: 49.54 KwH per pallet
(stipulated usage, holding freezer consumes 2.75 million KwH for 2,372
pallets based on an assumed 2 week inventory turn with 90% full
pallets).
C. For all activity at the Louisville plant: .0368 KwH per pound of
product.
The weighted average cost of electricity per kilowatt hour (KwH) shall be
stipulated at the beginning of each Quarter, and reconciled at the end of
each Quarter as provided in Section 3.2.3 based on the actual weighted
average cost per KwH (computed in the manner described in Exhibit 3.2B).
Stipulated Variable Electricity Costs shall be computed and paid weekly
pursuant to Section 3.2.
2. ALLOCATED NITROGEN AND CARBON DIOXIDE COSTS
Nitrogen and Carbon Dioxide costs shall be set at the following constant
usage rates for the contract Term:
A. .1647 pounds of Nitrogen per pound of scone dough.
B. .4183 pounds of Nitrogen per pound of cookie dough.
C. .07088 pounds of Carbon Dioxide per pound of laminated dough product
The respective cost per pound cost of Nitrogen and Carbon Dioxide shall be
stipulated at the beginning of each Quarter, and reconciled at the end of
each Quarter as provided in Section 3.2.3 based on the actual weighted
average cost per pound of Nitrogen and Carbon Dioxide (computed in the
manner described in Exhibit 3.2B). Stipulated Nitrogen and Carbon Dioxide
Costs shall be computed and paid weekly pursuant to Section 3.2.
3. STORAGE COSTS
Storage costs shall be set at the following constant usage rates for the
contract Term:
A. For the Crown Point plant: $20.25 per pallet.
B. For the Louisville plant: $.02 per pound
At the beginning of each contract year, these costs shall be increased (but
not reconciled) by an amount not to exceed five percent (5%) from the
then-current amount to reflect
EXECUTION COPY
SCHEDULE "B"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 2 OF 3
increases in compensation (including wages, and benefits and taxes at 44.2%
of wages) pursuant to Section 3.2.4. Storage costs shall be computed and
paid weekly pursuant to Section 3.2.
4. WATER AND SEWER COSTS
Water and sewer costs shall be set at the following constant rates for the
contract Term:
A. For the Crown Point plant: $.00233 per pound of product.
B. For the Louisville plant: $.00153 per pound of product.
At the beginning of each contract year, these costs shall be adjusted (but
not reconciled) pursuant to Section 3.2.4 to reflect municipal rate changes
in each municipality; provided, however, that updated sewer costs for any
contract year shall not exceed three hundred percent (300%) of water costs
for such year. Water and sewer costs shall be computed and paid weekly
pursuant to Section 3.2.
5. PRODUCTION SUPPLIES
Production supply costs shall be set at the following constant usage rates
for the contract Term:
A. For the Crown Point plant: $.013 per Case.
B. For the Louisville plant: $.0006 per pound.
Production supply costs shall be computed and paid weekly pursuant to
Section 3.2, and shall not be reconciled against actual production supply
costs.
6. VARIABLE REPAIR AND MAINTENANCE COSTS
Variable maintenance costs shall be set at the following rates for the
contract Term:
A. For the Crown Point plant: $.23 per Case.
B. For the Louisville plant: $.0077 per pound of product.
Variable maintenance costs shall be computed and paid weekly pursuant to
Section 3.2, and shall not be reconciled against actual repair and
maintenance costs.
7. VARIABLE DEPRECIATION
Variable depreciation for the Louisville plant only shall be set at the
following rates for the contract Term: $.0028 per pound of product.
Variable depreciation shall be computed and paid weekly pursuant to Section
3.2.
EXECUTION COPY
SCHEDULE "B"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 3 OF 3
8. TRUCKING EXPENSES BETWEEN APPROVED PLANTS
Trucking expenses shall set at the following rates: $.02 per pound of
product manufactured at the Louisville plant.
At the end of each Reporting Period, these costs shall be reconciled for
fuel surcharges assessed during such Reporting Period as provided in
Section When the monthly 3.2.2. National Average Price of Diesel Fuel, as
reported by the U.S. Energy Information Administration exceeds $1.50 per
gallon, fuel surcharges shall be assessed as follows:
Average Price Surcharge
(dollars per gallon) (cents per Case)
-------------------- ----------------
1.51 - 1.55 0.010
1.56 - 1.60 0.015
1.61 - 1.65 0.020
1.66 - 1.70 0.025
1.71 - 1.75 0.030
1.76 - 1.80 0.035
1.81 - 1.85 0.040
1.86 - 1.90 0.045
1.91 - 1.95 0.050
1.96+ 0.055
Trucking expenses shall be computed and paid weekly pursuant to Section
3.2.
