EXHIBIT 99.5
EXHIBIT 1.1(c)
CONAGRA SUPPLY AGREEMENT
THIS AGREEMENT is made as of ________, 2003 by and between CONAGRA
FOODS INC., a Delaware corporation ("ConAgra"), and PILGRIM'S PRIDE CORPORATION,
a Delaware corporation ("Pilgrim's").
RECITALS:
(a) ConAgra and certain of its operating companies (individually,
a "ConAgra Operating Company" and, collectively, the "ConAgra
Operating Companies") use certain Products (as defined below)
that are produced by Pilgrim's or its operating companies
(individually, a "Pilgrim Operating Company" and,
collectively, the "Pilgrim Operating Companies").
(b) ConAgra and Pilgrim's desire to establish a mutually-preferred
supplier/purchaser agreement and to facilitate a relationship
which enhances ConAgra's and the ConAgra Operating Companies'
purchase of, and the sale by Pilgrim's and the Pilgrim
Operating Companies of, the Products, taking into
consideration relevant commercial market factors.
(c) ConAgra's and the ConAgra Operating Companies' interest is to
purchase quantities of Products in amounts substantially
similar to the volume of Products purchased by them prior to
the date of this Agreement (subject to changes in product mix,
product reformulation, market conditions, etc.) at competitive
delivered prices, and Pilgrim's interest is for Pilgrim's and
the Pilgrim Operating Companies to supply such quantities of
Products to ConAgra and the ConAgra Operating Companies at
competitive delivered prices.
AGREEMENT:
In consideration of the foregoing recitals which are incorporated with
and are made a part of this Agreement, and in further consideration of the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows:
1. GENERAL STATEMENT. ConAgra hereby agrees that Pilgrim's and the
Pilgrim Operating Companies are a preferred supplier of the Products and
Pilgrim's hereby agrees that ConAgra and the ConAgra Operating Companies are
preferred purchasers of the Products.
2. PURCHASE AND SALE OF PRODUCTS. In order to facilitate this preferred
supplier/purchaser relationship, and subject to the terms and conditions set
forth herein,
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Pilgrim's and the Pilgrim Operating Companies shall sell to ConAgra and the
ConAgra Operating Companies, and ConAgra and the ConAgra Operating Companies
shall purchase, those chicken products meeting ConAgra's and the ConAgra
Operating Companies' quality and service standards (collectively, the
"Products") in amounts substantially similar to the volume of Products purchased
by ConAgra and the ConAgra Operating Companies during the twelve (12) month
period prior to the date of this Agreement (subject to changes in product mix,
product reformulation, market conditions, etc.), or in such greater or smaller
volumes as the parties may mutually agree upon from time to time. The parties
agree that ConAgra will offer Pilgrim's and the Pilgrim Operating Companies the
first opportunity to provide ConAgra and the ConAgra Operating Companies
(including operating companies formed or acquired after the date hereof that
require Products, subject to compliance by companies formed or acquired after
the date hereof with such companies' supply agreements or arrangements existing
prior to, and not established in contemplation of such companies' acquisition)
additional Products that any of them may require as a result of changes in
product mix and product reformulations, other than proprietary or other products
brought to ConAgra or the ConAgra Operating Companies by any third party for the
development and/or manufacture of new products. At least three (3) days prior to
the start of each period of time mutually agreed to by the parties during the
term of this Agreement, Pilgrim's will contact ConAgra and those ConAgra
Operating Companies requiring a supply of Products for the next immediately
succeeding mutually agreed to production period ("Production Period") to obtain
ConAgra's and/or such ConAgra Operating Companies' good faith estimate of
anticipated purchases of Products. Included in the information to be provided by
ConAgra and/or the ConAgra Operating Companies will be the type of Products,
quantities, specifications, estimated delivery requirements and other relevant
information for the upcoming Production Period and ConAgra and/or the ConAgra
Operating Companies shall offer Pilgrim's and the Pilgrim Operating Companies
the right to provide such Products to ConAgra on the terms and conditions set
forth herein. Based on this information, Pilgrim's or the applicable Pilgrim
Operating Company will notify ConAgra within three (3) days thereafter (or such
other period of time as to which the parties may mutually agree) which Products
it desires to supply. Within three (3) days (or such other period as to which
the parties may mutually agree) after sending such notice to ConAgra, Pilgrim's
will meet with ConAgra to develop good faith estimated orders for the Products
for the upcoming Production Period. Each party agrees to give the other party,
if possible, at least ninety (90) days prior notice of any significant demand
change with respect to the Products to be supplied and purchased hereunder of
which either party may become aware. To maintain this preferred supplier status,
Pilgrim's and the Pilgrim Operating Companies shall meet ConAgra's and the
ConAgra Operating Companies' specifications (consistent with existing
specifications and as may be reasonably changed in the future), quantity
delivery and service requirements. To maintain this preferred purchaser status,
ConAgra and the ConAgra Operating Companies shall comply with agreed payment
terms.
