EXHIBIT 10.7
MANUFACTURING AND PACKAGING AGREEMENT
THIS MANUFACTURING AND PACKAGING AGREEMENT is made and entered into on
May 15, 2001 in Hayward, California, by and between SWISS AMERICAN SAUSAGE
CO., a division of Provena Foods, Inc., a California corporation, having
principal offices at 000 X'Xxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 ("Swiss"),
and XXXXXXXX FOODS OF DISTINCTION, INC., a Colorado corporation, having
principal offices at 00000 Xxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
("Xxxxxxxx"), with reference to the following facts:
X. Xxxxxxxx is in the business of producing, marketing and
distributing food products for consumer use for itself and others.
X. Xxxxxxxx has developed and owns certain proprietary formulations
for such food products which have been submitted to Swiss for the purpose of
requesting Swiss to manufacture and package these products for Xxxxxxxx on a
"private label" or other basis.
C. Swiss desires to manufacture and package for Xxxxxxxx such food
products on a confidential and "private label" or other basis.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration,
Swiss and Xxxxxxxx agree as follows:
1. Term.
1.1 Subject to Sections 1.2 and 1.3, the term of this Agreement
shall commence on the date of this Agreement, and shall terminate on September
30, 2006, provided that this Agreement shall automatically be renewed for one
(1) additional year at the end of the original or any extended term, unless
either party gives written notice of termination to the other party at least
twelve (12) months prior to the expiration of the original or extended term.
Notwithstanding the above, however, immediately following the end of the third
year of the term of this Agreement, the parties shall negotiate in good faith
for the purpose of extending the initial term of this Agreement to ten (10)
years.
1.2 Upon expiration of this Agreement, Xxxxxxxx shall purchase
from Swiss at the formula prices any products ordered by Xxxxxxxx and produced
by Swiss prior to termination and shall purchase from Swiss at Swiss' costs
any ingredients or packaging materials for Xxxxxxxx products ordered by Swiss
in order to fill Xxxxxxxx'x orders prior to the expiration.
1.3 If either party fails to perform any material obligation
under this Agreement, the other party may terminate this Agreement upon thirty
(30) days' prior written notice to the breaching party, provided that the
breaching party has not cured the breach during that thirty-day period.
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2. Products. The products to be manufactured and packaged by Swiss for
Xxxxxxxx are listed on Exhibit A to this Agreement (the "Products"). The
Products shall be manufactured by Swiss utilizing equipment licensed to Swiss
by Xxxxxxxx (the "Equipment"). Xxxxxxxx shall purchase its requirements of
the Products exclusively from Swiss except to the extent Swiss is unable to
meet Xxxxxxxx'x requirements. Swiss will use commercially reasonable efforts
to meet Xxxxxxxx'x requirements which are estimated, initially, to be
1,150,000 pounds of meatballs per year and 700,000 pounds of chicken patties
per year, with the expectation of increases throughout the term.
3. Proprietary Formulas and Confidential Information.
3.1 The parties expect to receive and have access to
confidential information in the course of their dealing, including, but not
limited to, trade secrets and proprietary information relating to a party's
business, finances, plans, products, processes, recipes, formulas, customers,
and other information a party knows or should know to be confidential.
Confidential information does not include information generally available to
the public or in the industry or independently obtained or originated. Each
party agrees to refrain from using or disclosing such confidential information
except for the benefit of the other until such information becomes public
knowledge.
3.2 The parties agree that any violation of this paragraph may
cause the other party immediate and irreparable harm and, therefore, the other
party shall be entitled to injunctive relief as well as all other available
legal and equitable remedies. Upon the termination of this Agreement, both
parties shall promptly return to the other all proprietary information,
products and materials.
4. Price.
The prices for each product sold by Swiss to Xxxxxxxx shall be based upon
a formula adjusted each calendar month for the following month's sales. Swiss
will calculate the formula prices each month and deliver a copy of the
calculation to Xxxxxxxx, including appropriate backup substantiating any
modifications. The formula for each price shall set forth the price per pound
as the sum of direct costs plus overhead plus profit. Overhead (such as
quality control, management, insurance, depreciation, interest, and property
taxes) and profit shall remain constant. The direct costs will be itemized
and include ingredients, packaging materials, labor, finance charges and
utilities. Costs shall be adjusted based upon the following:
ITEM COST BASIS
Meat costs Market price
Other ingredients and packaging Swiss' actual costs
costs
Labor costs Wages and benefits under Swiss'
union contract plus payroll
taxes
Finance charges Comerica Bank-California "Base
Rate" plus .075%
Utility costs Swiss' utility rates
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Attached as Exhibit A is an itemized calculation of the formula price for
each product, including a description and amount of the cost basis for each
variable item, based upon contemporary costs. The parties agree to the
formula prices for the products set forth in Exhibit A. The prices are F.O.B.
