SPARTA FOODS, INC.
MANUFACTURING AGREEMENT
EFFECTIVE DATE: January 1, 1996
PARTIES: Sparta Foods, Inc.
0000 Xxxxxx Xxxxxx
Xx. Xxxx, XX 00000-0000 ("Sparta")
Fax #: (000) 000-0000
Xxx Xxxxx Products, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Fax #: (000) 000-0000 ("KDPI")
RECITALS:
A. Sparta manufactures and sells Mexican and other food products under its
own trademarks and brand names and also manufactures food products for other
food companies.
B. KDPI is engaged in the wholesale marketing of a line of cooking sauces
under the name "Xxx Xxxxx" and desires to engage Sparta to manufacture such
products.
C. Sparta is willing to manufacture such products for KDPI on the terms and
subject to the conditions of this Agreement.
AGREEMENT:
In consideration of the mutual promises set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Manufacture of Products.
a. Specifications. Sparta agrees to manufacture and package the line
of barbecue sauces identified on Exhibit A attached hereto (the
"Products") at Sparta's manufacturing facilities located at 0000
Xxxxxx Xxxxxx, Xx. Xxxx, Xxxxxxxxx pursuant to purchase orders
submitted by KDPI and accepted by Sparta. Sparta agrees to
manufacture the Products in accordance with the ingredient
specifications and manufacturing methods provided by KDPI in
writing to Sparta (the "Specifications"). KDPI agrees to provide
Sparta with thirty (30) days prior written notice of any changes
to the Specifications. Sparta acknowledges that it shall use the
Specifications solely for the manufacture and sale of the
Products to KDPI pursuant to the terms of this Agreement and
shall not use the Specifications for any other purpose.
b. Quality Control. Sparta agrees to (i) maintain control samples of
each production run of Product manufactured for a period of three
(3) years after such manufacture, (ii) provide KDPI with a
written report of each day's production with Sparta's assigned
date code, and (iii) provide KDPI with a written quality control
report of each daily batch of Product manufactured.
2. Packaging Of Product.
a. Package Design and Product Labels. Sparta shall package the
Products using the packaging design and product labels provided
by KDPI. KDPI shall be entirely responsible for the development
and cost of such design and labels. KDPI will provide Sparta with
sufficient quantities of Product labels as requested from time to
time by Sparta.
b. Purchase of Packaging Materials. Sparta will order packaging
(excluding Product labels) for the Products from its suppliers in
such reasonable quantities to minimize the price for such
packaging but not less than the minimum order size requirement of
the supplier. The price of such packaging is included in the
purchase price of the Products. KDPI shall pay Sparta for any
extra charges or assessments incurred by Sparta for
less-than-minimum or other non-standard size packaging orders
required by KDPI.
c. Discontinuance of Packaging. KDPI shall pay Sparta promptly for
any packaging purchased by Sparta for the Products if such
packaging is discontinued by KDPI for any reason whatsoever or
has remained unused by Sparta for a period of six (6) months.
3. Purchase of Products By KDPI.
a. Placement of Orders. KDPI shall place its orders for the Products
by delivery of a written purchase order to Sparta or by such
other method as approved by Sparta from time to time. Such
purchase orders must identify the Product to be manufactured, the
quantity and package size thereof, the shipping location and
shipping instructions, requested delivery dates and such other
information as Sparta may reasonably request from time to time.
KDPI shall not cancel orders for the Products or return any
Products ordered by it without Sparta's prior written consent.
Orders shall be binding upon Sparta only upon its acceptance of
the order by written acknowledgement or by delivery of the
Product. Sparta shall not be obligated to accept any purchase
order placed by KDPI which requests delivery of Products during a
one week period which exceeds historical weekly volumes for the
past two (2) years by more than one hundred twenty five percent
(125%).
b. Minimum Order Amounts. KDPI must order the Products from Sparta
in the minimum amounts established by Sparta from time to time,
and set forth on Exhibit B attached hereto, to facilitate
Sparta's ability to economically manufacture the Products. The
prices for the Products are predicated on these minimum order
amounts.
c. Terms of Orders. The terms and conditions in this Agreement shall
be the exclusive contract terms between the parties with respect
to KDPI's purchase of the Products. In the event of
inconsistencies between the terms of this Agreement and the terms
of any acceptance document, the terms of this Agreement shall
govern. Sparta objects to any terms set forth in KDPI's orders
for the Products which are different from or additional to the
provisions of this Agreement, and no such terms shall be binding
upon Sparta unless Sparta specifically consents thereto in
writing.
