EXHIBIT 10.51
SCHEDULE H
MASTER CO-PACK AGREEMENT
------------------------
THIS AGREEMENT ("Agreement") is entered into as of August 7, 2000, by and
between Xxxxxx'x Sales Enterprises, Inc., a Minnesota corporation, its
affiliates and subsidiaries, with its corporate offices located at 000 Xxxx
Xxxxxxx Xxxxx, Xxxxxxxx, XX, 00000 (hereinafter referred to as "SCHWAN'S"), and
Overhill Farms, Inc. a Nevada corporation, located at 0000 Xxxxxxxx Xxx, Xxxxx
000, Xxxxxx Xxxx, Xxxxxxxxxx 00000-0000 (hereinafter referred to as "CO-
PACKER").
XXXXXX'X desires that CO-PACKER produce for XXXXXX'X some or all of the products
listed in Exhibit A (as it may be amended from time to time) using XXXXXX'X
current and future formulae and specifications ("Xxxxxx'x Products") or CO-
PACKER's standard products ("Co-Packer's Products") in accordance with the terms
and conditions set forth in this Agreement (Xxxxxx'x Products and Co-Packer's
Products may be referred to collectively as the "Products").
In consideration of the mutual terms, covenants and conditions set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Products. CO-PACKER shall produce for XXXXXX'X some or all of the
Products, as elected by XXXXXX'X, as listed in Exhibit A, which Exhibit A may be
amended by XXXXXX'X, at its sole discretion, by drafting and executing an
amended Exhibit A to reflect any changes in the Products. Any amendment to
Exhibit A to reflect the addition of a product not listed on the then-current
Exhibit A which will require CO-PACKER to acquire additional equipment or know-
how shall require the written consent of CO-PACKER, such consent to not be
unreasonably withheld, and such new product shall be produced on price and terms
mutually agreed to by the parties in accordance with Section 4. CO-PACKER agrees
that any pricing for any new products shall be competitive with the market for
products of similar quality, quantity and terms. Any changes in price of the
Products shall be addressed as specified below in Section 4. Said Products will
be purchased as dictated by XXXXXX'X with labels which contain XXXXXX'X
proprietary trademarks, tradedress, and copyrights. CO-PACKER does not have the
right to market any of Xxxxxx'x Products.
2. Term and Termination. This Agreement shall commence upon the date of this
Agreement as stated above and shall remain in effect for a period of three (3)
year(s), or until XXXXXX'X meets the Minimum Purchase Requirement specified in
Section 3 below, whichever is earlier (the "Initial Term"). Upon expiration of
the Initial Term, this Agreement will be automatically renewed for additional
one (1) year periods ("Renewal Terms") thereafter. During any Renewal Term,
either party
shall have the right to terminate this Agreement without reason or cause by
giving the other party at least ninety (90) days' advanced written notice of
such termination. XXXXXX'X shall not be subject to any Minimum Purchase
Requirement during any Renewal Term.
Notwithstanding the foregoing, either party may, at its sole option, immediately
terminate this Agreement for cause:
(a) in the event the other party shall breach or violate any of the
warranties, representations, agreements, covenants or conditions required
by the terms of this Agreement and fails to remedy the breach or
violation within ten (10) days after receipt of written notice from the
terminating party; or
(b) in the event the other party shall make an assignment for the benefit
of its creditors, commit any act of bankruptcy, have a receiver
appointed, or otherwise admit to its inability to pay its material debts
as they mature.
In addition, XXXXXX'X, at its sole option, may immediately terminate this
Agreement for cause in the event CO-PACKER does not correct any quality
assurance inspection issues as reasonably prescribed by a XXXXXX'X inspector.
3. Minimum Purchase Requirement / Estimated Purchase Volume / Supply
Commitment by CO-PACKER / Accrual towards Minimum Purchase Requirement.
a. Minimum Purchase Requirement: During the Initial Term of this
Agreement, XXXXXX'X shall purchase from CO-PACKER at least twenty-six
million (26,000,000) pounds of Product(s) (the "Minimum Purchase
Requirement"). The parties acknowledge and agree that at all times from
and after the expiration of the Initial Term, XXXXXX'X shall not be
obligated to purchase any minimum quantity of Products from CO-PACKER.
b. Estimated Purchase Volume and Supply Commitment by CO-PACKER: On a
weekly basis, XXXXXX'X shall provide its estimated purchase volume
("Estimated Purchase Volume") of Products to be purchased from CO-PACKER
for the following thirteen-week period in order to assist CO-PACKER in
its production planning. The Estimated Purchase Volume may be increased
or decreased at any time by XXXXXX'X, in its reasonable sole discretion,
to reflect changes in its business conditions and is to be considered an
estimate only. However, CO-PACKER shall only be obligated to supply
Product(s) to XXXXXX'X up to the Estimated Purchase Volume plus an
additional twenty-five percent (25%).