9. VARIABLE SUPERVISION COSTS
For the Louisville plant only, variable supervision costs shall be fixed at
$.00274 per pound of product. In addition to the foregoing, variable
supervision costs are subject to an additional annual adjustment not to
exceed five percent (5%) of the then-current annual amount to compensate
only for increases Note: The supervision costs in wages. listed above
include benefits and taxes at 44.2% of wages for the contract Term.
This amount shall be computed and paid weekly pursuant to Section 3.2, and
shall not be reconciled against actually incurred supervision costs at the
Louisville plant.
EXECUTION COPY
SCHEDULE "C"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
ALLOCATED PROFIT
PROFIT - ($ PER UNIT)
---------------------------------------------------
NO. PRODUCT DESCRIPTION 2003 2004 2005 2006 2007
--- ------------------- ---- ---- ---- ---- ----
343 Choc Chip Cookie 0.0109 0.0109 0.0109 0.0109 0.0109
349 Nutty Choc Chip 0.0109 0.0109 0.0109 0.0109 0.0109
355 Chocolate Duet w/Mint 0.0109 0.0109 0.0109 0.0109 0.0109
357 Oatmeal Raisin 0.0109 0.0109 0.0109 0.0109 0.0109
370 Shortbread Cookie 0.0105 0.0105 0.0105 0.0105 0.0105
493 Orange Scone 0.0210 0.0210 0.0210 0.0210 0.0210
528 Cinnamon & Chip Scone 0.0210 0.0210 0.0210 0.0210 0.0210
552 Orange Icing 0.0955 0.0955 0.0955 0.0955 0.0955
553 Apple Bagel Topping 0.1313 0.1313 0.1313 0.1313 0.1313
554 Butter Croissant 0.0131 0.0131 0.0131 0.0131 0.0131
562 Carrot Mini Bundt 0.0778 0.0778 0.0778 0.0778 0.0778
563 Lemon Poppy Mini Bundt 0.0778 0.0778 0.0778 0.0778 0.0778
564 Pineapple Mini Bundt 0.0778 0.0778 0.0778 0.0778 0.0778
700 Apple Croissant 0.0175 0.0175 0.0175 0.0175 0.0175
702 Chocolate Croissant 0.0175 0.0175 0.0175 0.0175 0.0175
703 Cinnamon Roll 0.0219 0.0219 0.0219 0.0219 0.0219
704 Raspberry Croissant 0.0219 0.0219 0.0219 0.0219 0.0219
705 Cheese Croissant 0.0175 0.0175 0.0175 0.0175 0.0175
720 Apple Streudel 0.0219 0.0219 0.0219 0.0219 0.0219
000 Xxxxxx Xxxxxxxx 0.0000 0.0219 0.0219 0.0219 0.0219
722 Bear Claw 0.0219 0.0219 0.0219 0.0219 0.0219
723 Coffee Cake 0.0583 0.0583 0.0583 0.0583 0.0583
725 Filled Danish 0.0175 0.0175 0.0175 0.0175 0.0175
726 Pecan Roll 0.0175 0.0175 0.0175 0.0175 0.0175
730 Pecan Smear 0.0875 0.0875 0.0875 0.0875 0.0875
731 Yellow Icing 0.0875 0.0875 0.0875 0.0875 0.0875
732 Gooey Butter Filling 0.0875 0.0875 0.0875 0.0875 0.0875
733 Cobblestone Topping 0.0875 0.0875 0.0875 0.0875 0.0875
734 White Icing 0.0875 0.0875 0.0875 0.0875 0.0875
735 Streusel 0.1313 0.1313 0.1313 0.1313 0.1313
749 3 Xxxxx Batter 0.0135 0.0135 0.0135 0.0135 0.0135
750 Blueberry Muffin 0.0700 0.0700 0.0700 0.0700 0.0700
751 Pumpkin Muffin 0.0700 0.0700 0.0700 0.0700 0.0700
752 Banana Muffin Batter 0.0700 0.0700 0.0700 0.0700 0.0700
753 Choc Chip Muffin 0.0700 0.0700 0.0700 0.0700 0.0700
EXECUTION COPY
SCHEDULE "D"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
EMPLOYEE BENEFITS AND
WAGE RATES PER POSITION
A. EMPLOYEE BENEFITS
----------------
2003 2003
AVERAGE AVERAGE HOURLY
COST/HOUR WAGE - $12.370
--------- --------------
1. WORKERS' COMPENSATION
WORKERS' COMPENSATION $.0520 4.200%
CALCULATION METHODOLOGY:
Constant rate of 4.2% of
Direct Labor Costs for life of contract.
