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EXHIBIT 10.2
MANUFACTURING AND DISTRIBUTION AGREEMENT
BETWEEN
CPC INTERNATIONAL INC.
AND
AMERICAN ITALIAN PASTA COMPANY
MANUFACTURING AND DISTRIBUTION AGREEMENT
* CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT.
THE REDACTED MATERIAL HAS BEEN INDICATED WITH AN ASTERISK AND FILED SEPARATELY
WITH THE COMMISSION.
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MANUFACTURING AND DISTRIBUTION AGREEMENT
TABLE OF CONTENTS
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1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Actual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 AIPC Guaranteed Maximum Volume . . . . . . . . . . . . . . . . . . . . 1
1.5 Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Budget or Budgeted . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Calculation Period . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Contract Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Contract Year Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Conversion Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Cost Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 CPC Product Specifications . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Direct Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Handling and Warehousing Costs . . . . . . . . . . . . . . . . . . . . 3
1.23 Insolvency Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 Materials Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 Minimum Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 Packaging Materials . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 Packaging Materials Cost . . . . . . . . . . . . . . . . . . . . . . . 3
1.29 Party or Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.30 Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31 Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Raw Materials Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 Semolina Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35 Supply/Demand Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 Target Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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1.39 Tolling Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.40 Total Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.41 Warehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 AIPC's Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Location of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. COMPENSATION AND COST SAVINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Cost Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. PRODUCTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. QUALITY ASSURANCE AND CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. REJECTION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. PROCESSING AND PACKAGING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Delivery of Finished Products . . . . . . . . . . . . . . . . . . . . . . . . 10
10. PRODUCT ORDERS/INVOICING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.1 * Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Minimum Purchase/Supply Payments . . . . . . . . . . . . . . . . . . . . . . . 11
10.3 Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. OWNERSHIP/EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Recipes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Third-Party Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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12. TITLE AND RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. INDEPENDENT CONTRACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14.1 Mutual Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14.2 AIPC Service Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14.3 No Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.4 CPC Product Specifications Representation . . . . . . . . . . . . . . . . . . . . . . . . 14
14.5 CPC Marks, Ownership and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15. INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.1 AIPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.2 Mutual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
16. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16.1 Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16.2 Termination for Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16.3 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
18. RECORDS AND AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18.1 Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18.2 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18.3 Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18.4 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
19. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. TRADEMARKS AND ENDORSEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20.1 CPC Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20.2 License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20.3 Prohibited Use by AIPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20.4 Prohibited Use by CPC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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21. GOVERNING LAW AND DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . 23
21.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21.2 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22.2 AIPC Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22.3 CPC Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22.4 Permitted Assignment by AIPC . . . . . . . . . . . . . . . . . . . . . . . . . . 25
23. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
24. NOTICE OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
25. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
26. CHANGES IN ECONOMIC, TECHNICAL OR BUSINESS CONDITIONS . . . . . . . . . . . . . . . 26
27. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27.4 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
27.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
27.7 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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THIS AGREEMENT, made as of the 15th day of April, 1997 (the "Effective
Date"), between CPC INTERNATIONAL INC., a Delaware Corporation with its
principal office in Englewood Cliffs, New Jersey ("CPC"), and AMERICAN ITALIAN
PASTA COMPANY, a Delaware corporation with its principal office in Excelsior
Springs, Missouri ("AIPC"). CPC and AIPC are each referred to herein as a
"Party" and collectively "Parties."
WITNESSETH:
WHEREAS, AIPC represents to CPC that it has, or will have, the ability and
capacity to provide services to produce and package the quality and such
quantities of Products to meet the marketing and distribution requirements of
CPC, including (i) the purchase, scheduling, receiving and storing of packaging
materials; (ii) the supply of raw materials; (iii) the processing and packaging
of the Products; and (iv) the shipment of the finished Products to warehouses
(as directed by CPC), all in conformity with written quality control and
quality assurance requirements and specifications as established by the Parties
pursuant to the terms of this Agreement;
WHEREAS, CPC wishes to have AIPC provide such services to CPC; and
WHEREAS, it is the intent of the Parties to establish a relationship whereby
over time, CPC will purchase from AIPC and AIPC will produce for CPC, all of
CPC's requirements for Xxxxxxx'x(R) * branded retail long and short pasta and
noodle products, subject to the terms hereof and CPC's existing toll packing
agreements. *
NOW, THEREFORE, with the intention of being legally bound hereby, the Parties
agree as follows:
1. DEFINITIONS
For purposes of this Agreement the following words used herein shall be
applied as defined below:
1.1 Act - means the Food, Drug, and Cosmetic Act, 21 U.S.C. Section 301
et. seq., as amended.
1.2 Actual - when used immediately preceding any other term shall mean
that it occurs in fact during the referenced period of this Agreement.
1.3 Affiliate - means any United States or Canadian entity controlling,
controlled by, or under common control with such Party.
1.4 AIPC Guaranteed Maximum Volume - has the meaning set forth in
Section 5.1.3 below.
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1.5 Applicable Laws - means all applicable federal, state and local
laws, ordinances, rules and regulations, and any amendments thereto which are in
effect from time to time.
1.6 Budget or Budgeted - when used immediately preceding any other term
shall mean that it is estimated for a specified future period of production.
1.7 Calculation Period - has the meaning set forth in the definition of
Semolina Cost below.
1.8 Contract Year - the twelve (12) month period commencing on January 1
of each year during the Term hereof; provided, (i) the first Contract Year will
begin as of the date set forth in a written notice by AIPC to CPC notifying CPC
(after successful start-up and testing has been accomplished) that AIPC is
ready, willing and able to begin production of the Products as of that date
(which is targeted to occur on or about *), and (ii) the first Contract Year
will end December 31, 1998.
1.9 Contract Year Plan - means the plan established under Section 5.2.1
established by the Parties, as adjusted from time to time as provided herein.
1.10 Conversion Cost - the sum of * , all as defined herein.
1.11 Cost Savings - has the meaning set forth in Section 3.2.1 below.
1.12 CPC Product Specifications - has the meaning set forth in Section
14.4 below.
1.13 Damages - means all claims, actions, liability, loss, damage,
expense, including reasonable attorney's fees and expenses.
1.14 Depreciation - depreciation and amortization expenses of AIPC's
buildings and improvements, pasta production and packaging equipment,
palletization equipment, warehouse building and equipment, office furnishings
and equipment and the like allocable to Products produced by AIPC hereunder.
1.15 Direct Labor - the cost of press, packaging and general labor to
produce the Products.
1.16 Effective Date - means the date set forth in the first paragraph of
this Agreement.
1.17 Facility - has the meaning set forth in Section 2.1 below, and shall
include any other location added pursuant to an amendment to this Agreement.
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1.18 Factory Overhead - when referring to Product manufactured in:
1.18.1 Columbia, South Carolina, AIPC's cost * .
1.18.2 Excelsior Springs, Missouri, AIPC's cost * .
1.19 Force Majeure - has the meaning set forth in Section 17.2 below.
1.20 Forecasts - means the forecasts provided under Section 5.2 below.
1.21 GAAP - means generally accepted accounting principles, as
consistently applied by AIPC.
1.22 Handling and Warehousing Costs - means AIPC's expenses of
warehousing Products including * in each case related to Products produced by
AIPC hereunder. The terms of such warehousing costs shall be governed by the
Operating Agreement by and between AIPC and the Xxxxxx Company in the form of
EXHIBIT 1.22 attached hereto.
1.23 Insolvency Event - has the meaning set forth in Section 16.2.4
below.
1.24 Marks - means CPC's respective trade names and trade marks
identified in SCHEDULE 14.5 hereto.
1.25 Materials Cost - the sum of Raw Materials Cost plus Packaging
Materials Cost.
1.26 Minimum Volume - has the meaning set forth in Section 5.1.2 below.
1.27 Packaging Materials - includes, but is not limited to packaging
film, labels, bags, folding cartons, corrugate shippers, liners, stretch wrap,
pallets, ink, glue, tape and slip sheets.
