8/6/93
STATE OF UNDERSTANDING
REGARDING PET FOOD VENTURE
1. Parties. The parties to this Agreement are Xxxxxx Industries,
Inc., a Massachusetts corporation ("Xxxxxx"), and Xxxxxxx Milling Company, a
Minnesota corporation ("Xxxxxxx").
2. Entire Agreement; Amendments and Modifications. This Agreement
sets forth the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior written documents or oral discussions
with respect to such subject matter. The parties anticipate that this Agreement
may be amended and modified from time to time. Such amendments and modifications
will be in writing and will be prepared and executed by the parties as
supplements to this Agreement.
3. Representations. Each party to this Agreement represents and
warrants to the other that it is authorized to enter into this Agreement. Each
party also represents and warrants to the other that there are no suits or
proceedings pending or threatened against it, other than litigation that is
immaterial to it and to the Venture contemplated hereby, and that such party has
all permits, licenses and authorizations, governmental or otherwise, necessary
to enter into this Agreement and to carry out the transactions contemplated
hereby.
4. Businesses of Xxxxxx and Xxxxxxx. Xxxxxx is a consumer products
company with, among other things, a pet treat production plant in Rockford,
Illinois (the "Facility"), that manufactures a variety of pet treat products.
Xxxxxxx is an agribusiness company with, among other things, interests in the
manufacturing, marketing and production of pet food at various plants located in
the United States.
5. The Venture.
(a) Nature of Venture. Xxxxxxx and Xxxxxx hereby enter into a
venture (the "Venture") whereby commencing July 28, 1993 Xxxxxx will
manufacture and sell to Xxxxxxx, and Xxxxxxx will resell to customers
those pet treat products listed on Exhibit I hereto together with such
additional products, if any, as Xxxxxxx and Xxxxxx may from time to time
agree (collectively, the "Products").
(b) Offer of New Products to Venture. If during the term of this
Agreement a party shall propose to manufacture or market a pet treat
product which does not constitute a Product of the Venture but is the same
as or substantially similar to a Product of the Venture (other than a
product being manufactured or marketed on the date hereof in the United
States or Canada by such party, a corporate affiliate of such party or a
joint venture in which such party participates), such party shall first
offer in writing to the other to add such product as a Product of the
Venture. If within thirty
(30) days of such offer, the other party responds in writing expressing
its desire to add such product as a Product of the Venture, then such
product shall become an additional Product of the Venture, and Xxxxxx will
manufacture and sell to Xxxxxxx, and Xxxxxxx will resell to customers such
Product on the terms set forth in this Agreement, with such changes, if
any, as the parties may mutually agree. If the other party shall not have
so responded expressing its desire to add the product as a Product of the
Venture then the offering party shall be free to manufacture and market
such product without restriction and such product shall not be added as a
Product of the Venture.
6. Authorized Representatives.
(a) Designation. The parties agree that policy and management
decisions relating to the Venture shall be made an authorized
representative of each party (individually an "Authorized Representative",
and collectively the "Authorized Representatives"). Each party will
designate its Authorized Representative and one alternate who shall act in
the absence of such Authorized Representative. Until further notice, the
Authorized Representative of Xxxxxx will be Xxx Xxxxx with Xxxxx Xxxxx as
alternate, and the Authorized Representative of Xxxxxxx will be Xxx Xxxxxx
with Xxxxxxx Xxxxxxxx as alternate. Each party may, by written notice to
the other, designate a substitute representative or alternate.
(b) Matters Requiring Joint Approval. The following actions can be
taken only with the prior written approval of the Authorized
Representatives of both Xxxxxxx and Xxxxxx:
i. the addition of new Products to the Venture;
ii. the creation of or material changes to the design or any
other specifications with respect to the packaging of any Product;
iii. the establishment of or material changes to the
formulation or specification of any Product;
iv. the establishment of or material changes in quality
control standards with respect to the manufacturing of any Product;
v. approval of a request by Xxxxxxx to establish credit
policies for the sale of Products materially inconsistent with those
in effect as of the date hereof for its sales of pet food
products generally; and
vi. such other matters as by terms of this Agreement require
the approval or agreement of the Authorized Representatives.
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7. Responsibilities of Xxxxxx.