(NOT CALCULATED AS PART OF THE "CPI + 5%"
LIMIT IN WAGE AND BENEFIT ALLOWANCE)
2. GOVERNMENT MANDATED CHARGES
FICA AND MEDICARE $0.946 7.650%
UNEMPLOYMENT INSURANCE $0.062 0.500%
CALCULATION METHODOLOGY:
Annual percentage rate computed and
adjusted once per year per Section 3.2.4.
according to government mandate.
(NOT CALCULATED AS PART OF THE "CPI + 5%"
LIMIT IN WAGE AND BENEFIT ALLOWANCE)
3. HEALTH CARE COSTS
MEDICAL BENEFITS $1.601 12.943%
DENTAL BENEFITS $0.106 0.857%
CALCULATION METHODOLOGY:
Annual percentage rate computed and
adjusted once per year per Section 3.2.4.
Total annual dollar adjustment not to exceed
twenty-five percent (25%) of prior year's costs;
provided, however that changes in the medical and dental program
which result in a net increase in costs shall not be borne by Buyer.
(NOT CALCULATED AS PART OF THE "CPI + 5%"
LIMIT IN WAGE AND BENEFIT ALLOWANCE)
EXECUTION COPY
SCHEDULE "D"
TO
BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 2 OF 3
4. ALL OTHER BENEFITS
401(K) $1.863 15.061%
VACATION
PROFIT SHARING
SICK DAYS
HOLIDAYS
CALCULATION METHODOLOGY:
Annual percentage rate computed and
adjusted once per year per Section 3.2.4.
(CALCULATED AS PART OF THE "CPI + 5%"
LIMIT IN WAGE AND BENEFIT ALLOWANCE)
--------------------------------------------------------------------------------
TOTAL EMPLOYEE BENEFIT ALLOWANCE $5.098 41.211%
(PERCENTAGE INSERTED IN COLUMN V
OF WEEKLY RECONCILIATION REPORT)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXECUTION COPY
SCHEDULE "D"
TO BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 3 OF 3
B. WAGE RATES PER POSITION
CROWN POINT 2003 LABOR RATES
OPERATION ($/HOUR)
----------- ----------------
Filling Preparer 13.04
Line Leader 13.04
Mixer 13.04
Operator 13.04
Butter Operator 11.83
Filling Depositor 11.83
Freezer 11.83
Helper 11.83
QC Checker 11.83
QC Counter 11.83
Retarder 11.83
Dough Blocker 11.58
Folder 11.58
Packer 11.58
Palletizer 11.58
Panner 11.58
Rack Puller 11.58
Twister 11.58
LOUISVILLE LABOR RATES
OPERATION ($/HOUR)
---------- -----------
Xxxx 15.26
Capper 14.26
Stacker 14.26
Blender 15.26
EXECUTION COPY
SCHEDULE "E"
TO BAKERY PRODUCT SUPPLY AGREEMENT
APPROVED DISTRIBUTORS
The Sygma Network
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Xxxxx Foods
0000 Xxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Multifoods Distributors
00000 X. Xxxxxxxx Xx. Xxxx X
Xxxxxxxxx, Xxxxxxxx 00000
EXECUTION COPY
SCHEDULE "F"
TO BAKERY PRODUCT SUPPLY AGREEMENT
OPERATIONAL VARIANCE
INGREDIENTS VARIANCE PERCENTAGE
PRODUCT ---------------------------------------
NO. DESCRIPTION 2003 2004 2005 2006 2007
--- ----------- ---- ---- ---- ---- ----
343 Choc Chip Cookie 2.0% 2.0% 2.0% 2.0% 2.0%
349 Nutty Choc Chip 2.0% 2.0% 2.0% 2.0% 2.0%
355 Chocolate Duet w/Mint 2.0% 2.0% 2.0% 2.0% 2.0%
357 Oatmeal Raisin 2.0% 2.0% 2.0% 2.0% 2.0%
370 Shortbread Cookie 2.0% 2.0% 2.0% 2.0% 2.0%
493 Orange Scone 2.0% 2.0% 2.0% 2.0% 2.0%
528 Cinnamon & Chip Scone 2.0% 2.0% 2.0% 2.0% 2.0%
552 Orange Icing 2.0% 2.0% 2.0% 2.0% 2.0%
553 Apple Bagel Topping 2.0% 2.0% 2.0% 2.0% 2.0%
554 Butter Croissant 2.5% 2.5% 2.5% 2.5% 2.5%
562 Carrot Mini Bundt 2.0% 2.0% 2.0% 2.0% 2.0%
563 Lemon Poppy Mini Bundt 2.0% 2.0% 2.0% 2.0% 2.0%
564 Pineapple Mini Bundt 2.0% 2.0% 2.0% 2.0% 2.0%
