CERTAIN CONFIDENTIAL MATERIAL CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.4
CO-PACK AND WAREHOUSING AGREEMENT
THIS CO-PACK AND WAREHOUSING AGREEMENT (this "AGREEMENT") is made and
entered into this 26th day of January 2001, by and between HOOPESTON FOODS
DENVER CORP. ("HFDC"), a Delaware corporation and XXXXXX CANNING COMPANY
("XXXXXX"), a Colorado corporation.
WITNESSETH
WHEREAS, XXXXXX, and its affiliates, are in the business of marketing and
distributing a variety of canned food products; and
WHEREAS, pursuant to various agreements between HFDC and XXXXXX set forth
on Schedule 1 hereto (the "Other Agreements"), HFDC has leased and now operates
the Denver, Colorado processing plant owned by XXXXXX (the "DENVER FACILITY");
and
WHEREAS, HFDC desires to produce and package for XXXXXX a variety of canned
food products (the "PRODUCTS") as described in Exhibit A, attached hereto and
incorporated herein, and XXXXXX is willing to purchase the Products from HFDC
in accordance with the terms and conditions of this Agreement; and
WHEREAS, XXXXXX desires that HFDC warehouse the Products produced
hereunder on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Manufacture and Packaging of Products.
(a) Products. HFDC shall produce and package the Products for XXXXXX
pursuant to the terms and conditions of this Agreement. In the event that the
parties hereto agree in writing that a product other than the Products shall be
produced and packaged by HFDC for XXXXXX, then such other product(s) shall be
deemed to be a Product for the purposes of this Agreement.
(b) Manufacture and Packaging of Products. HFDC shall produce,
package and label the products in accordance with the terms and conditions of
this Agreement and an annual pack plan, and shall comply with the
specifications set forth in Exhibit A, unless otherwise agreed to by both
parties. An Annual pack plan shall be negotiated and agreed to by the parties
for each Contract Year, as defined herein, during the term of this Agreement.
(c) Production. HFDC warrants and guarantees that the Products
manufactured by HFDC hereunder shall comply with all federal and state pure
food laws and regulations, as
amended, and that the Products shall not be adulterated within the meaning
of the Federal Food, Drug and Cosmetic Act (the "FEDERAL ACT") or any
similar statute, and will not be an article which may not, under the
provisions of Section 404 of the Federal Act, be introduced into interstate
commerce. HFDC shall not use any food additive in the Products, as defined
in the Federal Act, unless XXXXXX has approved its use and the United
States Food & Drug Administration or the United States Department of
Agriculture, has either exempted it from the food additive requirements of
the Federal Act or prescribed the conditions under which it may be safely
used, in which case the prescribed conditions shall be complied with.
(d) Raw Materials. HFDC shall supply all the raw materials and
packaging materials necessary to manufacture and package the Products as
outlined in Exhibit B, attached hereto and incorporated herein.
(e) Labels. XXXXXX shall supply the labels necessary to package the
products and shall be solely responsible for assuring that the labels
required to package the Products are delivered to the Denver Facility in a
timely manner.
(f) Compliance With Law. In connection with the manufacture and
warehousing of the Products, packaging and raw materials, HFDC shall comply
with all applicable local, county, state and federal laws, codes and
ordinances of any description, including without limitation, all laws
regarding occupational health or safety issues, labor laws, product safety
laws, fire codes and hazardous waste or toxic substances management,
handling or disposal laws, and HFDC shall forthwith remedy any breach of
such laws in a customary manner. Without limiting the generality of the
foregoing, HFDC shall comply with all applicable laws, codes and ordinances
regarding environmental protection or pollution control, including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended, and HFDC shall
forthwith remedy any breach of such law in a customary manner.
2. Term. This Agreement shall commence on January 26, 2001 and
shall have an initial term of five (5) years, until January 26, 2006, unless
terminated earlier pursuant to Section 17. On June 30 of each year commencing
June 30, 2001, the term of this Agreement shall be extended for one additional
year, without action by either party, unless prior to June 30 of each year
during the term hereof either party gives written notice that it will not agree
to any additional extensions of the term. In the event of such notice, the term
of this Agreement shall then be fixed and not be subject to any further
additional automatic extensions. Each twelve (12) month period during the term
of this Agreement shall be referred to herein as a "CONTRACT YEAR".