(a) Purchase of Packaging and Ingredients. Xxxxxx shall be
responsible for purchasing or arranging for the purchase of all packaging
and ingredients for the Products; provided, however, that if the
Authorized Representatives shall from time to time determine that
packaging and ingredients can be purchased at a lower cost by Xxxxxxx,
Xxxxxxx shall purchase such packaging and ingredients for Xxxxxx. Xxxxxx
shall be responsible for payment when due of all invoices for packaging
and ingredients and shall reimburse Xxxxxxx for the cost of any packaging
and ingredients purchased by Xxxxxxx for Xxxxxx hereunder. The cost of all
art, design, plates, development and related costs with respect to
packaging will be paid by Xxxxxx, subject to the 50% reimbursement
obligation of Xxxxxxx set forth in Section 8(g) hereof. In the event
Xxxxxxx incurs any such costs, Xxxxxx will reimburse Xxxxxxx therefor upon
submission of a statement by Xxxxxxx to Xxxxxx. If Xxxxxx purchases
reasonable quantities of packaging pursuant to this Section 7(a) but
through no fault of Xxxxxx, such packaging thereafter becomes obsolete and
Xxxxxx does not recover the cost thereof from a third party, then Xxxxxxx
will reimburse Xxxxxx for 50% of the cost of such obsolete packaging.
(b) Nature and Source of Ingredients. Xxxxxx shall be responsible
for purchasing Product ingredients that meet the quality specifications
for such Product. Xxxxxx shall have the right to specify sources of
ingredients, including premixes, that are used for the Products.
(c) Manufacturing of the Products. Subject to the provisions of
Section 10 hereof, Xxxxxx will manufacture and package quality Products
for sale to Xxxxxxx pursuant to the agreed upon formulations and
specifications and will use its best efforts to control its cost of
manufacturing consistent with the quality specifications for the Products.
Xxxxxx will devote to such manufacturing all equipment owned or leased by
Xxxxxx necessary for the production of the Products, and the services of
all Xxxxxx employees necessary for such production.
(d) Storage of Ingredients and Finished Product. Xxxxxx will
maintain and store an inventory of packaging and ingredients and an
inventory of finished products adequate to satisfy purchase orders.
(e) Shipment of Products. Following transmission of a customer order
to Xxxxxx by Xxxxxxx pursuant to Section 8(c) hereof, Xxxxxx shall deliver
Products to a carrier at the Facility for shipment in accordance with such
customer order.
(f) Servicing the Customer. Xxxxxx shall make every reasonable
effort to satisfy customer requests as to delivery,
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customer pick-up and other related courtesies required to satisfy the
needs of customers.
(g) Quality Assurance. Xxxxxx shall be responsible for performing
the following activities in accordance with quality control standards
established by the Authorized Representatives: (i) purchasing proper
ingredients; (ii) maintaining quality standards at the Facility and for
Products manufactured at the Facility, including implementing sanitation
policies and programs; and (iii) taking samples, inventory control and
maintaining plant production records necessary for quality control.
(h) Insurance. Xxxxxx shall purchase products liability insurance
for Products of the Venture in an amount not less than $3,000,000 with
Xxxxxx and Xxxxxxx both named as insured parties thereunder. Such
insurance shall be in addition to such products liability insurance, if
any, as Xxxxxx from time to time maintains for other products manufactured
by Xxxxxx.
(i) Books and Records. Xxxxxx shall maintain books and records with
respect to its activities in connection with the Venture and will make
such books and records available to the Authorized Representatives and to
Xxxxxxx on reasonable notice and during normal business hours for the
purpose of establishing and from time to time adjusting the Transfer Price
for Products. Such books and records shall be maintained in accordance
with generally accepted accounting principles.
(j) Reimbursement of Certain Expenses. Xxxxxx shall reimburse
Xxxxxxx for 50% of (i) the cost of Product registrations paid by Xxxxxxx
in accordance with Section 8(e) hereof, and (ii) such other direct
expenses of Xxxxxxx from time to time approved by the Authorized
Representatives incurred by Xxxxxxx in connection with the Venture but
not included in Xxxxxxx'x selling cost in establishing the anticipated net
profit pursuant to Section 9(b) hereof.
8. Responsibilities of Xxxxxxx.
(a) Sales and Marketing. Xxxxxxx shall be responsible for reselling
in the United States and Canada (the "Territory") Products manufactured by
Xxxxxx and sold to Xxxxxxx. Xxxxxxx will have the exclusive right to sell
the Products within the Territory, except as otherwise expressly provided
in Exhibit II hereto. In consideration of such exclusive right, Xxxxxxx
(i) except as provided in Section 5(b) and Section 10 hereof, shall
purchase its requirements for Products and pet treat products that are the
same as or substantially similar to the Products from Xxxxxx to the extent
such requirements can be reasonably satisfied by Xxxxxx, and (ii) shall
use reasonable efforts and endeavor in good faith to generate sales of
Products within the Territory.
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A sale of Products by Xxxxxxx shall be deemed to be within the Territory
if the principal customer contact is within the Territory, notwithstanding
that the customer may resell some portion of the Product outside the
Territory. Conversely, a sale of Products by Xxxxxx shall be deemed to be
outside the Territory if the principal customer contact is outside the
Territory, notwithstanding that the customer may resell some portion of
the Product within the Territory.
