Exhibit 10.4
SUPPLY AGREEMENT
EFFECTIVE DATE: January 14, 1999
PARTIES: Sparta Foods, Inc.
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxxxxx, XX 00000 ("Sparta")
Rupari Food Services, Inc.
0000 Xxxx Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx Xxxxx, XX 00000 ("Rupari")
RECITALS:
A. Sparta manufactures and sells Mexican and other food products under
its own trademarks and brand names and also manufactures food products for other
food companies.
B. Sparta is willing to supply such products for Rupari on the terms
and subject to the conditions of this Agreement.
AGREEMENT:
In consideration of the mutual promises set forth herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Supply of Products.
1.1. Specifications. Sparta agrees to supply the products
identified on Exhibit A attached hereto (the "Products") at Sparta's
manufacturing facilities pursuant to the terms and conditions of this
Agreement. Sparta agrees to manufacture the Products in accordance with
the written specifications provided by Sparta in writing to Rupari (the
"Specifications"). Sparta agrees to provide Rupari with thirty (30)
days prior written notice of any proposed changes to the
Specifications. Such proposed changes to the Specifications shall be
subject to Rupari's approval, which approval shall not be unreasonably
withheld or delayed. Rupari acknowledges that the recipes for the
Products and manufacturing methods used for manufacturing of the
Products have been developed by and are owned by Sparta and/or its
subcontractor manufacturers.
1.2. Quality Control. Sparta agrees to maintain records of
production runs of Product manufactured for a period of two (2) years
after such manufacture.
2. Packaging and Inventory.
2.1. Package Design. Sparta shall package the Products using
the packaging design furnished by Sparta and the trademark designated
by Rupari ("Rupari Trademark"). Rupari shall have the right to approve
the final packaging design including the Rupari Trademark, which
approval shall not be unreasonably withheld or delayed. Rupari shall be
entirely responsible for the development and cost of the packaging
design. If Rupari requests any changes to the packaging design or the
type of packaging material used for the Products, Sparta shall not be
required to ship Products utilizing such new design and/or packaging
material until it is actually available to Sparta in quantities
necessary to economically package the Product and the parties have
agreed upon the adjustment, if any, to the purchase price of the
Product due to such requested change in the packaging design and/or
packaging material.
2.2. Packaging Materials. Sparta will order packaging for the
Products from its suppliers according to the minimum order requirements
of such suppliers. The price of such packaging is included in the
purchase price of the Products. Rupari shall pay Sparta Sparta's actual
cost for any extra charges or assessments incurred by Sparta for
less-than-minimum or other non-standard size packaging orders required
by Rupari. Upon termination of this Agreement for whatever reason,
Rupari shall pay to Sparta Sparta's actual cost for any Product
packaging in Sparta's inventory. In addition, Rupari shall pay Sparta
for any Product packaging purchased by Sparta if such packaging becomes
obsolete because it is discontinued by Rupari for any reason.
3. Exclusivity. During the term of this Agreement, Rupari agrees not to
manufacture, or permit any person other than Sparta to manufacture for Rupari or
any affiliate of Rupari for resale, any Product or any other chip and cheese or
chip and salsa combination product. During the term of this Agreement, Sparta
shall be permitted to manufacture and sell the Product to the customers (the
"Customers") identified on Exhibit B attached hereto, as amended from time to
time by mutual written agreement of the parties, at the prices set forth on
Exhibit A (the "Customer Price"). For each sale to a Customer, Sparta shall pay
Rupari fifty percent (50%) of the excess of the Net Customer Price over the
price for the Product as sold to Rupari and set forth on Exhibit A. The "Net
Customer Price" shall equal the Customer Price less associated expenses for
brokers' commissions, freight, promotional allowances and rebates and less
deductions for returned or damaged goods.
4. Purchase of Products.
4.1. Forecasts. Upon execution of this Agreement, Rupari shall
provide Sparta with a twelve (12) month rolling forecast of the
anticipated purchase orders for each of the Products. Rupari agrees to
update such rolling forecast on a monthly basis. Such forecasts shall
be provided in good faith but shall not be legally binding on either
party.