3. Prices and Terms.
(a) XXXXXX shall pay the prices specified on Exhibit C attached
hereto and incorporated herein for the Products manufactured and packaged
by HFDC hereunder, which prices shall represent the cost of HFDC for
manufacturing and labeling the Products as set forth in Exhibit C and shall
be based initially on the historic cost of XXXXXX as set forth in Exhibit C
to manufacture and package such Products, plus a fixed rate per case as
margin
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The prices set forth in Exhibit C shall be reviewed after the completion of the
first full Contract Year, and thereafter, shall be reviewed annually only to
take into account any changes in the cost of items listed in Exhibit C.
Notwithstanding the foregoing, the prices charged by HFDC to XXXXXX hereunder
shall in no event exceed the lowest prices offered by HFDC to any of its other
customers for comparable products.
(b) HFDC shall invoice XXXXXX upon the labeling of the Products and XXXXXX
shall pay such invoices to HFDC within thirty (30) days from the date of such
invoices. For each Contract Year during the term of this Agreement, beginning on
January 26, 2001, if XXXXXX does not purchase Products aggregating 585,053
12-pack (15 oz.) equivalent cases during each Contract Year, XXXXXX shall pay
HFDC, on or before the thirtieth (30th) day following the end of such Contract
Year, the amount set forth in Exhibit C as fixed manufacturing expense/fixed
warehousing expenses (FME/FWE) multiplied by the difference between 585,053
12-pack (15 oz.) equivalent cases and the actual number of cases purchased by
XXXXXX from HFDC during such Contract Year.
(c) No later than May 1st preceding the beginning of each Contract Year,
XXXXXX shall specify to HFDC the estimated annual quantities by stock keeping
unit ("SKU") required for brite and labeled products that HFDC will manufacture,
process and package during such Contract Year. On or before August 1st,
preceding each Contract Year, XXXXXX shall specify the actual quantities by SKU
that HFDC will manufacture, process and package during such Contract Year (the
"REQUIRED VOLUME"). The notices provided under this paragraph are for planning
purposes only and are not binding on the parties and shall not effect the
minimum volume requirements contained in paragraph 3(b) above.
(d) XXXXXX shall prepare a Monthly Production Plan (the "PRODUCTION
PLAN") setting forth HFDC's total production requirements for a three-month
period. Based on the Production Plan, HFDC and XXXXXX shall use their best
efforts to prepare a proposed thirteen (13) week production schedule. Based
on this thirteen (13) week production schedule, XXXXXX and HFDC will use their
best efforts to establish firm two (2) week production schedules.
(e) HFDC shall provide such written reports as are reasonably requested
by XXXXXX, in a form reasonably acceptable to XXXXXX, on actual production and
amounts and location of brite and finished product and packaging inventories on
a monthly basis or as otherwise requested by XXXXXX.
(f) HFDC shall maintain and retain accurate records of production,
shipment, rejected Raw Materials and rejected Product, as well as other records
required to be kept by applicable local, state or federal law or as may be
reasonably requested by XXXXXX. Such records shall be available to XXXXXX for
copying and audit verification at any time during HFDC's regular business hours
and shall be retained by HFDC for XXXXXX' use for at least two (2) years after
completion of production.
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(g) HFDC shall cause Xxxx Xxxxxx to devote sufficient time to HFDC
to properly run and manage the business of HFDC and perform all of HFDC
obligations under this Agreement and the Other Agreement.
4. Manufacture. HFDC shall manufacture and package the Products in
accordance with the production schedule specified in the annual pack plan,
which shall be attached hereto as Exhibit D and incorporated herein by
reference. It may be necessary from time to time for HFDC to increase inventory
levels in order to meet seasonal demands. Therefore, based on HFDC's
manufacturing and packaging output, HFDC may make reasonable adjustments to the
monthly manufacturing and packaging of the Products. The annual pack plan shall
contemplate the building of inventory levels to meet historical seasonal
demands of the Products and shall not unreasonably interfere with or increase
the costs of the ongoing production of the private label products produced for
other customers of HFDC.
5. Delivery and Acceptance. XXXXXX shall not be deemed to have accepted
the Products delivered unless Products meet the specifications of XXXXXX as
outlined in Exhibit A and the other requirements of this Agreement. XXXXXX
shall test shipments on a periodic basis as determined by XXXXXX from time to
time. HFDC will produce the quantities and qualities specified in Exhibit A and
in this Agreement. Any deviation from the quality spectrum percentage must be
agreed to in writing in advance to any production.