1.28 Packaging Materials Cost - the delivered cost to AIPC of Packaging
Materials consumed in packaging the Products, including a provision for loss
allowance agreed to by the Parties.
1.29 Party or Parties - has the meaning set forth in the first
paragraph of this Agreement.
1.30 Product - means all of CPC's Xxxxxxx'x(R) * branded dry pasta
products * .
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1.31 Raw Materials - means all ingredients used to manufacture the
Products, including but not limited to, semolina, first clear flour, egg
powder, spinach powder, tomato powder and enrichments, and any other purchased
raw materials.
1.32 Raw Materials Cost - the Actual delivered cost to AIPC of the Raw
Materials including, but not limited to Semolina Cost.
1.33 Semolina Cost - means the cost of semolina at the applicable
Facility. This cost for any period of time (the "Calculation Period") shall be
calculated as follows: *
1.34 Services - has the meaning set forth in Section 2.1 below.
1.35 Supply/Demand Plan - has the meaning set forth in Section 5.2.1
below.
1.36 Target Volume - has the meaning set forth in Section 5.1.3 below.
1.37 Term - has the meaning set forth in Section 4 below. "Term"
includes the "initial Term" and extensions thereof.
1.38 Termination Fee - means the fee payable by CPC under Section 16.1.1
below.
1.39 Tolling Fee - means * .
1.40 Total Cost - the sum of Materials Cost plus Conversion Cost,
determined in accordance with GAAP.
1.41 Warehouse - means a (i) warehouse facility adjacent to a Facility,
or (ii) any other warehouse facility designated by AIPC from time to time for
the storage of the Products pending delivery to a carrier for shipment to CPC,
which warehouse facility has been approved by CPC for the storage of Products.
2. SERVICES
2.1 AIPC's Services. In consideration for the compensation to be paid
to AIPC as set forth herein, AIPC hereby agrees to perform the following
services (the "Services") for CPC at its Excelsior Springs, Missouri and
Columbia, South Carolina facilities (the "Facilities") on the terms and
conditions set forth herein: * . All of the above must be in accordance with
the CPC Product Specifications set forth and included in EXHIBIT A attached
hereto, as may be amended by the mutual written consent of the Parties and other
provisions of this Agreement.
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2.2 Location of Services. AIPC at its discretion may produce the
Products at either Facility. However, AIPC will strive for lowest Total Cost.
If a change in Facility allocation for production from the Contract Year Plan
would incur additional costs, AIPC will obtain CPC's prior written consent.
3. COMPENSATION AND COST SAVINGS
3.1 Compensation. In exchange for the Services rendered by AIPC to CPC
hereunder, CPC shall pay to AIPC compensation in an amount equal to * , as
invoiced and provided in Section 10.1 below. Compensation will be adjusted
quarterly as provided in Section 3.2.2 below.
3.2 Cost Savings. "Cost Savings" are to be allocated to AIPC and CPC as
set forth below.
3.2.1 Definition and Allocation. "Cost Savings" are savings
generated by: *
3.2.2 Computation. AIPC will reconcile, quarterly, Budgeted
Materials Cost and Budgeted Conversion Cost with Actual Materials Cost and
Actual Conversion Cost, respectively, as of March 31, June 30, September 30 and
December 31 (or the actual date on which AIPC closes its quarterly financial
records) during each Contract Year. These calculations will be computed on a *
basis for Products purchased during such quarter.
If Actual Conversion Cost exceeds Budgeted Conversion Cost during
the quarter, CPC will pay that amount to AIPC within * of the date of an
invoice from AIPC. If the Actual Conversion Cost is less than Budgeted
Conversion Cost during the quarter, such savings will be allocated between the
Parties pursuant to Section 3.2.1. above, and AIPC will refund CPC's share of
such Cost Savings to CPC within * from the date such calculation is completed
by AIPC; provided AIPC will complete this calculation no later than * after
the closing date of the quarter under review.
Similarly, if Actual Materials Cost exceeds Budgeted Materials
Cost during the quarter, CPC will pay that amount to AIPC within * of the
date of an invoice from AIPC. If Actual Materials Cost is less than Budgeted
Materials Cost, AIPC will refund such savings to CPC within * from the date
such calculation is completed by AIPC; provided AIPC will complete this
calculation no later than * after the closing date of the quarter under
review.
Amounts payable by, and to, CPC hereunder may be netted by AIPC,
before paying, or submitting an invoice to, CPC, as the case may be.
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4. TERM
This Agreement shall be effective as of the Effective Date, with the
initial Term to begin as of the first day of the first Contract Year and shall
continue for a period of nine (9) Contract Years unless earlier terminated
pursuant to the terms of this Agreement. At CPC's sole option the Term may be
extended by CPC during the seventh Contract Year for an additional three (3)
Contract Years beyond the initial Term ending December 31, 2006 on the same
terms and conditions, other than economic terms and conditions which will be
negotiable, by delivering a written notice of CPC's desire to exercise this
option to AIPC before * . If the Parties are unable to reach a written
agreement on the economic terms and conditions applicable to the extended Term
on or before * , the extension option shall expire, and this Agreement will
expire upon and including December 31, 2006 and the original terms will remain
in effect through the expiration date.
5. PRODUCTION PLANS
The Parties hereby acknowledge that CPC's current demand for the
Products is approximately * of Product per Contract Year and that AIPC is
undertaking a significant expansion of the Facilities to accommodate the
production of up to approximately * of Product per Contract Year to satisfy
CPC's demand for the Products. Notwithstanding, AIPC acknowledges that CPC
desires to increase demand for the Products to an amount in excess of * of
Product per Contract Year, and CPC acknowledges that AIPC will need substantial
lead time and capital investment to satisfy such increases in demand for the
Products and will use all commercially reasonable efforts to provide to AIPC at
least * advance written notice of significant increases in the demand for the
Products. In consideration of the foregoing, the Parties agree to establish the
following Product volume commitments to apply for each Contract Year until
adjusted as provided below.
CPC will provide to AIPC at least * advance written notice with
respect to significant changes in product mix/cuts or at least * advance
written notice of changes in volume requirements exceeding the applicable AIPC
Guaranteed Maximum Volume, as the case may be. If AIPC is unable to
successfully produce a particular cut or volume of product (or Products)
requested by CPC, AIPC shall promptly so notify CPC in writing. CPC shall then
have the right to develop an alternative source for such products, provided, as
a condition to such right CPC will use good faith efforts to secure such
requirements under a term that closely matches AIPC's estimate of when AIPC
will be able to produce these requirements. In any event, CPC agrees to
purchase such requirements from AIPC as soon as commercially reasonable (and
consistent with CPC's contractual obligations) after the date AIPC notifies CPC
that AIPC has added such capability/capacity. Also, in any event, CPC's
Minimum Volume requirement for such Contract Year shall be correspondingly
reduced, provided, the cut requested falls within the standard range of short
cut, long cut and noodle products produced on the type of equipment owned by
AIPC and CPC's requirements for other Products is less than the Minimum Volume.
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5.1 Commitments
5.1.1 Exclusivity. Except for CPC products produced under the
existing toll packaging agreements listed on SCHEDULE 5.1.1 and not initially
transferred for production to AIPC and except as otherwise provided herein,
AIPC shall be the exclusive producer of the Products and CPC agrees to purchase
all such Products from AIPC as of the first day of the first Contract Year and
thereafter throughout the Term of this Agreement, to the extent of CPC's
requirements. *
CPC and AIPC will agree to a specific timetable for the changeover of
Xxxxxxx'x(R) volumes to the Facilities, including a breakdown of those volumes
produced at the Excelsior Springs, Missouri Facility and at the Columbia, South
Carolina Facility. From the Effective Date, the Parties currently estimate a
switch over date * . The suggested target date for all of CPC's pasta
production switch is * . If mutually advantageous, some of CPC's pasta
production may be switched to one of the Facilities prior to the target switch
over date.
