9
EXHIBIT 10.23
RECIPROCAL CO-PACK AGREEMENT
This Agreement is effective as of May 5, 1997 by and between
Curtice Burns Foods, Inc., acting through its Comstock Michigan Fruit Division
("CMF") and Seneca Foods Corporation, a New York corporation having its
headquarters in Pittsford, New York ("Seneca").
CMF has sold and Seneca has purchased most of the canned
vegetable business formerly conducted by CMF in the State of New York, except
for beets packed in glass jars, sauerkraut and some other canned vegetables. The
canned vegetable business sold by CMF to Seneca is hereinafter referred to as
the "Business."
Prior to the sale of the Business to Seneca, CMF processed
canned vegetables at its plants in Leicester and Oakfield, New York, each of
which contain facilities for canning and freezing vegetables. The Leicester
plant has now been purchased by Seneca. Because it is not economically feasible
to transfer the freezing facilities located at Leicester and the canning
facilities at Oakfield to another location, Seneca has agreed to pack frozen
vegetables at Leicester for the account of CMF, and CMF has agreed to pack
canned vegetables at Oakfield for the account of Seneca, all as herein provided.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Term of Agreement. This Agreement shall commence on May 5,
1997 and shall have an initial term of ten years, until April 28, 2007 unless
terminated earlier pursuant to Sections 11, 12 or 21. On April 28 of each year
commencing in 1998, the term of this Agreement shall be extended for one
additional year, without action by either party, unless prior to April 28 either
party gives notice that it will not agree to any additional extensions of the
term. In the event of such notice, the term of the Agreement shall be fixed and
not be subject to any additional automatic extensions.
2. Frozen Pack at Leicester. Seneca agrees to pack frozen
vegetables during the 1997 pack season at Leicester for delivery to CMF in such
types and in such quantities and according to such specifications as are
described in exhibit 1 attached hereto (the "Frozen Pack Plan"). A similar
Frozen Pack Plan shall be negotiated and agreed to by the parties for each
subsequent year during the term of this Agreement. Such vegetables as processed
by Seneca are hereinafter referred to as the "Frozen Pack." The obligation of
Seneca to process the Frozen Pack is limited to the capacity of the facilities
at Leicester as to the volume and type of frozen vegetables previously packed at
Leicester by CMF.
3. Canned Pack at Oakfield. CMF agrees to can vegetables during
the 1997 pack season at Oakfield for delivery to Seneca in such types and in
such quantities and according to such specifications as are described in exhibit
2 attached hereto (the "Canned Pack Plan"). A similar Canned Pack Plan shall be
negotiated and agreed to by the parties for each subsequent
year during the term of this Agreement Such vegetables as
processed by CMF are hereinafter referred to as the "Canned Pack." The
obligation of CMF to process the Canned Pack is limited to the capacity of the
facilities at Oakfield as to the volume and type of canned vegetables previously
packed at Oakfield by Curtice Burns.
4. Raw Product Supply. Pursuant to the Raw Product Supply
Agreement between CMF and Seneca dated as of May 5, 1997 (the "Supply
Agreement"), CMF agrees to supply all Raw Products for the Frozen Pack at
Leicester as provided in the Frozen Pack Plan and for the Canned Pack at
Oakfield as provided in the Canned Pack Plan. The Raw Products so supplied to
Leicester for the Frozen Pack are hereinafter referred to as "CMF Raw Products"
and those supplied to Oakfield for the Canned Pack are hereinafter referred to
as "Seneca Raw Products."
5. Purchase Price. Each party shall pay the other for packing
vegetables for such party the cost to the party producing such vegetables,
including the cost of Raw Products. Such costs shall be determined in accordance
with the accounting practices and procedures specified in exhibit 3 attached
hereto. Such cost shall be determined on an estimated basis during the pack. As
for applicable direct cost, such estimate shall be revised and adjusted
accordingly as soon as possible following the conclusion of the pack, and all
cost estimates shall be adjusted to conform to actual cost no later than May of
each year. The cost of the Seneca Raw Products shall be the cost to CMF to
procure such Raw Products, as adjusted, if at all, pursuant to Section 8 of the
Supply Agreement. The cost of the CMF Raw Products shall be the cost incurred
for such Raw Products pursuant to the Supply Agreement.
