CO-PACK AGREEMENT
THIS AGREEMENT is made this 8th day of June, 1999
BETWEEN:
NESTLE CANADA INC., a corporation organized and existing under
the laws of the Province of Ontario (the "Vendor")
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ARCHIBALD CANDY CORPORATION, a corporation organized and existing
under the laws of the State of Illinois (the "Purchaser").
WHEREAS:
A. The Vendor and the Purchaser have entered into an Asset Purchase
Agreement dated May 26, 1999 (the "Asset Purchase Agreement"), pursuant to
which the Purchaser purchased from the Vendor certain assets as designated in
the Asset Purchase Agreement;
B. The assets purchased by the Purchaser under the Asset Purchase
Agreement include the retail business for the distribution and sale of the
Products but do not include the production facility located at 1500
Birchmount Road, Scarborough, Ontario (the "Vendor's Facility"); nor do they
include the equipment and machinery used to produce and package the Products
and located at the Vendor's Facility;
C. The Purchaser desires that the Vendor produce for the Purchaser at
the Vendor's Facility the products set forth in Schedule 1 attached hereto
(collectively, the "Products");
D. The Vendor desires to produce the Products for the Purchaser at the
Vendor's Facility;
NOW THEREFORE, in consideration of the mutual covenants and
conditions hereinafter set forth, the Vendor and the Purchaser mutually agree
as follows:
ARTICLE 1. SPECIFICATIONS
1.1 The Vendor shall produce, package, store and ship the Products in
accordance with Good Manufacturing Practices prevailing in the
industry and in compliance (other than non-compliance in a minor or
inconsequential manner) with the specifications, formulae,
manufacturing processes, quality control standards,
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coding systems and any other standards or guidelines (collectively,
the "Specifications") attached hereto as Schedule 2.
1.2 (a) The Vendor shall use commercially reasonable efforts to implement
such changes in the Specifications as the Purchaser may from time
to time request. Such changes shall not be effective until
agreed upon by the Vendor and the Purchaser in writing and signed
by a duly authorized officer of the Vendor and the Purchaser.
Any change in the Specifications which increases or decreases the
Vendor's costs shall result in a commensurate increase or
decrease in the prices set forth in Schedule 1 hereto; provided
that any such price increases or decreases are agreed upon in a
writing signed at such time by a duly authorized officer of the
Vendor and the Purchaser.
(b) The Vendor shall use commercially reasonable efforts to produce,
package, store and ship additional products that the Purchaser
may from time to time request, including gift items, seasonal
items and specialty packaging. No such additional products shall
become "Products" unless and until agreed upon (including the
prices of such additional products) by the Vendor and the
Purchaser in writing and signed by a duly authorized officer of
the Vendor and the Purchaser.
1.3 In the event of a conflict or inconsistency between the Specifications
and either a Good Manufacturing Practice or an applicable law or
regulation, the Specifications shall control unless the application of
a particular Specification would result in the violation of an
applicable law or regulation, in which case that applicable law or
regulation shall control.
1.4 The Vendor shall prepare, maintain and submit to the Purchaser the
quality control records and reports referred to in Schedule 2 and
shall also retain for the Purchaser, for a period of one week, at
least four ounces of samples per Product per shift for quality control
purposes. The Vendor also shall retain for the Purchaser, at the
Purchaser's expense, any additional samples that the Purchaser
reasonably requests.
1.5 Prior to the commencement of, and at any time during, production,
packaging, storage and shipping operations, the Purchaser shall have
the right, upon reasonable notice, to send one or more of its
authorized employees to observe, audit and inspect, during regular
business hours, the manufacturing, warehousing and any facilities,
including the Vendor's Facility, used to produce, package, store and
ship the Products, and the Purchaser shall have access to all relevant
records of the Vendor, it being agreed that such employees may be
assigned by the Purchaser on a full time basis and that the Vendor
shall allow such employees to document the Vendor's purchasing,
production, storage and shipping practices to
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the extent relating to the Products. The Vendor further agrees
that, during the term of this Agreement and for the 90 days
following the termination of this Agreement, it shall, upon the
request of the Purchaser and at the Purchaser's expense (including,
without limitation, a reasonable per diem charge), use reasonable
efforts to make certain of its employees (as mutually agreed
between the Vendor and the Purchaser) available to the Purchaser at
the Purchaser's Chicago facility for purposes of training the
Purchaser's employees in the manufacture of the Products.
