PRODUCTION AGREEMENT
This Production Agreement (the "Agreement") is made as of the 9th day of
June, 1997, by and between MBW Foods, Inc., a Delaware corporation ("Buyer"),
and The Red Wing Company, Inc., a Delaware corporation ("Producer").
WITNESSETH
WHEREAS, Buyer possesses formulas and processes for the manufacture of
certain food products described in Schedule A hereto (the "Products");
WHEREAS, Producer is engaged in the business of manufacturing and mixing
food products, including food products similar to the Products;
WHEREAS, Producer has facilities and expertise for the production of the
Products; and
WHEREAS, Buyer and Producer desire to define and develop a business
relationship whereby Producer will manufacture and sell, and Buyer will
purchase, the Products subject to the terms and conditions set forth herein.
NOW THEREFORE, for mutual and adequate consideration, Producer and Buyer
agree as follows:
1. TERM. Unless earlier terminated in accordance with Section 22 hereof, this
Agreement shall commence on the date hereof (the "Commencement Date") and
shall end on the fifth anniversary of the Commencement Date (the "Original
Term") and shall be subject to automatic renewal for additional consecutive
one year terms (the "Renewal Term or Terms") unless a decision is made by
either party not to renew. Any decision not to renew shall be submitted in
writing by the party making such decision no later than one-hundred eighty
(180) days prior to the expiration of the Original Term or any Renewal
Term. The "Agreement Term" shall mean the Original Term, and if this
Agreement is renewed, the Renewal Term or Terms.
2. PRODUCTION FACILITIES. The Products will be manufactured at Producer's
facilities located at San Jose, California (the "San Xxxx Plant"),
Streator, Illinois (the "Streator Plant") and any other plant location of
Producer as is approved in advance by Buyer, which approval shall not be
unreasonably withheld (each, an "Approved Facility").
3. PRODUCTS. Subject to the terms and conditions of this Agreement, Producer
agrees to manufacture and sell to Buyer, and Buyer agrees to purchase from
the Producer, the Products as set forth on Schedule A
in such quantities and at such Approved Facilities as shall be determined
from time to time in the sole judgment of Buyer. Notwithstanding the
foregoing, Buyer agrees that (i) during the first year of the Original Term
(with the first year being measured from the Commencement Date to the day
immediately preceding the first anniversary of the Commencement Date), Buyer
shall order at least one million five hundred thousand equivalent cases of
Products from the Producer (with an equivalent case being equal to 288
ounces of the Products) and (ii) during each year of the Original Term
thereafter, Buyer shall order at least two million five hundred thousand
equivalent cases of Products from the Producer. IF, DURING ANY SUCH YEAR
OF THE ORIGINAL TERM, BUYER SHALL FAIL TO ORDER AT LEAST SUCH NUMBER OF
EQUIVALENT CASES OF PRODUCTS FROM THE PRODUCER, THE SOLE AND EXCLUSIVE
REMEDY FOR PRODUCER FOR SUCH FAILURE SHALL BE THAT, FOR EACH YEAR IN WHICH
THE BUYER FAILS TO ORDER AT LEAST SUCH NUMBER OF EQUIVALENT CASES OF
PRODUCTS FROM THE PRODUCER, AN ADDITIONAL ONE HUNDRED EIGHTY DAYS SHALL BE
ADDED TO THE ORIGINAL TWO YEAR PERIOD SET FORTH IN Section 22(B) OF THIS
AGREEMENT BEFORE THE BUYER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT
PURSUANT TO SECTION 22(B).
4. MANUFACTURING STANDARDS. Producer agrees to manufacture each of the
Products in accordance with Buyer's specifications, quality control
standards and other procedures that are contained in the Operating Manual
that has been delivered to Producer and that shall be deemed to be a part
hereof as Schedule B (the "Specifications"), which may be modified from
time to time in the sole judgment of Buyer upon thirty days prior written
notice to the Producer; provided, however, in the event any such
modifications to the Specifications result in any change in the cost to
produce the Products, the price for the Products shall be adjusted upward
or downward, as the case may be, to cover the change in the cost to produce
the Products. Upon written notification from Buyer to the Producer
modifying the Specifications, Schedule B shall be deemed amended by such
modification. Buyer agrees to promptly supply Producer with all formulas,
operating techniques, manufacturing procedures and other technical
information necessary and appropriate for the manufacture of the Products;
provided, however, that Producer understands that Buyer is relying upon
Producer's expertise in suggesting to Buyer and implementing the
appropriate procedures for the manufacture of the Products.
5. GRANT OF LICENSE. Subject to the terms and conditions of this Agreement,
Buyer hereby grants to Producer, who accepts the same, a non-exclusive,
non-assignable, indivisible and royalty-free right and license to
manufacture and sell the Products to Buyer exclusively. The
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license includes the right to use the Specifications and any other technical
know-how, formulas, manufacturing processes, and other technical and
confidential information useful or necessary for the manufacture of the
Products. This license will remain in effect until the expiration or other
termination of this Agreement and may not be assigned, transferred
(including any transfer by operation of law), subcontracted or sublicensed
to any third party (other than, in the case of a sublicense or subcontract,
to a wholly-owned subsidiary of the Producer) without the prior written
consent of Buyer, which consent may be withheld in the sole discretion of
Buyer. In the event Producer enters into any sublicense or subcontract
with a wholly-owned subsidiary of Producer, Producer shall be responsible
for all acts and omissions of its wholly-owned subsidiary.