4.2. Placement of Orders. Rupari shall place its orders for
the Products by delivery by mail or by fax of a written purchase order
to Sparta or by such other method as approved by Sparta from time to
time. The initial purchase order shall be for at least 2,000,000
packages (166,667 cases). Such purchase orders must identify the
Product to be manufactured, the quantity and package size thereof, the
shipping location and shipping instructions, requested delivery dates
and such other information as Sparta may reasonably request from time
to time. Rupari may cancel or modify a purchase order submitted to
Sparta only with Sparta's prior written consent; provided, however, no
consent is needed if such cancellation or modification is delivered to
Sparta prior to Sparta's acceptance of such order. Orders will be
deemed accepted if Sparta does not given Rupari written notice of
rejection of an order within three (3) business days after receipt of
the written order. Rupari may not return Product unless it receives
prior written consent of Sparta. Return of defective Product, however,
shall be governed by the provisions of Section 7.2. Notwithstanding the
above, Sparta agrees to use commercially reasonable efforts to supply
all Products ordered by Rupari within a commercially reasonable time.
4.3. Terms of Orders. The terms and conditions in this
Agreement shall be the exclusive contract terms between the parties and
Rupari's purchase of the Products. Sparta objects to any terms set
forth in Rupari's orders for the Products which are different from or
additional to the provisions of this Agreement, and no such terms shall
be binding upon Sparta unless both parties specifically agree thereto
in a separate writing.
5. Price and Payment.
5.1. Price. The price for the Products are specified on
Exhibit A attached hereto and are FOB Sparta's location. Sparta may
change such prices by delivery of thirty (30) days prior written notice
to Rupari. Any such price increases shall be based upon actual increase
in Sparta's costs associated with the Products, including, without
limitation, cost of ingredients, packaging, labor and overhead
allocation. Sparta shall provide to Rupari, upon request, reasonable
documentation showing its calculations of and supporting information
for any such price change. Rupari shall pay any and all taxes, fees,
duties or other governmental charges and all shipping and shipping
insurance charges relating to the ordered Products.
5.2. Payment. Rupari shall pay Sparta for any Products ordered
directly by Rupari within ten (10) days after the date of invoice. If
Rupari fails to make any payment for Product ordered by it when due,
and such nonpayment continues for a period of five (5) days after
delivery of written notice by Sparta regarding such nonpayment, Sparta
shall have the right to require Rupari to pay all purchase orders for
the Product in advance, by COD, by letter of credit or by any other
means upon notifying Rupari of the change in credit terms.
5.3. Late Fees and Collection Costs. Any amounts not paid by
Rupari when due will be subject to a late payment fee computed daily at
a rate equal to the lesser of twelve percent (12%) per annum or the
highest rate permitted under applicable usury law. In addition, Rupari
shall be liable to Sparta for all costs incurred by Sparta in its
collection of any amounts owing by Rupari which are not paid when due,
including, without limitation, collection agency fees or reasonable
attorneys' fees and expenses.
6. Delivery and Inspection.
6.1. Delivery. Sparta will deliver the Products using the
carrier designated in the purchase order, or if not so designated, by a
carrier selected by Sparta. Title to and all risk of loss regarding the
Products shall pass to Rupari when Sparta delivers the Products to such
common carrier for shipment to the location designated in the purchase
order.
6.2. Inspection. Rupari or its customer, if a Product is
shipped directly to the customer, shall inspect all Products promptly
upon receipt and either Rupari or the customer shall notify Sparta
within seven (7) working days after receipt of any shortages, damages
or other non-conformance of the shipped Products which is discoverable
upon a visual inspection. After such time period, Sparta shall not be
liable for any non-conformance of the Products which Rupari and/or its
customer could reasonably have discovered within such time period,
excepting for breach of warranty claims.
7. Warranties; Indemnification; Insurance.
7.1. By Rupari. Rupari represents and warrants that it has
full right and title to the Rupari Trademark and the package design and
agrees that Sparta shall have no liability to Rupari or to any third
party for packaging the Products using the Rupari Trademark and the
package design supplied by Rupari. Rupari agrees to indemnify and hold
Sparta harmless from and against any and all claims (including, without
limitation, infringement claims), liabilities, damages, costs and
expenses (including reasonable attorneys' fees and legal expenses)
which Sparta may suffer or incur relating to or arising out of,
directly or indirectly, (i) use of the Rupari Trademark and/or the
package design supplied by Rupari for the Products, (ii) use or
consumption of any of the Products to the extent arising from any
negligent or intentional act or omission of Rupari.