1.6 If any of the Vendor's Facility, processes, inventories or equipment
are in unsanitary condition or do not otherwise comply (a) with the
Specifications (other than non-compliance in a minor or
inconsequential manner) or (b) in all material respects, with all
applicable laws, rules and regulations or the terms and conditions of
this Agreement, the Vendor shall, within 30 days of notification by
the Purchaser, take such action as will correct the deficiencies and
bring such Vendor's Facility, processes, inventories and equipment
into compliance with the Specifications, all applicable laws, rules
and regulations and the terms and conditions of this Agreement.
1.7 The Vendor shall not relocate the production of the Products from the
Vendor's Facility to another facility without the prior written
consent of the Purchaser.
1.8 The Purchaser reserves the right at any time, either before or after
shipment of any Products, to reject any Products which have not been
produced, packaged, stored or shipped by the Vendor in compliance
(other than non-compliance in a minor or inconsequential manner) with
the Specifications or which are otherwise not in compliance, in all
material respects, with the terms and conditions of this Agreement
("Non-Conforming Products"). Specifically, but not by way of
limitation, both parties agree that:
(a) the Purchaser may reject and refuse to pay for any Products which
have been produced and packaged during a particular run if a
representative number of samples from that production or
packaging run do not comply (other than non-compliance in a minor
or inconsequential manner) to the Specifications or are otherwise
not in compliance, in all material respects, with the terms and
conditions of this Agreement;
(b) the Purchaser may reject and refuse to pay for any Products which
(i) have been damaged during storage or handling by the Vendor,
(ii) do not fully comply with the Specifications (other than
non-compliance in a minor or inconsequential manner) or (iii) do
not fully comply, in all material respects, with the other terms
and conditions of this Agreement;
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(c) any Product Supplies (defined in Paragraph 2.1), work in progress
or Products rejected by the Purchaser pursuant to Paragraph
1.8(a) or (b) hereof shall be dealt with by the Vendor at the
Vendor's cost and expense in a manner which shall absolutely
preclude re-use in the production of the Product (unless the
Purchaser's consent to re-use is obtained, which consent shall
not be unreasonably withheld). The Vendor shall remove all
Purchaser identification and dispose of the same as mutually
agreed in writing between the Purchaser and the Vendor;
(d) if the Purchaser has previously paid the Vendor for
Non-Conforming Products which are later validly rejected by the
Purchaser, the Purchaser shall invoice the Vendor for the cost of
such Non-Conforming Products thus rejected and for any freight,
handling or other disposition costs or expenses incurred by the
Purchaser in connection with such Non-Conforming Products, and
the Purchaser shall be entitled, at the Purchaser's election,
either to (i) offset and withhold the sum of such invoice amount
from amounts due and owing to the Vendor hereunder or (ii)
require the Vendor to pay to the Purchaser the sum of such
invoice amount within 30 days of the date of such invoice;
(e) in the event the Vendor has produced or shipped any
Non-Conforming Products, the Purchaser may order the Vendor to
suspend the further production or packaging of the affected
Products until such time as the Vendor has corrected the
non-conformity; and
(f) If a Product becomes a Non-Conforming Product due to defective
Product Supplies furnished by the Purchaser to the Vendor, then
the Vendor shall not be liable to the Purchaser and the Purchaser
shall pay all costs associated with the correction of each such
non-conformity or with the disposition of such Product.
(g) If the Purchaser chooses to accept a Non-Conforming Product as a
"second" the Vendor and Purchaser shall mutually agree on the
price to be paid by the Purchaser for such Non-Conforming
Product, failing which the Purchaser shall have all of its rights
relating to a Non-Conforming Product as provided herein or
elsewhere in this Agreement.
1.9 The Vendor shall make available, at the Purchaser's request, the
results of all federal, provincial and local inspection reports and
sanitation audits, conducted any time during the term of this
Agreement or up to 30 days after the termination of this Agreement,
and relating to or affecting the (i) Vendor's Facility or (ii)
Equipment, Product Materials, work-in-process or Products located
therein. The Vendor shall notify the Purchaser's designated quality
assurance representative immediately by telephone of any such
inspections or audits or of any other
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information which indicates to the Vendor the presence of any
Non-Conforming Products and shall telecopy written confirmation of
such to the Purchaser within two business days. The Vendor shall
promptly communicate to the Purchaser's designated quality
assurance representative Products on "hold" beyond normal periods
of time as specified in the Specifications and shall comply with
the Purchaser's directions regarding the disposition of same.