6. CONFIDENTIAL INFORMATION.
a. For the purpose of this Agreement, "Confidential Information" shall
mean all written information related to the Products and all formulas,
manufacturing processes, data, know-how, technical and non-technical
materials, and product samples and specifications (including the
Specifications) which Buyer has disclosed to Producer prior to this
Agreement or which Buyer may disclose to Producer pursuant to or in
connection with this Agreement, and all pricing information with
respect to the Products, all written financial information,
manufacturing processes, data, know-how, technical and non-technical
materials which Producer has disclosed to Buyer prior to this
Agreement or which Producer may disclose to Buyer pursuant to or in
connection with this Agreement.
b. Notwithstanding the foregoing, Confidential Information shall not
include any information which the non-disclosing party can demonstrate
by reasonable evidence: (i) is or becomes public knowledge through no
fault or omission of the non-disclosing party; (ii) is lawfully
obtained by the non-disclosing party from a third party under no
obligation of confidentiality concerning such information; (iii) was,
at the time of receipt, otherwise known to the non-disclosing party
without restrictions as to use or disclosure; or (iv) is developed
independently by the non-disclosing party and without reliance upon
the Confidential Information disclosed hereunder. The burden of
proving any such exceptions to the definition of Confidential
Information will reside with the non-disclosing party.
c. The non-disclosing party agrees to hold all Confidential Information
of the disclosing party in confidence and not to
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disclose any Confidential Information to any third party except (i)
those with a need to know in order to assist in the manufacture of the
Products, (ii) as may be required by law; or (iii) to accountants,
attorneys, bankers and other professional advisors of a party. The
non-disclosing party agrees not to make any use of the Confidential
Information except as provided herein.
d. The non-disclosing party agrees that its directors, officers,
employees, agents and other representatives who have access to the
Confidential Information of the disclosing party will be made aware of
the obligations of confidentiality and non-use set forth in Section 6
of this Agreement and will be bound to abide by these obligations. The
non-disclosing party agrees that it shall be responsible for any
breach of the obligations of confidentiality or non-use by any person
to whom such information is disclosed by the non-disclosing party.
e. The Confidential Information of the disclosing party shall remain the
exclusive property of the disclosing party, and the non-disclosing
party acquires no interest in or rights thereto under this Agreement
or otherwise. Upon termination of this Agreement, or at any time upon
the disclosing party's request, the non-disclosing party shall, at its
sole option, either promptly return all tangible forms of Confidential
Information of the disclosing party (including copies) to the
disclosing party then in the non-disclosing party's possession or
under its control or destroy such Confidential Information and deliver
a certificate to the disclosing party certifying such destruction.
Upon termination of this Agreement, to the extent that any document
prepared by or on behalf of the non-disclosing party incorporates any
Confidential Information of the disclosing party, the non-disclosing
party shall destroy such documentation and deliver a certificate to
the disclosing party certifying such destruction.
f. The non-disclosing party shall be liable to the disclosing party for
all direct and incidental damages (including, without limitation,
reasonable attorneys fees) incurred as a result of the breach of the
confidentiality and/or non-use provisions of Section 6 of this
Agreement by the non-disclosing party. The non-disclosing party also
acknowledges and agrees that, in the event of such a breach, such
Damages may not be an adequate remedy and that the disclosing party
shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach.
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g. The non-disclosing party acknowledges that the Confidential
Information disclosed or to be disclosed by the disclosing party
represents the disclosing party's valuable property, which is intended
to be maintained in perpetuity as trade secret property. Accordingly,
the confidentiality and non-use obligations of Section 6 of this
Agreement shall be continuing in nature and shall survive termination
of this Agreement.
7. SALE AND PURCHASE OF PRODUCTS.
a. The terms and conditions contained in this Agreement shall be
effective for all Products sold by the Producer to the Buyer during
the Agreement Term. During the Agreement Term, Producer agrees to
manufacture and sell the Products to Buyer against the Monthly
Production Request (as such term is hereinafter defined in Section 10
of this Agreement) of the Buyer, which request shall be deemed to be a
production purchase order. During the Agreement Term, Producer
agrees to deliver the Products manufactured and sold to Buyer against
shipping orders of Buyer. Except as otherwise set forth in this
Agreement, each contract for the purchase and sale of the Products
shall be initiated hereunder by Buyer's issuance to Producer of a
production purchase order and delivery of such Products shall be
initiated against shipping orders of the Buyer. Unless Buyer
otherwise agrees in writing, ALL PRODUCTION PURCHASE ORDERS AND
SHIPPING ORDERS ARE EXPRESSLY LIMITED TO THE TERMS HEREOF AND ANY
ADDITIONAL OR DIFFERENT TERMS ARE OBJECTED TO WITHOUT FURTHER
NOTIFICATION BY PRODUCER AND BUYER. Shipping orders shall be issued
to the Producer at least five (5) business days prior to the requested
shipping date. If the quantity of the particular Product requested in
such shipping order for delivery in a calendar month, when added
together with all other shipping orders for such particular Product
for delivery in the same calendar month, is not in excess of the
quantity for such Product as set forth in the then current Monthly
Production Request, such shipping order for such Product shall be
deemed accepted without any further act of the Producer. If the
quantity of the particular Product requested in such shipping order
for delivery in a calendar month, when added together with all other
shipping orders for such particular Product for delivery in the same
calendar month, is in excess of the quantity for such Product as set
forth in the then current Monthly Production Request, such shipping
order shall be deemed accepted to the extent that such quantities are
not in excess of the then current Monthly Production Request for such
Product and, with respect to the
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remaining quantities, shall be accepted or rejected by Producer in
writing within five (5) business days of the issuance of the shipping
order to the Producer. If the Producer shall not have otherwise
notified the Buyer within five (5) business days of the issuance of
such shipping order, the order shall be deemed accepted in full by
Producer and, to the extent the quantities are in excess of the then
current Monthly Production Request for such Product, shall be deemed
to be a production purchase order with respect to such excess
quantities. Producer shall use its best efforts to deliver all
quantities of Products ordered by Buyer pursuant to any shipping order.