(b) Quality Assurance/Production Assistance. Xxxxxxx will provide
consulting services to Xxxxxx with respect to quality assurance and
production as from time to time reasonably requested by Xxxxxx. Xxxxxx
shall pay consulting fees for such services in such amount as from time to
time agreed by the parties.
(c) Customer Orders, Accounts Receivable/Invoices. Xxxxxxx shall be
responsible for maintaining an order desk in Mankato, Minnesota to which
all customer orders for Products shall be directed. Orders will be
transmitted daily by Xxxxxxx to Xxxxxx at such location as the Xxxxxx
Authorized Representative shall from time to time specify. Xxxxxxx will
process all customer invoices, collect accounts receivable and carry such
receivables until collected or written off as uncollectible.
(d) New Customer Development. Xxxxxxx shall be responsible for
developing customers. Xxxxxxx shall disclose new customer prospects to
Xxxxxx, and Xxxxxx personnel shall have the option to accompany Xxxxxxx
personnel on new customer calls.
(e) Product Registrations. Xxxxxxx will be responsible for all
governmental registrations for Products in the United States and Canada
and will pay all costs with respect thereto, subject to the 50%
reimbursement obligation of Xxxxxx contained in Section 7(j) hereof.
(f) Books and Records. Xxxxxxx shall maintain books and records with
respect to its activities in connection with the Venture and will make
such books and records available to the Authorized Representatives and to
Xxxxxx on reasonable notice and during normal business hours for the
purpose of establishing and from time to time adjusting the Transfer Price
for Products. Such books and records shall be maintained in accordance
with generally accepted accounting principles.
(g) Reimbursement of Certain Expenses. Xxxxxxx shall reimburse
Xxxxxx for 50% of (i) the cost of all art, design, plates, development and
related costs with respect to packaging paid by Xxxxxx in accordance with
Section 7(a) hereof, and (ii) such other direct expenses of Xxxxxx from
time to time approved by the Authorized Representatives
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incurred by Xxxxxx in connection with the Venture but not recoverable
through the Transfer Price, as defined in Section 9(b) hereof.
9. Sale of Products by Xxxxxx to Xxxxxxx; Accounts Receivable from
Resale of Products by Xxxxxxx.
(a) Generally. Xxxxxx shall sell to Xxxxxxx, and Xxxxxxx shall
purchase from Xxxxxx, Products when and as delivered by Xxxxxx to a
carrier for shipment in accordance with Section 7(e) hereof. The price for
such Products shall be the Transfer Price (as hereinafter defined). Xxxxxx
shall invoice Xxxxxxx for the Transfer Price for Products not more often
than weekly, and Xxxxxxx shall pay each such invoice within fifteen (15)
days of receipt thereof by Xxxxxxx.
(b) Transfer Price. The Transfer Price for any Product shall be
equal to the sum of the cost of ingredients, packaging cost, production
cost, freight and 50% of the anticipated net profit, all determined in
accordance with this Section 9(b) and Exhibit III hereto:
i. Cost of Ingredients. The cost of ingredients will be
calculated by multiplying the pounds of each ingredient used
(including a shrink factor as provided in Exhibit III hereto) by the
ingredient's cost per pound. Each ingredient's cost will be
established on a quarterly basis and shall be the market price of
the ingredient, F.O.B. the Facility, on the Wednesday of the month
that falls between the 4th and 10th of the month prior to
commencement of the calendar quarter, unless otherwise agreed by the
Authorized Representatives. Market price of an ingredient shall be
the actual lowest cost that an ingredient can be purchased for at
the time of the quarterly pricing in the quantities required by
Xxxxxx.
ii. Packaging Cost. The packaging cost will be calculated
using the actual cost of the packaging, F.O.B. the Facility, less
all applicable rebates, credits or discounts. A shrink factor shall
be included in the determination of actual cost as provided in
Exhibit III hereto.
iii. Production Cost. The production cost shall include direct
labor costs of production employees, a production supervision charge
for supervisory employees, utilities, quality assurance costs
incurred pursuant to Section 7(g) hereof, product liability
insurance costs incurred pursuant to Section 7(h) hereof, and such
other direct manufacturing expenses as are identified in Exhibit III
hereto or otherwise approved by the Authorized Representatives, but
excluding depreciation.
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iv. Freight. Freight shall include any costs actually incurred
by Xxxxxx for delivery of the Product.
v. Anticipated Net Profit. The anticipated net profit for each
Product shall be an amount per unit from time to time approved by
the Authorized Representatives as the excess per unit of (A) the
estimated sales price by Xxxxxxx to the customer over (B) the sum
of the estimated Transfer Price (excluding anticipated net profit)
and Xxxxxxx'x estimated selling cost. Xxxxxxx'x selling cost shall
consist of the following expenses incurred by Xxxxxxx: all marketing
and sales expenses, travel, promotional costs, discounts,
advertising, freight, and other expenses directly related to selling
the Product as are identified in Exhibit IV hereto or otherwise
approved by the Authorized Representatives. The Authorized
Representatives shall meet periodically, not less frequently than
quarterly, to review and adjust as appropriate the anticipated net
profit for each Product.