6. Shipment Transportation Terms. XXXXXX shall arrange for the shipment
of Products and shall be solely responsible for all costs resulting from the
transportation of the Products, freight on board the applicable production
facility or freight on board the Facility if such Products are labeled at the
Facility, including but not limited to pallet charges and special handling
charges.
7. Warehousing and Distribution. HFDC shall warehouse the Products for
the convenience of XXXXXX for a period of thirty (30) days after the Products
are labeled, and any additional warehousing and distribution costs will be
invoiced by HFDC to XXXXXX at the end of each calendar month in accordance with
the prices and terms specified in Exhibit E and shall be paid by XXXXXX within
thirty (30) days from the date of such invoices. The charge to XXXXXX for
additional warehousing shall be no greater than the lowest prices offered by
HFDC to any of its other customers for the same services.
8. Insurance. HFDC shall be solely responsible for maintaining insurance
for fire, damage, etc., protection for the facilities. HFDC shall be
responsible for ensuring that Product is handled appropriately within its
warehouse. Any damaged or lost Product will be the responsibility of HFDC and
HFDC will reimburse XXXXXX for any such Product within ten (10) days of
receiving any insurance proceeds for an insured claim and within thirty (30)
days of occurrence for an uninsured claim.
Until completion of the services to be provided hereunder, HFDC shall
maintain at all times and at its own expense the following described insurance,
all of the occurrence form:
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(a) Workers Compensation Insurance, including occupational disease
coverage, all as required by law, and Employer's Liability Insurance with
a limit of $500,000 per occurrence for each employee.
(b) Commercial General Liability Insurance, including products,
completed operations and contractual liability, insuring against personal
injuries and property damage with limits of not less than $2,000,000
general aggregate and each occurrence; $500,000 fire damage any one fire;
and $5,000 medical expense any one person.
9. Proprietary Rights.
(a) HFDC acknowledges XXXXXX' sole and exclusive ownership and right
to exercise control over the nature and quality of XXXXXX' trademarks,
service marks and copyright rights. HFDC shall not acquire, nor authorize,
nor permit anyone to acquire, any right with respect to any trademark,
service xxxx or copyright of XXXXXX.
(b) HFDC covenants that all packaging materials will be used in the
manner set forth and shall comply with the quality performance
requirements set forth in Exhibit A.
10. Quality and Compliance. All Products produced under this Agreement
shall be wholesome, merchantable and fit for human consumption, and shall
comply with all specifications therefor as set forth in Exhibit A and this
Agreement. Each party shall promptly notify the other of any significant matter
relating to any of the Products produced under this Agreement including,
without limitation, any citation or regulatory action by any federal, state or
local authority or regulatory agency that relates to the quality or
merchantability of the Products; any bacterial, chemical, pesticide or other
communication of any of the Products or other condition that violates any
federal, state or local food and drug law or regulation; or any mislabeling,
misbranding or adulteration of any of the Products.
11. Access. Representatives of XXXXXX shall have reasonable access during
the term of this Agreement to the facilities of HFDC in which the Products are
manufactured and labeled, and to all production, and quality records pertaining
to the Products, to the extent the same may be relevant, necessary and
appropriate to monitoring quality control and to assuring compliance under this
Agreement. XXXXXX may send qualified representatives to the facilities of HFDC
during any time Products are being produced under this Agreement, for the
purpose of monitoring quality control and assuring compliance. In the event this
option is exercised, HFDC shall furnish space at its facilities, together with
utilities furnished to such space, in order that such grading and testing of
ingredients, materials and raw materials may be carried on as said
representatives deem appropriate. Except for the negligent or willful misconduct
of such qualified representatives which is relied upon or acted upon by HFDC,
such qualified representatives' actions or inaction hereunder shall not relieve
HFDC of its responsibilities under this Agreement.
12. Consumer Complaints. In the event of consumer complaints, claims or
legal actions alleging damage, death, illness or injuries resulting from
consumption or use of any Products produced under this Agreement, XXXXXX shall
forthwith notify HFDC, and both shall make an
5
investigation. The parties agree the investigation by the claim services of the
National Food Processors Association (NFPA) shall satisfy both parties'
investigative requirements. The findings of any such investigation shall serve
as the basis for negotiations between the parties to determine their respective
shares, if any, of the responsibility and cost for the defense thereof, in whole
or in part. The parties agree to pursue any such negotiations in good faith for
a period not less than ninety (90) days following actual notice to each of them
of the results of the investigation, following which period either party may
pursue such remedies as it may have at law or equity.