4. Price and Payment.
a. Price. The price for the Products are FOB Sparta's dock and are
set forth on Exhibit B attached hereto. Sparta may change such
prices by delivery of ninety (90) days prior written notice to
KDPI. KDPI shall pay any and all taxes, fees, duties or other
governmental charges and for any and all shipment and shipping
insurance costs relating to the ordered Products.
b. Payment. KDPI shall pay Sparta for the Products within thirty
(30) days after the date of invoice, with a discount of one
percent (1%) if paid within twenty (20) days after the date of
invoice. If KDPI fails to make payment on any undisputed invoice
or any undisputed portion of a disputed invoice when due, and/or
fails to make payment on undisputed invoice(s) which exceed
$10,000 and such failure continues for a period of ten (10) days
after Sparta delivers written notice of such nonpayment to KDPI,
Sparta shall have the right to require payment in advance, by
COD, by letter of credit or by any other means upon notifying
KDPI of the change in credit terms. Any amounts not paid by KDPI
when due will be subject to a late payment fee computed daily at
a rate equal to eighteen percent (18%) per annum or at the
highest rate permitted under applicable usury law, whichever is
lower. In addition, KDPI shall be liable to Sparta for all costs
incurred by Sparta in its collection of any amounts owing by KDPI
which are not paid when due, including reasonable attorneys' fees
and expenses.
5. Delivery.
a. Delivery. Sparta will deliver the Products FOB Sparta's dock.
Sparta will make the Products available for pick up at its dock
by KDPI's carrier. KDPI will be responsible for selection and
retention of the carrier and direct payment for all shipping
charges. Title to and all risk of loss regarding the Products
shall pass to KDPI when Sparta tenders delivery to the designated
carrier who shall be solely the agent of KDPI.
b. Delivery Dates. Sparta will use its best efforts to fill KDPI's
orders in the ordinary course of its business, but all delivery
dates for the Products shall be estimates only. Sparta needs at
least seven (7) business days lead time to manufacture the
Products. Sparta shall not be in breach of this Agreement or
incur any liability to KDPI or any other person for failure to
meet a delivery date unless Sparta misses such delivery date by
more than three (3) business days, excluding events of force
majeure.
6. Warranties; Disclaimer of Warranties; Insurance.
a. Warranty and Indemnification By KDPI. KDPI represents and
warrants that it has full right and title to the Specifications
and the package design and Product labels and agrees that Sparta
shall have no liability to KDPI or to any third party for
manufacturing the Products in accordance with the Specification
or in packaging the Products using the package design and Product
labels supplied by KDPI. KDPI agrees to indemnify and hold Sparta
harmless from and against any and all claims (including, without
limitation, infringement claims), liabilities, damages, costs and
expenses (including reasonable attorneys' fees and legal
expenses) which Sparta may suffer or incur relating to or arising
out of, directly or indirectly, (i) use of the Specifications,
package design and/or Product labels supplied by KDPI for the
Products, (ii) use or consumption of any of the Products, unless
and solely to the extent such claim arise from the failure of
Sparta to follow the Specifications or the negligent or
intentional wrongdoing of Sparta or its employees. Sparta shall
notify KDPI of any third party claim made against it within ten
(10) days of knowledge of same if Sparta intends to seek
indemnity with respect to such claim under this paragraph. KDPI
shall have the right to undertake, conduct and control, through
counsel of its own choosing, the defense and settlement of any
such claim. Sparta shall have the right to be represented by
counsel of its own choosing, but at its own expense. So long as
is KDPI is contesting any such claim in good faith, Sparta shall
not pay or settle such claim.
b. Warranty By Sparta. Sparta warrants to KDPI that the Products
sold under this Agreement shall be manufactured in accordance
with the Specifications and shall be merchantable in accordance
with FDA standards at the time and point of delivery. The
exclusive remedy for breach of such warranty shall be, at
Sparta's option, to either (i) replace the defective Product or
(ii) refund the purchase price of the defective Product paid by
KDPI. No credits shall be taken by KDPI against its Product
invoices for alleged breaches of this warranty without the prior
written authorization of Sparta. EXCEPT AS EXPRESSLY PROVIDED
ABOVE, SPARTA MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, WHETHER AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, WARRANTIES ARISING FROM COURSE OR DEALING OR ANY
OTHER MATTER. No employee or representative of Sparta shall have
any authority to bind Sparta to any warranty or representation
except as expressly stated above. KDPI shall be exclusively
responsible for any warranty or representation which KDPI makes
to any customer.