Swiss' plant.
5. Insurance.
5.1 Xxxxxxxx and Swiss each agree to provide, and maintain in
effect throughout the term of this Agreement, product liability coverage in
the minimum amount of Two Million Dollars ($2,000,000) per occurrence for
products manufactured by Swiss for Xxxxxxxx and to name each other as
additional insureds on such insurance. Swiss shall provide an endorsement to
the insurance policy evidencing Xxxxxxxx'x status as an additional insured.
The endorsement shall provide that the insurance may not be canceled or
materially amended without thirty (30) days' prior written notice to the other
party.
5.2 Each party further agrees to maintain in effect throughout
the term of this Agreement workers compensation insurance, automobile
liability insurance, and general liability insurance with coverage in amounts
consistent with general industry standards. Each party will furnish the other
party upon request a certificate of insurance which evidences that the
required insurance is in effect.
6. Production, Invoicing and Delivery.
The parties estimate that the installation, start-up and test production
runs will be completed by October 1, 2001. The Products will be made to
Xxxxxxxx'x formulas and specifications. The parties will cooperate in
developing Swiss' capability of producing Products satisfactory to Xxxxxxxx.
The Products will be produced and packaged by Swiss under labels specified by
Xxxxxxxx. Swiss shall invoice Xxxxxxxx upon receipt of Xxxxxxxx sales order.
Invoices shall be paid in accordance with Swiss' standard commercial terms
previously supplied to Xxxxxxxx. Swiss shall prepare all shipments for
pick-up by a common carrier selected by Xxxxxxxx.
7. Product Specifications.
The parties shall agree to the Product quality specifications required by
Xxxxxxxx for each Product manufactured by Swiss. Specifications shall be
listed on Exhibit B to this Agreement. All Products manufactured by Swiss
under this Agreement shall be subject to inspection by Xxxxxxxx. If the
manufactured product does not meet the Product specifications, Swiss shall
either replace the non-complying Product with complying product or deduct the
amount paid by Xxxxxxxx, for Products that are returned by Xxxxxxxx or its
customers due to defects in manufacturing, from Xxxxxxxx'x invoices, at
Xxxxxxxx'x sole discretion. If a Product recall is necessary because of
manufacturing or production defects, Swiss shall bear the costs for the
recall.
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8. Competitive Products.
Swiss may produce and sell products to others competitive with the
Products, provided that Swiss will not sell to others any product using any
proprietary formula belonging to Xxxxxxxx, or any product utilizing a formula
which is known by Swiss to be an immaterial modification of a proprietary
formula belonging to Xxxxxxxx. Swiss will not utilize the Equipment to
produce for itself or others any product during any time in which Swiss is
unable to fulfill Xxxxxxxx'x requirements for a similar product. Swiss will
pay to Xxxxxxxx a fee of $0.01 per pound on any meatballs sold to third
parties during the term of this Agreement which were produced using the
Equipment.
9. Swiss' Representations and Warranties Regarding Proposition 65 and
Adulteration of Products.
Swiss hereby makes the representations and warranties set forth in
Exhibit C to this Agreement.
10. EEO Certification of Compliance.
Swiss hereby certifies to Xxxxxxxx that it will comply with the
requirements set forth in Exhibit D to this Agreement
11. Indemnification.
Swiss agrees to indemnify, defend and hold harmless Xxxxxxxx against and
in respect of any and all claims, demands, losses, costs, expenses, fines,
obligations, liabilities, damages, recoveries, and deficiencies, including
interest, penalties, and reasonable attorneys' fees, incurred or suffered by
Xxxxxxxx that are caused by the act or omission of Swiss and arise from,
result from, or relate to (i) each and every demand, action, suit, claim or
proceeding brought or commenced by a federal, state or local authority against
Xxxxxxxx alleging that any such article manufactured, packed, warehoused,
distributed or sold by Swiss to or on the order of Xxxxxxxx was, as of the
date of such shipment, adulterated, misbranded and/or falsely advertised
within the meaning of any state, federal or local law; or (ii) the injury,
illness and/or death of any person or damage to property arising out of or
alleged to have arisen out of or caused or alleged to have been caused by any
such article manufactured, packed, warehoused, distributed or sold by Swiss to
or on the order of Xxxxxxxx which was as of the date of such shipment,
adulterated, misbranded and/or falsely advertised within the meaning of any
state, federal or local law.