(c) Periodic Adjustment of Transfer Price. Upon the completion of
each calendar quarter, the Authorized Representatives shall review the
Transfer Price (including without limitation anticipated net profit and
Xxxxxxx'x selling costs taken into account in establishing the anticipated
net profit) for each Product relative to the actual costs of the parties
incurred in connection with the manufacture and sale of Products and the
actual sales price of Products. Based upon such review, the Authorized
Representatives shall from time to time adjust the Transfer Price in order
to assure that the parties generally recover their respective costs in
connection with the manufacture and sale of Products and generally derive
an equal profit from their activities in connection with the Venture.
(d) Title to Inventory; Risk of Loss. Xxxxxx shall have title to and
bear the risk of loss with respect to all inventories of Product raw
materials, packaging, work in process and finished goods except Products
delivered to a carrier for shipment in accordance with Section 7(e)
hereof. Upon delivery of Products to a carrier for shipment in accordance
with Section 7(e) hereof, title to and risk of loss (as between Xxxxxx and
Xxxxxxx) with respect to such Products shall shift from Xxxxxx to Xxxxxxx.
(e) Accounts Receivable. Accounts receivable arising from the sale
of Products by Xxxxxxx to customers shall be and remain the property of
Xxxxxxx. However, in consideration of 50% of the anticipated net profit
of Xxxxxxx from such sale being included in the Transfer Price from Xxxxxx
to Xxxxxxx in accordance with Section 9(b) hereof, Xxxxxx agrees to
reimburse Xxxxxxx for 50% of (i) all adjustments to accounts receivable
after the date of invoice arising from claims made
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by customers with respect to the Products, and (ii) all accounts
receivable for Products written off by Xxxxxxx as uncollectible. Xxxxxxx
shall submit to Xxxxxx written statements for such reimbursement and
Xxxxxx shall pay such statements within thirty (30) days of the date
thereof. Unless otherwise approved by the Authorized Representatives,
Xxxxxxx shall establish credit policies for the sale of Products
consistent with those from time to time in effect for its sales of pet
food products generally. Xxxxxxx shall review its credit policies with
Xxxxxx from time to time upon the request of Xxxxxx.
10. Projected Requirements. During the first sixty (60) days of
each calendar quarter Xxxxxxx will furnish Xxxxxx a good faith estimate of its
requirements for the delivery of Products during the next calendar quarter, and
Xxxxxx shall promptly inform Xxxxxxx of its acceptance of such requirements (and
any failure by Xxxxxx to furnish any notice to Xxxxxxx within fifteen (15) days
after the receipt by Xxxxxx of such estimate shall be deemed acceptance) or of
any difficulties Xxxxxx anticipates in meeting such requirements. In the event
any such difficulties are identified by Xxxxxx, the Authorized Representatives
will meet promptly to establish mutually agreeable delivery requirements.
Although Xxxxxx will thereafter use reasonable efforts to meet any requests for
delivery of Products in excess of the amounts agreed upon, Xxxxxx shall have no
liability to Xxxxxxx for the failure of Xxxxxx to deliver such excess Products
and Xxxxxxx may purchase such excess Products from other sources.
11. Trademarks, Etc. Except as set forth below, all existing and new
names, trademarks, patents, copyrights, and licenses of each party shall remain
its property, and the other party shall not acquire any right, title, or
interest therein by reason of this Agreement or by reason of the use of such
trademarks, patents, copyrights, licenses, or other registrations for the sale
of Products under this Agreement. Notwithstanding the foregoing, new tradenames
or trademarks that are developed during the term of this Agreement solely for
use in the sale of Products in the Territory ("New Product Marks") shall be
registered by Xxxxxxx in Xxxxxxx'x name. If upon termination of this Agreement
either party wishes to continue to use a New Product Mark, it shall pay the
other party 50% of the value thereof, as mutually agreed by the parties, and
such New Product Mark shall be registered in the name of the party acquiring the
mark.
12. Trade Secrets, Etc. Both parties agree to a full and open
exchange of all information relating to the Products including, but, not limited
to formulations, specifications, customer lists, product know-how, marketing
plans, manufacturing and process technology, customer credit files, trade
secrets, etc. (hereafter referred to as "Proprietary Information"). During the
term of this Agreement, each party agrees that it will not use any Proprietary
Information received by it from the other except as required to carry out its
responsibilities hereunder. Upon
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termination of the Venture, each party will be free to use its Proprietary
Information as it shall see fit, but neither party will use any Proprietary
Information of the other for any purpose. Proprietary Information developed by
the parties in furtherance of this Venture shall be the property of both parties
and may be used by either party in its own separate business activities, both
during the term of the Venture and upon termination.