5.1.2 Minimum Volume. CPC agrees that it shall purchase from
AIPC a minimum volume of Products of * ("Minimum Volume") per Contract Year;
provided, the Minimum Volume will be reset from Contract Year to Contract Year
to an amount equal to * of the immediately preceding Contract Year's Actual
volume of Products produced, provided, further, that in no event will the
Minimum Volume be less than * per Contract Year.
5.1.3 Target Volume. It is estimated that the volume of
Products for the first Contract Year will be approximately * ("Target
Volume") and will not exceed * * (exclusive of any third party toll packing
volume not produced in AIPC's facilities). The Target Volume will be revised
by CPC for each Contract Year and included in the Contract Year Plan; provided,
the Target Volume may not be an amount lower than the Minimum Volume for such
Contract Year nor more than the AIPC Guaranteed Maximum Volume without AIPC's
prior written consent. AIPC guarantees to produce, if required by CPC, * of
Products the first Contract Year and, subject to CPC's compliance with the
notice provisions required in the first paragraph of this Section 5, AIPC will
guarantee to produce, in subsequent Contract Years, a volume of Products up to
* of the previous Contract Year's Actual volume ("AIPC Guaranteed Maximum
Volume"); provided, the AIPC Guaranteed Maximum Volume may not exceed * during
any Contract Year.
5.1.4 Pro-Ration. Minimum Volume, Target Volume and AIPC
Guaranteed Maximum Volume for any Contract Year will be pro-rated daily for (i)
the first Contract Year (if such Contract Year begins later than * ) and (ii)
each Contract Year thereafter to the extent of periods during an occurrence of
Force Majeure or other event set forth herein requiring adjustments to the
volume of Products to be produced or purchased hereunder.
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5.2 Forecasts
5.2.1 Contract Year Plan: General. During the last quarter of 1997
and thereafter at the beginning of the last quarter of each Contract Year, CPC
and AIPC will meet to jointly develop and agree to an economic plan for the
next Contract Year (a "Contract Year Plan"). The Contract Year Plan shall
include a determination of the Target Volume, on a Product SKU basis, any new
cuts and/or change in the mix of Products, a production plan for each Facility,
and a review of each Party's supplier base for all Raw and Packaging Materials.
In addition, the Contract Year Plan will include a "Supply/Demand Plan" for
such Contract Year which will include by Product SKU: (i) CPC's forecasted
monthly demand requirements, (ii) CPC's forecasted plan for desired monthly
inventory balances, and (iii) a production plan for AIPC to satisfy such
forecasts subject to a monthly minimum/maximum volume production limit, based
upon AIPC's then current capacity constraints, to be established in such
Supply/Demand Plan. The Parties will review and revise, with mutual consent,
the Supply/Demand Plan monthly, or any other agreed to frequency, during each
Contract Year, provided CPC will provide AIPC with at least * advance written
notice of the desired effective date of any dramatic changes in, or additions
to, the Product mix to be produced by AIPC (including changes desired during
the next succeeding Contract Year). The Parties shall use their best efforts
to meet these requirements.
5.2.2 Budget. The Contract Year Plan will establish an agreed
Budget for the Total Cost per pound on a Product by Product basis for the next
Contract Year. * As part of the procedure to develop a Budget, CPC will have
access to AIPC's financial records with respect to Actual Total Costs of
production from the current or most recently past Contract Year.
In the event of significant market or other cost component changes, the
Parties may decide on establishing an updated Budget * by Product for the
remaining portion of such Contract Year, prior to the end of a Contract Year.
*
5.2.3 Rolling Demand Forecast. CPC will provide to AIPC on or
before the last day of each month a rolling * forecast of demand by Product
SKU.
5.3 Durum Procurement Practices. *
6. QUALITY ASSURANCE AND CONTROL
6.1 AIPC shall perform such quality control tests and procedures as are
agreed by AIPC and CPC in the Manual/Codebook set forth and included in EXHIBIT
A attached hereto.
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6.2 AIPC will promptly notify CPC of any out-of-specification Products.
AIPC agrees to perform under CPC's direction with respect to any
out-of-specification situations and to handle all out-of-specification problems
on a case-by-case basis, pursuant to CPC's directions.
6.3 AIPC will be responsible for the receiving and incoming quality
inspections of ingredients and packaging materials and for identifying any
overages, shortages, or materials which are damaged or otherwise do not meet
prescribed specifications.
6.4 In the event of ingredient or packaging materials being rejected for
failing quality inspection or later identified as defective, AIPC is
responsible for notifying the vendor and promptly undertaking to secure the
resupply of acceptable materials.
6.5 AIPC will adopt the CPC recall procedures as referenced in the
Manual/Codebook, or equivalent approved in writing by CPC. AIPC agrees to
notify CPC's QA Department prior to initiating any product recall procedure.
AIPC shall be responsible for all Damages associated with any recall or Product
withdrawal, unless CPC has been responsible therefore.
6.6 Upon reasonable notice by CPC to AIPC, CPC has the right to inspect
AIPC Facilities during regular business hours.
7. REJECTION PROCEDURE
The following procedures shall be followed with respect to rejection of
Products:
7.1 In the case of rejection, AIPC shall promptly determine the reason for
the defect in the lot and submit a proposed method of correction of the defect.
Such proposal shall also include a method for preventing a repetition of the
cause of the defect, if possible.
7.2 CPC will have * after receipt of the proposed method of correction
(accompanied by reworked samples, if necessary) to accept or reject such
proposed method. Acceptance shall extend only to the method of correction and
shall not in and of itself constitute or imply approval of the lot after
correction. After correction, the lot must meet all regular quality tests and
any special tests made necessary by the nature of the defect.
7.3 CPC shall have * from the date of receipt of samples from any
reworked lot to retest the reworked lot. Failure to reject such reworked lot
during such period shall constitute acceptance of the lot. If any batch or lot
is finally rejected, AIPC shall dispose of such batch or lot in accordance with
Applicable Laws and in a manner that
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will not, in CPC's good faith reasonable judgment, have a negative impact on
the image of the Products.
7.4 *
7.5 In any event, AIPC's obligation with respect to any defect readily
observable at the time of delivery shall be to replace the Product, and all
other directly incurred costs including freight, storage and handling.
8. PROCESSING AND PACKAGING
8.1 AIPC will act in conformity with the Manual/Codebook. The
Manual/Codebook in-process and finished Product specifications will be
controlling.
8.2 AIPC agrees to abide by all current Kashruth requirements set by the
Union of Orthodox Jewish Congregations of America in the manufacture of Product
requiring Kosher Certification.
8.3 With respect to the process and equipment certified for the production
of Product, AIPC will notify CPC's QA Department in writing * prior to
implementation of any and all planned process changes excluding replacement of
like equipment for like equipment. This includes changes in processing
equipment, ingredient and significant changes in procedures affecting
through-put rates. Any such changes will be implemented by AIPC only after
full and open discussion, including testing where advisable, between the
Parties.
9. INVENTORIES
9.1 Procurement. AIPC agrees to maintain (and procure) an adequate
inventory of Raw Materials and Packaging Materials based upon AIPC's past
experience and inventory management programs, consistent with the agreed
procedures set forth in the applicable Contract Year Plan. If CPC requests
that a significantly higher level be maintained, AIPC will consider such
requests, and CPC agrees to finance the additional non- standard inventory
investment agreed to by the Parties.
9.2 Delivery of Finished Products. Finished Products are to remain under
AIPC's control until AIPC quality control has approved Products for release and
shipment to CPC at the applicable Warehouse and title to the Products has
passed to CPC in accordance with Article 12 below.
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10. PRODUCT ORDERS/INVOICING
10.1 * Invoice. AIPC will submit to CPC an invoice on a * basis for all
Products delivered to a Warehouse and prepared for shipment during the
immediately preceding * . The invoice will identify the Products by SKU,
volume and the price * .