This Agreement and all orders issued pursuant hereto shall be deemed a
series of installments and shall be deemed to constitute a single
contract between Producer and Buyer. The parties recognize that
the demands and convenience of business operations may make it
necessary or desirable for Buyer to transmit, and Producer to
accept, production purchase orders and shipping purchase orders
by telecopier or by electronic data interchange (in each case
with reasonable confirmation procedures in place).
b. Time and quantity shall be of the essence in any shipping order.
Unless otherwise specified, delivery times specified are the times of
delivery of the Products at an Approved Facility as designated by
Buyer. Producer shall inform Buyer immediately of any occurrence
which will or is expected to result in any delivery at any time or in
any quantity not specified in any shipping order and also of
corrective measures which Producer has taken, or will take, to
minimize the effect of such occurrence. Buyer, in addition to all
other remedies available to it in law or in equity, shall have the
right to cancel any shipping order or part thereof if delivery is not
made within the time specified or in the quantities ordered.
c. If, for any reason other than a Force Majeure Event (as hereinafter
defined in Section 19), Producer is unable to produce from an Approved
Facility the amount of the Monthly Production Request for any
particular line of Product that the Monthly Production Request
contemplates being produced from such Approved Facility, Producer
shall produce the amount at another Approved Facility of the Producer,
including, if approved by the Buyer (which approval shall not be
unreasonably withheld) facilities of the Producer that are not
currently Approved Facilities (each, a "Substitute Facility"). The
price charged to the Buyer for the Product produced at the Substitute
Facility shall be the unit price that would have been charged to Buyer
had such Product been produced at the Approved Facility. In addition,
in
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the event Producer is required to produce Products at a Substitute
Facility, Producer shall reimburse Buyer for all incidental damages
(e.g., additional shipping charges) incurred by Buyer as a result the
Products being produced at a Substitute Facility.
8. PRICES, PAYMENT TERMS AND DELIVERY.
a. The initial unit purchase prices of the Products shall be as specified
in the pricing schedule attached hereto as Schedule C. During the
Agreement Term, the unit purchase prices for the Products shall be
subject to change (both upward and downward) based upon market
fluctuations in the cost of the components that form the line item
"Raw Materials", "Packaging Materials", "Direct Labor", "Variable
Overhead" and "Factory Fixed" as set forth in Schedule C. Producer
agrees that it shall not effect any change in the purchase price of
the Products as a result of a change in the price of corn syrup except
upon reasonable prior written notice from the Producer to the Buyer.
Producer further agrees that, if Producer believes a change in the
Factory Fixed cost component of the purchase price for the Products is
warranted, Producer shall notify Buyer in writing of such requested
change and identify with reasonable specificity the basis for the
price change of the Products not less than thirty, nor more than
sixty, days prior to an anniversary of the Commencement Date.
Producer further agrees that the Factory Fixed cost component shall
not be requested to be changed more than one time a year. Prior to
implementing any change in the Factory Fixed cost component, Buyer and
Producer shall mutually agree on such change; provided, however, that
in the event Buyer and Producer do not mutually agree on such change,
the parties nevertheless intend to be bound by this Agreement, and any
such change in the Factory Fixed cost component shall be reasonable
(as construed in accordance with Section 1302.18(A) of the Ohio
Revised Code). Any change in the Factory Fixed cost component shall
be effective as of the applicable anniversary of the Commencement
Date. In the event of any price change (including a price change as a
result of a change in the price of corn syrup), upon request of Buyer,
Producer shall promptly identify with reasonable specificity the basis
for the price change of the Products. Upon request of Buyer, Producer
shall promptly supply Buyer with copies of documentation supporting
such price change and the methodology used by Producer to determine
the price change. The parties intend for the price of the Products to
be the Producer's cost of
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manufacturing the Products plus a tolling fee that is included within
the line item "Factory Fixed" as set forth in Schedule C.
b. In all cases under this Agreement, Producer shall use its best efforts
to obtain the lowest and best prices and/or rates for all raw
materials and packaging materials used in the production of the
Products.
c. In the event Buyer of a price change to the Products, Buyer may
suggest to the Producer for its consideration reasonably acceptable
alternate sources in order to lessen a price increase or enhance a
price decrease.
d. Except as specifically provided elsewhere in this Agreement, Producer
warrants that the unit purchase prices for the Products as determined
in accordance with this Section 8 shall be complete, and no additional
charges of any kind shall be added without Buyer's express written
consent.
e. Delivery of the Products set forth in or with reference to each
shipping order shall be F.O.B. Buyer's carrier at the loading dock of
an Approved Facility or any Substitute Facility of the Producer.
f. Producer shall submit an invoice to the Buyer on Monday of each week
for the Products produced by the Producer during the preceding week.