6. Audit. For a period of a year following the reporting by
either party to the other of costs incurred under this Agreement, each party
shall have the right on reasonable notice to the other to examine the pertinent
records of the other to verify the accuracy of such costs and the
appropriateness of the allocation of such costs. However, neither party shall
disclose to the other any cost data other than that necessary to permit such
verification. Should any disagreement arise as to such costs, the matter shall
be referred for resolution to a Big-Six public accounting firm mutually
acceptable to and independent from Seneca and CMF (the "Accountant"). Upon the
engagement of the Accountant, Seneca and CMF shall each submit a statement to
the Accountant setting forth its respective position regarding the disagreement.
The determination of the Accountant shall be conclusive and binding upon the
parties. All fees and expenses of the Accountant in performing its duties
hereunder shall be shared equally be Seneca and CMF, each of which hereby agrees
to pay its shares of fees and expenses.
7. Terms of Payment. Each party shall invoice the other for
the cost of packing vegetables on a daily basis at the time of production, and
the parties agree to pay such invoices no later than 30 days from the time of
receipt. As provided in Section 5, to the extent that such invoices are based on
estimated costs the parties agree to review and adjust the invoices based upon
such estimates at the end of the pack to which such invoices relate, after which
a rebate or additional payment will be paid as appropriate based upon such
review.
8. Packaging and Labels. The Frozen Pack shall be packed in
bulk in totes and liners supplied to Seneca by CMF at no cost to Seneca. Such
totes and liners shall be and shall remain the property of CMF. CMF shall not
label the Canned Pack, which shall be delivered to Seneca as bright pack. CMF
shall purchase the cans needed for the Canned Pack. During the first year of
this Agreement Seneca shall pay for such cans the cost to CMF to acquire such
cans. Thereafter for the remaining term of this Agreement Seneca shall pay CMF
for cans the lower of the cost of such cans to CMF and the cost to Seneca to
manufacture such cans.
9. Warehousing and Delivery. Unless the parties make separate
arrangements for warehousing, CMF shall take delivery of each day of production
of the Frozen Pack FOB Leicester no later than the day following such
production, and Seneca shall take delivery of each day of production of the
Canned Pack FOB Oakfield no later than the day following such production.
10. Maintenance of Equipment. The equipment necessary to pack
the Frozen Pack at Leicester is as specified on exhibit 4 attached hereto (the
"Frozen Equipment") and the equipment necessary to pack the Canned Pack at
Oakfield is as specified on exhibit 5 attached hereto (the "Can Equipment").
Seneca agrees to record on its books the value assigned to the Frozen Equipment
at the time of purchase from CMF and to charge depreciation thereon in the same
manner as was charged by CMF prior to the sale of such equipment to Seneca. CMF
agrees to continue to record on its books the value of the Can Equipment as
specified as of the date of this Agreement and to continue to depreciate such
equipment at the same rate charged previously. Seneca agrees to maintain and
repair and insure for replacement value the Frozen Equipment so as to be able to
process the Frozen Pack expeditiously and economically for CMF and not to use
the Frozen Equipment to pack frozen foods for anyone other than CMF. CMF agrees
to maintain and repair and insure for replacement value the Can Equipment so as
to be able to process the Canned Pack expeditiously and economically for Seneca
and not to use the Can Equipment to pack canned foods for anyone other than
Seneca. The parties agree to consult with each other concerning the status of
the Frozen Equipment and the Can Equipment. To the extent that capital
improvements are required for the efficient operation of the Frozen Equipment,
CMF agrees to pay for such improvements and to permit Seneca to install and
operate such improvements at Leicester in conjunction with the Frozen Equipment
("CMF Capital Improvements"). To the extent that capital improvements are
required for the efficient operation of the Can Equipment, Seneca agrees to pay
for such improvements and to permit CMF to install and operate such improvements
at Oakfield in conjunction with the Can Equipment ("Seneca Capital
Improvements").