10.2 Minimum Purchase/Supply Payments.
10.2.1 CPC. Except if prevented by an event of Force Majeure, if CPC
fails to purchase the Minimum Volume of Products in any Contract Year, CPC
shall pay * . Amounts payable by CPC to AIPC * for all pounds of Product
below the Minimum Volume not purchased by CPC. Amounts payable by CPC to AIPC
under this Section 10.2.1 will be reduced by amounts paid by CPC to, and
received by, AIPC with respect to * under Section 3.2.2 above throughout such
Contract Year.
10.2.2 AIPC. Except if prevented by an event of Force Majeure, if
AIPC does not deliver to the Warehouse for CPC all of CPC's requirements of
Products Actually ordered from AIPC consistent with the applicable Contract
Year Plan (not to exceed the AIPC Guaranteed Maximum Volume for such applicable
Contract Year), AIPC shall pay to CPC an amount equal to the Actual
unreimbursed out-of-pocket per pound cost incurred by CPC (excluding CPC's
Actual Materials Cost) to purchase such shortfall in excess of * for such
products.
10.3 Payment Terms. Except as otherwise provided herein, CPC will pay
invoices to AIPC within * from the date of receipt of such invoice. Payment
will be made by electronic transfer of funds when possible. Payment of an
invoice by CPC does not relieve AIPC of AIPC's obligations to deliver the
Products to CPC's carrier at the Warehouse in accordance with the quality
control and other specifications set forth in Sections 6, 7 and 8 and otherwise
under this Agreement and to pass title to the Products to CPC upon placement of
the Products on a carrier at the applicable Warehouse for shipment to CPC.
11. OWNERSHIP/EXCLUSIVITY
11.1 Recipes. Except for recipes provided by CPC, AIPC shall retain sole
ownership of the recipes and formulations for the Products; provided, that upon
any termination of the Agreement CPC will have the non-exclusive royalty free
right to use the recipes (other than AIPC's flavored pasta recipes) and
formulations for the Products.
11.2 *
11.3 Third-Party Production. Notwithstanding anything to the contrary
herein, AIPC may produce branded retail products for third parties, other than
for Xxxxxx, Xxxxxxx or Xxxxxxx, or any of the Xxxxxx, Hershey or Barilla
brands, without CPC's consent
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provided that such production in any Contract Year is limited to approximately
three (3) million pounds in any quarter of any Contract Year, subject to an
annual maximum of twelve (12) million pounds in any Contract Year, and further
provided that AIPC is capable of satisfying CPC's Actual requirement for
Products ordered from AIPC (up to the applicable annual AIPC Guaranteed Maximum
Volume).
12. TITLE AND RISK OF LOSS
Title and risk of loss to finished Products will pass to CPC upon (a) full
payment to AIPC for such Products and (b) such time as such Products have been
placed on CPC's delivery carrier or another carrier designated or acceptable to
CPC for distribution from the applicable Warehouse.
13. INDEPENDENT CONTRACTOR
AIPC is an independent contractor hereunder. Nothing contained in this
Agreement is intended or shall be construed to create or establish any agency,
partnership, joint venture or other profit-sharing arrangement,
landlord-tenant, or lessor-lessee relationship between the Parties. No Party
shall have any authority, express or implied, to create or assume any
obligation, enter into any agreement, make any representation or warranty, file
any document with any governmental body, or serve or accept legal process on
behalf of any other Party, settle any claim by or against any other Party, or
to bind or otherwise render any other Party liable in any way to any other
person, without the prior express written consent of the Party to be affected
by such action.
14. REPRESENTATIONS AND WARRANTIES
14.1 Mutual Representations. Each Party represents and warrants to the
other Party as of the date hereof that:
14.1.1 Due Incorporation; Authorization of Agreements - The Party
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which it will conduct business or carry out the
transactions contemplated under this Agreement, if the failure to be so
qualified would have a material adverse effect on the business or assets of the
respective Party or materially affects its ability to perform its obligations
hereunder. The Party has the full power and authority to execute and deliver
this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated by this Agreement. The Party has all
necessary licenses to market and sell the Products and to provide the Services
as contemplated by this Agreement.
14.1.2 No Conflict; No Default - Neither the execution, delivery and
performance of this Agreement nor the consummation by the Party of the
transactions
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contemplated hereby: (i) will violate or cause a breach of any of the terms,
conditions or provisions of any existing law, regulation, order, writ,
injunction, decree, determination or award of any governmental authority or any
arbitrator, applicable to such Party, or (ii) will violate or cause a breach of
or constitute a default under any of the terms, conditions or provisions of the
certificate of incorporation or bylaws (or other governing documents) of such
Party or of any material agreement or instrument to which such Party is or may
be bound or to which any of its material properties or assets is subject,
including the course of conduct between the Party and the other party(ies) to
such agreement, or (iii) will violate or cause a breach of, constitute a
default under (whether with notice or lapse of time or both), accelerate or
permit the acceleration of the performance required by, give to others any
interests or rights or require any consent, authorization or approval under any
indenture, mortgage or lease agreement or material financial obligation to
which such Party or by which such Party is or may be bound.
14.1.3 Litigation - There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Party,
threatened against or affecting the Party or any of its properties, assets or
businesses in any court or before or by any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator which could,
if adversely determined (or, in the case of an investigation, could lead to any
action, suit or proceeding, which if adversely determined could) reasonably be
expected to have a material adverse effect on the Party's ability to perform
its obligations under this Agreement. The Party has not received any currently
effective notice of default under any law, regulation, contract, agreement or
otherwise which if not timely cured could have a material adverse effect on the
Party's ability to perform its obligations under this Agreement. The Party is
not in default under any applicable order, writ, injunction, decree, permit,
determination or award of any governmental authority or any arbitrator which
could reasonably be expected to have a material adverse effect on the Party.
14.1.4 Right to Disclose. - Each Party has the right to disclose all
proprietary information which it has disclosed to the other Party pursuant to
this Agreement.
14.2 AIPC Service Warranties. In addition to all other warranties
expressed in this Agreement, AIPC warrants that, except as may be directed by
CPC or AIPC's compliance with the CPC Product Specifications:
14.2.1 the Products shall be of merchantable quality and fit for
their intended use as food for human consumption;
14.2.2 the Products shall conform to, and shall be processed,
produced, packaged and held in inventory in accordance with the CPC Product
Specifications to be established by the Parties hereunder and set forth and
included in EXHIBIT A hereto;
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14.2.3 AIPC shall perform hereunder in compliance with all
applicable federal, state, county and municipal laws and regulations now in
effect and hereinafter enacted, including, but not limited to the Act;
14.2.4 the Products, at the time of delivery to the carrier at a
Warehouse for shipment to CPC, shall not be adulterated, contaminated or
misbranded within the meaning of the Act and any regulations thereunder or any
similar state or local laws or regulations, nor is any Product one which may
not under such Act or law be introduced into intrastate commerce;
14.2.5 the Products shall be produced and manufactured in
accordance with the provisions of the Fair Labor Standards Act of 1938, as
amended, and laws, regulations and orders, now in effect or hereinafter enacted
or administered by the United States Department of Labor and any similar state
agency; and
14.2.6 that AIPC is an Equal Opportunity Employer and agrees that,
if subject to the terms of Section 202 of Executive Order 11246, AIPC will
comply with the terms of such laws.
ALL PRODUCT AND SERVICE
WARRANTIES BY AIPC WILL BE LIMITED
TO THE TERMS SET FORTH ABOVE IN
THIS SECTION 14.2.
14.3 No Representation. CPC will not make to any customer or potential
customer any representation or warranties whatsoever on behalf of AIPC, and
shall effectively disclaim any authority to make such warranty or
representation on AIPC's behalf, to any customer or potential customer
regarding any of the Products or Services, except as specifically set forth
above or authorized by AIPC in writing.
AIPC will not make to any customer or potential customer any representation
or warranty whatsoever on behalf of CPC, and shall effectively disclaim any
authority to make such warranty or representation on CPC's behalf, to any
customer or potential customer regarding any of the Products or Services,
except as specifically authorized by CPC in writing.