7.2. By Sparta. Sparta warrants to Rupari that the Products
sold under this Agreement shall be manufactured in accordance with the
Specifications and shall be merchantable in accordance with FDA
standards at the time and point of delivery. The exclusive remedy for
breach of such warranty shall be, at Sparta's option, to either (i)
replace the defective Product or (ii) refund the purchase price of the
defective Product paid by Rupari. Rupari shall promptly notify Sparta
in writing of any alleged breaches of this warranty. Rupari shall not
return to Sparta any alleged defective Product, or take any credits
against its Product invoices for such alleged defective product,
without the prior written authorization of Sparta. EXCEPT AS EXPRESSLY
PROVIDED ABOVE, SPARTA MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, WHETHER AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT,
WARRANTIES ARISING FROM COURSE OR DEALING OR ANY OTHER MATTER. No
employee or representative of Sparta shall have any authority to bind
Sparta to any warranty or representation except as expressly stated
above. Rupari shall be exclusively responsible for any warranty or
representation which Rupari makes to any customer. Notwithstanding the
above disclaimers, Sparta agrees to indemnify and hold Rupari harmless
from and against any and all third party claims (including, without
limitation, infringement claims) and any liabilities, damages, costs
and expenses (including reasonable attorneys' fees and legal expenses)
resulting therefrom which Rupari may suffer or incur relating to or
arising out of, directly or indirectly, (i) use of the Specifications
supplied by Sparta for the Products, or (ii) use or consumption of any
of the Products to the extent arising from (A) a breach of the above
warranty or (B) any other manufacturing defect in the Product or any
negligent or intentional act or omissions of Sparta or its employees.
Nothing in this paragraph shall be interpreted to limit Sparta's
liability as manufacturer of the Products to third party consumers.
7.3. Insurance. Sparta shall maintain products liability
insurance covering the Products in a minimum amount of Two Million
Dollars ($2,000,000). Sparta shall provide Rupari with insurance
certificates evidencing such insurance coverage at the request of
Rupari. Rupari shall be named as loss payee and additional insured
under such policies.
8. Independent Contractor Rupari is and shall remain an independent
contractor. Neither this Agreement nor the relationship between the parties
constitutes a partnership, franchise or joint venture between Sparta and Rupari.
Neither party shall have any authority or right under any circumstances
whatsoever to bind or purport to bind the other party in any manner or thing
whatsoever.
9. Confidentiality.
9.1. Definition. The term "Confidential Information" as used
in this Agreement means any information or compilation of information
which is proprietary to one of the parties to this Agreement and
relates to such party's existing or reasonably foreseeable business,
including, without limitation, trade secrets, the Specifications,
information relating to products of the disclosing party, manufacturing
techniques, recipes, data, marketing strategies, product development,
customer information and any other information about the disclosing
party's business which is normally considered confidential or which is
indicated in writing to be confidential or trade secret. Confidential
Information shall not include any information:
i. which is part of the public domain or becomes part
of the public domain through no fault of the receiving party;
or
ii. which was already in the receiving party's
possession, as evidenced by written documentation, prior to
the disclosure of such information to the receiving party by
the disclosing party; or
iii. which is subsequently disclosed to the receiving
party on a non-confidential basis by a third party who is not
under any obligation of confidentiality relating to such
disclosed information; or
iv. which is specifically authorized by the
disclosing party, in writing, to be disclosed; or
v. which is required to be disclosed by applicable
law or order of a court of competent jurisdiction in which
case the receiving party agrees to notify the disclosing party
of such requirement and to cooperate with the disclosing party
in an effort to narrow or avoid disclosure.