11. Purchase of Frozen Equipment. At any time between the end
of the annual Frozen Pack and the next March 31 thereafter CMF may notify Seneca
in writing of its election to purchase and remove the Frozen Equipment from
Leicester to a location specified by CMF. Following such notice, the Frozen
Equipment shall remain in place and be used by the parties for the pack of the
Frozen Pack pursuant to this Agreement for the ensuing season; upon the
conclusion of that pack, the Frozen Equipment and the CMF Capital Improvements
shall be moved as directed by CMF. As the purchase price for the Frozen
Equipment, CMF will at the time of removal thereof pay Seneca the book value of
such equipment. CMF shall also pay for the relocation of the Frozen Equipment
and the CMF Capital Improvements. Seneca shall deliver to CMF a bill of sale
transferring title to the Frozen Equipment free and clear of all encumbrances.
Once the purchase and removal of the Frozen Equipment as herein provided has
been completed, this Agreement shall terminate as to the Frozen Pack and be of
no further force and effect except as it pertains to the Frozen Pack produced
prior to such termination. The parties shall cooperate in filing such documents
as are reasonably required to establish the option of CMF under this Section 11.
12. Purchase of the Can Equipment. At any time between the end
of the annual Canned Pack and the next March 31 thereafter Seneca may notify CMF
in writing of its election to purchase and remove the Can Equipment from
Oakfield to a location specified by Seneca. Following such notice, the Can
Equipment shall remain in place and be used by the parties for the pack of the
Canned Pack pursuant to this Agreement for the ensuing season; upon the
conclusion of that pack, the Can Equipment and the Seneca Capital Improvements
shall be moved as directed by Seneca. As the purchase price for the Can
Equipment, Seneca will at the time of removal thereof pay CMF the book value of
such equipment. Seneca shall also pay for the relocation of the Can Equipment
and the Seneca Capital Improvements. CMF shall deliver to Seneca a bill of sale
transferring title to the Can Equipment free and clear of all encumbrances. Once
the purchase and removal of the Can Equipment as herein provided has been
completed, this Agreement shall terminate as to the Canned Pack and be of no
further force and effect except as it pertains to the Canned Pack produced prior
to such termination. The parties shall cooperate in filing such documents as are
reasonably required to establish the option of Seneca under this Section 12.
13. Quality and Compliance. All vegetables produced under this
Agreement shall be wholesome, merchantable and fit for human consumption, and
unless otherwise agreed shall meet normal grade quality for available Raw
Products consistent with historical experience regarding grade differentials.
Each party shall promptly notify the other of any significant matter relating to
any of the vegetables produced under this Agreement including, without
limitation, any citation or regulatory action by any federal, state or local
authority or regulatory agency that relates to the quality or merchantability of
the vegetables; any bacterial, chemical, pesticide or other communication of any
of the vegetables or other condition of any of the vegetables that violates any
federal, state or local food and drug law or regulation; or any mislabeling,
misbranding or adulteration of any of the vegetables.
14. FDA Compliance. Each party warrants and guarantees that
the vegetables which it produces under this Agreement shall comply with all
federal and state pure food laws and regulations, as amended, and that the
vegetables will not be adulterated within the meaning of the Federal Food, Drug
and Cosmetic Act (hereinafter the "Federal Act") or any similar state statute,
and will not be an article which may not, under the provisions of Section 404 of
the Federal Act, be introduced into interstate commerce. Neither party shall use
any food additive in the vegetables, as defined in the Federal Act, unless the
other party has approved its use and the United State Food & Drug
Administration, or the United States Department of Agriculture, as appropriate,
either has exempted it from the food additive requirements of the Federal Act or
has prescribed the conditions under which it may be safely used, in which case
the prescribed conditions shall be complied with.