700 Apple Croissant 5.0% 5.0% 5.0% 5.0% 5.0%
702 Chocolate Croissant 5.0% 5.0% 5.0% 5.0% 5.0%
703 Cinnamon Roll 3.0% 3.0% 3.0% 3.0% 3.0%
704 Raspberry Croissant 5.0% 5.0% 5.0% 5.0% 5.0%
705 Cheese Croissant 5.0% 5.0% 5.0% 5.0% 5.0%
720 Apple Streudel 5.0% 5.0% 5.0% 5.0% 5.0%
000 Xxxxxx Xxxxxxxx 5.0% 5.0% 5.0% 5.0% 5.0%
722 Bear Claw 5.0% 5.0% 5.0% 5.0% 5.0%
723 Coffee Cake 5.0% 5.0% 5.0% 5.0% 5.0%
725 Filled Danish 5.0% 5.0% 5.0% 5.0% 5.0%
726 Pecan Roll 3.0% 3.0% 3.0% 3.0% 3.0%
730 Pecan Smear 2.0% 2.0% 2.0% 2.0% 2.0%
731 Yellow Icing 2.0% 2.0% 2.0% 2.0% 2.0%
000 Xxxxx Butter Filling 2.0% 2.0% 2.0% 2.0% 2.0%
733 Cobblestone Topping 2.0% 2.0% 2.0% 2.0% 2.0%
734 White Icing 2.0% 2.0% 2.0% 2.0% 2.0%
735 Streusel 2.0% 2.0% 2.0% 2.0% 2.0%
749 3 Xxxxx Batter 2.0% 2.0% 2.0% 2.0% 2.0%
750 Blueberry Muffin 2.0% 2.0% 2.0% 2.0% 2.0%
751 Pumpkin Muffin 2.0% 2.0% 2.0% 2.0% 2.0%
752 Banana Muffin Batter 2.0% 2.0% 2.0% 2.0% 2.0%
753 Choc Chip Muffin 2.0% 2.0% 2.0% 2.0% 2.0%
EXECUTION COPY
SCHEDULE "F"
TO BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 2 OF 3
PACKAGING VARIANCE PERCENTAGE
PRODUCT ---------------------------------------
NO. DESCRIPTION 2003 2004 2005 2006 2007
--- ----------- ---- ---- ---- ---- ----
343 Choc Chip Cookie 1.5% 1.5% 1.5% 1.5% 1.5%
349 Nutty Choc Chip 1.5% 1.5% 1.5% 1.5% 1.5%
355 Chocolate Duet w/Mint 1.5% 1.5% 1.5% 1.5% 1.5%
357 Oatmeal Raisin 1.5% 1.5% 1.5% 1.5% 1.5%
370 Shortbread Cookie 1.5% 1.5% 1.5% 1.5% 1.5%
493 Orange Scone 1.5% 1.5% 1.5% 1.5% 1.5%
528 Cinnamon & Chip Scone 1.5% 1.5% 1.5% 1.5% 1.5%
552 Orange Icing 0.8% 0.8% 0.8% 0.8% 0.8%
553 Apple Bagel Topping 0.8% 0.8% 0.8% 0.8% 0.8%
554 Butter Croissant 1.5% 1.5% 1.5% 1.5% 1.5%
562 Carrot Mini Bundt 0.8% 0.8% 0.8% 0.8% 0.8%
563 Lemon Poppy Mini Bundt 0.8% 0.8% 0.8% 0.8% 0.8%
564 Pineapple Mini Bundt 0.8% 0.8% 0.8% 0.8% 0.8%
700 Apple Croissant 1.5% 1.5% 1.5% 1.5% 1.5%
702 Chocolate Croissant 1.5% 1.5% 1.5% 1.5% 1.5%
703 Cinnamon Roll 1.5% 1.5% 1.5% 1.5% 1.5%
704 Raspberry Croissant 1.5% 1.5% 1.5% 1.5% 1.5%
705 Cheese Croissant 1.5% 1.5% 1.5% 1.5% 1.5%
720 Apple Streudel 1.5% 1.5% 1.5% 1.5% 1.5%
000 Xxxxxx Xxxxxxxx 1.5% 1.5% 1.5% 1.5% 1.5%
722 Bear Claw 1.5% 1.5% 1.5% 1.5% 1.5%
723 Coffee Cake 1.5% 1.5% 1.5% 1.5% 1.5%
725 Filled Danish 1.5% 1.5% 1.5% 1.5% 1.5%
726 Pecan Roll 1.5% 1.5% 1.5% 1.5% 1.5%
730 Pecan Smear 0.8% 0.8% 0.8% 0.8% 0.8%
731 Yellow Icing 0.8% 0.8% 0.8% 0.8% 0.8%
000 Xxxxx Butter Filling 0.8% 0.8% 0.8% 0.8% 0.8%
733 Cobblestone Topping 0.8% 0.8% 0.8% 0.8% 0.8%
734 White Icing 0.8% 0.8% 0.8% 0.8% 0.8%
735 Streusel 0.8% 0.8% 0.8% 0.8% 0.8%
749 3 Xxxxx Batter 0.8% 0.8% 0.8% 0.8% 0.8%
750 Blueberry Muffin 0.8% 0.8% 0.8% 0.8% 0.8%
751 Pumpkin Muffin 0.8% 0.8% 0.8% 0.8% 0.8%
752 Banana Muffin Batter 0.8% 0.8% 0.8% 0.8% 0.8%
753 Choc Chip Muffin 0.8% 0.8% 0.8% 0.8% 0.8%
EXECUTION COPY
SCHEDULE "F"
TO BAKERY PRODUCT SUPPLY AGREEMENT
PAGE 3 OF 3
TOTAL LABOR VARIANCE PERCENTAGE
PRODUCT -------------------------------------------------------------------------
NO. DESCRIPTION 2003 2004 2005 2006 2007
--- ----------- ----------------- ---- ---- ---- ----
Q1 Q2-4 Q1-4 Q1-4 Q1-4 Q1-4
-- ---- ---- ---- ---- ----
343 Choc Chip Cookie 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
349 Nutty Choc Chip 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