14.4 CPC Product Specifications Representation. CPC hereby represents and
warrants to AIPC that all instructions and directions of, and all product
specifications and procedures provided by, CPC to AIPC and set forth and
included in EXHIBIT A hereto or otherwise communicated by CPC to AIPC, from
time to time, which are to be utilized by AIPC in the manufacturing of the
Products pursuant to the terms and conditions of this Agreement (the "CPC
Product Specifications"), shall at all times be in strict compliance with any
and all Applicable Laws. CPC further represents and warrants that all Products
manufactured by AIPC in accordance with the CPC Product Specifications shall be
in strict
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compliance with all Applicable Laws, and shall not be subject to any Applicable
Laws which would prohibit the Products from being introduced into interstate
commerce.
14.5 CPC Marks, Ownership and Registration. CPC's trademarks designated
on SCHEDULE 14.5 hereto ("Marks") and the registration thereof are good, valid
and enforceable at law and in equity. Marks which are being applied for and
those for which registrations have not been renewed are not included in this
representation and warranty (it being understood no Party, by this exception,
waives its claim to such Marks and this Agreement shall apply to such Marks
even if only applied for or currently not registered).
15. INDEMNIFICATION AND INSURANCE
15.1 AIPC. AIPC (as "Indemnifying Party") shall defend, indemnify, and
hold harmless CPC, its employees and representatives (an "Indemnitee") from and
against all Damages incurred by such Indemnitee attributable to any actions and
claims arising out of or in connection with the Products attributable to AIPC
and/or AIPC performance of Services hereunder with respect to: (i) injury
and/or death to persons including AIPC's employees, agents or representatives
and damage to property (ii) fines, levies or other charges imposed by any
governmental authority or agency, (iii) AIPC's failure to comply with or
violation of any applicable laws, regulations, rules and ordinances, (iv)
violations by AIPC of the Comprehensive Environmental Response Compensation and
Liability Act or any other federal, state or local law, regulation or order
regarding the environment or contamination thereof now in effect or hereinafter
enacted, (v) any alleged infringement or violation of any patent right in
connection with performance of Services hereunder unless the alleged
infringement or violation was directed by CPC. Notwithstanding anything to the
contrary herein, in no event will AIPC be required to indemnify any Indemnitee
for any such Damages attributable to (A) the acts or omissions of CPC, or (B)
AIPC's acts or omissions taken or made (or omitted to be taken or made) in
accordance with the CPC Product Specifications, at the direction of CPC, or
otherwise in accordance with the terms of this Agreement.
15.2 Mutual. Each Party hereto (the "Indemnifying Party") agrees to
indemnify and hold harmless the other Party hereto and their permitted assigns
and Affiliates, and their officers, directors, employees and agents, and each
of their representatives, and their successors and assigns (collectively, the
"Indemnitees") at all times from and after the Effective Date against and in
respect of any Damages suffered by the Indemnitees as a direct or indirect
result of any claims, actions or demands by a third party, to the extent caused
by or attributable to: (i) any breach of any representation or warranty made
by the Indemnifying Party in this Agreement or any agreement executed by the
Indemnifying Party in connection herewith including, but not limited to, with
respect to the CPC Product Specifications; (ii) breach or default in the
performance by the Indemnifying Party of any of the covenants to be performed
by the Indemnifying Party under this Agreement or any agreement executed by the
Indemnifying Party in connection herewith; (iii) any debts, liabilities or
obligations of the Indemnifying Party, whether accrued, absolute, contingent,
or
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otherwise, due or to become due not specifically addressed herein; (iv) any
claim by a third party preventing, or attempting to prevent, the Indemnifying
Party from substantially performing its material obligations hereunder; (v) the
Indemnifying Party's acts or omissions with respect to any advertising relating
to the Products (other than claims arising out of (A) the proper use of the
Indemnified Party's Marks, and (B) advertising that is specifically approved in
form and content by the Party), or (vi) any other act or omission of the
Indemnifying Party or any occurrence on the property of the Indemnifying Party,
unrelated to this Agreement.
15.3 Procedure. Promptly upon receipt by an Indemnitee of notice of any
demand, assertion, claim, action or proceeding, judicial or otherwise with
respect to any matter as to which such Indemnitee seeks indemnification under
the provisions of this Agreement, the Indemnitee will give prompt notice
thereof in writing to the Indemnifying Party, together with the statement of
such information respecting such demand, assertion, claim, action or proceeding
as the Indemnitee shall then have. If the claim for indemnification is not
disputed, the Indemnifying Party will promptly proceed to process such claim
with applicable insurance providers, if any.
If the claim is with respect to a claim by a third party, and if the
Indemnifying Party acknowledges full liability or potential liability without
admitting same under this Agreement, the Indemnifying Party shall have the
right to contest and defend by all appropriate legal or other proceedings any
demand, assertion, claim, action or proceeding with respect to which it has
been called upon to indemnify the Indemnitee under the provisions of this
Agreement; provided, however, that:
(i) notice of intention so to contest shall be delivered to the
Indemnitee within * calendar days from the receipt by the Indemnifying
Party of notice of the assertion of such demand, assertion, claim, action or
proceeding;
(ii) the Indemnifying Party will pay all costs and expenses of such
contest or defense, including all attorneys' and accountants' fees, and the
cost of any bond required by law to be posted in connection with such
contest or defense;
(iii) such contest or defense shall be conducted by reputable attorneys
employed by the Indemnifying Party and reasonably approved by the
Indemnitee, at the Indemnifying Party's sole cost and expense, but the
Indemnitee shall have the right to participate in such proceedings and to be
represented by attorneys of its own choosing, at the Indemnitee's cost and
expense without contribution or indemnification by the Indemnifying Party
for such costs or expenses;
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(iv) if after such opportunity, the Indemnifying Party does not elect to
assume the defense in any such proceedings, the Indemnifying Party shall be
bound by the results obtained by the Indemnitee, including without
limitation any out-of-court settlement or compromise;
(v) if the Indemnifying Party assumes the defense, the Indemnitee(s)
will not settle, or attempt to settle, such claim without the Indemnifying
Party's consent; and
(vi) the Indemnifying Party will not settle any claim without the prior
written consent of the Indemnitees, unless the settlement contains a
complete and unconditional release of the Indemnitee(s), and the settlement
does not involve the imposition of any nonmonetary relief on the
Indemnitees.
15.4 Insurance.
15.4.1 AIPC. AIPC shall procure and maintain, at all times while
performing hereunder, occurrence based liability insurance with a reputable and
financially responsible insurance carrier(s) satisfactory and acceptable to CPC
for the coverage in the amounts set forth in EXHIBIT 15.4 attached hereto and
incorporated by reference herein, and any additional insurance as may be
required by applicable laws, ordinances or governmental orders, rules and
regulations. In the event AIPC purchases or maintains insurance policies with
limits that are greater than the limits required by this Agreement, the maximum
limits of such policies shall be fully available to CPC.
Endorsements expressly naming CPC as additional insured with
respect to such coverage, and loss payee with respect to property loss or
damage, and the copies of the policies shall be delivered to CPC. In addition,
the endorsements shall expressly (i) state that AIPC's primary and excess or
umbrella policies are primary coverage and not concurrent or excess over other
insurance which may be available to CPC, (ii) provide for waiver of all
subrogation rights against CPC, and (iii) state that any change restricting or
reducing coverage or cancellation of any policy shall not be valid as respects
CPC's interests until CPC has received * notice in writing of such change or
cancellation. In the event that coverage is renewed during the original term
or any subsequent term of this Agreement, endorsements for the renewed policies
shall be delivered to CPC within * after renewal.