13. Employees. Employees of Xxxxxx or Xxxxxxx who perform services
in connection with the Venture shall remain employees of their respective
employer which shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and discharge.
Neither Xxxxxx nor Xxxxxxx (or any of their respective employees) shall have any
responsibility for the development or approval of personnel policies with
respect to the employees of the other; provided, however, that any increase in
the compensation of employees who perform services in connection with the
Venture and whose compensation is included in the pricing of Products will be
excluded from Product pricing unless (i) such increase is in the ordinary course
of business consistent with the employer's past practices, or (ii) such increase
is approved by the Authorized Representatives. Xxxxxx and Xxxxxxx shall remain
solely liability for the payment of compensation or any employment benefits to
their respective employees and for the payment of any taxes, charges or
assessments payable with respect to their respective employees, including
without limitation any such payments made to governmental agencies or bodies.
Neither the Venture nor Xxxxxxx shall be considered a successor employer of
Xxxxxx' employees, and neither the Venture nor Xxxxxx shall be considered a
successor employer of Xxxxxxx'x employees.
14. Reputations of Parties. Xxxxxx and Xxxxxxx both cherish their
reputations in the world at large and internally. Both parties agree they will
use every reasonable means to respect and enhance those reputations.
15. Status. The Venture is a contractual arrangement between the
parties for the manufacture and sale of goods and does not constitute a separate
entity.
16. No Assumption of Liabilities, Etc. Xxxxxxx Xxxxxxx nor Xxxxxx
shall, by virtue of this Agreement be deemed to have assumed any liability of
any kind or nature whatsoever arising with respect to activities or operations
of the other, including without limitation employee compensation, workers
compensation or employment-related claims, environmental matters, taxes or other
governmental charges. Neither party to this Agreement shall be deemed to have
become, as a result of this Agreement, the owner or operator of any facility of
the other party.
17. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
transmitted by registered or
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certified U.S. Mail, return receipt requested and postage prepaid, or by
facsimile transmission with receipt confirmed, addressed to the other party at
its address hereinafter set forth or at such other address as the other party
shall theretofore have designated by notice in accordance with this Section 17.
Xxxxxx Industries, Inc.
000 Xxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Xxxxxxx Milling Company
000 Xxxxx Xxxxxxxxxx Xxxxx
P.O. Box 8500
Mankato, Minnesota 56002-8500
Attention: President
The date of giving such notice shall be the date received, if served personally,
or the date on which the notice is delivered to the other party as indicated by
the return receipt.
18. Xxxxxx' and Xxxxxxx'x Other Operations. It is understood that
both Xxxxxx and Xxxxxxx conduct businesses similar to the contemplated business
of the Venture, both within and outside the Territory (the "Other Activities").
It is agreed that nothing in this Agreement is intended to limit the conduct by
either party of its Other Activities, except as expressly set forth herein, and
neither party shall include, directly or indirectly, as costs of its activities
related to the Venture any costs arising out of any of its Other Activities.
19. No Hiring of Employees. During the term of this Agreement and
for a period of two years thereafter, neither Xxxxxx nor Xxxxxxx will, without
the prior written consent of the other, hire or attempt to hire anyone who is at
the time or was within the period of one year prior to such time an employee of
the other.
20. Term.
The term of this Agreement is twenty-five (25) years unless
terminated earlier in accordance with this Section 20. This Agreement shall
terminate prior to expiration of the stated term, as follows:
i. This Agreement may be terminated at any time with the
mutual written consent of Xxxxxx and Xxxxxxx.
ii. This Agreement may be terminated by either party upon not
less than eighteen (18) months prior written notice to the other
party of its election to terminate the Agreement.
iii. This Agreement may be terminated by either party upon
written notice of its election to terminate
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the Agreement following the institution of any bankruptcy or
insolvency proceedings by or against the other party (whether
voluntary or involuntary, and whether under federal or state law),
the dissolution, liquidation or winding up of either party or the
assignment by the other party of any significant portion of its
property or assets for the benefit of creditors or claimants.
iv. This Agreement may be terminated by either party upon
written notice of its election to terminate the Agreement if there
is a willful breach by the other party of a material term of this
Agreement and such breach has not been cured within sixty (60) days
after written notice of such breach.
v. This Agreement may be terminated by either the remaining
party or the permitted assignee of the other party upon not less
than twelve (12) months written notice to the remaining party or
such assignee, as the case may be, following the assignment of a
party's interest in the Venture pursuant to Section 23 hereof;
provided, however, that such notice of termination may not be given
more than three (3) months after the effective date of such
assignment.
vi. This Agreement shall terminate six (6) months after the
assignment of a party's interest in the Agreement pursuant to
Section 23 hereof, or on such earlier date after the assignment as
specified by the non-assigning party upon not less than thirty (30)
days prior written notice to the assigning party and its assignee,
if (A) prior to such assignment, the assigning party requested in
writing that the other party consent to the assignment, such consent
not to be unreasonable withheld, and (B) the other party failed to
consent in writing to such assignment within thirty (30) days of
such request; provided, however, that nothing herein contained shall
require a party to request such consent prior to an assignment of
its interest in the Agreement pursuant to Section 23 hereof.