9.2. Nondisclosure. During the term of this Agreement and at
all times thereafter, the receiving party agrees to hold in strictest
of confidence and to never disclose, transfer, convey, make assessable
to any person or use in any way Confidential Information of the
disclosing party for its own or another's benefit or permit the same to
be used in competition with the disclosing party. Rupari agrees to
disclose the Specifications to its employees only on a "need to know"
basis. Upon the request of Sparta, Rupari shall require its employees
who are given access to the Specifications to execute confidentiality
agreements regarding the Specifications. Each party agrees to take
reasonable precautions to prevent its employees, representatives,
agents and others from disclosing or appropriating for their own use
any and all of the Confidential Information of the other party.
10. Term and Termination. This Agreement shall begin on the date
inserted on the front page hereof and shall continue for five (5) years or
unless terminated earlier in any manner provided below:
10.1. Either party may terminate this Agreement if the other
party commits a breach of this Agreement and fails to remedy such
breach within thirty (30) days after delivery of written notice from
the non-breaching party describing the alleged breach.
10.2. Either party may terminate this Agreement effective
immediately upon delivery of written notice to the other party, if the
other party (i) is unable to pay its debts as they mature or admits in
writing its inability topay its debts as they mature, (ii) makes a
general assignment for the benefit of creditors, (iii) files a
voluntary petition for bankruptcy or has filed against it an
involuntary petition for bankruptcy, or (iv) applies for the
appointment of a receiver or trustee for substantially all of its
assets or permits the assignment of any such receiver or trustee who is
not discharged within a period of thirty (30) days after such
appointment.
11. Effect of Termination.
11.1. Return of Confidential Information. Upon termination of
this Agreement, each party shall, within ten (10) days after the
termination of this Agreement (or such earlier time as request by the
other party), return to the other party all copies of materials and
documents or copies thereof containing any Confidential Information of
the other party.
11.2. Payment Obligations. Upon termination or expiration of
this Agreement:
i. Rupari shall pay Sparta Sparta's actual cost for
any Product packaging in Sparta's inventory as provided in
Section 2.2 above.
ii. If the total of cases of Product purchased by
Rupari and sold by Sparta to Customers prior to the effective
date of termination or expiration of this Agreement is less
than Seven Hundred Eight One Thousand (781,000) cases of
Product, Rupari shall pay Sparta Two and 40/100 Dollars
($2.40) times the shortfall (i.e. calculated by taking 781,000
minus (the number of cases purchased by Rupari from Sparta
plus the number of cases of Product sold by Sparta to
Customers). Such amount shall be payable by Rupari within ten
(10) business days after the effective date of termination or
expiration.
iii. Rupari shall also pay Sparta for all Product
ordered by Rupari prior to the effective date of termination
or expiration and delivered by Sparta in accordance with the
payment terms set forth in Section 5.2.
11.3. Surviving Obligations. Any provisions contained in this
Agreement which by their terms are intended to continue after
termination or expiration of this Agreement shall survive such
termination or expiration, including, without limitation, the
provisions of Sections 5, 7, 9, 11, 12 and 13.
12. General Provisions.
12.1. Nonassignment; Binding Nature. Neither party shall
transfer or assign any of its rights or obligations under this
Agreement without the other party's prior written consent, except as
part of a merger or to a successor who purchases a controlling interest
in the stock of the party or purchases substantially all of the assets
of the party. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their permitted
successors and assigns. Notwithstanding the above provisions, Sparta
shall have the right to sublicense the manufacturing obligations
hereunder to a third party with Rupari's consent, which shall not be
unreasonably withheld. Sparta shall continue to be primarily liable for
performance under this Agreement.
12.2. Force Majeure. No party to this Agreement will be liable
to any other party or be in breach of this Agreement caused in whole or
in part by any event beyond such party's reasonable control, including
without limitation, acts of God, fire, war, strikes, riots, acts of any
government or any agency or subdivision thereof, transportation delays,
or shortage or inability to secure labor, fuel, energy, raw materials,
supplies or machinery at reasonable prices from regular sources.
12.3. Entire Agreement. This Agreement, together with the
Exhibits, contains the entire contract between the parties as to the
subject matter hereof and supersedes any prior or contemporaneous
written or oral agreements between the parties with respect to the
subject matter hereof.