c. Indemnification By Sparta. Sparta agrees to indemnify, defend and
hold KDPI harmless from and against any and all third party
claims, liabilities, damages, costs and expenses (including
reasonable attorneys' fees and legal expenses) which KDPI may
suffer or incur relating to or arising out of Sparta's failure to
manufacture the Products in accordance with the Specification or
other negligent or intentional wrongdoing of Sparta or its
employees relating to the manufacture of the Products. KDPI shall
notify Sparta of any third party claim made against it within ten
(10) days of knowledge of same if KDPI intends to seek indemnity
with respect to such claim under this paragraph. Sparta shall
have the right to undertake, conduct and control, through counsel
of its own choosing, the defense and settlement of any such
claim. KDPI shall have the right to be represented by counsel of
its own choosing, but at its own expense. So long as is Sparta is
contesting any such claim in good faith, KDPI shall not pay or
settle such claim.
d. Insurance. Sparta shall maintain products liability insurance
covering the Products in a minimum amount of Two Million Dollars
($2,000,000). Sparta shall provide KDPI with insurance
certificates evidencing such insurance coverage at the request of
KDPI.
7. Independent Contractor KDPI is and shall remain an independent
contractor. Neither this Agreement nor the relationship between the parties
constitutes a partnership, franchise or joint venture between Sparta and KDPI.
Neither party shall have any authority or right under any circumstances
whatsoever to bind or purport to bind the other party in any manner or thing
whatsoever.
8. Confidentiality.
a. Definition. The term "Confidential Information" as used in this
Agreement means any information or compilation of information
which is proprietary to one of the parties to this Agreement and
relates to such party's existing or reasonably foreseeable
business, including, without limitation, trade secrets, the
Specifications, information relating to products of the
disclosing party, manufacturing techniques, recipes, data,
marketing strategies, product development, customer information
and any other information about the disclosing party's business
which is normally considered confidential or which is indicated
in writing to be confidential or trade secret. Confidential
Information shall not include any information:
i. which is part of the public domain or becomes part of the
public domain through no fault of the receiving party; or
ii. which was already in the receiving party's possession, as
evidenced by written documentation, prior to the disclosure
of such information to the receiving party by the disclosing
party; or
iii. which is specifically authorized by the disclosing party, in
writing, to be disclosed; or
iv. which is required to be disclosed by applicable law or order
of a court of competent jurisdiction in which case the
receiving party agrees to notify the disclosing party of
such requirement and to cooperate with the disclosing party
in an effort to narrow or avoid disclosure.
b. Nondisclosure. During the term of this Agreement and at all times
thereafter, the receiving party agrees to hold in strictest of
confidence and to never disclose, transfer, convey, make
assessable to any person or use in any way Confidential
Information of the disclosing party for its own or another's
benefit or permit the same to be used in competition with the
disclosing party. Sparta agrees to disclose the Specifications to
its employees only on a "need to know" basis. Sparta shall
require its production manager and quality control supervisor to
execute confidentiality agreements regarding the Specifications.
Each party agrees to take reasonable precautions to prevent its
employees, representatives, agents and others from disclosing or
appropriating for their own use any and all of the Confidential
Information of the other party.
9. Term and Termination.
a. Term. This Agreement shall begin on the date inserted on the
front page hereof and shall continue until terminated in any
manner provided in subparagraph b below.
b. Termination. This Agreement may be terminated in any of the
following manners:
i. By either party by delivery of one hundred eighty (180) days
prior written notice of termination.
ii. By either party if the other party commits a material breach
of this Agreement and fails to cure such breach within
thirty (30) days after delivery of written notice from the
nonbreaching party describing the alleged breach. Nonpayment
by KDPI of any amounts owing to Sparta hereunder, breach of
the provisions of Section 6.a. and breach of the provisions
of Section 8 shall each be deemed to be material breaches of
this Agreement.
iii. By either party, effective immediately, by delivery of
written notice to the other party if the other party (A) is
unable to pay its debts as they mature or admits in writing
its inability to pay its debts as they mature, (B) makes a
general assignment for the benefit of creditors, (C) files a
voluntary petition for bankruptcy or has filed against it an
involuntary petition for bankruptcy, or (D) applies for the
appointment of a receiver or trustee for substantially all
of its assets or permits the assignment of any such receiver
or trustee who is not discharged within a period of ninety
(90) days after such appointment.