c. Accrual towards Minimum Purchase Requirement: In the event that
XXXXXX'X purchases any Products(s) from sources other than CO-PACKER as a
result of (i) noncompetitive pricing by CO-PACKER of any of the Products
not included on the then-current Exhibit A as compared to prices
generally available in the marketplace for similar quantities and quality
of products, (ii) failure of CO-PACKER to comply with any of XXXXXX'X
quality assurance requirements, as reasonably requested, and/or formulae
and specifications of the Products, and/or (iii) insufficient supply of
any of the Products from CO-PACKER relative to its supply commitment
specified in subsection 3.b. above, then the volume of Products acquired
from such other sources by XXXXXX'X shall accumulate towards the Minimum
Purchase Requirement herein. CO-PACKER acknowledges and agrees that
Exhibit A may be amended from time to time by XXXXXX'X to reflect, among
other revisions that the parties shall mutually agree upon, additions or
deletions of various Products, subject to the consent of CO-PACKER with
regard to the addition of new products as set forth in Section 1 above,
and that any purchases from CO-PACKER by XXXXXX'X of either Xxxxxx'x
Products or Co-Packer's Products shall accrue towards the Minimum
Purchase Requirement. In the event that purchases by XXXXXX'X from CO-
PACKER during the Initial term do not meet at least twenty million
(20,000,000) pounds, after reconciling for any volumes acquired from
other sources as a result of the circumstances described above, then (I)
XXXXXX'X shall reimburse CO-PACKER for any costs, expenses and losses
associated with the lack of purchases, including, but not limited to,
lost profits, labor, materials and overhead costs associated with the
shortfall in purchases by XXXXXX'X relative to the twenty-million pound
threshold, and (ii) only $0.06 per pound as applied to the shortfall from
twenty million (20,000,000) pounds to twenty six million (26,000,000)
pounds. In the event that purchases by XXXXXX'X from CO-PACKER during
the Initial Term meet or exceed twenty million (20,000,000) pounds but do
not meet or exceed the Minimum Purchase Requirement, after reconciling
for any volumes acquired from outside sources as a result of the
circumstances described above, XXXXXX'X sole liability and CO-PACKER'S
sole remedy, shall be compensation to CO-PACKER by XXXXXX'X in the amount
of $0.06 per pound as applied to the shortfall in purchasing by XXXXXX'X
relative to the twenty-six-million pound threshold. During the Initial
Term, in lieu of the above payment in the event of shortfall, the parties
are free to enter into a mutually-acceptable alternative minimum purchase
requirement so as to eliminate any shortfall payment. At any time during
the Initial Term, in the event that XXXXXX'X determines in its sole
discretion that its purchases of the Products from CO-PACKER will not
meet or exceed the Minimum Purchase Requirement, CO-PACKER hereby agrees
to discuss with XXXXXX'X an alternative to this purchase obligation that
is mutually agreeable to both parties.
4. Price. The prices for the Products during the Initial Term shall be as set
forth on the attached Exhibit A. Notwithstanding the preceding sentence, the
prices set forth in Exhibit A shall be adjusted on a quarterly basis, up or
down, based on mutually agreed upon documented marketplace price fluctuations in
raw materials and packaging. Any such adjustment shall be made for the
subsequent quarter and shall be based on the average price of each raw material
and packaging item during the preceding quarter. Both parties agree that
XXXXXX'X retains the right to source raw materials and/or packaging supplies for
XXXXXX'X finished goods produced under this Agreement. Any price changes beyond
raw materials and packaging, and the establishment of prices for new products,
must be mutually agreed upon, which agreement shall not unreasonably be
withheld, and shall be reflected in an addendum to this Agreement as signed by
both parties. Upon acceptance by XXXXXX'X of any price increase, or upon the
addition of any new product, the parties shall promptly execute an amended
Exhibit A (which amended Exhibit A shall be incorporated with this Agreement by
attachment or reference) showing such new prices and/or new product and the
respective effective date. Payment terms shall be Net Thirty (30).
5. Inventory. CO-PACKER shall, at its expense, furnish all raw materials,
ingredients and packaging materials required for the manufacture, production,
processing and packaging of the Products under this Agreement. In the event of
(a) termination of this Agreement, or (b) discontinuance by XXXXXX'X of the
purchase of any of the Products, XXXXXX'X will pay CO-PACKER for all filmwrap,
nonstandard raw materials and finished goods particular to XXXXXX'X business in
inventory at the price paid for the same by CO-PACKER provided, however,
XXXXXX'X shall not have to pay for filmwrap, raw material or finished goods
inventory or other specific packaging in excess of production equivalent to the
most recent three-month average historical purchasing of the same by XXXXXX'X.