Notwithstanding anything to the contrary contained in this Section
15.4, it is acknowledged and agreed that CPC shall not be designated a loss
payee (other than with respect to inventory of Products and Raw Materials in
AIPC's possession or in a Warehouse, which has been purchased and paid for by
CPC) with respect to or have any right to any proceeds of any insurance
purchased or maintained by AIPC unless and until the "Total Commitment" and all
"Interest Rate Protection Agreements and Other Hedging Agreements" (as each such
term is defined in the Credit Agreement, as amended, dated as of April 11, 1997
(as such Agreement may be amended, modified or restated from time to time and
any
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agreement refinancing in whole or in part such Agreement, collectively, the
"Credit Agreement"), among AIPC, the banks and agents party thereto from time to
time) are terminated and all "Obligations" (as defined in the Credit Agreement)
have been paid in full.
16. TERMINATION
16.1 Without Cause. Either party may terminate this Agreement without
cause (i) pursuant to Section 17.5 below, or (ii) during 1997 by giving the
other party three (3) years prior written notice and at any time thereafter by
giving the other party two (2) years prior written notice.
16.1.1 CPC Termination Fee. In the event CPC terminates this
Agreement pursuant to Section 16.1 above or Section 22 below, or AIPC terminates
this Agreement for cause under Section 16.2.1 below, CPC will pay to AIPC as
liquidated damages, and not a penalty, the applicable Termination Fee (set forth
below) which is intended to compensate AIPC for unrealized capital expenditures
and which shall be CPC's total liability for such termination.
The applicable Termination Fee will be:
Year in which
Termination
is Effective Termination Fee
* *
Notwithstanding anything to the contrary above, beginning in the calendar
year * and thereafter, the applicable Termination Fee set forth above for a
year will be reduced by * for each full calendar quarter during such calendar
year that CPC purchases and pays for at least * of Products from AIPC during
each such quarter. For example, if the Agreement is terminated effective * ,
and CPC is required to pay the Termination Fee set forth above, the Termination
Fee will be reduced by * , if CPC purchased and paid for at least * of
Products from AIPC during * .
16.1.2 AIPC Termination. In the event AIPC terminates this
Agreement pursuant to Section 16.1 above, AIPC will compensate CPC by payment to
CPC for the remaining Term of this Agreement, an amount equal * , in each case
as of the effective date of a termination hereunder. CPC agrees to use
reasonable efforts to obtain the Products at reasonable costs and agrees to
consider qualified production alternatives presented by AIPC.
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16.2 Termination for Cause.
16.2.1 AIPC. AIPC may terminate this Agreement for cause if any
of the following occurs: (i) an Insolvency Event shall occur with respect to
CPC, that, in AIPC's reasonable opinion, materially threatens CPC's ability to
perform hereunder which has not been cured after notice from AIPC to CPC and the
expiration of the period to cure as provided in Section 16.2.3 below; (ii) CPC
fails to make any payments due to AIPC hereunder, which in the aggregate equal
or exceed * and are not the subject of a good faith dispute between the
Parties, within * after notice from AIPC that such payment is due and payable
which has not been cured after notice from AIPC to CPC and the expiration of the
period to cure as provided in Section 16.2.3 below; (iii) a material breach by
CPC of any non-payment terms of this Agreement, including but not limited to any
material misrepresentation of financial or other information or persistent
disregard of laws or regulations which has not been cured after notice from AIPC
to CPC and the expiration of the period to cure as provided in Section 16.2.3
below; or (iv) as provided in Section 22 below upon the occurrence of an event
set forth therein.
16.2.2 CPC. CPC may terminate this Agreement for cause if any of
the following occurs: (i) an Insolvency Event shall occur with respect to AIPC,
that, in CPC's reasonable opinion, materially threatens AIPC's ability to
perform hereunder; (ii) a material breach by AIPC of any non-payment terms of
this Agreement, including but not limited to any material misrepresentation of
financial or other information or persistent disregard of laws or regulations
which has not been cured after notice from CPC to AIPC and the expiration of the
period to cure as provided in Section 16.2.3 below; (iii) subject to the terms
hereof and for any reason, other than Force Majeure or the fault of CPC, AIPC
fails to supply to CPC the lesser of (A) CPC's Actual requirements for Products
ordered from AIPC, or (B) the applicable annual AIPC Guaranteed Maximum Volume;
or (iv) as provided in Section 22 below upon the occurrence of an event
described therein.
16.2.3 Effective Date. Termination for cause by a Party under this
Section 16.2 shall be effective after the expiration of * following receipt
of a notice to the other Party describing the event giving rise to such
termination; provided that this Agreement shall not terminate on such * day
if the event giving rise to such termination has been cured (or, if the event
giving rise to such termination is susceptible to cure, but not susceptible to
cure within such * day period, the breaching Party has taken all reasonable
steps within such * day period to cure the event giving rise to such
termination as promptly as practicable thereafter).
16.2.4 Insolvency Event Defined. "Insolvency Event" means, with
respect to any Party, that such Party (i) makes an assignment for the benefit of
creditors, admits in writing its inability to pay its debts as they become due,
files a voluntary petition in bankruptcy, is adjudicated as bankrupt or
insolvent, files a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future bankruptcy law, seeks, consents to, or
acquiesces
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in, the appointment of any trustee, receiver, custodian, or liquidator of it or
of all or substantially all of its properties; or it, its directors, or
shareholders takes action to dissolve or liquidate it; or an involuntary
petition in bankruptcy is brought against such Party or an answer proposing the
adjudication of such Party as a bankrupt or proposing its liquidation or
reorganization pursuant to any applicable bankruptcy law is filed in any court
and such Party consents to or acquiesces in the filing thereof of such petition
or answer is not dismissed within ninety (90) days after the filing thereto.
16.3 Inventory. Within * following the effective date of any
termination of this Agreement (or the end of the Term hereof), CPC will (i)
purchase (at AIPC's Actual cost) all Product Raw Materials and Packaging
Materials within current specifications in AIPC's inventory that cannot be used
by AIPC to produce and distribute pasta products on its own account as of the
effective date of a termination of this Agreement, and (ii) evacuate, at CPC's
sole cost and expense, all Product inventory from the warehouses owned or used
by AIPC.
17. FORCE MAJEURE
17.1 If the performance of this Agreement (including without limitation
any deliveries hereunder) is interfered with by any circumstance or event of
Force Majeure, the Party affected will be excused from such performance on a
day-to-day basis to the extent of such interference (and the other Party will
likewise be excused from performance on a day-to-day basis to the extent such
Party's obligations relate to the performance so interfered with), and such
event shall not give rise to any claim for Damages or other relief; provided,
that the affected Party gives (i) prompt notice to the other Party (no later
than * ) of the commencement of the Force Majeure, stating the specific
circumstances constituting the Force Majeure and describing the obligation or
performance which is thereby delayed or prevented and (ii) notice to the other
Party, within * after cessation of the Force Majeure, of such cessation and
of the specific facts and circumstances supporting the Party's claim concerning
the occurrence and duration of the Force Majeure event.
17.2 "Force Majeure" means an act, event or occurrence that materially and
adversely affects a Party's ability to perform hereunder, and is demonstrably
beyond the control of the affected Party, such as (i) acts of war, whether
declared or not; (ii) insurrection, rebellion, sabotage, acts of terrorists,
public or local disorders, riots, or violent demonstrations; (iii) explosions,
fires, floods, earthquakes or other such natural calamities which it is not
reasonably possible for the affected Party to overcome; (iv) embargoes,
judicial action, lack of or inability to obtain export/import permits or
approvals or other governmental action or inaction not occasioned by the fault
or negligence of the Party affected thereby; (v) abnormal or unusually severe
weather conditions which it is not reasonably possible for the affected Party
to overcome; or (vi) strikes, boycotts or lockouts or such other labor disputes
(but excluding those that are initiated within or limited to the labor force of
the affected Party).
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17.3 A claim of Force Majeure not adequately supported within * of the
date of such claim by specific facts and evidence shall be void and treated,
for purposes of this Agreement, as if never made.