Following any notice, of termination of the Agreement pursuant to this Section
20, and upon any such termination, the parties shall endeavor in good faith to
effect an orderly winding up of the manufacture and sale of Products under the
Agreement. Nothing contained in this Section 20 shall affect or impair any
rights or obligations arising prior to or at the time of the termination of this
Agreement, or which may arise by an event causing the termination of this
Agreement.
21. Certain Payments of Profits After Termination. If the term of
this Agreement is terminated by either party pursuant to Section 20 (ii) or
Section 20(v), then for a period of three (3) years after the effective date
of such termination the party giving
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notice of termination shall pay to the other 50% of its profit, computed on the
same basis as anticipated net profit in accordance with Section 9(b) hereof, as
nearly as practicable under the circumstances then existing (recognizing that
such party may then be both manufacturing and selling Products), with respect to
all sales by it of Products within the Territory to entities that were customers
of the Venture at the time such notice is given; provided, however, that a party
terminating this Agreement pursuant to Section 20(v) as the result of the other
party assigning its interest in the Agreement shall be required to share profits
pursuant to this Section 21 only if (i) prior to the assignment of its interest
in the Agreement the assigning party requested in writing the consent of the
terminating party to such assignment, which consent shall not be unreasonably
withheld, (ii) the terminating party granted such consent in writing within
thirty (30) days of such request, and (iii) the terminating party thereafter
terminates the Agreement pursuant to Section 20(v) as a result of such
assignment.
22. Licenses. Nothing herein shall constitute a license by Xxxxxxx
for Xxxxxx to use, or a license by Xxxxxx for Xxxxxxx to use, the names,
trademarks, patents, copyrights, licenses and other registrations or
specifications made available to the Venture by such party.
23. Assignment. Except as expressly permitted by this Section 23,
neither party shall assign or encumber its interest in the Venture. For purposes
of this Agreement, the sale or transfer of 50% or more of the common stock of a
party in a single transaction or integrated series of transactions (a "Change of
Control") shall be deemed to be an assignment by such party of its interest in
the Venture. A party's interest in the Venture may be assigned to another entity
in connection with the sale of such party's business substantially as a whole or
substantially all of the assets of a division or component of such party's
business to another entity, or as a result of a Change of Control, provided
that, in the case of a sale by such party of substantially all of its business
or a division or component thereof, (i) such party remains liable for observance
and performance of its obligations under this Agreement; (ii) the financial
condition of the transferee is reasonably satisfactory to the other party; and
(iii) the transferee specifically agrees to be bound by the terms of this
Agreement. Each and every provision in this Agreement shall survive such
assignment or transfer and remain in full force and effect.
24. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto, their successors and permitted assigns.
25. Other Instruments, Etc. The parties agree that they will perform
all other acts and execute and deliver such other documents as may be necessary
or appropriate to carry out the intent and purpose of this Agreement. The
parties recognize that
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this is a long term Agreement and that issues will arise from time to time in
the course of the Venture requiring further negotiations and agreement of the
parties. The parties agree to negotiate in good faith all such issues as they
arise.
26. Arbitration. All unresolved disputes or controversies arising
out of or in relation to this Agreement shall be determined and settled by
arbitration at a mutually convenient location in accordance with the commercial
Rules of the American Arbitration Association in effect at the time of said
controversy, and judgment upon any award rendered by the arbitrator(s) may be
entered in any court of competent jurisdiction. The expenses of the arbitration
shall be divided equally between the parties, provided that each of Xxxxxx and
Xxxxxxx shall pay for and bear the costs of its own experts, evidence, and legal
counsel. Whenever any action is required to be taken under this Agreement within
a specified period of time and the taking of such action is materially affected
by a matter submitted to arbitration, such period shall automatically be
extended for the number of days plus ten (10) that are taken for the
determination of that matter by the arbitrator(s).
27. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Minnesota and Xxxxxx hereby consents to the
jurisdiction of the State of Minnesota.
28. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the 10th day of August, 1993.
XXXXXX INDUSTRIES, INC.
By /s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx
President
XXXXXXX MILLING COMPANY
By /s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx
Vice President, Pet Food
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EXHIBIT I
PET TREAT PRODUCTS
Round Jerky Sticks (formulated and produced as a clone to Pupperoni(R))
Flat Jerky Strips (formulated and produced as a clone of Xxxxx(R)
Jerky Dog Snacks)
(See attached specification sheets)
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A Pupperoni Style Product
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The Market: Pupperoni is the second largest brand in the Jerky
category: 22% dollar increase in 91-92 makes it the
fastest growing dog treat brand.