12. No Waiver.
The failure by either party hereto, at any time or times, to enforce any
provisions of this Agreement or to require performance by either party of any
provisions hereof, shall in no way be construed to be a waiver of such
provisions or to affect the validity of this Agreement or any part hereof, or
the right of either party thereafter to enforce each and every provision in
accordance with the terms of this Agreement.
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13. Notices.
Any notice or other communication to be given by either party hereto to
the other party hereto shall be in writing and mailed by certified or
registered mail with return receipt requested to the party to be notified, or
by overnight delivery by Federal Express or other guaranteed overnight
delivery service, at its address set forth below (or at such different address
as the party to receive the notice so designates by written notice to the
other party):
Xxxxxxxx: Xxxxxxxx Foods of Distinction, Inc.
00000 Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Swiss: Swiss American Sausage Company
000 X'Xxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxx Arena, President
14. No Oral Modification.
No modification, amendment or waiver of any of the provisions of this
Agreement shall be effective unless made in writing specifically referring to
this Agreement and duly signed by an authorized officer of each party hereto.
15. Entire Agreement.
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter of this Agreement and any and all
written or oral agreements heretofore existing between the parties hereto with
respect to this subject matter are expressly canceled.
16. Partial Invalidity.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, all of which shall
remain enforceable in accordance with their terms. Should any of the
obligations hereunder be found illegal or unenforceable as being too broad
with respect to the duration, scope or subject matter thereof, such
obligations shall be deemed and construed to be reduced to the maximum
duration, scope or subject matter allowable by law.
17. Sale of Business.
Either party may assign all of its rights under this Agreement and to the
Equipment to a person who acquires the business of the party to which this
Agreement and the License Agreement relate, provided that there is a
concurrent assignment to the person of the party's rights under the License
Agreement, provided that the person assumes and agrees to perform all
obligations to the other party under this Agreement and the License Agreement
and provided that the other party consents to the assignment, which consent
shall not be unreasonably withheld.
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18. Relationship Between Xxxxxxxx and Swiss.
Nothing in this Agreement shall be construed to place the parties in a
relationship whereby either shall be considered to be the agent of the other
for any purpose whatsoever. Neither party is authorized to enter into any
contract or assume any obligation for the other. Nothing in this Agreement
shall be construed to establish a relationship between Xxxxxxxx and Swiss as
partners or joint venturers.
19. Governing Law.
This Agreement shall be governed and interpreted by the laws of the State
of California, and jurisdiction and venue shall rest exclusively in the State
Courts located in San Francisco, California, or the United States District
Court for the Northern District of California. This paragraph shall survive
termination of the Agreement.
20. Arbitration.
20.1 Any controversy or claim arising out of or relating to
this Agreement or the making, performance or interpretation thereof shall be
settled by binding arbitration before JAMS/Endispute and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy. Arbitration shall take place in San
Francisco, California..
20.2 If any arbitration or other proceeding is brought for the
enforcement of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be awarded attorneys' fees, expert
witness' fees, arbitration fees and any and all other costs incurred in that
action or proceeding, including post-judgment attorneys' fees and costs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
XXXXXXXX FOODS OF DISTINCTION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Its: President
"Xxxxxxxx"
SWISS AMERICAN SAUSAGE CO.,
a division of Provena Foods, Inc., a
California corporation
By: /s/
Its: President
"Swiss"
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EXHIBIT A
PRODUCTS AND PRICE
EXHIBIT B
PRODUCT QUALITY SPECIFICATIONS
EXHIBIT C
SWISS' REPRESENTATIONS AND WARRANTIES
REGARDING MANUFACTURED PRODUCTS
Swiss represents and warrants to Xxxxxxxx as follows:
1. California Safe Drinking Water Act and Toxic Enforcement Act of 1986
Swiss acknowledges that Xxxxxxxx is subject to the Safe Drinking Water
and Toxic Enforcement Act of 1986 of the State of California, popularly known
as Proposition 65. Proposition 65 requires that all persons doing business in
the State of California provide clear and reasonable notice to all persons
exposed to chemicals identified by the State to cause cancer or reproductive
toxicity. Xxxxxxxx is required by each of its distributors to certify that
its products contain none of the chemicals listed by the State which are known
to cause cancer or reproductive toxicity or if any such chemicals are present,
they pose no significant risk. As a result of this legal requirement,
Xxxxxxxx is required to obtain from its suppliers certification that the
products manufactured by Swiss for Xxxxxxxx either (i) contain no chemicals
subject to Proposition 65 or that the chemicals meet State of California and
federal regulations and are not present in concentrations that would pose a
"significant risk" to consumers as defined in California law, or (ii) carry
appropriate product label warnings. Swiss hereby certifies that the foregoing
is true and correct. In addition, Swiss agrees to notify Xxxxxxxx of any
changes to the content of the products manufactured hereunder if any such
changes would affect the above certification. Because the list of Proposition
65 chemicals will be amended from time to time (generally on a quarterly
basis), it is the responsibility of Swiss to notify Xxxxxxxx of such changes
as they may affect compliance with Proposition 65.