355 Chocolate Duet w/Mint 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
357 Oatmeal Raisin 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
370 Shortbread Cookie 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
493 Orange Scone 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
528 Cinnamon & Chip Scone 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
552 Orange Icing 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
553 Apple Bagel Topping 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
554 Butter Croissant 10.0% 7.0% 6.0% 6.0% 6.0% 6.0%
562 Carrot Mini Bundt 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
563 Lemon Poppy Mini Bundt 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
564 Pineapple Mini Bundt 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
700 Apple Croissant 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
702 Chocolate Croissant 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
703 Cinnamon Roll 9.0% 6.0% 6.0% 6.0% 6.0% 6.0%
704 Raspberry Croissant 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
705 Cheese Croissant 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
720 Apple Streudel 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
000 Xxxxxx Xxxxxxxx 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
722 Bear Claw 12.0% 9.0% 6.0% 6.0% 6.0% 6.0%
723 Coffee Cake 9.0% 6.0% 6.0% 6.0% 6.0% 6.0%
725 Filled Danish 13.0% 10.0% 6.0% 6.0% 6.0% 6.0%
726 Pecan Roll 13.0% 10.0% 6.0% 6.0% 6.0% 6.0%
730 Pecan Smear 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
731 Yellow Icing 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
000 Xxxxx Butter Filling 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
733 Cobblestone Topping 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
734 White Icing 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
735 Streusel 9.2% 9.2% 6.0% 6.0% 6.0% 6.0%
749 3 Xxxxx Batter 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
750 Blueberry Muffin 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
751 Pumpkin Muffin 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
752 Banana Muffin Batter 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
753 Choc Chip Muffin 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
EXECUTION COPY
SCHEDULE "2.3"
TO BAKERY PRODUCT SUPPLY AGREEMENT
OTHER DOCUMENTS ESTABLISHING
MANUFACTURING REQUIREMENTS
SEE VOLUMES 2-3
EXECUTION COPY
SCHEDULE "2.6"
TO BAKERY PRODUCT SUPPLY AGREEMENT
DISTRIBUTOR REQUIREMENTS FOR
SHELF LIFE, PACKAGING/LABELING,
HOLD HARMLESS AND INSURANCE
1. Supplier shall confirm all purchase orders with each Distributor within one
(1) business day after receipt of purchase order.
2. All invoices shall be sent directly to the Distributor from which a purchase
order originates. All invoices shall reference the purchase order number,
show unit and extended price and quantity on each item, and list the "ship
to" address.
3. Supplier shall notify each Distributor (by the means designated by such
Distributor -either via phone or "e-mail") of any shortages to any purchase
orders as soon as such shortages have been determined (but in no
circumstances shall notification be made after shipment of such purchase
order).