12.4. Modifications and Waivers. No purported amendment,
modification or waiver of any provision of this Agreement shall be
binding unless set forth in a written document signed by all parties
(in the case of amendments and modifications) or by the party to be
charged thereby (in the case of waivers). Any waiver shall be limited
to the circumstance or event specifically referenced in the written
waiver document and shall not be deemed a waiver of any other term or
provision of this Agreement or of the same circumstance or event upon
any recurrence thereof.
12.6. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have
been duly delivered (i) when received if delivered by hand, (ii) the
next business day if placed with a reputable overnight carrier for
delivery on the morning of the next business day or (iii) four (4)
business days after deposit, if placed in the mail for delivery by
registered or certified mail, return receipt requested, postage
pre-paid, and addressed to the appropriate party at the addresses set
forth on the first page hereof. All notices to Sparta should be
addressed to the attention of the Chief Financial Officer. All notices
to Rupari should be addressed to the attention of Xxxxxx Xxxxx. If
either party should change its address, such party shall give written
notice of the other party of the new address in the manner set forth
above, but any such notice shall not be effective until received by the
addressee.
12.7. Severability. In the event that any provision, or
portion thereof, is held to be unenforceable by final order of any
court of competent jurisdiction, such provision, or portion thereof,
shall be severed herefrom without effecting the validity or
enforceability of the remaining provisions.
12.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota,
without application of its conflict of laws provisions.
13. Dispute Resolution.
13.1. Sparta and Rupari have entered into this Agreement in
good faith and in the belief that it is mutually advantageous to them.
It is with that same spirit of cooperation that these parties pledge to
attempt to resolve any dispute amicably, without the necessity of
litigation. Accordingly, the parties agree that if any dispute
("Dispute") arises between them concerning this Agreement, other than
an action to enjoin the unauthorized disclosure of confidential or
proprietary information, the parties will make a good faith attempt to
resolve the Dispute by alternative dispute resolution (ADR) prior to
commencing any legal action to interpret or enforce this Agreement. The
ADR procedures set forth in this Article 13 apply strictly to disputes
arising directly out of each party's obligations set forth in this
Agreement.
13.2. Without limiting the scope or method of ADR to be
employed by subsequent mutual agreement, the parties agree and commit
to the following efforts at a minimum:
i. The party seeking to initiate the ADR (the
"Initiating Party") shall give written notice to the other
party or parties involved in the dispute. The notice must
describe in general terms the nature of the Dispute and the
Initiating Party's claim for relief and identifying one or
more individuals with authority to settle the Dispute on such
party's behalf. The party receiving such notice (the
"Responding Party") shall have ten (10) days within which to
designate one or more individuals with authority to settle the
Dispute on such Party's behalf. (The individuals so designated
shall be known as the "Authorized Individuals").
ii. The Authorized Individuals shall meet promptly,
but in no event later than thirty (30) days from the date of
the Notice of Dispute. If the Dispute has not been resolved
within thirty (30) days from the date of their initial
meeting, the Initiating Party or Responding Party may request
that ADR be ended in which case the parties may then pursue
available legal remedies.
iii. ADR attempts under this Agreement are considered
a compromise negotiation for purposes of the Federal and State
Rules of Evidence and shall constitute privileged
communication. The entire ADR process is confidential and no
stenographic, visual or audio record will be made.
13.3. All conduct, statements, promises offers, views and
opinions, whether oral or written, made in the course of the ADR
process by any party, by their agents, employees, representatives or
other invitees and by the mediator are confidential and shall, in
addition and where appropriate, be deemed to be privileged. Such
conducts, statements, promises, offers, views and opinions shall not be
discoverable or admissible for any purposes including impeachment, in
any litigation or other proceeding involving the parties, and shall not
be disclosed to anyone not an agent, employee, expert, witness or
representative of any of the parties; provided, however, that evidence
otherwise discoverable or admissible shall not be excluded from
discovery or admission as a result of its use in the mediation.
The parties have executed this Agreement, in the manner appropriate to
each, to be effective as of the date on the first page hereof.
SPARTA FOODS, INC. RUPARI FOOD SERVICE, INC.
By /s/ Xxxx X. Xxxxxx By /s/ Xxxxxx Xxxx
Its President and CEO Its President