2. Representations and Warranties Regarding Adulteration and Misbranding
Each and every article contained in each shipment or other delivery
hereafter made to, or on the order of, Swiss is hereby guaranteed as of the
date of such shipment (i) to not be adulterated or misbranded within the
meaning of:
(a) the Federal Food, Drug and Cosmetic Act, as amended, and all rules
and regulations promulgated thereunder; and not an article which may not,
under the provisions of Section 404, 505 or 512 of such Act, be introduced
into interstate commerce;
(b) the Federal Meat Inspection Act, as amended, and all rules and
regulations promulgated thereunder;
(c) The Poultry Products Inspection Act, as amended, and all rules and
regulations promulgated thereunder; and
(d) Any similar state or local laws, and all rules and regulations
promulgated thereunder.
(ii) to not be adulterated, misbranded or packaged in misbranded
packages, within the meaning of the terms of the Federal Insecticide,
Fungicide, and Rodenticide Act, the Federal Hazardous Substances Labeling Act,
the state pure food and drug acts or any other applicable federal, state or
local laws, ordinances, rules or regulations and not an article of food, drug,
device or cosmetic, which is in violation of, or which cannot be legally
transported or sold under, the provisions of any federal, state, or local
laws, ordinances, rules or regulations; (iii) to not be misbranded within the
meaning of any federal, state or local laws, ordinances, rules or regulations
when bearing labels furnished by Swiss, and affixed to such article of food,
drug, device or cosmetic on repackaging by Xxxxxxxx in accordance with
instructions furnished by Swiss; (iv) to be free from any Salmonella organism,
pathogen or toxin; and (v) to be free from any foreign material, poisonous or
injurious matter.
EXHIBIT D
EEO CERTIFICATE OF COMPLIANCE
Swiss agrees that the following provisions are automatically made part of
and supplement all purchase orders and contracts issued or entered into by
Xxxxxxxx for the purchase of materials, supplies or services furnished by
Swiss.
A. Equal Opportunity Clause. Swiss agrees to comply with all
applicable provisions of Executive Order 11246, as amended by Executive Order
11373 and 12906, as implemented by 41 CFR Section 60-1.4.
B. Certification of Nonsegregated Facilities. Swiss certifies that
it does not and will not maintain or provide for its employees any segregated
facilities at any of its establishments, and that it does not and will not
permit its employees to perform services at any location where facilities are
segregated on the basis of race, color, religion or national origin. Swiss
understands and agrees that a breach of this certification is a violation of
the Equal Opportunity Clause described in Paragraph A above.
C. Employer Information Report (EEO-l) Standard Form 100. If Swiss
is required under 41 CFR Section 60-1.7 to file an Employer Information Report
EEO-1 (Standard Form 100), Swiss hereby certifies that it has done so.
D. Employment of Veterans. Swiss agrees to comply with all
applicable provisions of the Vietnam Era Veteran's Readjustment Assistance Act
of 1974, Executive Order 11701 (41 CFR Section 60250) and the provisions of
the standard contract clauses prescribed thereunder, dealing with the
employment of qualified disabled veterans and veterans of the Vietnam War.
E. Federal Contractors Veterans Employment Report (VETS-100). If
Swiss is required under 41 CFR Section 60-250 to file a Veterans Employment
Report (Vets-100), Swiss hereby certifies that it has done so.
F. Employment of Handicapped Persons. Swiss agrees to comply with all
applicable provisions of the Rehabilitation Act of 1973 (41 CFR Section
60-741) and all of the standard contract clauses prescribed thereunder,
pertaining to the employment of qualified handicapped individuals.
G. Utilization of Small Business Concerns and Small Business Concerns
Owned and Controlled by Socially and Economically Disadvantaged Individuals.
Swiss agrees to comply with all applicable provisions of Executive Order 11625
and Section 211 of Public Law 95-507 relating to assistance to minority
business enterprises, as implemented by Federal Acquisition Regulations, 48
CFR, Chapter 1, Part 52.
H. Utilization of Women-Owned Business Concerns. Swiss agrees to
comply with all applicable provisions of Executive Order 12138 relating to
opportunities for women-owned business, as implemented by Federal Acquisition
Regulations, 48 CFR, Chapter 1, Part 52.