XXXXXX'X shall pay for such inventory within thirty (30) days of receipt of
itemized invoice from CO-PACKER, and, upon receipt of full payment from XXXXXX'X
for the three-month quantity, CO-PACKER agrees to promptly destroy any inventory
it may have accumulated in excess of the three-month inventory quantity.
6. Insurance. CO-PACKER shall, at its own expense, maintain in full force and
effect during the Initial Term and Renewal Terms of this Agreement commercial
and general business liability insurance coverage with a responsible insurance
carrier satisfactory to XXXXXX'X and endorsed to include products/completed
operations coverage, broad form vendors endorsement, products liability, and
contractual coverage, with a combined limit to Two Million and no/100 Dollars
($2,000,000) per occurrence with an aggregate of Ten Million and no/100 Dollars
($10,000,000) for all occurrences within a single policy year, each such limit
to be maintained at all times regardless of any payments made thereunder.
Xxxxxx'x Sales Enterprises, Inc. shall be named as an additional insured on CO-
PACKER'S
policy. CO-PACKER shall provide XXXXXX'X with a Certificate of Insurance
evidencing both the required coverages before CO-PACKER begins manufacturing for
XXXXXX'X hereunder. CO-PACKER will provide additional Certificates of Insurance
as on-going evidence of the insurance required herein while this Agreement is in
effect and as may be reasonably requested thereafter by XXXXXX'X. XXXXXX'X shall
be provided at least thirty (30) days' advance notice if CO-PACKER's insurance
is canceled.
7. Guarantee. CO-PACKER has executed a General and Continuing Guarantee in
favor of XXXXXX'X, which terms are incorporated within this Agreement by
reference.
8. EEO Certification. CO-PACKER has executed an EEO Compliance Certificate,
which terms are incorporated within this Agreement by reference. CO-PACKER will
be required to execute an EEO Compliance Certificate each year hereafter on or
around January 1st while this Agreement is in effect upon receipt of the
certification form from XXXXXX'X.
9. Trademarks. The parties hereto understand and acknowledge that nothing
contained in this Agreement shall be deemed to give CO-PACKER any right, title,
interest or license to any of XXXXXX'X trademarks and trade names, service
marks, patents or copyrights owned by XXXXXX'X (collectively the "Xxxxxx'x
Properties") and the same shall at all times remain in XXXXXX'X, and CO-PACKER
shall have no right to use any of Xxxxxx'x Properties, except to produce
products for XXXXXX'X hereunder, or as otherwise authorized in writing by
XXXXXX'X. Should XXXXXX'X fail to compensate CO-PACKER for the three-month
inventory for raw materials, packaging and finished goods as provided for
earlier in Section 5, XXXXXX'X hereby authorizes CO-PACKER to sell, liquidate or
dispose of any resulting finished goods containing Xxxxxx'x Properties, as CO-
PACKER sees fit, up to the three-month quantity limit specified in Section 5.
10. Proprietary Rights.
(a) The parties recognize that, while this Agreement is in effect, each
party may become exposed to or become informed of certain proprietary
information of the other party. The receiving party agrees not to
disclose or to use, for its own benefit or the benefit of third parties,
any of the disclosing party's formulas, formulations, specifications,
methods of processing and production, trade secrets, data or other
proprietary information that the receiving party becomes exposed to or
informed of by the disclosing party and to keep all such information
confidential for as long as the information remains the confidential
information of the disclosing party, except as may be required to perform
under this Agreement. The receiving party will allow access to the
aforesaid information only to those employees of the receiving party who
require the same in order that the receiving party may perform hereunder.
The receiving party will, upon request of the disclosing
party, promptly return to the disclosing party any and all documents
containing the disclosing party's confidential information disclosed to
it, together with all copies thereof. The terms of this Section 10(a)
shall survive the expiration or termination of this Agreement.
(b) It is understood between the parties that confidential product
formulations developed for or provided by XXXXXX'X are trade secrets and
shall be the exclusive property of XXXXXX'X.
(c) XXXXXX'X may, with CO-PACKER'S approval, purchase one or more of CO-
PACKER's other products without change to formula or specifications.
XXXXXX'X acknowledges that CO-PACKER's other product formulas and
specifications are the exclusive and confidential property of CO-PACKER.