15. Access. Representatives of each party shall have
reasonable access during the term of this Agreement to all locations, and to all
production and quality records located thereon, where vegetables to be packed
under this Agreement are being processed, stored or loaded, to the extent the
same may be relevant, necessary and appropriate to either party's efforts in
monitoring the quality control and assuring compliance under this Agreement.
Either party, at its option, may send qualified representatives to the other's
processing facility during any time vegetables are being processed under this
Agreement, for the purpose of monitoring quality control and assuring
compliance. In the event this option is exercised, the party at whose facility
the visiting representatives are working shall furnish space in such facility,
together with utilities furnished to such space, in order that grading and
testing of ingredients, materials and vegetables may be carried on as said
representatives deem appropriate. Such qualified representatives' actions,
inaction, acceptance or rejection of vegetables hereunder shall not relieve
either party of its responsibilities under this Agreement.
16. Consumer Complaints. In the event of consumer complaints,
claims or legal actions alleging damage, death, illness or injuries resulting
from consumption or use of any vegetables produced under this Agreement, the
party marketing those vegetables shall forthwith notify the party that produced
them, and both shall make an investigation. The parties agree the investigation
by the claims services of the National Food Processors Association (NFPA) shall
satisfy both parties' investigative requirements. The findings of any such
investigation shall serve as the basis for negotiations between the parties to
determine their respective shares, if any, of the responsibility and cost for
the defense thereof, in whole or in part. The parties agree to pursue any such
negotiations in good faith for a period not less than ninety (90) days following
actual notice to each of them of the results of the investigation, following
which period either party may pursue such remedies as it may have at law or
equity. If, on the basis of the NFPA investigation or otherwise, the parties
have reason to believe that an entity not affiliated with either party caused or
contributed to the alleged defect or harm which is the basis for the complaint,
claim or action, the parties will cooperate in asserting and enforcing their
rights against that entity.
17. Recalls and Seizures. In the event of a recall (as that
term is defined under appropriate regulations of the United States Food & Drug
Administration) or any seizure (as that term is defined under the Federal Act
and applicable Federal regulations) of any vegetables produced hereunder, and in
the event such recall or seizure has resulted from any act or omission of one
party hereto which would require its indemnification under this Agreement of the
other party hereto, the indemnifying party immediately shall reimburse the other
party for all out-of-pocket direct expenses incurred by the other party in
connection with the recall or seizure, and shall replace the vegetables subject
to the recall or seizure.
18. Title and Risk of Loss. CMF shall transfer title to the
Canned Pack to Seneca and Seneca shall transfer title to the Frozen Pack to CMF
as of the time, date, and place of delivery, free and clear of liens and other
claims by third parties. Risk of loss shall pass from one party to the other
upon such transfer of title.
19. Confidential Information. During the term of this
Agreement, and for a period of four (4) years thereafter, neither party shall
disclose to any third parties, nor use, except in the performance of this
Agreement, any trade secrets or information received from the other party;
provided, however, this obligation of confidentiality and non-use shall not
apply or shall cease to apply to information which (1) was known to the party
charged with confidentiality before disclosure; (2) was in the public domain as
of the date of disclosure, or subsequently comes into the public domain; or (3)
is subsequently legally acquired by the party charged with confidentiality. The
parties agree that exhibits 1 and 2 shall constitute confidential information.
20. Force Majeure. If the performance of any part of this
Agreement by either party is prevented, hindered or delayed by reason of any
cause or causes beyond the control of such party due to acts of God, war, riot,
fire, explosion, accident, flood, sabotage, inability to obtain raw materials or
fuel or power, governmental laws, regulations or orders, breakage of machinery
or any other cause beyond the reasonable control of such party, or labor unrest,
strike, lockout or injunction, as the case may be and which cannot be overcome
by due diligence, the party affected shall be excused from such performance to
the extent that it is necessarily prevented, hindered or delayed thereby. During
the continuance of any such happening or event, this contract shall be deemed
suspended so long as and to the extent that any such cause prevents or delays
its performance. Any reduction of deliveries of raw products by CMF excused by
this section 20 shall be handled as a pack shortfall pursuant to the Supply
Agreement.