17.4 In no event shall Force Majeure excuse or suspend any obligation to
give any notice or to pay any sum of money due under this Agreement, whatever
the nature of the Force Majeure may be.
17.5 If an event of Force Majeure (i) prevents AIPC from producing the
lesser of (A) CPC's Actual requirements for Products ordered from AIPC, or (B)
the applicable quarterly AIPC Guaranteed Maximum Volume, or (ii) prevents CPC
from accepting and purchasing the Minimum Volume under this Agreement, in
either case for a period in excess of * , then either Party may, by * prior
written notice to the other, terminate this Agreement.
17.6 A party subject to Force Majeure shall exercise all possible
diligence in order to, as soon as possible, remove the effects of, or to
mitigate said effects if their removal is not immediately possible, such Force
Majeure, including the expenditure of a reasonable amount of money. If a
Facility continues to have capacity to produce Products, notwithstanding an
event of Force Majeure affecting such Facility, AIPC will allocate a pro-rata
amount of such remaining capacity to the production of the Products for CPC, in
proportion to the average monthly amount of the full capacity of such Facility
utilized to produce the Products for CPC during the immediately preceding *
period, until such time as the Facility retains the level of capacity in
existence immediately preceding the Force Majeure.
17.7 Unless this Agreement has been terminated as provided herein, each
Party shall reassume, with full rights, the duty of complying with its
obligations hereunder as soon as the Force Majeure ceases, without the right to
claim any compensation from the other party for the period of suspension.
17.8 The Contract Year Plan in effect as of the date of any event of Force
Majeure will be reviewed and adjusted, as necessary, to take into account the
effects of any such event.
18. RECORDS AND AUDIT
18.1 Methods. AIPC will participate in CPC Product planning and tracking
using a remote terminal to enter data related to daily production, daily
inventory status, and daily shipments from the Warehouse pursuant to the
systems referenced below. In connection therewith, the Parties will work
together to establish mutually acceptable methods of reporting production,
product recall, distribution and customer information. AIPC will reasonably
consider CPC's requests to conform or integrate CPC's existing systems into
such reporting methods and procedures. CPC and AIPC will conduct a monthly
reconciliation of
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Product inventory in the Warehouses in accordance with CPC's financial
reporting systems. AIPC will be responsible for any shortages (and CPC will be
responsible for any overages) in the amount of Product invoiced and paid for by
CPC and the amount of Product actually delivered to a carrier at a Warehouse
for shipment to CPC, with allowance for shrinkage of * .
18.2 Maintenance. AIPC shall keep and maintain current and accurate books
and records pertaining to the purchase of Raw Materials and Packaging Materials
and production of the Products and all other records required by law.
Production records shall include but are not limited to, lot numbers of Raw
Materials (for tracking), data on weight control (actual weight, and moisture
content at packing), records on micro stability of egg products used in the
manufacture of the Products.
18.3 Audit. During the term of this Agreement and for one (1) year after
the termination or expiration of this Agreement, AIPC will permit CPC to
review, audit, inspect and copy the records with respect to all Services by
allowing CPC or its designated auditors or other personnel reasonable access to
AIPC's premises and the records upon prior notice.
18.4 Accounting Changes. AIPC shall notify CPC of any accounting method
changes (such as on Depreciation) that could affect the cost structure for the
Products.
19. CONFIDENTIALITY
A Confidentiality Agreement between CPC and AIPC dated August 9, 1996 is
attached hereto as EXHIBIT 19 and made a part hereof.
20. TRADEMARKS AND ENDORSEMENTS
20.1 CPC Representation. CPC shall be responsible for providing
mechanicals for all Packaging Materials and represents, warrants and agrees
that the mechanicals for artwork and printed materials do not, and will not,
infringe any copyright or trademark of any third party. AIPC will not make any
changes in the artwork without CPC's prior written permission.
20.2 License. CPC hereby grants a revocable (upon termination of this
Agreement), non-exclusive, royalty-free license to AIPC to apply to the
Products as necessary CPC's trademark Xxxxxxx'x(R) * for sale only to CPC,
and set forth on SCHEDULE 14.5 hereto. AIPC hereby acknowledges that it shall
so apply such designated trademarks to the Products only for sale to CPC and
such trademarks shall remain the sole property of CPC. Nothing in this
Agreement shall be deemed to confer upon AIPC any right, title or interest in
or to said trademarks or to the goodwill now or hereafter associated therewith.
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During the term of this Agreement, each such trademark shall not be employed by
AIPC in any manner as to impair, dilute or jeopardize same nor otherwise than
in accordance with instructions given from time to time by CPC.
Upon termination of this Agreement, AIPC shall make no further use of the
CPC Marks or any confusingly similar trademarks or tradenames for any purpose
whatsoever nor employ any other trademark or trade name which gives the
impression or tends to suggest that AIPC continues to produce CPC's Products or
is otherwise associated with CPC.
20.3 Prohibited Use by AIPC. AIPC shall not, without CPC's written
consent, use CPC's trademarks, brand names, company and/or division name,
package likeness, letterhead or other material bearing CPC's name or products
in any advertising, promotion or endorsement.
20.4 Prohibited Use by CPC. CPC shall not, without AIPC's written
consent, use AIPC's trademarks, brand names, company and/or division name,
package likeness, letterhead or other material bearing AIPC's name or products
in any advertising, promotion or endorsement.
21. GOVERNING LAW AND DISPUTE RESOLUTION
21.1 Governing Law. All matters regarding interpretation of this
Agreement. and the rights of the parties shall be determined by the laws of the
State of Illinois without giving effect to the principles of conflict of laws
thereof.
21.2 Dispute Resolution.
21.2.1 In the event of a dispute relating to this Agreement, the
disputing Party shall given the other Party written notice of the dispute.
Each Party shall designate a senior corporate officer who will meet to attempt
to settle the matter in good faith within * of such notice.
21.2.2 If the dispute has not been resolved within * of the
meeting of the senior corporate officers, the Parties shall submit the dispute
for non-binding mediation in accordance with the procedures set forth in EXHIBIT
21.2.2; provided, however, if the dollar amount of any such dispute is *
Dollars ($ * ) or less, the decision of the mediator shall be binding upon the
Parties, and enforceable in a court of competent jurisdiction.
21.2.3 If the dispute has not been resolved pursuant to the
aforesaid mediation procedure within * of the commencement of such mediation,
or if either Party will not participate in mediation, the dispute shall be
settled by binding arbitration in accordance with the Arbitration Procedures
attached as EXHIBIT 21.2.3 hereto.
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21.3 Expenses. Each Party will bear their own attorney fees, other
professional fees, and expenses incurred in connection with any dispute
resolution hereunder. The fees and expenses of the mediator/arbitrator and
mediation/arbitration hearing will be equally shared by the Parties, unless
otherwise determined by the mediator in a binding mediation or arbitrator in
arbitration. If any Party commences litigation against the other Party in
connection with this Agreement, and it is finally determined by a court of
competent jurisdiction (and the period for appeals if any, has expired) that
such dispute must be submitted to mediation/arbitration hereunder, the Party
who commenced the litigation shall pay all of the attorney fees and expenses
incurred by the other Party in connection with such litigation, and such amount
can be awarded by the court reaching such conclusion.
22. ASSIGNMENT
22.1 General. Neither Party hereto may assign or transfer this Agreement,
in whole or in part, or any interest arising hereunder, without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary herein, this Agreement may
be assigned or transferred by CPC to any Affiliate of CPC a majority of whose
capital stock or interests entitled to vote generally in the election of
directors (or other governing body) is owned by CPC, or CPC may assign this
Agreement, in whole or in part, to a third party (subject to Section 22.3
below), provided that CPC remains financially responsible for and guarantees
the assignee's obligations to AIPC under this Agreement, unless the assignee
has a Xxxxx'x Investor Services credit rating of at least "A" or better as of
the date of such assignment. Subject to the provisions of this Section 22,
this Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Parties hereto.