Terms of payment for each invoice will be net twenty-five (25) days
from the date of invoice. The invoice will reference item code and
Product name, number of cases, unit price per case, the Approved
Facility or the Substitute Facility, as the case may be, and amount
due.
g. Invoices for payment shall be sent to:
MBW Foods, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Payments shall be sent to:
SunTrust Bank
X.X. Xxx 0000
Xxxxxxx Xxxxxxx 00000
For credit to: The Red Wing Company, Inc.
Account Number 8801079982
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h. Producer warrants and covenants that all units of the Product
delivered to Buyer shall be free from any security interest, lien or
other encumbrance of any person, corporation, partnership,
governmental body or other entity.
9. RAW MATERIALS AND PACKAGING MATERIALS.
a. Unless otherwise set forth herein, Producer shall be responsible for
ordering and paying for all raw materials, packaging materials and
supplies to be utilized in producing the Products (including ordering
of the labels, flavors and miscellaneous packaging, if any).
b. Producer shall use its best efforts to maintain an adequate inventory
of raw materials, packaging materials and supplies necessary to meet
production requirements at each Approved Facility.
c. Packaging materials and other items of inventory that are tailored for
the Products will be used by the Producer only for the Products.
Producer shall not maintain excessive levels of such inventory at any
Approved Facility. Upon request, the Buyer shall be provided with
access to all records concerning such inventory at each Approved
Facility
d. At least annually, Producer shall discuss with Buyer strategic issues
concerning purchasing of raw materials and packaging materials for the
Products.
10. PRODUCTION SCHEDULE.
a. Buyer will provide Producer, on or about the fifteenth day of each
month during the Agreement Term, with a rolling three month production
forecast (the "Forecasted Quantities of Products") for the next three
calendar months. The purpose of the Forecasted Quantities of Products
is to provide the Producer with Buyer's good faith estimate of
production needs in order to allow Producer to plan for ordering raw
materials, packaging materials and supplies (including labels, flavors
and miscellaneous packaging, if any) and to plan for Product
production.
b. On or before the fifteenth day of each month during the Agreement
Term, Buyer will provide Producer with a written production request
for the delivery of Products during the next calendar month (the
"Monthly Production Request"), which (i)
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until such time as the Approved Facilities are both producing the
Products, such Monthly Production Request shall not for any
particular calendar month exceed such number of cases of Products
as Producer shall in good faith advise Buyer that it is capable
of producing based on its capacity limitations and (ii) after such
time as the Approved Facilities are both producing the Products,
such Monthly Production Request shall not for any particular
calendar month exceed in the aggregate 350,000 equivalent cases
of Products. Producer shall be obligated to deliver
to Buyer the quantities of the Products set forth in each Monthly
Production Request. By the last day of each calendar month, Buyer
shall be obligated to purchase and take delivery of the Products in
quantities that are not less than the quantities as are set forth in
the Monthly Production Request for such calendar month. Producer
shall in good faith schedule the timing and volume of the production
of the Products over the course of each month (with the intention
being that Buyer shall not receive invoices for the production of
Products substantially in advance of the shipping orders for the
Products), and Buyer shall in good faith place shipping orders over
the course of each month in a manner generally consistent with its
past practices in an orderly fashion so that the shipping orders will
exhaust the Monthly Production Request (with the intention being that
Producer shall not have unreasonable day to day increases in the level
of inventory of the finished Products during a month).
11. INVENTORY OF FINISHED PRODUCTS.
a. With respect to each Approved Facility, Producer agrees to maintain at
all times during the Agreement Term, either on the floor at such
Approved Facility or in outside warehousing facilities maintained by
the Producer, an inventory of finished Products in quantities equal to
at least ten (10) days of the average quantities of such Products
sold to Buyer during the preceding sixty (60) days for immediate
shipment.
12. SHIPMENT AND PALLET EXCHANGE.
a. Unless otherwise mutually agreed in writing, the Products will be
shipped in pallet quantities on conventional pallets or, at Buyer's
cost and expense, Chep pallets. Producer and Buyer agree to observe a
conventional pallet exchange procedure pursuant to which Buyer will
return to Producer one (1) conventional pallet for each conventional
pallet received by Buyer. If Buyer fails to return to Producer
conventional pallets on a one-for-one basis, Buyer shall pay Producer
$5.00 for each conventional pallet Buyer has failed to return within
twenty-five (25) days of date of invoice for such pallets. If Buyer
has delivered to Producer more conventional pallets than the number of
conventional pallets received by Buyer, Producer shall credit against
the purchase price for the Products $5.00 for each conventional pallet
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Buyer has returned to Producer in excess of the number of
conventional pallets received by the Buyer. Buyer and Producer shall
establish reasonable procedures in order to comply with the terms of
the pallet exchange program.
b. Shipment of Products shall be made directly by Buyer using its owned
or contracted carriers. Title and risk of loss for the Products shall
pass to Buyer at the time of delivery of possession of the Products to
the carrier by Producer.
c. Buyer shall be responsible for transportation costs for the Products
from an Approved Facility or outside warehousing facilities maintained
by the Producer to the warehouse or other destination designated by
Buyer.
13. MANUFACTURING EQUIPMENT OF BUYER.
a. Buyer shall supply to Producer, deliver and install, at no cost to the
Producer, certain existing equipment of the Buyer identified in
Schedule D (the "Manufacturing Equipment") that is used in the
production of the Products for installation in the Approved Facility
identified on Schedule D. Buyer shall use its bests efforts to ensure
that the delivery and installation of the equipment at an Approved
Facility shall be completed no later than the dates set forth on
Schedule D, subject to any Force Majeure Events. Except as disclosed
to Producer at the time of the removal of the Manufacturing Equipment
from their current locations, Buyer represents and warrants that the
Manufacturing Equipment is, or shall be, after delivery and
installation at the Approved Facilities, in good operating condition
and repair (reasonable wear and tear excepted) and suitable for its
intended purpose.
b. Buyer shall control, and be responsible for all costs related to, the
removal, packaging, moving and reinstallation of the Manufacturing
Equipment to the designated Approved Facility for such equipment.