4. There shall be no automatic reordering of product by Supplier in the name of
Distributor for shortages to purchase orders. UNAUTHORIZED BACKORDERS AND
PARTIAL ORDERS SHALL NOT BE ALLOWED OR ACCEPTED.
5. Temperature Control - Supplier shall maintain Product at zero (0) degrees
Fahrenheit in storage and utilize transportation services which maintain
temperature of Product in transit not to exceed ten (10) degrees Fahrenheit.
6. Packaging and Labeling - All Product cases shall contain nationally accepted
UPC scannable labels on the exterior of the case packaging. Labels shall be
placed on the "side" and "end" panels of cartons and on the side of pails.
7. Inventory Management - The oldest product within Supplier's warehouse shall
be the first product shipped to Distributor.
8. Shelf Life Requirements - Product shall arrive at Distributor's Warehouse
within 4 weeks of the date Product was manufactured.
9. Guarantees, Warranties & Miscellaneous Requirements.
a. Supplier shall indemnify and hold harmless any Distributors
requiring such document.
b. Supplier shall provide a certificate of insurance that meets, or
exceeds, the Distributor's minimum requirements.
EXECUTION COPY
SCHEDULE "12.3"
TO BAKERY PRODUCT SUPPLY AGREEMENT
XXXX COMPETITORS
The term "Xxxx Competitors" shall mean the manufacturing and distribution
operations of any of the following companies or their Affiliates:
1. CSM
2. General Xxxxx/Xxxxxxxxx
3. Bunge
4. ABF (Associated British Foods)
5. Xxxxxx Xxxxxx companies
EXECUTION COPY
SCHEDULE "13"
TO BAKERY PRODUCT SUPPLY AGREEMENT
INSURANCE REQUIREMENTS
COMMERCIAL GENERAL LIABILITY:
Bodily Injury and Property Damage: $1,000,000 per occurrence combined
$2,000,000 general aggregate
Personal Injury and Advertising Injury: $1,000,000 any one person or organization
Products/Completed Operations: $2,000,000 annual aggregate
Fire Legal Liability: $1,000,000 any one fire
AUTOMOBILE LIABILITY:
Bodily Injury and Property Damage: $1,000,000 per accident
Hired and Non-Owned Automobiles: $1,000,000
WORKERS COMPENSATION: STATUTORY
EMPLOYERS LIABILITY: $500,000 per employee, bodily injury by disease
$500,000 per employee, bodily injury by accident
UMBRELLA LIABILITY: $5,000,000, any one occurrence
$5,000,000, annual aggregate
The certificate holder must be listed as Panera, LLC, SLBC/Panera Bread, its
subsidiaries, affiliates and divisions.
Panera, LLC, SLBC/Panera Bread, its subsidiaries, affiliates and divisions must
be listed as an additional insured using ISO Form CG 20 26 in regard to the
commercial general, product and excess liability coverage.
The certificate must be current and resubmitted each year within 30 days of
policy expiration.
EXECUTION COPY
SCHEDULE "14.5(A)"
TO BAKERY PRODUCT SUPPLY AGREEMENT
PROTECTED SIGNATURE PRODUCT
NO. PRODUCT DESCRIPTION
343 Choc Chip Cookie
349 Nutty Choc Chip
355 Chocolate Duet w/Mint
357 Oatmeal Raisin
370 Shortbread Cookie
493 Orange Scone
528 Cinnamon & Chip Scone
552 Orange Icing
553 Apple Bagel Topping
554 Butter Croissant
562 Carrot Mini Bundt
563 Lemon Poppy Mini Bundt
564 Pineapple Mini Bundt
700 Apple Croissant
702 Chocolate Croissant
703 Cinnamon Roll
704 Raspberry Croissant
705 Cheese Croissant
720 Apple Streudel
000 Xxxxxx Xxxxxxxx
722 Bear Claw
723 Coffee Cake
725 Filled Danish
726 Pecan Roll
730 Pecan Smear
731 Yellow Icing
732 Gooey Butter Filling
733 Cobblestone Topping
734 White Icing
735 Streusel
749 3 Xxxxx Batter
750 Blueberry Muffin
751 Pumpkin Muffin
752 Banana Muffin Batter
753 Choc Chip Muffin
EXECUTION COPY
SCHEDULE "14.5(B)"
TO BAKERY PRODUCT SUPPLY AGREEMENT
PANERA COMPETITORS
The retail operations conducted in the continental United States of the
following companies:
1. Atlanta Bread Company
2. Corner Bakery
3. Starbucks
4. Au Bon Pain (see note below)
5. New World Coffee Group
a. Einsteins/Noah Bagels
b. Manhattan Bagels
c. New World Coffee
6. La Xxxxxxxxx Xxxxxx Bakery Cafe
7. Paradise Bakery
8. Schlotzky's Deli
9. Xxx Xxxxxx'x
10. ViCorp - Village Inn/Xxxxx'x Square
11. Brueggers
12. Chesapeake Bagel/AFC Enterprises, Inc.
NOTE: Au Bon Pain will not be considered a Panerea Competitor until 180 days
following the signing of a Bakery Product Supply Agreement between Panera, LLC
and Xxxx Food Products, Inc.