10. Effect of Termination.
a. Return of Confidential Information. Upon termination of this
Agreement, Each party shall within ten (10) days after the
termination of this Agreement (or such earlier time as request by
the other party) return to the other party all copies of
materials and documents or copies thereof containing any
Confidential Information of the other party.
b. Payment Obligations. Upon termination of this Agreement for any
reason, KDPI shall pay Sparta immediately for (i) all finished
inventory of Product, but not to exceed two (2) times the monthly
average of Products purchased by KDPI during the prior twelve
(12) month period, (ii) any Products already identified to any
order of KDPI, (iii) any ingredients, packaging or packaging
supplies for the Products already purchased by Sparta, (iv) any
ingredients, packaging or packaging supplies for the Products
which Sparta has ordered and cannot cancel without penalty, and
(v) any ingredients, packaging or packaging supplies for the
Products purchased by Sparta's supplier(s) which Sparta is bound
to pay the supplier; provided, however that KDPI will only be
required to purchase Product ingredients, packaging and packaging
supplies equal to not more than six (6) times the average monthly
usage of such items by Sparta in the manufacture of the Product
in the prior twelve (12) month period; and provided, that KDPI
shall have no obligation to purchase finished Product,
ingredients, packaging or packaging supplies after such
termination to the extent that KDPI can reasonably establish that
the specific finished Product, ingredients, packaging or
packaging supplies fails to meet the Specifications. Sparta shall
have the right to fill all open purchase orders for the Products
received from KDPI and accepted by Sparta prior to or as of the
effective date of termination.
c. Surviving Obligations. The provisions of Sections 4.b., 5 (as it
relates to Products shipped after termination pursuant to Section
10.b. above), 6, 8, 10 and 11 shall survive any termination of
this Agreement.
11. General Provisions.
a. Nonassignment; Binding Nature. Neither party shall transfer or
assign any of its rights or obligations under this Agreement
without the other party's prior written consent. Subject to the
foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and
assigns.
b. Limitation of Remedies. SPARTA SHALL HAVE NO LIABILITY TO KDPI OR
ANY OTHER PERSON FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OF ANY DESCRIPTION, WHETHER ARISING UNDER
WARRANTY OR OTHER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER
TORT, OR OTHERWISE. THE PARTIES EXPRESSLY AGREE THAT THE
LIMITATIONS TO SPECIAL, INCIDENTAL, CONSEQUENTIAL AND PUNITIVE
DAMAGES SET FORTH HEREIN ARE AGREED ALLOCATIONS OF RISK AND SHALL
SURVIVE THE DETERMINATION OF ANY COURT OF COMPETENT JURISDICTION
THAT ANY REMEDY PROVIDED HEREIN FAILS OF ITS ESSENTIAL PURPOSE.
UNDER NO CIRCUMSTANCES SHALL SPARTA'S LIABILITY HEREUNDER FOR ANY
CAUSE EXCEED THE PURCHASE PRICE RECEIVED BY IT FOR THE PRODUCTS;
provided, however, such limitations shall not apply to a breach
by Sparta of the provisions of Section 6.c. or Section 8 or to
any intentional breach of any provision herein by Sparta.
c. Force Majeure. No party to this Agreement will be liable to any
other party or be in breach of this Agreement caused in whole or
in part by any event beyond such party's reasonable control,
including without limitation, acts of God, fire, war, strikes,
riots, acts of any government or any agency or subdivision
thereof, transportation delays, or shortage or inability to
secure labor, fuel, energy, raw materials, supplies or machinery
at reasonable prices from regular sources.
d. Entire Agreement. This Agreement, together with Exhibits A and B,
contains the entire contract between the parties as to the
subject matter hereof and supersedes any prior or contemporaneous
written or oral agreements between the parties with respect to
any business matter.
e. Modifications and Waivers. No purported amendment, modification
or waiver of any provision of this Agreement shall be binding
unless set forth in a written document signed by all parties (in
the case of amendments and modifications) or by the party to be
charged thereby (in the case of waivers). Any waiver shall be
limited to the circumstance or event specifically referenced in
the written waiver document and shall not be deemed a waiver of
any other term or provision of this Agreement or of the same
circumstance or event upon any recurrence thereof.
f. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
duly delivered (i) when received if delivered by hand, (ii) the
next business day if delivered by facsimile or (iii) three (3)
business days after deposit, if placed in the mail for delivery
by registered or certified mail, return receipt requested,
postage pre-paid, and addressed to the appropriate party at the
addresses set forth on the first page hereof. If either party
should change its address or facsimile number, such party shall
give written notice of the other party of the new address or
facsimile in the manner set forth above, but any such notice
shall not be effective until received by the addressee.
g. Severability. In the event that any provision, or portion
thereof, is held to be unenforceable by final order of any court
of competent jurisdiction, such provision, or portion thereof,
shall be severed herefrom without effecting the validity or
enforceability of the remaining provisions.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota.
The parties have executed this Agreement, in the manner appropriate to
each, to be effective as of the date on the first page hereof.
SPARTA FOODS, INC.
By ________________________
Its_______________________
XXX XXXXX PRODUCTS, INC.
By_________________________
Its_______________________