Buyer shall retain title to all of the Manufacturing Equipment.
c. In the event Buyer and Producer jointly agree in writing that any
additional manufacturing equipment is needed to manufacture the
Products at an Approved Facility under this Agreement, Buyer
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shall be responsible for all costs related to the purchase, delivery
and installation of such additional equipment. Such additional
equipment shall become part of the Manufacturing Equipment, the title
to which shall be retained by Buyer.
d. In the event that any of the Manufacturing Equipment (whether or not
such equipment is existing as of the Commencement Date) requires
extraordinary repairs in the nature of major overhauls and/or major
upgrades during the Agreement Term, the Buyer shall control, and be
responsible for all costs related to, such extraordinary repairs.
e. Producer shall control, and be responsible for all costs related to,
all ordinary and routine maintenance and repair of the Manufacturing
Equipment during the Agreement Term. In the ordinary course of
business, Producer shall maintain and repair such Manufacturing
Equipment so that such equipment is, and remains, in substantially the
same condition as when installed at the Approved Facilities by Buyer,
reasonable wear and tear and damage by unavoidable casualty excepted.
f. Producer agrees that the Manufacturing Equipment shall only be used by
Producer in connection with the production of the Products on behalf
of Buyer. Producer agrees that it shall not use such equipment for
any other purpose.
14. MANUFACTURING EQUIPMENT OF THE PRODUCER
a. Producer agrees that certain manufacturing equipment owned and used by
Producer at its San Xxxx Facility, which equipment is identified on
Schedule E (the "Producer Manufacturing Equipment"), shall be used in
connection with the production of some of the Products at such
Approved Facility.
b. Buyer agrees to reimburse Producer for all costs associated with
retrofitting the Producer Manufacturing Equipment so as to enable the
Producer to utilize such equipment in the production of Products.
Producer shall have title to all retrofitted pieces of equipment;
provided Buyer shall have title to any change parts which are needed
solely for the production of the Products. Schedule E sets forth an
estimate of the costs to retrofit certain Producer Manufacturing
Equipment but shall not be deemed to limit Buyer's obligation to
reimburse Producer for all costs associated with the retrofitting.
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c. Buyer understands and agrees that the Producer Manufacturing Equipment
will not be used solely to produce the Products, but will also be used
by Producer to produce other products, including, but not limited to,
Producer's spaghetti sauce and ketchups.
d. In the event that any of the Producer Manufacturing Equipment (whether
or not such equipment is existing as of the Commencement Date)
requires extraordinary repairs in the nature of major overhauls and/or
major upgrades during the Agreement Term, the Producer shall control,
and be responsible for all costs related to, such extraordinary
repairs.
e. Producer shall control, and be responsible for all costs related to,
all ordinary and routine maintenance and repair of the Producer
Manufacturing Equipment during the Agreement Term. In the ordinary
course of business, Producer shall maintain and repair such Producer
Manufacturing Equipment so that such equipment is, and remains, in
good operating condition and repair and suitable for its intended
purpose.
15. ADDITION TO THE STREATOR FACILITY.
a. In consideration for the Buyer entering into this Agreement, Producer
has agreed to construct an addition to its Streator Facility (the
"Streator Addition"). The estimated costs of the Streator Addition
are attached hereto as Schedule F.
b. The Producer shall control, and be responsible for all costs related
to, the construction of the Streator Addition. Title to the Streator
Addition shall be in the name of Producer. The Producer agrees to
commence construction of the Streator Addition as soon as possible and
agrees that it will use its best efforts to ensure that the
construction of the Streator Addition will be completed no later than
December 31, 1997, subject to any Force Majeure Events.
c. During the Agreement Term, the Streator Addition shall not be used to
store or produce any other products, unless such storage or production
does not materially disrupt or interfere with the production and
storage of Products at the Streator Addition.
d. In consideration for the Producer constructing the Streator Addition,
during the Agreement Term, Buyer agrees to pay an additional charge on
each case of the Products produced at any Approved Facility or
Substitute Facility in the amount set forth
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in Schedule C up to an aggregate amount that is the lesser of (i) the
actual construction cost of the Streator Addition or (ii) the
estimated cost of the Streator Addition as set forth on Schedule F.
On a quarterly basis, the Producer shall provide to Buyer an
itemized account of the number of cases for each particular line
of the Product purchased by Buyer from each Approved Facility and
any Substitute Facility and the aggregate amount of the additional
charge paid by Buyer to Producer relating to the Streator Addition.
e. If on the anniversary date of the Commencement Date each year, the
aggregate amount of the building amortization charge on each case of
Products sold during such year is less than $240,000, Buyer shall pay
to Producer the difference between the aggregate amount of the
building amortization charge and $240,000, which amount shall be paid
within ten (10) days of the anniversary date of the Commencement Date.