11. Manufacturing. CO-PACKER shall produce the Products only at CO-PACKER's
facility(ies) as preapproved in writing and in advance by XXXXXX'X, which such
approval shall not be unreasonably withheld. XXXXXX'X shall provide CO-PACKER
with four (4) weeks' lead-time on all orders and one (1) week lead-time for
release of Product(s). CO-PACKER has executed a "General Requirements and
Agreement to Comply with Specifications", which terms are incorporated within
this Agreement by reference, and shall manufacture according to XXXXXX'X
requirements of the Products in accordance with instructions and specifications
received from XXXXXX'X. Accordingly, CO-PACKER guarantees that products
delivered at CO-PACKER'S docks shall meet XXXXXX'X specifications.
Additionally, the Products shall be manufactured in accordance with the
applicable provisions of the Federal Food, Drug & Cosmetic Act and any other
applicable federal, state, or local law, regulation, or other requirement in
accordance with the General and Continuing Guarantee mentioned in Section 7.
12. Title/Risk of Loss. XXXXXX'X acknowledges and agrees that any products
purchased from CO-PACKER are shipped F.O.B. CO-PACKER's docks. CO-PACKER shall
load and seal all trailers with a metal numbered seal. Al bills of lading shall
have the trailer seal numbers noted thereon. Upon delivery of the Products to
XXXXXX'X and verification by XXXXXX'X that the trailer seals correspond to the
seal numbers noted on the xxxx(s) of lading and that the seals have not been
removed or broken, CO-PACKER shall be liable to XXXXXX'X for any shortage of
Products noted upon delivery and XXXXXX'X may deduct such corresponding amounts
from any payments due by it to CO-PACKER. Title to the products and all risk of
loss or damage transfers to XXXXXX'X at the time CO-PACKER transfers possession
of the products to the transportation or freight carrier.
13. Product Recall. XXXXXX'X shall have the right, exercisable in its
reasonable discretion, to initiate and direct the content and scope of a recall,
market withdrawal, stock recovery, product correction and/or advisory safety
communication regarding the products. XXXXXX'X in its reasonable discretion
shall determine the manner, text and timing of any publicity to be given such
matters subject to the approval of CO-PACKER, which such approval shall not be
unreasonably withheld. In the event a recall action is initiated or directed by
XXXXXX'X, CO-XXXXXX agrees to fully cooperate and take all such steps as are
reasonably requested to implement the recall action in a timely and complete
manner. CO-PACKER shall have the right, exercisable in its reasonable
discretion, to initiate and direct the content and scope of a recall if required
by law or regulation. Any and all action be taken in connection with a recall
action shall be in accordance with FDA OR USDA, AS APPLICABLE, policies and
other laws. CO-PACKER shall bear the costs associated with any recall action
which results from such product not complying with XXXXXX'X specifications
and/or CO-PACKER'S warranties under this Agreement. In all other cases,
XXXXXX'X shall bear the costs associated with any recall action.
14. Indemnification. Each party (the "Indemnitor") shall indemnify, defend and
hold harmless the other (the "Indemnitee") from and against any and all claims,
demands, actions, suits, causes of action, damages and expenses (including, but
not limited to, expenses of investigation, settlement, litigation and attorney's
fees incurred in connection therewith) arising out of or resulting from (i) the
breach by the Indemnitor of any representation or warranty made or given by the
Indemnitor herein or any other term or condition therein to be performed by
Indemnitor, or (ii) the negligence or willful misconduct of the Indemnitor, its
agents or employees. The indemnification obligations stated in this Agreement
shall survive the expiration or termination of this Agreement. Any breach or
default under the Asset Purchase Agreement, referenced within the introductory
paragraphs of this Agreement, shall constitute a default hereunder. Without
limiting any of the rights or remedies available to XXXXXX'X, XXXXXX'X shall
have the right to offset any amounts due hereunder against any amounts due to
XXXXXX'X from Purchaser under the Asset Purchase Agreement.
15. Performance Security. If sufficient Product from CO-PACKER becomes
unavailable for any reason, then XXXXXX'X shall have the right to obtain
acceptable replacement product from other sources ("Replacement Product"),
either within or separate from CO-PACKER, until sufficient Product from CO-
PACKER is again available. In the event that an insufficient supply of Product
from CO-PACKER is due to the negligence or fault of CO-PACKER, the CO-PACKER
shall: (i) pay the difference, if any, between the price paid by XXXXXX'X for
the Replacement Product and the price XXXXXX'X would have paid to CO-PACKER for
the same had sufficient supply been available, and (ii) reimburse XXXXXX'X for
any costs, expenses and losses associated with the lack of supply of Product,
including, but limited to, lost profits and labor, materials and overhead costs
associated with any downtime experienced by XXXXXX'X.