22.2 AIPC Assignment. Notwithstanding anything to the contrary herein, in
the event of a sale, transfer or merger of AIPC to or with * or the sale or
transfer of all of substantially all of its business or assets to or with * ,
CPC shall have the right to terminate this Agreement at any time within *
from the date of a notice of the transaction to CPC by giving AIPC written
notice thereof which will include CPC's tentative schedule of dates for
termination of this Agreement, subject to an effective date of termination that
is at least * but no more than * following the date of the notice of
termination.
22.3 CPC Assignment. Notwithstanding anything to the contrary herein, in
the event of a sale, transfer or merger of CPC to or with * , or the sale of
substantially all of CPC's assets, the Best Foods division, or CPC's
Xxxxxxx'x(R) pasta business, or any assignment of this Agreement to * , AIPC
shall have the right to terminate this Agreement at anytime within * from the
date of a notice of the transaction to AIPC by giving CPC written notice
thereof which will include a schedule of dates for terminating this Agreement,
which will provide to CPC's successor notice of termination that is not less
than the lesser of (a) the remaining portion of the then current term of this
Agreement (without options to extend) and (b) * .
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22.4 Permitted Assignment by AIPC. Notwithstanding anything to the
contrary herein, AIPC may assign AIPC's rights hereunder in connection with any
capital financing of AIPC's business; provided, in no such event will AIPC's
obligations to CPC, or CPC's rights under this Agreement, be diminished or
affected by any such assignment.
23. NOTICES
23.1 Any notice required or permitted to be given under this Agreement
shall be considered as having been given by either Party to the other Party
upon faxing the notice and confirming the notice by mailing thereof to such
other Party by registered or certified mail, required postage prepaid, or by
overnight courier service, at the following addresses, or by making personal
delivery thereof to such other Party at the said address or, in either case, at
such other address as the Parties may from time to time specify in writing. A
Post Office or courier service receipt showing the receipt of such notice and
the date thereof shall be prima facie evidence of the giving of such notice.
23.2 Notices shall be directed to:
If to CPC: Best Foods
X.X. Xxx 0000, Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxx, XX 00000-0000
Atten: President
FAX: 000-000-0000
with a copy to: Legal Department
X.X. Xxx 0000, Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxx, XX 00000-0000
FAX: 000-000-0000
Atten: Assistant General Counsel
If to AIPC: 0000 Xxxxxxx Xxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Atten: President
Fax: 000-000-0000
with a copy to: Xxxxx X. Xxxxxx, Esq.
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
Suite 1100
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Fax: 000-000-0000
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24. NOTICE OF SALE
If AIPC intends to sell or transfer all or a material portion of its
company or CPC intends to sell or transfer all or a material portion of its
pasta business, it shall give the other Party * notice in writing.
Notwithstanding anything to the contrary herein, neither Party will be required
to provide notice of intent to issue capital stock or debt in an underwritten
public offering pursuant to a registration statement filed under the Securities
Act of 1933.
25. PUBLICITY
AIPC shall not advertise or publicize the fact that CPC has entered into
this Agreement before the earlier of (i) two (2) months following the Effective
Date, or (ii) the date CPC has publicly announced the existence of the
relationship established hereunder; provided, however, AIPC may disclose the
existence and terms of this Agreement (i) to the extent required (A) by
Applicable Law, rule or regulation (including complying with any
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process to which AIPC is subject, or (B) under
applicable securities laws, and (ii) to AIPC's banks, lenders, stockholders,
Affiliates, directors, officers, employees, agents, counsel or representatives.
Each Party will provide a draft of any publicity release to the other Party at
least * before release of such material to the public. Except as provided
herein, neither AIPC nor any of its suppliers or agents shall use CPC's
photographs, logos, trademarks or other identifying features or articles or
make speeches concerning this Agreement without CPC's prior written approval.
26. CHANGES IN ECONOMIC, TECHNICAL OR BUSINESS CONDITIONS
26.1 AIPC and CPC agree to renegotiate, to the extent commercially
reasonable, applicable provisions of this Agreement in the event the following
business circumstances occur:
26.1.1 AIPC or CPC growth opportunities require significant Product
volume increases which require additional capital expenditure, or a shift in
the operating structure described in this Agreement.
26.1.2 Major manufacturing cost improvements by competitive pasta
producers which significantly alter the cost structure advantage to AIPC and
CPC will trigger discussion on how to regain low cost status within the pasta
industry. AIPC and CPC recognize this may require additional capital
expenditure, which will be analyzed on the basis of the cost/benefit trade-off,
and the after tax internal rate of return for both parties. The implementation
and financing of such investment to be agreed to jointly. If CPC's cost
structure becomes disadvantaged * , CPC may, at its option finance capital
expenditures necessary to regain cost competitiveness. If AIPC does not agree
to permit CPC to place new equipment to reduce or eliminate a CPC cost
disadvantage without creating
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disadvantages in AIPC's remaining cost structure, CPC may at its option
terminate this Agreement "for cause" and negotiate a scheduled exit from AIPC's
facilities within * .
26.1.3 Sustained ( * ), significant ( * ) volume decreases in
AIPC's business will require the Parties to use their best efforts to equitably
redistribute required overheads for continued, efficient operations.
26.2 In the event of sustained ( * ), significant ( * ) volume
decreases in the CPC pasta business, and AIPC is producing all of CPC's
Xxxxxxx'x(R) and other retail branded pasta requirements (producible by AIPC),
AIPC will use its commercially reasonable efforts to mitigate CPC's exposure to
AIPC * under this Agreement. In furtherance of the foregoing, the Parties
will use their commercially reasonable efforts to renegotiate the restrictions
on AIPC's ability to produce branded retail products for * to the extent
necessary to enable AIPC to produce and sell an aggregate volume of products
(to CPC and other parties) during any Contract Year in an amount at least equal
to the * for such Contract Year.
27. MISCELLANEOUS
27.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules to the Agreement, which are hereby incorporated herein and made a
part hereof, set forth the entire understanding of the Parties with respect to
the subject matters contained herein or therein, and supersede any prior or
contemporaneous agreements, understandings and representations, whether oral or
written, made by or between the Parties hereto.
27.2 Amendments. No supplement, modification or amendment of this
Agreement, the Exhibits or Schedules shall be binding unless executed in
writing by the Parties hereto.
27.3 Waiver. If any Party fails, at any time, to enforce any right or
remedy available to it under this Agreement, that failure shall not be
construed to be a waiver of the right or remedy with respect to any other
breach or failure by the other Party.
27.4 Validity. If for any reason any clause or provision of this
Agreement, or the application of any such clause or provision in a particular
context or to a particular situation, circumstance, or person, should be held
unenforceable, invalid or in violation of law by any court or other tribunal,
then the application of such clause or provision in contexts or to situations,
circumstances or persons other than that in or to which it is held
unenforceable, invalid or in violation of law shall not be affected thereby,
and the remaining clauses and provisions hereof shall nevertheless remain in
full force and effect. Further, where state or federal law governs any aspect
of matters or services covered by this Agreement, such state or federal law
shall prevail over inconsistent provisions in this Agreement.
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27.5 Captions. The captions included in this Agreement have been inserted
as a matter of convenience only and in no way are intended to define, limit or
to be used in connection with the interpretation of this Agreement.
27.6 Counterparts. This Agreement may be executed in two (2)
counterparts, each of which shall be deemed an original for all purposes, and
all of which shall constitute but one and the same instrument.
27.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
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SIGNATURE PAGE TO MANUFACTURING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE ENFORCEABLE BY THE
PARTIES.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
AMERICAN ITALIAN PASTA COMPANY
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------------------------
By: Xxxxxxx X. Xxxxxxx
Its: President
CPC INTERNATIONAL INC.
/s/ Axel C.A. Xxxxxx
------------------------------------------------------
By: Axel C.A. Xxxxxx
Its: Senior Vice President
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------------------------
By: Xxxxxxxx X. Xxxxxxxx
Its: Vice President
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