1.10 The Vendor shall immediately notify the Purchaser by telephone and by
telecopy and in accordance with Article 17 of any prospective recall,
seizure, withdrawal or destruction of any of the Products or of the
need for such actions of which the Vendor is aware. The Purchaser
shall immediately notify the Vendor by telephone and by telecopy in
accordance with Article 17 of any prospective recall, seizure,
withdrawal or destruction of any of the Products or the need for such
actions of which the Purchaser is aware. The Vendor and the Purchaser
shall co-operate with one another in implementing any recall, seizure,
withdrawal or destruction of any of the Products. The costs and
expenses incurred in connection with any such recall, seizure,
withdrawal or destruction of any of the Products shall be allocated
between the Purchaser and the Vendor based on the relative fault, if
any, of a party. In the event that neither the Purchaser nor the
Vendor has any fault with respect to any such recall, seizure,
withdrawal or destruction the Vendor and the Purchaser shall each pay
one-half of all costs associated therewith; provided that where the
fault is attributable to a supplier of the Vendor in connection with
this Agreement, the Vendor shall pay all costs and the Purchaser shall
assign to the Vendor any action it may have to pursue the third party
at fault and shall cooperate with the Vendor in connection therewith.
ARTICLE 2. PROCUREMENT
2.1 (a) The Vendor shall have full responsibility for the procurement of
and the payment for all raw materials, ingredients and packaging
materials ("Product Supplies") necessary to produce the Products
for the Purchaser in accordance with this Agreement. The Vendor
shall have full responsibility for the procurement of and the
payment for all services and arrangements necessary for it to
produce, package, store and ship the Products for the Purchaser
in accordance with this Agreement.
(b) The Vendor shall store all Product Supplies in accordance with
Good Manufacturing Practices prevailing in the industry and in
strict compliance with the terms and conditions set forth in
Schedule 2. Such Product Supplies shall be ordered in quantities
mutually agreed to by the Purchaser and the Vendor.
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(c) The Vendor shall use its best efforts to purchase all Product
Supplies at the lowest available cost, consistent with the
Vendor's obligation to produce and package the Products in
compliance with terms and conditions set forth in the
Specifications and in compliance with the other terms and
conditions of this Agreement.
2.2 The Purchaser shall have the right to review all pricing and/or supply
proposals received by the Vendor and purchase orders placed by the
Vendor in respect of any Product Supplies.
2.3 The Vendor shall examine all Product Supplies and shall have the final
responsibility for accepting or rejecting Product Supplies which do
not conform with (i) the Specifications, (ii) the other terms and
conditions of this Agreement or (iii) applicable federal, provincial
and local laws, rules, regulations and guidelines.
2.4 The Vendor shall handle all shipper damage and shortage claims
relating to Product Supplies.
ARTICLE 3. RECEIVING, SCHEDULING, STORAGE AND SHIPMENT
3.1 The Vendor's obligations with respect to receiving, scheduling of
production, use of pallets, storage, handling and shipment of Products
are as set forth in the Specifications, failing which the Vendor shall
deal with such matters in accordance with the Vendor's ordinary
practices.
3.2 Within 60 days of the date of this Agreement, the Purchaser shall
provide a forecast of the Purchaser's anticipated requirements for the
remaining term of the Agreement, broken down by Product and by SKU
(the "Annual Forecast"). On or before the first day of each month,
the Purchaser agrees to provide the Vendor with a rolling schedule of
the Purchaser's production requirements for the shorter of (a) the
following three month period and (b) the remainder of the term of the
Agreement. Such rolling schedules shall include a firm production
commitment for the first scheduled month (the "Monthly Production
Order") and a non-binding estimate of the Purchaser's production
requirements for the shorter of (a) the remaining two months covered
by such schedule and (b) the remainder of the term of the Agreement.
The Vendor shall meet the Purchaser's requirements as set forth in the
Monthly Production Order and the Purchaser shall be required to
purchase all Product so produced, except to the extent otherwise
provided in Section 1.8 herein. If the Monthly Production Order in
any rolling schedule provided by the Purchaser to the Vendor varies by
10% or more from the estimate for such month provided by the Purchaser
to the Vendor in its previous rolling schedule, then any incremental
increase or decrease in the cost of manufacturing
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any of the Products resulting from such variation shall increase or
decrease, dollar for dollar, the price for such Products as
provided in Article 4 herein. If upon receipt of a forecast the
Vendor becomes aware of its inability to meet its requirements set
forth therein the Vendor shall promptly notify the Purchaser and
cooperate with the Purchaser with respect thereto.
3.3 The Vendor shall maintain sufficient inventories of the Products to
meet the rolling schedules provided to the Vendor by the Purchaser.
3.4 The Vendor shall prepare and submit to the Purchaser the receiving and
shipping documents and the production and inventory control reports
referenced in Schedule 2, as well as such other reports and records as
the Purchaser may reasonably require to determine the Vendor's
compliance with the terms and conditions of this Agreement.