16 WARRANTIES OF PRODUCER REGARDING QUALITY OF PRODUCT AND CONFORMANCE TO
SPECIFICATIONS.
a. Producer agrees and warrants to Buyer that Producer has and will
adhere to all laws, regulations, orders, ordinances and industry
standards relating to Producer's manufacture, packaging, labeling and
sale of the Products, including those specifically relating to the
manufacture and packaging of foodstuffs and the Federal Food, Drug and
Cosmetic Act; that each unit of the Products will meet the
Specifications therefor and, upon delivery to Buyer, will be free of
all defects of manufacture, handling, packaging and processing.
b. Producer warrants that it has obtained, or prior to the time it
commences production of the Products will have obtained, any
governmental approvals required in connection with the production and
sale of the Products, and will furnish copies or other evidence
satisfactory to Buyer of all such approvals upon the request of Buyer.
c. Producer warrants that all raw materials and packaging materials for
the manufacturing and packaging of the Products will be sampled and
tested by Producer in accordance with its obligations under this
Agreement, including those contained in Section 17 of this Agreement.
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d. At Producer's request, Buyer shall make reasonable amounts of each
allegedly defective or nonconforming unit of the Product available for
Producer's inspection or shall, if so directed by Producer, return, at
Producer's cost and expense, each such unit of the Product to an
Approved Facility of the Producer.
e. In the event of Producer's breach of the covenants or warranties set
forth in this Section 16, Producer shall, at Buyer's option, either
(i) replace the defective or nonconforming units of the Product at
Producer's sole cost and expense and deliver the replacement units of
the Product to Buyer within 20 days, or (ii) permit Buyer, at
Producer's sole cost and expense, to return the defective or
nonconforming units of the Product and, if payment therefor has
already been made, credit the price thereof to Buyer, together with
all incidental damages incurred by Buyer in connection with such
return. Buyer shall have no obligation to accept delivery or take
possession of any defective or nonconforming Product from Producer.
The remedies of Buyer set forth in this Section 16(e) for breach of
any of the warranties and covenants in Section 16 by Producer are the
sole and exclusive remedies of Buyer for any such breach by Producer.
f. THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES EXCEPT THAT OF TITLE, WHETHER WRITTEN, ORAL OR IMPLIED, IN
FACT OR IN LAW (INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
17. QUALITY ASSURANCE INSPECTIONS AND TESTING
a. Representatives of Buyer shall have the right to inspect, at
reasonable times and upon prior notice, the Approved Facilities and to
observe its procedures prior to and during the period of
manufacturing, packaging, storing and handling the Products. Producer
reserves the right to guide such inspections in order to protect the
confidential nature of other products being manufactured by Producer.
b. Producer shall be responsible for routine quality assurance of the
Products at the time of manufacture and, in the fulfillment of such
obligations, shall apply quality assurance tests, procedures and
methods in accordance with the Specifications.
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18. INSPECTIONS, ACCEPTANCE AND RETURNS.
a. Product not rejected within thirty (30) days after title passes to
Buyer will be deemed accepted by Buyer. If, after any inspection,
Buyer attempts to reject any Product, Buyer shall specify all claimed
non-conformity in a notice of rejection sent to Producer. Product
rejected by Buyer shall be returned in substantially the same
condition as when title passed to Buyer. Nothing contained in this
Agreement shall relieve in any way Producer from the obligation of
testing, inspection and quality control.
19. FORCE MAJEURE; PRODUCTION AT SUBSTITUTE FACILITIES
a. In the event of strikes; war; civil insurrection; riots; thefts;
inability to obtain necessary labor, materials, components, fuel or
transportation; changes in the Specifications; fire; flood;
earthquake; or other act of God or other cause beyond the control of
the parties hereto which renders it impracticable for either party to
comply with the terms of this Agreement (a "Force Majeure Event"),
except as otherwise set forth herein, no liability for non-compliance
caused thereby during the continuance thereof will exist or arise
under this Agreement.
b. If a Force Majeure Event occurs, the party who is unable to perform
as a result of such event shall immediately notify the other party,
which other party may suspend its obligations hereunder for a period
equal to the Force Majeure Event. In addition, if, within 90 days
after the occurrence of the Force Majeure Event, the party who was
unable to perform as a result of such event is still unable to perform
in accordance with this Agreement, the other party may terminate this
Agreement upon written notice to the party who is unable to perform in
accordance with this Agreement.
c. If a Force Majeure Event occurs, the party who is unable to perform as
a result of such event agrees that it shall use its best efforts to
eliminate the cause of such event or otherwise take actions so that it
is able to perform under this Agreement as promptly as is reasonably
practicable. Notwithstanding the foregoing, if a Force Majeure Event
prevents Producer from performing any of its obligations hereunder and
such Force Majeure Event could be cured by Producer incurring
additional costs (e.g., if there were a strike and the strike could be
resolved by Producer's meeting the demands of its employees), Producer
shall have no obligation to cure such Force Majeure Event by the
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incurrence of additional costs in connection with the production of
the Products unless Buyer agrees to pay such additional costs.
d. If a Force Majeure Event occurs that directly affects fewer than all
of the Approved Facilities of the Producer (e.g., a fire at only one
of the Approved Facilities), Producer agrees that, if, as a result of
the Force Majeure Event, Producer is unable to produce from an
Approved Facility the amount of the Monthly Production Request for any
particular line of Product that the Monthly Production Request
contemplates being produced from such Approved Facility, Producer
shall use its best efforts to produce the amount at a Substitute
Facility in a manner that is consistent with its obligations to other
customers. The price charged to the Buyer for the Product produced at
the Substitute Facility shall be the unit price for producing such
Product at the Substitute Facility.
e. If a Force Majeure Event occurs that directly affects fewer than all
of the Approved Facilities of the Producer, Producer agrees that, in
the event that the transfer of production of Products to a Substitute
Facility creates production capacity problems at the Substitute
Facility, Producer shall in good faith take reasonable steps to meet
the production requirements of the Buyer under this Agreement in a
manner consistent with Producer's obligations to other customers. In
addition, Producer agrees that, in the event of a production capacity
problem at a Substitute Facility as a result of a Force Majeure Event
that directly affects fewer than all of the Approved Facilities of the
Producer, Producer shall fairly and in good faith allocate production
capacity at the Substitute Facility among Buyer and other customers
who have outstanding production contracts with Producer.