13. Recalls and Seizures. In the event of a recall (as that term is
defined under appropriate regulations of the United States Food & Drug
Administration) or any seizure (as that term is defined under the Federal Act
and applicable Federal regulations) of any Products produced hereunder which
results from any act or omission of HFDC, which would require its
indemnification of XXXXXX under this Agreement, HFDC or its insurance carrier
shall reimburse XXXXXX for all out-of-pocket direct expenses incurred by XXXXXX
in connection with the recall or seizure, and shall, without charge to XXXXXX,
replace the Products subject to the recall or seizure; provided, however, HFDC
shall be obligated to indemnify XXXXXX only to the extent such expenses and
replacement costs are not recovered by HFDC from insurance proceeds pertaining
to such recall or seizure.
14. Title and Risk of Loss. HFDC shall transfer title to the Products to
XXXXXX at the applicable production facility, in most cases, the Denver
Facility, as of the date, time and place of delivery free and clear of liens and
other claims by third parties. Risk of loss shall pass from HFDC to XXXXXX upon
such transfer of title.
15. Confidential Information. During the term of this Agreement, and for a
period of ten (10) years thereafter, HFDC shall not disclose to any third
parties, nor use, except in the performance of this Agreement, any trade secrets
or information received from XXXXXX; provided, however, this obligation of
confidentiality and non-use shall not apply or shall cease to apply to
information which (a) was known to HFDC before disclosure; (b) was in the public
domain as of the date of disclosure, or subsequently comes into the public
domain; or (c) is subsequently legally acquired by HFDC. The parties agree that
the exhibits to this Agreement and the annual pack plans hereunder shall
constitute confidential information.
16. Force Majeure. If the performance of any part of this Agreement by
either party is prevented, hindered or delayed by reason of any cause or causes
beyond the control of such party due to acts of God, war, riot, fire,
explosion, accident, flood, sabotage, inability to obtain raw materials or fuel
or power, governmental laws, regulations or orders, breakage of machinery or
any other cause beyond the reasonable control of such party, or labor unrest,
strike, lockout or injunction, as the case may be and which cannot be overcome
by due diligence, the party affected shall be excused from such performance to
the extent that it is necessarily prevented, hindered or delayed thereby.
During the continuance of any such happening or event, this contract shall be
deemed suspended so long as and to the extent that any such case prevents or
delays its performance.
6
17. Termination by Either Party. Without prejudice to any other rights
either party may have under this Agreement, applicable law or rule of equity,
either party shall have the option to terminate this Agreement in the event:
(a) Subject to the provisions of Section 16, the other party commits
a material breach of any term, covenant or condition of this Agreement (and,
specifically by way of example and not limitation if HFDC ceases operation or
fails to substantially comply with the production schedule in an annual pack
plan) and such breach is not remedied within thirty (30) days after the
aggrieved party has sent written notice of such breach to the other party;
(b) The other party becomes insolvent within the meaning of any
bankruptcy or insolvency law, or makes an assignment for the benefit of its
creditors;
(c) An attachment, execution or lien is levied against the Products
under this Agreement and such attachment, execution or lien is not remedied
within thirty (30) days after the aggrieved party has sent written notice of
such event to the other party;
(d) A controlling interest in the other party is sold or
transferred, other than by gift or inheritance, unless the other party consents
to the change, which consent shall not be unreasonably withheld; provided,
however, that the non-transferring party shall consent to the change if it is
reasonably concluded that after the transfer of a controlling interest the
ability of the other party to perform this Agreement will not be impaired; or
(e) Subject to the provisions of Section 16, HFDC's ability to
produce and deliver the Products pursuant to this Agreement is impaired by
substantial damage or destruction of its processing facility, and such damage
or destruction is not repaired within sixty (60) days.
(f) The other commits a breach of any obligations under the Other
Agreements and such breach is not cured within any applicable cure periods set
forth in the Other Agreements.
