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EXHIBIT 10.2
CONFIDENTIAL TREATMENT REQUESTED
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
PAGE
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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TABLE OF CONTENTS
(CONTINUED)
PAGE
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
5.3 Durum Procurement Practices.................................................................... 9
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 Exclusive Business .................................................................. 11
11.3 Third-Party Production............................................................... 11
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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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TABLE OF CONTENTS
(CONTINUED)
PAGE
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 ▇▇▇▇▇▇▇'▇(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.ss.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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇'▇(R), Napolena(R) or
any other similarly branded dry pasta products, and any other long, short and
noodle pasta products marketed by CPC or any Affiliate thereof, at retail,
including but not limited to the products listed by description and SKU number
on the list set forth and included in EXHIBIT A attached
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hereto (as such list of products may be revised from time to time as part of the
Contract Year Plan to be prepared in accordance with the terms of this Agreement
and to add new pasta products added to the scope of this Agreement consistent
with the intent of the Parties set forth in the third recital set forth above).
When referring to individual Products hereunder, a Party will refer to such
Product's "SKU" number.
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: (i) order, pay for, schedule, receive,
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store, and inventory Packaging Materials; (ii) have available sufficient amounts
of any Raw Materials to manufacture the Products, (iii) process and package the
Products necessary to meet demand forecast set forth in the applicable Contract
Year Plan; (iv) conduct quality control tests and inspections; and (v) deliver
the packaged Products to the applicable Warehouse pending delivery to a carrier
for shipment to CPC. 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.
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
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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.
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
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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.
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
▇▇▇▇▇▇▇'▇(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
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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.
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. Budgeted Total Cost will be based, among other
factors, on AIPC's Actual Total Cost incurred to produce such Product during the
Contract Year then ending. The Budgeted Total Cost will be based on * of the
Target Volume for the upcoming Contract Year and will include a breakdown of the
Conversion and Materials Cost. 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.
The Budgeted Conversion Cost for the current Contract
Year will be used for the next succeeding Contract Year until the Parties
establish a Budget for such succeeding Contract Year (provided the Budgeted
Materials Cost will be adjusted to the Actual Materials Cost incurred in the
last quarter of the then ending Contract Year), until such time as the Parties
establish a new Conversion and Materials Cost for such Contract Year, at which
time there will be appropriate retroactive adjustments.
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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. AIPC and CPC will establish
the procedures by which procurement decisions for durum wheat will be made by
the Parties and executed by AIPC for each Contract Year. Such agreed procedures
will be set forth in the applicable Contract Year Plan.
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.
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.
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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 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.
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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.
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 * 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.
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11.2 Exclusive Business. * AIPC agrees not to produce pasta
for ▇▇▇▇▇▇, Hershey or Barilla, or any of the brands owned by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇, or for any of their Affiliates, without the other Party's prior written
consent.
11.3 Third-Party Production. Notwithstanding anything to the
contrary herein, AIPC may produce branded retail products for third parties,
other than for ▇▇▇▇▇▇, Hershey or Barilla, or any of the ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇ brands, without CPC's consent 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
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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 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;
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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;
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
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in accordance with the CPC Product Specifications shall be in strict 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
otherwise, due or to become due not specifically
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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;
(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;
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(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 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.
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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.
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 fifty thousand dollars ($50,000) and are not the
subject of a good faith
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dispute between the Parties, within 10 days 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 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
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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).
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.
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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 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.
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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 ▇▇▇▇▇▇▇'▇(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. 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.
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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.
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
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responsible for and guarantees the assignee's obligations to AIPC under this
Agreement, unless the assignee has a ▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇,
Hershey or Barilla or the sale or transfer of all of substantially all of its
business or assets to or with ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇,
Hershey or Barilla , or the sale of substantially all of CPC's assets, the Best
Foods division, or CPC's ▇▇▇▇▇▇▇'▇(R) pasta business, or any assignment of this
Agreement to ▇▇▇▇▇▇, Hershey or Barilla, 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) * .
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.
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23.2 Notices shall be directed to:
If to CPC: Best Foods
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Atten: President
FAX: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Legal Department
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
Atten: Assistant General Counsel
If to AIPC: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Atten: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Suite 1100
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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,
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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 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
▇▇▇▇▇▇▇'▇(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.
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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.
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President
CPC INTERNATIONAL INC.
/s/ Axel C.A. ▇▇▇▇▇▇
-------------------------------
By: Axel C.A. ▇▇▇▇▇▇
Its: Senior Vice President
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Vice President
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