21. Termination. Without prejudice to any other rights either
party may have under this Agreement, applicable law or rule of equity,
either party shall have the option to terminate this Agreement in the
event:
(1) The other party commits a material breach of any term,
covenant or condition of this Agreement and such breach is not remedied within
thirty (30) days after the aggrieved party has sent written notice of such
breach to the other party;
(2) The other party becomes insolvent within the meaning of any
bankruptcy or insolvency law, or makes an assignment for the benefit of its
creditors.
(3) An attachment, execution or lien is levied against vegetables
under this Agreement and such attachment, execution or lien is not remedied
within thirty (30) days after the aggrieved party has sent written notice of
such event to the other party;
(4) A controlling interest in the other party is sold or
transferred, other than by gift or inheritance, unless there is a mutual
agreement to the change; or
(5) The other party's ability to produce and deliver vegetables
pursuant to this Agreement is impaired by substantial damage or destruction of
its processing facility, and such damage or destruction is not repaired within
thirty days. If this Agreement is terminated pursuant to this Section 21(5)
because of fire or other damage to the Frozen Equipment or the Can Equipment,
then following such damage either party may exercise its option to purchase
equipment as provided in Sections 11 and 12, in which event the party entitled
to receive the damaged equipment shall instead be paid the insurance proceeds
payable as a result of the damage to such equipment. 22. Indemnification. Each
party hereto agrees to fully indemnify, defend and hold the other party harmless
from any and all claims, complaints, losses, costs, expenses, damages or fees
(including all attorneys' fees) arising from or associated with any failure by
such party to comply with the terms, undertakings or commitments set forth in
this Agreement. Each party waives any claim, or right to seek indemnification,
for consequential damages. If the indemnifying party shall so request, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any claim which the indemnifying party elects to contest
or, if appropriate, in making any counterclaim against the person asserting the
claim, or any cross-complaint against any person. The indemnifying party shall
reimburse the indemnified party for any expenses incurred by it in so
cooperating. 23. Severability. If any provision herein is held to be illegal,
invalid, or unenforceable in any jurisdiction, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such
provision had never comprised a part hereof; the remaining provisions hereof
shall remain in full force and effect and shall not be affected by such
provision or by its severance herefrom. Furthermore, in lieu of such provision
there shall be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable, and which will give effect to the
intention of the parties.
24. Non-Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, which consent shall
not be unreasonably withheld. Any attempted assignment without such consent
shall be void.
25. Independent Contractors. It is understood that neither Seneca nor CMF
is the agent or partner of the other, and that this Agreement shall not be
construed as a joint venture between them. It is further understood that neither
party shall be responsible for the debts or obligations of the other, and
neither party has the authority to bind or act on behalf of the other.
26. Notices. All notices, requests, demands or other communications
required or permitted under this Agreement shall be given in writing and shall
be deemed to have been given if delivered personally, sent by fax or Federal
Express, or mailed postage prepaid, to the following addresses: As to Curtice
Burns: Comstock Michigan Fruit A Division of Curtice Burns Foods, Inc. 90 Linden
Place Rochester, New York 14625 Attn: President
With a copy to:
Thomas M. Hampson
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, New York 14604-1687
As to Seneca:
Seneca Foods Corporation
1162 Pittsford-Victor Road
Pittsford, New York 14534
Attn: President
With a copy to:
William I. Schapiro
Jaeckle Fleischmann & Mugel
Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202-2292
27. Modification. This Agreement cannot be modified except in
writing, signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto duly execute this Agreement as of
May 5, 1997. CURTICE BURNS FOODS, INC. SENECA FOODS CORPORATION
By: /s/ Earl L. Powers By: /s/Phillip Parras
Title: Chief Financial Officer Title: Vice President - Finance