18. Termination by HFDC. If (i) XXXXXX should breach the Lease Agreement
for the Plant, the Equipment Lease Agreement, or the Exclusive License
Agreement (collectively, the "Subject Contracts"), which comprise three of the
Other Agreements and are listed on Schedule 1 hereto, and XXXXXX fails to cure
such breach within 30 days after receipt of written notice from HFDC describing
such breach (if XXXXXX is diligently attempting to cure the breach and the
nature of the breach requires longer than 30 days to cure, the cure period
shall be extended to allow a reasonable additional period of time to cure the
breach), or (ii) if any of the Subject Contracts shall expire or terminate
early pursuant to its terms, during the term of this Agreement, HFDC shall have
the right to terminate this Agreement as of the effective date of the
termination or expiration of said Subject Contracts.
19. Indemnification. Each party hereto agrees to fully indemnify, defend
and hold the other party harmless from any and all claims, complaints, losses,
costs, expenses, damages or fees (including all attorneys' fees) arising from
or associated with any failure by such party to comply
7
with the terms, undertakings, commitments, representations or warranties set
forth in this Agreement. Each party waives any claim or right to seek
indemnification for consequential damages. If the indemnifying party shall so
request, the indemnified party agrees to cooperate with the indemnifying party
and its counsel in contesting any claim which the indemnifying party elects to
contest or, if appropriate, in making any counterclaim against the person
asserting the claim, or any cross-complaint against any person. The
indemnifying party shall reimburse the indemnified party for any expenses
incurred by it in so cooperating.
20. Audit. For a period of one (1) year following the reporting to XXXXXX
by HFDC as to its costs incurred under this Agreement, XXXXXX shall have the
right on reasonable notice to HFDC to examine, on an "open book" basis, the
pertinent records of HFDC to verify the accuracy of such costs and the
appropriateness of the allocation of such costs. Should any disagreement arise
as to such costs, the matter shall be referred for resolution to a big-six
public accounting firm mutually acceptable to and independent from HFDC and
XXXXXX (the "Accountant"). Upon the engagement of the Accountant, HFDC and
XXXXXX shall each submit a statement to the Accountant setting forth its
respective position regarding the disagreement. The determination of the
Accountant shall be conclusive and binding upon the parties. All fees and
expenses of the Accountant in performing its duties hereunder shall be shared
equally by HFDC and XXXXXX, each of which hereby agrees to pay its share of
such fees and expenses. Beginning on January 1, 2002 and at the end of each
Contract Year thereafter, HFDC shall adjust the prices and terms set forth in
Exhibit C based on the evaluation of its previous 12 months' actual costs.
21. Severability. If any provision herein is held to be illegal, invalid
or unenforceable in any jurisdiction, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such provision had
never comprised a part hereof; the remaining provisions hereof shall remain in
full force and effect and shall not be affected by such provision or by its
severance herefrom. Furthermore, in lieu of such provision, there shall be
added automatically as part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible which
shall be legal, valid and enforceable, and which will give effect to the
intention of the parties, and which is agreed to by the parties in writing.
22. Non-Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Any attempted assignment without such
consent shall be void.
23. Independent Contractor. The parties hereto acknowledge and agree that
the arrangements provided for by this Agreement and the relationship created
thereby shall not be construed as a joint venture, partnership or other
affiliation. HFDC and XXXXXX are independent contractors and their performance
under this Agreement does not make or constitute either of them the agent or
representative of the other for any purpose whatsoever.
24. Notices. Any notice which may or must be given under this Agreement
shall be in writing and shall either be delivered by messenger or sent by
certified mail, air courier, facsimile machine (followed by certified mailing),
or other confirmable form of delivery to the intended party, at the following
addresses:
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To HFDC at:
Xxxx X. Xxxxxx
XXXX
Xxx Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxx Xxxxx Xxxxxxx
Xxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To XXXXXX at:
Xxx Xxxxx
XXXXXX
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx, Esq.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address as a party may hereafter designate by notice in
writing to the other party.
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IN WITNESS WHEREOF, the parties hereto duly execute this Agreement as of
January 26, 2001.
HOOPESTON FOODS DENVER CORP. XXXXXX CANNING COMPANY
/s/ Xxxx X. Xxxxxx /s/ Xxxxx X. Xxxxx
--------------------------- ---------------------------
By: Xxxx X. Xxxxxx By: Xxxxx X. Xxxxx
----------------------
Its: President and CEO Its: CEO
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