EXECUTION COPY
EXHIBIT 1.1
XXXX OF MATERIALS
AS OF DATE OF AGREEMENT
XXXX OF MATERIALS
SEE VOLUMES 2-3
EXECUTION COPY
EXHIBIT 3.2A
FORM OF WEEKLY
RECONCILIATION REPORT
FORM OF WEEKLY RECONCILIATION REPORT
SEE ATTACHED
EXECUTION COPY
EXHIBIT 3.2B
FORM OF QUARTERLY
RECONCILIATION REPORT
FORM OF QUARTERLY RECONCILIATION REPORT
SEE ATTACHED
EXECUTION COPY
EXHIBIT 7.1
FORM OF BUYER GUARANTY
FOR DISTRIBUTOR
GUARANTY
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the undersigned, PANERA, LLC, a Delaware limited
liability company (the "Guarantor") unconditionally guarantees the performance
of all of the "Product Debt" (as defined herein) of [ Distributor ] (the
"Distributor") to XXXX FOOD PRODUCTS, INC., an Indiana corporation ("Supplier").
This Guaranty is given by Guarantor pursuant to the terms of that
Bakery Products Supply Agreement, dated ______________, 2002 by and among
Supplier and Guarantor (the "Supply Agreement"). Capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the Supply
Agreement.
Guarantor represents and warrants that (i) Guarantor is associated with
Distributor by virtue of a distribution agreement between [among] Distributor
and Guarantor [or one or more of Guarantor's franchisees], (ii) Distributor's
relationship (as hereinafter defined) with Supplier benefits Guarantor, (iii)
the relationship between Distributor and Supplier is necessary or convenient for
the business purposes of Guarantor, (iv) Guarantor has specifically authorized
that this Guaranty be executed and delivered as necessary to the conduct of the
business of Guarantor, and (v) Guarantor understands that Supplier, in
continuing to supply Distributor after the date of this Guaranty in accordance
with the Supply Agreement, is relying on the obligations being undertaken by the
Guarantor as set forth herein.
As used herein, the term " Product Debt" includes the monetary
obligations of Distributor to Supplier now existing or hereafter arising solely
for the payment by Distributor of the Invoice Price of Product delivered to
Distributor pursuant to the Supply Agreement. The term "Product Debt" shall not
include any other obligations of Distributor to Supplier, monetary or otherwise,
whether or not arising under the Supply Agreement.
In the event payment of the Product Debt is not made by Distributor to
Supplier in accordance with the terms of the Supply Agreement within five (5)
business days of its due date, then, notwithstanding any other rights or
remedies which may then be available to Supplier, the entire unpaid amount of
such Product Debt shall become immediately due and payable by Guarantor in the
event that within thirty (30) days following such default, Supplier gives
written notice to Guarantor of Distributor's failure to timely make payment on
the Product Debt when due. Payment of such liabilities shall be made by
Guarantor within five (5) business days following Guarantor's receipt of such
notification by Supplier. Such notice shall be in writing and shall be deemed
effectively given to Guarantor in all respects when delivered, if delivered by
hand, by certified mail (return receipt requested) or by a nationally recognized
overnight courier service (otherwise delivery shall be effective only upon
actual receipt), and addressed as follows:_____________________________________
_______________________________________________________________________________
EXECUTION COPY
EXHIBIT 7.1
FORM OF BUYER GUARANTY
FOR DISTRIBUTOR
PAGE 2 OF 3
__________________, or at such alternative address as may be designated by
Guarantor. A business day is any Monday through Friday on which first class mail
is delivered.
Any payments made by Guarantor to Supplier pursuant to this Guaranty
shall be applied to such invoices as Guarantor in its discretion may determine.
Nothing contained in this Guaranty shall constitute an extension of the time for
the timely payment of the Product Debt by Distributor. Upon the making of any
such payments, Guarantor shall be fully subrogated to the rights of Supplier
with respect to the Product Debt paid by Guarantor.