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3. PRICING OF PRODUCTS.
(a) GENERAL PRICING. Except for Products supplied to ConAgra
and/or the ConAgra Operating Companies from Pilgrim's
Batesville kill facility (the "Batesville Facility"), the
pricing of which is addressed in Section 3(b) below, all
Products supplied to ConAgra and/or the ConAgra Operating
Companies hereunder shall be sold at mutually agreed to fair
market prices based upon a thirteen (13) week rolling average
of the Xxxxx Xxxxx Midwest ("UB") price, with any
overage/underage to or from the UB prices to be negotiated and
locked in on a quarterly basis, on a delivered or FOB basis as
ConAgra shall choose. Pilgrim's will meet periodically with
ConAgra to discuss and determine pricing and payment mechanics
and procedures.
(b) BATESVILLE PRICING. All Products supplied to ConAgra and/or
the ConAgra Operating Companies hereunder from the Batesville
Facility shall be sold at Pilgrim's actual production cost
(meat cost plus complex overhead) in producing Products at the
Batesville Facility (which, as of the end of ConAgra's April
2003 monthly period was reported on ConAgra's Plant Costs -
Consolidated with Debone Report for Period 1-11 of Fiscal Year
2003 (the "Plant Costs Report") as $.4838 per pound)
("Pilgrim's Cost"), plus four cents ($.04) per pound of
Product. The parties agree that Pilgrim's Costs shall include
the matters described in the Plant Costs Report and shall
exclude finance costs, corporate overhead allocations, selling
expense and freight (which excluded items, as reflected on
ConAgra's Business Plan for Fiscal Year 2004, is $.0147 per
pound). Pilgrim's agrees to use its reasonable best efforts to
manage its fixed, variable and input costs in producing
Products at the Batesville Facility as efficiently as
possible. Both parties will agree to an industry standard cost
benchmark or other metrics to which Pilgrim's Cost can be
compared in order to insure the competitive cost structure at
the Batesville Facility. ConAgra shall have at all reasonable
times the right to audit Pilgrim's books and records in order
to verify Pilgrim's Costs and Pilgrim's determination and
calculation thereof. Pilgrim's shall use its reasonable best
efforts to maximize the number of birds which meet ConAgra's
WOGS specifications.
(c) MEDIATION. If, at any time, during the term of this Agreement,
ConAgra and Pilgrim's cannot agree on any price or component
of a price which is to be mutually agreed to by the parties,
then the pricing dispute shall be submitted to Pilgrim's Vice
President of Sales and ConAgra's Vice President of Operations
(for the ConAgra operation involved in the pricing dispute)
for resolution. If such individuals are unable to resolve such
pricing dispute after ten (10) days of discussions, then the
pricing dispute shall be submitted to Pilgrim's Chief
Financial Officer and ConAgra's Executive Vice President
Operations Control and Development for resolution.