20. INDEMNIFICATION.
a. Producer will indemnify and hold harmless Buyer and its
representatives, stockholders, controlling persons, and affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to
the Buyer Indemnified Persons, the amount of, any loss, liability,
claim, damage, cost and expense (including costs of investigation and
defense and reasonable attorneys' fees), (collectively, "Damages"),
incurred by the Buyer Indemnified Persons involving a third-party
claim arising, directly or indirectly, from or in connection with any
injury (including death) to person
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or property to the extent proximately caused by the Producer's breach
of this Agreement, negligence or willful misconduct.
The remedies provided in this Section 20(a) will not be exclusive of
or limit any other remedies that may be available to Buyer or Buyer
Indemnified Persons.
b. Buyer will indemnify and hold harmless the Producer and its
representatives, stockholders, controlling persons and affiliates
(collectively, the "Producer Indemnified Persons") for, and will pay
to the Producer Indemnified Persons, the amount of any Damages
incurred by the Producer Indemnified Persons involving a third-party
claim arising, directly or indirectly, from or in connection with any
injury (including death) to person or property to the extent
proximately caused by the Buyer's breach of this Agreement,
negligence or willful misconduct.
The remedies provided in this Section 20(b) will not be exclusive of
or limit any other remedies that may be available to Producer or the
Producer Indemnified Persons.
c. Promptly after receipt by an indemnified party under Section 20(a) or
20(b) of notice of the commencement of any proceeding against it, such
indemnified party will, if a claim is to be made against an
indemnifying party under any such Section, give written notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
d. If any proceeding referred to in Section 20(c) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it
wishes (unless (i) the indemnifying party is also a party to such
proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party
of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the
defense of such proceeding with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party
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of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this
Section 20 for any fees of other counsel or any other expenses with
respect to the defense of such proceeding subsequently incurred by the
indemnified party in connection with the defense of such proceeding.
If the indemnifying party assumes the defense of a proceeding, (i) no
compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent (which
consent shall not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of legal requirements or any
violation of the rights of any person and no effect on any other
claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (ii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying
party of the commencement of any proceeding and the indemnifying party
does not, within ten days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume
the defense of such proceeding, the indemnifying party will be bound
by any determination made in such proceeding or any compromise or
settlement effected by the indemnified party.
e. Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a proceeding
may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend, compromise,
or settle such proceeding, but the indemnifying party will not be
conclusively bound by any determination of a proceeding so defended or
any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
21. INSURANCE. During the Agreement Term, Producer agrees to maintain insurance
against public liability which may arise out of, relate to or be caused by
the Products insurance in an amount of not less than $2 million per
occurrence. Producer will maintain at all times during the Agreement Term
product liability insurance in an amount of not less than $5 million per
occurrence. In addition, Producer shall maintain liability umbrella
coverage of not less than $5 million. Producer shall deliver to Buyer
certificates of insurance issued by the insurance
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carriers adding the Buyer as an additional insured on all such policies.
Each such certificate shall provide that such insurance shall not be
canceled without fifteen days prior written notice to the Buyer.
22. TERMINATION.
a. If either party shall breach any of the provisions of this Agreement
and such breach shall continue for a period of thirty (30) days after
the receipt of written notice specifying the breach to such party, or
should either party (i) file or have filed against it a bankruptcy
petition (which, in the case of a petition filed against a party, is
not thereafter dismissed within sixty days after the filing of the
petition against the party) or (ii) enter into any type of proceeding
under and pursuant to the insolvency or receivership laws of any state
or (iii) make a general assignment for the benefit of creditors or
(iv) a Force Majeure Event occurs that gives rise to a right of
termination under Section 19, then, and in any such events, the other
party shall have the right to terminate this Agreement by giving
written notice to that effect to such party, with termination becoming
effective upon the date set forth therein. If this Agreement is
terminated as a result of a breach of any of the provisions of this
Agreement by Buyer or as a result of the occurrence of an event
identified in clause (i), (ii), (iii) or (iv) of this Section 22(a),
Buyer shall pay to Producer, in addition to any other remedies or
damages available to Producer at law or equity, within thirty days
after such termination, the unpaid balance of the amount that Buyer
would have paid pursuant to Section 15(d) of this Agreement for the
Streator Addition.
b. Subject to the provisions of Section 3 of this Agreement, on and after
the second anniversary of the Commencement Date, Buyer may terminate
this Agreement entirely, or terminate the Agreement as it relates to
production of Products at a particular Approved Facility, at any time
upon one hundred eighty days prior written notice to the Producer. If
the Buyer terminates this Agreement entirely pursuant to this Section
22(b), within thirty days after such termination, Buyer shall pay to
Producer as a termination fee the unpaid balance of the amount that
Buyer would have paid pursuant to Section 15(d) of this Agreement for
the Streator Addition.
c. The termination of this Agreement shall not relieve either party of
any obligation or liability accrued prior to termination, or rescind
or give rise to any right to rescind anything done by either party
prior to such termination. The termination of this
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Agreement shall not in any way affect the confidentiality and non-use
obligations under Section 6 of this Agreement or any other obligations
which are expressly stated herein to be continuing or are by their
nature continuing.
d. Upon the effective date of a complete termination of this Agreement:
(i) The license provided for in Section 5 shall terminate.