This Guaranty shall not be affected by any fraudulent, illegal, or
improper act by the Distributor. No provision of this Guaranty may be altered,
amended, waived, canceled or modified, except by a written instrument executed,
sealed and acknowledged by the Guarantor and Supplier. Except as provided
herein, Guarantor waives (i) presentment, demand, notice, and protest with
respect to the Product Debt and (ii) any right to require Supplier to pursue or
to proceed against Distributor prior to enforcing its rights against Guarantor
hereunder to the same extent as if Guarantor were jointly and severally liable
with the Distributor for the Product Debt. Guarantor hereby waives notice of
acceptance of this Guaranty.
Anything to the contrary contained herein notwithstanding, the
undersigned shall be notified in advance and in writing of any indulgence or
waiver which Supplier proposes to grant to Distributor with respect to the
Product Debt and of any alteration, amendment, cancellation, waiver, or
modification of any term or condition of the Product Debt. The undersigned shall
have the right to approve such alteration, amendment, cancellation waiver or
modification of any term or condition of the Product Debt, which consent shall
not be unreasonably withheld or delayed. The undersigned agrees that no action
by Supplier which has been consented to in advance by the undersigned in
accordance with the terms of this Guaranty shall affect the obligations of the
undersigned to the Supplier hereunder.
The rights, remedies, powers, privileges and discretion of Supplier
hereunder (hereinafter, the "Supplier's Rights and Remedies") shall be
cumulative and not exclusive of any rights or remedies which it would otherwise
have, and no delays or omissions by Supplier in exercising or enforcing any of
Supplier's Rights and Remedies shall operate as or constitute a waiver thereof.
No waiver or modification by Supplier on any one occasion shall be deemed a
waiver on any subsequent occasion, nor shall it be deemed a continuing waiver.
All of each of the Supplier's Rights and Remedies under any other agreement with
the undersigned, the Distributor, or any such other person shall be cumulative
and not alternative or exclusive, and may be exercised by the Supplier at such
time or times and in such order of preference as Supplier, in its sole
discretion, may determine.
This Guaranty shall be governed, construed, and interpreted in
accordance with the laws of the State of
Missouri, as applicable to agreements
executed and entirely performed in said State. Any disputes relating to the
terms of this Guaranty shall be subject to the exclusive jurisdiction of the
United States District Court for the Eastern District of
Missouri (or, if
subject matter jurisdiction in that court is not available, in any state court
located within the County of St. Louis,
Missouri). Any determination that any
provision herein is invalid, illegal, or unenforceable in any respect in any
instance shall not affect the validity, legality or enforceability of such
provision in any other instance and shall not affect the validity, legality or
enforceability
EXECUTION COPY
EXHIBIT 7.1
FORM OF BUYER GUARANTY
FOR DISTRIBUTOR
PAGE 3 OF 3
of any other provision contained herein. This Guaranty shall inure to the
benefit of the successors and assigns of Supplier. This Guaranty shall be
binding upon the successors, representatives, and assigns, of the undersigned.
Unless terminated by Guarantor in accordance with the terms hereof,
this Guaranty shall remain in full force and effect until all Product Debt is
paid or otherwise satisfied in full. Guarantor may terminate this Guaranty at
any time upon not less than five (5) business days' prior notice to Supplier;
provided, however, that no such termination shall relieve Guarantor of any
liability for Product Debt relating to Product delivered to Distributor prior to
the date of termination.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as a
sealed instrument on this __ day of ____________, _____.
PANERA, LLC
By:
---------------------------------
Its:
-------------------------------
EXECUTION COPY
EXHIBIT 9.2
CERTIFIED FINANCIAL INFORMATION
OF BUYER
CERTIFIED FINANCIAL INFORMATION OF BUYER
SEE ATTACHED
EXECUTION COPY
EXHIBIT "16.6"
TO BAKERY PRODUCT SUPPLY AGREEMENT
DISASTER RECOVERY PLAN
ASSUMPTION: One hundred twenty (180) day recovery period for a Force Majeure
Event.
WET PRODUCTS: Fillings, Icings, and Glazes
Within ninety (90) days after the execution date of the Agreement, Supplier's
Denver facility will be ready to produce products that are currently planned to
be produced in its Louisville facility.
COOKIES AND SCONES:
Within ninety (90) days after the execution date of the Agreement, equipment
will be in place at another of frozen production facility of Supplier sufficient
to manufacture Buyer's cookie and scone Products.
LAMINATED PRODUCTS:
Within ninety (90) days after the execution date of the Agreement, Xxxx will
secure a co-packer to produce Buyer's laminated Products. Within one hundred
eighty (180) days after the execution date of the Agreement, a laminated line
will be in place at another Xxxx frozen facility.
EXECUTION COPY