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4. TERM. The term of this Agreement shall be five (5) years commencing
on the date hereof.
5. SPECIAL CIRCUMSTANCES. The parties acknowledge that, from time to
time, ConAgra and/or the ConAgra Operating Companies may have unpredicted and/or
special purchase needs for Products that cannot be accommodated by the purchase
and sale mechanism set forth in Section 2 above, including ConAgra's and/or the
ConAgra Operating Companies' desire to effect forward purchases of Products
(i.e., the purchase of goods made pursuant to a contract in which the buyer and
seller agree to terms and conditions for future delivery of those goods). With
respect to such special circumstances, ConAgra and/or the ConAgra Operating
Companies will use their good faith efforts to work with Pilgrim's and the
Pilgrim Operating Companies so that Pilgrim's will have the first opportunity to
supply such Products where practical, but in the event Pilgrim's or any Pilgrim
Operating Company is unable to supply such Products, or does not agree to effect
ConAgra's and/or the ConAgra Operating Companies' forward purchases of Products,
ConAgra and/or the ConAgra Operating Companies shall be free to purchase such
Products (including forward purchases of Products) from unrelated third-party
suppliers. With respect to any such Products that Pilgrim's or a Pilgrim
Operating Company is initially unable to provide ConAgra (and for which ConAgra
has not entered enter into an agreement that requires such Product to be
supplied by a third party), ConAgra shall offer Pilgrim's or the applicable
Pilgrim Operating Company the opportunity to provide such Products pursuant to
the next three (3) month notice under Section 2 above if ConAgra's requirements
for such Products continue.
6. REPRESENTATIONS AND WARRANTIES OF PILGRIM'S. Pilgrim's warrants and
represents that:
(a) All of the Products shall comply with the specifications
therefor, and shall be fit and wholesome for human consumption
at the time of delivery.
(b) None of the Products delivered hereunder shall be, as of the
date of such delivery, adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act, as
amended, or any other applicable food or drug law or
regulation. All Products delivered pursuant to this Agreement
by Pilgrim's or any Pilgrim Operating Company shall be goods
that, under the provisions of such laws and regulations, may
be lawfully shipped and sold in interstate commerce and
conform in all respects to the requirements of such laws and
rules and regulations issued pursuant to such laws.
(c) The Products shall be merchantable, of good quality, and fit
for the purpose intended.
(d) The execution of the Agreement and performance of its
obligations under this Agreement does not, and will not,
breach or conflict with any agreement, pledge, or contract to
which Pilgrim's or any Pilgrim Operating
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Company is a party or to which any of the assets of Pilgrim's
or any Pilgrim Operating Company are subject.
(e) Pilgrim's or a Pilgrim Operating Company shall have clear
title to all Products sold to ConAgra and/or the ConAgra
Operating Companies hereunder, and ConAgra and/or the ConAgra
Operating Companies shall receive clear and unencumbered title
to such Products.
7. REPRESENTATIONS AND WARRANTIES OF ConAgra. The execution of the
Agreement and performance of its obligations under this Agreement does not, and
will not, breach or conflict with any agreement, pledge, or contract to which
ConAgra and/or any ConAgra Operating Company is a party or to which any assets
of ConAgra or any ConAgra Operating Company are subject.
8. INDEMNIFICATION.
(a) Pilgrim's shall indemnify and hold ConAgra and the ConAgra
Operating Companies harmless from and against any and all
claims, demands, actions, causes of action, proceedings,
judgments and other liabilities, obligations, losses, damages,
costs and expenses (including reasonable attorneys' fees and
costs) of any nature which arise out of Pilgrim's negligent
acts or omissions or result from a breach by Pilgrim's of any
representation, warranty, covenant or agreement provided
herein.