(ii) Producer shall:
(a) cease any use of the Confidential Information of Buyer;
(b) return to Buyer or destroy all tangible forms of the
Confidential Information of Buyer;
(c) make available for purchase by the Buyer at Producer's cost
all packaging materials and other items of inventory that,
pursuant to Section 9(c), are tailored exclusively for the
Products;
(d) return to Buyer, at Buyer's sole cost and expense, all of
Manufacturing Equipment installed in any of the Approved
Facilities and provide access during normal business hours
to any representatives of Buyer to any such facilities for
the removal of such equipment from the facilities of the
Producer; and
(e) make available for delivery to Buyer any finished Product
inventory maintained by Producer.
(iii) Buyer shall:
(a) within ten days after such termination, purchase at
Producer's cost all packaging materials and other items of
inventory that, pursuant to Section 9(c), are tailored
exclusively for the Products and that are in good and usable
condition;
(b) within thirty days after such termination, remove at Buyer's
cost and expense, all of Manufacturing Equipment installed
in any of the Approved Facilities and repair all damage
caused to any of the
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Approved Facilities in connection with the removal of such
equipment;
(c) within ten days after such termination, purchase any
finished Product inventory maintained by Producer;
(d) cease any use of the Confidential Information of Producer;
and
(e) return to Producer or destroy all tangible forms of the
Confidential Information of Producer.
.
(iv) Producer shall make conforming deliveries under the terms of this
Agreement for any then-outstanding Orders; and
(v) All sums owed Producer by Buyer shall become immediately due and
payable.
23. MISCELLANEOUS.
a. Notice. Notices permitted or requested to be given hereunder shall be
in writing and shall be deemed effective, if given by registered or
certified mail, postage prepaid, ten (10) days after deposit thereof
with the appropriate postal authorities, if given by nationally
recognized express courier which provides a receipt of delivery, on
the date delivery is completed, and if given by confirmed telecopier,
on the date of transmittal, and in all cases addressed to:
It to Producer: The Red Wing Company, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, President
Facsimile: (000) 000-0000
If to Buyer: MBW Foods, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
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b. Assignment. Neither party shall assign this Agreement without the
prior written consent of the other party; provided, however, that
either party may assign this Agreement without the written consent of
the other party in connection with the sale of all or substantially
all of the assets of such assigning party.
c. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties and supersedes all prior or
contemporaneous agreements and understandings whether written, oral or
implied between Buyer and Producer or their affiliates with respect to
the subject matter hereto.
d. Amendment. Except for any Specifications that are furnished by Buyer
to Producer from time to time after the date hereof, and which shall
become a part of this Agreement, this Agreement may not be amended,
superseded or altered except by an instrument in writing duly executed
and delivered on behalf of each of the parties hereto.
e. Waiver. No failure or delay on the part of either party hereto to
exercise any right, privilege or power under this Agreement shall
operate as a waiver or relinquishment thereof; nor shall any single or
partial exercise by either party preclude any other or further
exercise thereof, or the exercise of any other right, privilege or
power.
f. Severability. The provisions of this Agreement are separate and
divisible and if any court of competent jurisdiction shall determine
any provision of this Agreement to be void and/or unenforceable, the
remaining provision or provisions shall be construed as if the void
and/or unenforceable provision or provisions were not included in the
Agreement.
g. Non-Exclusive Agreement. This Agreement is not an exclusive agreement
and Buyer may, without limitation, manufacture the Products itself or
may enter into an agreement with other parties for the manufacture of
such Products.
h. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio.
i. Independent Contractors. The parties are independent contractors.
Nothing contained herein shall be deemed to create the relationship of
partnership or joint venture between the
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parties. Neither party shall have the right to incur any obligation
to third parties which shall be binding upon the other.
24. LIMITATION OF LIABILITY FOR CONSEQUENTIAL DAMAGES. Except as may arise
pursuant to the indemnification provided by Section 20 of this Agreement,
neither party shall be liable for consequential damages (including lost
profits or lost revenues) of any kind resulting from a breach of this
Agreement by a party.
25. RIGHT OF FIRST OPPORTUNITY. Buyer hereby agrees that, during the Agreement
Term, Buyer shall provide Producer with a right of first opportunity to bid
or otherwise quote Buyer for the production of any products owned,
developed or acquired by Buyer that are not currently set forth on Schedule
A and that are within the production or packing expertise of Producer,
including, without limitation, any products from the Log Cabin line of
products in the event such products are acquired by Buyer. Buyer shall
also provide Producer with the first opportunity to produce Products on the
terms and conditions set forth in this Agreement that may be in excess of
the 350,000 equivalent case cap that is set forth in Section 10(b) of this
Agreement. Producer shall promptly respond to any request from Buyer for
a bid or quote on any such products or to produce Products in excess of the
Monthly Production Request cap set forth in Section 10(b) of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their respective duly authorized representative to be effective as
of the date first set forth above.
MBW FOODS, INC. THE RED WING COMPANY, INC.
("Buyer") ("Producer")
By /s/ Xxxxxx X. Xxxxxxx By /s/ Xxxxxx X. Xxxxxx
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Its President Its President
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