If CO-PACKER is unable to supply XXXXXX'X requirements of Product as specified
in subsection 3.b. herein for a period of ninety (90) consecutive days, XXXXXX'X
shall have the right to terminate this Agreement at anytime by providing CO-
PACKER with at least thirty (30) days prior written notice. Any purchases by
XXXXXX'X of Replacement Product during periods of insufficient supply from CO-
PACKER shall accrue towards XXXXXX'X purchases towards the Minimum Purchase
Requirement. If and to the extent that acceptable Replacement Product is not
available for purchase by XXXXXX'X, then the Minimum Purchase Requirement shall
be reduced proportionately to account for the period of time that the supply of
Product or Replacement Product was not available.
16. Arbitration. Any dispute between the parties arising under or in
connection with this Agreement shall be resolved by binding arbitration
conducted by the American Arbitration Association under its rules for expedited
commercial arbitration at Los Angeles, California. The decision of the
arbitrators is final and binding on all parties. The arbitrators may issue
appropriate orders as well as award monetary (but not exemplary or punitive)
damages.
17. No Waiver. No failure by one party to take action on account of any
default or breach by the other party to this Agreement, whether in single
instance or repeatedly, shall constitute a waiver of the default or of the
performance required by the defaulting or breaching party. Furthermore, any
express waiver shall be in writing and shall not be construed as a waiver of any
other or future provision, performance or default.
18. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California.
19. Conformity with Laws. Each party shall secure and maintain in force all
required licenses, permits and certificates and shall operate its business in
full compliance with all applicable federal, state and local laws, ordinances,
rules, regulations and orders.
20. Severability. If any provision of this Agreement shall be construed to be
illegal or invalid, it shall not affect the legality or validity of the other
provisions hereof, and the illegal or invalid provisions shall be deemed
stricken and deleted herefrom to the same extent and effort as if never
incorporated herein, and, if necessary or desired by either party, replaced with
a mutually agreeable replacement provision.
21. Relationship of Parties. The parties are independent contractors and
neither is an agent, partner, or joint venture of the other. Neither party
shall be liable for any debts, accounts, obligations, or other liabilities of
the other party, its agents, or employees. Neither party shall have the
authority to obligate or bind the other party in any manner.
22. Notices. Any notice that may be given hereunder shall be deemed to have
been sufficiently given by one party when sent by certified and/or registered
mail in a postpaid envelope or via facsimile to the other at the last designated
address of the other party. Notices shall be sent to the parties at the
following designated address:
To CO-PACKER: Overhill Farms, Inc.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxxx, Vice President
Fax: 000-000-0000
and
Xxxxxxx, Xxxxxxx & Smiley
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Arbiter, Esquire
Fax: 000-000-0000
To XXXXXX'X: SCHWAN'S SALES ENTERPRISES, INC.
000 Xxxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, Director of Purchasing
Fax: 000-000-0000
and
SCHWAN'S SALES ENTERPRISES, INC.
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
Fax: 000-000-0000
23. Interpretation. The parties agree that each party and its counsel have
reviewed this Agreement and the normal rule of construction that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
24. Assignment / Binding. This Agreement is not assignable by either party
without the prior written consent of the other party. However, XXXXXX'X may,
without such consent of CO-PACKER, assign this Agreement to any subsidiary or
affiliate of XXXXXX'X or to a successor of its business, and CO-PACKER may
collaterally assign to its secured lenders only its rights to receive proceeds
hereunder. This Agreement shall be binding on the parties hereto and their
successors and assigns.
25. Entire Agreement. This Agreement and the agreements, certifications and
other documents incorporated herein by reference embody the entire understanding
of the parties and cannot be changed or modified orally but only by an
instrument in writing signed by a duly authorized representative of the party
against which enforcement of any waiver, change, modification or discharge is
sought. This Agreement replaces, supersedes and nullifies any agreement of the
same subject matter, whether oral or written, that the parties may have had. In
the event a conflict occurs between the terms included within this Agreement and
the terms of any other document specifically incorporated herein by reference,
the terms of this Agreement shall control. Furthermore, it is the intention of
the parties that this Agreement be controlling over additional or different
terms of any order, confirmation, invoice or similar document, even if accepted
in writing by both parties, and that waivers and amendments shall be effective
only if made by non-preprinted agreements clearly understood by both parties to
be an amendment or waiver.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
OVERHILL FARMS, INC., XXXXXX'X SALES ENTERPRISES, INC.
("CO-PACKER") ("XXXXXX'X")
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------ ------------------------