Proposed Product: 12/2.8 oz. Jerky Stick Snacks in beef flavor. 12
sticks to the 2.8 oz. package, 3/8" diameter x 4 3/4"
length. Other flavors can be added.
Positioning: A quality jerky stick item sold everyday at
approximately 33% below the national brand at
attractive gross margins.
Ingredients: Meat By Products, Soy Grits, Liver, Sugar, Beef,
Dextrose, Glycerin, Spices, Hydrolized Plant Protein,
Natural Smoke Flavor, Potassium Sorbate (A
Preservative), Monosodium Glutamate, Sodium Nitrate
(for color retention)
Guaranteed Analysis: Crude Protein Minimum 28.0%, Crude Fat Minimum 5.0%,
Crude Fiber Maximum 2.02%, Moisture Maximum 24.0%
Shelf Life: 8 months. Code dates will reflect customer policy.
Acceptance: Equal to Pupperoni in kennel tests (results on
request).
Promotional Support: Planned program to create attractive special
pricing.
Packaging: 100 guage OPP (Oriented Polyproalene) laminated with
12 pound polyethelene. Laminated to 48 guage
metalized [illegible] polyester.
Master Case: Self contained corrugated shipper caddy.
Packaging Design: Maximum six color. Flat or line artwork should be
used. Process printing would require additional cost.
Product Specification:
Case Dimensions: 81/2" (L) x 5" (W) x 9" (D)
Case Cube: .22 cubic feet
Gross weight: 3.6 lbs.
Cases Per Pallet: 200
Pallet Pattern: 40 cases/[illegible] -5/high
Minimum Purchase: 1 pallet
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A Private Label Jerky Program
3 Oz. Foil Laminate Pouch
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Specification Sheet
The Market: Over 30% of dog treat unit purchases are jerky items.
Jerky represents over 21% of all dog treat retail
dollars-second to biscuits.
Proposed Product: 12/3 oz. Jerky in beef and bacon flavors, typically
14-15 sticks to each 3 oz. package. Liver and Chicken
flavors also available.
Positioning: A quality jerky product sold every day at 35% below
the national brand prices at attractive gross profit
margins.
Ingredients: Meat by-products, soy grits, dextrose, beef (or liver
or chicken or bacon), salt, spice, hydrolyzed
vegetable proteins, natural and artificial flavor,
potassium sorbate (a preservative), natural smoke
flavor, monosodium glutamate, vegetable oil,
tricalcium phosphate, sodium nitrate, artificial
color.
Guaranteed Analysis: Crude protein minimum 37%, crude fat minimum 10%,
crude fiber minimum 3%, moisture maximum 20%.
Shelf Life: 8 months. Code dates will reflect customer policy.
Acceptance: Out performs Xxxxx Xxxxxx in kennel tests (results on
request).
Promotional Support: Planned program to create attractive special pricing.
Packaging: 100 guage OPP (Oriented Polypropelene) laminated with
12 pound polyethelene. Laminated to 48 guage
metalized scalable polyester.
Master Case: Self contained corrugated shipper caddy.
Packaging Design: Maximum six color. Flat or line artwork should be
used. Process printing would require additional cost.
Product Specification:
Case Dimensions: 81/2" (L) x 5" (W) x 9" (D)
Case Cube: .22 cubic feet
Gross weight: 3.75 lbs.
Cases Per Pallet: 200
Pallet Pattern: 40 cases/[illegible] -5/high
Minimum Purchase: 1 pallet
TERMS: 2% 10 days cash discount, net 11 days
PRODUCT LIABILITY: $2 million bodily injury/property damage/general
liability (Certificate Available on Request)
EXHIBIT II
1. All sales by Xxxxxx of the Products outside of the territory of the United
States and Canada are excluded from this Agreement.
2. All sales by Xxxxxx under the Xxxxxx-owned brand name "Glad-Wags" and
other Xxxxxx-owned brand names existing or hereinafter registered are
excluded from this Agreement.
3. All sales by Xxxxxx to Nestle of the Products are excluded from this
Agreement, and Xxxxxx will handle this account directly until such time as
the Authorized Representatives deem there to be a customer advantage for
this account to be covered by the Agreement. Until such time as this
account becomes covered by the Agreement, all costs and profits of the
account will be retained by Xxxxxx.
4. All sales by Xxxxxx to Vons' Giant and Eagle of the Products are excluded
from this Agreement, and Xxxxxx will handle these accounts directly until
such time as the Authorized Representatives deem there to be a customer
advantage for these accounts to be covered by the Agreement. Until such
time as these accounts becomes covered by the Agreement, all costs and
profits of these accounts will be retained by Xxxxxx.