(b) ConAgra shall indemnify and hold Pilgrim's and the Pilgrim
Operating Companies harmless from and against any and all
claims, demands, actions, causes of action, proceedings,
judgments and other liabilities, obligations, losses, damages,
costs and expenses (including reasonable attorneys' fees and
costs) which arise out of ConAgra's negligent acts or
omissions or result from a breach by ConAgra of any
representation, warranty, covenant or agreement provided
herein.
9. INSURANCE. During the term of this Agreement each party shall
maintain adequate public liability or other insurance with reputable insurance
companies as hereinafter set forth. Each party shall furnish the other party
with certificates of insurance properly executed by its insurers evidencing such
insurance, and requiring the insurers to give at least thirty (30) days notice
to the other party in the event of cancellation or material alteration of such
coverage. The minimum insurance coverage to be maintained shall be as follows:
(a) Commercial general liability insurance written on occurrence
form, providing blanket contractual liability coverage and
products liability (including coverage for terroristic acts,
if available and at a reasonable cost) against claims for
bodily injury, death and property damage, affording minimum
single limit protection of no less than U.S. Two Million
Dollars (US$2,000,000) per occurrence.
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(b) Worker's compensation (or acceptable equivalent) insurance in
accordance with the statutory requirements (including any
self-insurance provisions, if applicable) of the states in
which the insured conducts its operations and employer's
liability insurance affording minimum single limit protection
of $1,000,000 in respect to personal injury or death resulting
from one occurrence.
(c) Automobile liability insurance with limits of coverage of no
less than $2,000,000 per occurrence.
(d) Excess liability insurance with limits of coverage of no less
than $3,000,000 per occurrence and must follow form on all
underlying policies.
10. CONFIDENTIALITY. Each party acknowledges that in connection with
this Agreement it may receive certain confidential information from the other
party ("Confidential Information"). The receiving party shall not at any time
disclose the Confidential Information to any person, firm, partnership,
corporation or other entity (other than persons employed by the receiving party
and having a need to access the Confidential Information for purposes of
performing this Agreement) for any reason whatsoever, nor shall the receiving
party use the Confidential Information for its benefit or for the benefit of any
person, firm, partnership or affiliates during the term of this Agreement or for
any purpose other than this Agreement, and for a period of two (2) years after
the termination hereof unless required by any governmental authority or in
response to any valid legal process. Confidential Information disclosure will be
limited to that information necessary to effectuate the purpose of this
Agreement. Each party shall take all actions necessary to ensure that its
employees and representatives having access to the Confidential Information are
bound by the terms of this Agreement. Confidential Information shall not include
information which (i) was in the receiving party's possession prior to
disclosure, (ii) is hereafter independently developed by the receiving party,
(iii) lawfully comes into the possession of the receiving party, or (iv) is now
or subsequently becomes, through no act or failure to act by the receiving
party, part of the public domain.
11. FORCE MAJEURE. Neither Pilgrim's nor ConAgra shall be liable for,
or deemed to be in default hereunder or subject to any remedies of the other
party as a result of, delays or performance failures due to power failures,
fire, acts of God, acts of civil or military authority, embargoes, epidemics,
terrorism, strikes, riots or similar causes beyond such party's reasonable
control, and without the fault or negligence of ConAgra, any ConAgra Operating
Company, Pilgrim's or any Pilgrim Operating Company. Should any force majeure
condition occur which prevents Pilgrim's or any Pilgrim Operating Company from
performing its obligations pursuant to this Agreement from one of its plants,
Pilgrim's shall, at ConAgra's request, use commercially reasonable efforts to
provide Products from another plant of Pilgrim's or any Pilgrim Operating
Company. If Pilgrim's is unable to provide Products from another Pilgrim's
plant, then ConAgra shall
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have the right during the period of force majeure to either (i) purchase
Products from any third party, or (ii) to the extent Pilgrim's may agree, direct
Pilgrim's to obtain Products required hereunder by ConAgra and/or the ConAgra
Operating Companies from third party suppliers reasonably acceptable to ConAgra.
Each party shall use reasonable best efforts to minimize the impact of any force
majeure condition it experiences on the other party to this Agreement and to
otherwise keep the other party timely advised as to minimization and removal of
such condition.
12. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Delaware, excluding its choice of law rules.
13. NO ASSIGNMENT. Neither party may assign this Agreement or its
rights hereunder without prior written consent from the other party, which
consent shall not be unreasonably withheld. For purposes of this Agreement, an
assignment shall be deemed to occur upon a change in the controlling ownership
interest of the respective party (or any Operating Company), either directly or
indirectly, whether by merger, consolidation, stock transfer, or otherwise. In
the event the proposed assignee of this Agreement does not accept assignment of
this Agreement or in the event such consent is withheld with respect to the
sale, merger or other transfer of any Operating Company or the assets thereof,
then in either event the assigning party shall have the right to terminate this
Agreement; provided that with respect to a proposed partial assignment, such
termination shall only relate to the Operating Companies or plants, as
applicable, subject to such partial assignment. In the event either party is
interested in selling any plant or business which is involved in either the
purchase or sale under this Agreement, then the party desiring to sell such
plant or business shall notify the other party hereto of its interest in such
sale at the same time it notifies third parties of its interest in selling the
plant or business.
14. NOTICES. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered personally or via telefacsimile or
overnight courier, or mailed by registered, certified or express mail, postage
prepaid, as follows:
(a) If to Pilgrim's or any Pilgrim's Pride Corporation
Pilgrim Operating 000 Xxxxx Xxxxx Xxxxxx
Company: Xxxxxxxxx, XX 00000
ATTN: CFO
Fax: (000) 000-0000
With a copy to: Pilgrim's Pride Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
ATTN: Risk Management Department
Fax: (000) 000-0000
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(b) If to ConAgra and/or any ConAgra Foods, Inc.
ConAgra Operating One ConAgra Drive
Company: Xxxxx, XX 00000
ATTN: CONTROLLER
Fax: (000) 000-0000
or at such other address as any party hereto shall have designated by notice in
writing to the other parties hereto.
14. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their legal representatives, successors and
permitted assigns.
15. ENTIRE AGREEMENT; AMENDMENTS. This writing constitutes the entire
understanding between the parties and supersedes all previous agreements or
negotiations on the subject matter herein whether written or oral, and shall not
be modified or amended except by written agreement duly executed by the parties
hereto.
16. WAIVER. A waiver by either party of any breach or default of this
Agreement is not to be construed as a waiver of any subsequent breach or
default.
17. INDEPENDENT CONTRACTORS. The relationship between the parties shall
at all times be deemed that of independent contractors. This Agreement is not
intended to create between the parties a relationship of partners, principal and
agent, joint venturers or any other similar relationship.
18. NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL A PARTY OR ITS
AFFILIATES OR THEIR RESPECTIVE OFFICERS, DIRECTORS, REPRESENTATIVES AND
EMPLOYEES BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES OR THEIR RESPECTIVE
OFFICERS, DIRECTORS, REPRESENTATIVES AND EMPLOYEES, WHETHER BASED IN CONTRACT,
TORT, WARRANTY, OR ANY OTHER LEGAL OR EQUITABLE GROUNDS, FOR ANY LOSS OF THE
INCOME, PROFIT OR SAVINGS OR COST OF CAPITAL OR FINANCING OF THE OTHER PARTY OR
ITS AFFILIATES, FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR ANY
EXEMPLARY, SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND, RESULTING FROM OR RELATING
TO THIS AGREEMENT OR THE PRODUCTS DELIVERED HEREUNDER, EVEN IF THE OTHER PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first written above.
CONAGRA FOODS, INC., PILGRIM'S PRIDE CORPORATION,
a Delaware corporation a Delaware corporation
By: By:
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Its: Its:
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