5. All sales by Xxxxxx to Pet Life of the Products are excluded from this
Agreement. No additional sales will be made to Pet Life without agreement
of Authorized Representatives.
6. All sales by Xxxxxx to Kmart, Stop 'N Shop, Foodtown, Xxxx'x, Xxxx
Markets, A & P, SGC, WFC, Safeway, Target, Xxxxx, ConAgra and Xxxxx of the
Products are excluded from this Agreement during the initial transition
period of 12 months from the date of the commencement of the Venture.
During this transition, Xxxxxx will handle these accounts directly, and
costs and profits of the accounts will be retained by Xxxxxx. After the
transition period, these accounts will become subject to the Agreement,
with Xxxxxx manufacturing the Products for sale to Xxxxxxx and resale by
Xxxxxxx to the accounts. All other terms and conditions of the Agreement
apply to these accounts after the transition period with the exception of
the profit percentages specified in Section 14 which shall be 80% Xxxxxx
and 20% Xxxxxxx through June 30, 1997, after which time the 50% split
shall apply on these accounts.
Joint Venture
Xxxxxxx Milling Cornpany/Phe1ps Industries, Inc.
Strips & Sticks
Exhibit III
3 Oz. 2.8 Oz.
P.L. Jerky P.L. Jerky
Strips Sticks
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Meat & Additives
Sticks { Assumed Wgt - 7.1 grams
{ X 156 Pos (2.45 lbs Case) 1.2005
Sticks { Assumed Wgt - 7.6 grams
{ x 132 Pos (2.22 lbs. Case) 1.0785
Packaging
Film 12x.05 x 112% .6720 .6720} No
Master (.20 x 1.025) .2153 .2153} Actual's
Cards (.0081 x 1.025) x 12 .0996 .0996} Based On
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Total Packaging: .9869 .9869} Strips
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Total Materials: 2.1874 2.0654
Direct Labor & Fringes
Processing .2236 .356
Packing .2766 .495
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Sub Total: .5002 .851
Add: 54% Fringes .2701 .459
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Total Labor & Fringes: .7703 1.310
Manufacturing Overhead
.0073 Per Pos 1.1388 0.9636
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Total Cost FOB, Rockford 4.0965 4.339
Exhibit III
Notes
Meat & Ingredients (Jerky Strips 12/3 Oz. Case)
Approx Batch Gross Weight: 393 lbs
Approx Dry Packed Yeild: 165 lbs (41.98%)
Avg Cost Ingredients in Batch: 81.00
Avg Cost Per Dry Pound: 0.49 (cents)
Avg Weight 3 Oz. Case of 12: 2.45 lbs
Meat & Ingredients (Jerky Sticks 12/2.8 Oz. Case)
Approx Batch Gross Weight: 430 lbs
Approx Dry Packed Yeild: 220 lbs (51%)
Avg Cost Ingredients in Batch: 106.88
Avg Cost Per Dry Pound: 0.4858 (cents)
Avg Weight 2.8 Oz. Case of 12: 2.22 lbs
Packaging (12/3 Oz. Strips & 12/2.8 Oz. Sticks)
Prices will vary with quantity and complexity of film etc. Costs on Exhibit III
are average costs for private label. Film includes scrap factor of 12%. Master
cartons and cards include scrap factor of 2.5%.
Direct Labor & Fringes
Costs on Exhibit III represents average cost for five month period ended
5/28/93. Cost can vary slightly from month to month depending on volume
throughput.
Manufacturing Overhead
Attached is a list of accounts included in this cost category.
Manufacturing Overheads - Chart Of Accounts
Exhibit III
Indirect Labor (Line Supervisor & Maintenance Man)
Plant Accountant
Plant Manager
Office Person
Fringes On Above (54% for indirect labor and 19% of all others)
Plant Manager Travel
Employee Gratuities
Rent
Building Repairs
Manufacturing Supplies
Depreciation Expense
Insurance Expense
Real Estate Taxes
Telephone Expense
Water Expense
Electric Expense
Gas Expense
Repair - M&E
Uniform Rentals
Misc. Manufacturing Exp
UPS & Federal Express Exp
Truck Lease Expense
EXHIBIT IV
Xxxxxxx'x Selling Costs
Allocation 12/3 oz. Case
Method Amount/Case
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Freight (Xxxxxxx to Customer) *Actual
Off-Invoice Allowances and Incentives *Actual Program
Brokerage *Actual
Cash Discounts Calculated 2% of Sale $.17
Registration and Tonnage Taxes *Actual
Selling/Advertising Calculated $.25
Warehousing Costs Calculated $.04
* "Actual" will be established after the program is agreed on between
the venture and the customer. This will be outlined on individual
margin sheet by account.