3.5 Products manufactured by the Vendor for the Purchaser shall be stored
in the Vendor's Facility until delivered to the Purchaser and the
Purchaser shall pay its proportion of the fixed distribution costs for
warehousing and "pick and pack", which shall be consistent with past
practices.
3.6 The Vendor shall be responsible for the safe and proper loading of the
Products onto all shipping vehicles used to ship the Products to the
Purchaser.
3.7 (a) Except as otherwise provided in the Asset Purchase Agreement, the
Purchaser acknowledges and agrees that the Vendor and its
Affiliates possess and may further develop in the future their
own formulae, specifications and know-how in the manufacture of
chocolates and other confectionary and that the Vendor currently
does, and will continue to, manufacture on its own behalf and for
others, using such formulae, specifications and know-how,
chocolates and other confectionary similar to and competitive
with the Products, and that, subject to confidentiality
provisions between the Vendor and the Purchaser herein, the use
by the Vendor of such formulae, specifications and know-how to
produce and sell chocolates and other confectionary for itself
and others shall not be considered to be an infringement or
violation of the provisions of this Agreement.
(b) Except as otherwise provided in the Asset Purchase Agreement, the
Vendor acknowledges and agrees that the Purchaser and its
Affiliates possess and may further develop in the future their
own formulae, specifications and know-how in the manufacture of
chocolates and other confectionary and that the Purchaser
currently does, and will continue to, manufacture on its own
behalf and for others, using such formulae, specifications and
know-how, chocolate and other confectionary similar to
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and competitive with products produced and sold by the Vendor,
and that, subject to confidentiality provisions between the
Vendor and the Purchaser herein, the use by the Purchaser of such
formulae, specifications and know-how to produce and sell
chocolates and other confectionary for itself and others shall
not be considered to be an infringement or violation of the
provisions of this Agreement.
3.8 Except as provided in (i) Paragraph 3.2 with respect to the
Purchaser's one month firm production commitment and (ii) Paragraph
14.7 upon termination, the Purchaser has no obligation to order any
quantity of Products from the Vendor, provided that the Purchaser
shall purchase all of its requirements for Products during the term of
this Agreement from the Vendor if the Vendor is able to supply such
Products to the Purchaser on a timely basis in accordance with the
terms and conditions of this Agreement. Notwithstanding anything in
this Agreement to the contrary, if, as a result of an event of force
majeure, the Vendor is not able to supply any of the Products to the
Purchaser, then the Purchaser (i) shall not be required to obtain its
requirements for such Products from the Vendor for the duration of the
event of force majeure and (ii) shall be able to rely on other parties
to supply the Purchaser with its requirements for such Products,
during the period of such force majeure.
ARTICLE 4. INVOICES AND PAYMENTS
4.1 The Vendor's total price for the production and packaging of the
Products shall be as set out in Schedule 1 hereto.
4.2 The prices listed in Schedule 1 shall be subject to adjustments on a
quarterly basis (commencing three months after execution of this
Agreement) as required to reflect any increases or decreases in the
cost to the Vendor in the prices for ingredients, materials or
packaging specifically related to the manufacturing of the Products.
Any increase in costs incurred by the Vendor as a result of the
relocation of the production of the Vendor's products to another
facility shall not result in an increase in the prices charged by the
Vendor to the Purchaser for the Products.
4.3 The Vendor shall invoice the Purchaser for the Products upon delivery
f.o.b. the Vendor's Facility. The Purchaser shall be responsible for
taking delivery of the Products at the Vendor's Facility unless
otherwise requested by the Purchaser. If so requested by the
Purchaser, the Vendor will organize delivery of the Products on the
Purchaser's behalf (including making all claims against third parties
as reasonably requested by the Purchaser). The Purchaser shall
reimburse the Vendor for all costs, expenses and other amounts
incurred or disbursed by the Vendor in so acting. Invoices shall
indicate the description and quantity of
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Products produced to the Purchaser in each shipment. Payment terms
are 1%/10 days net 30 days from the date of invoice; provided, that
any amounts not paid by the Purchaser on or prior to the 30th day
from the date of invoice shall bear interest at a per annum rate
equal to the Prime Rate (in effect on such 30th day) PLUS 1% until
paid. Prime Rate shall have the meaning provided in the Asset
Purchase Agreement.
4.4 The Purchaser shall have the right to offset and withhold from amounts
due and owing to the Vendor hereunder any sums which may be due and
owing to the Purchaser from the Vendor under the terms of this
Agreement.
ARTICLE 5. TITLE AND RISK OF LOSS
5.1 All Product Supplies supplied by the Purchaser, if any, shall remain
the property of the Purchaser at all times, but the Vendor shall bear
sole responsibility for all risk of loss or damage to such Product
Supplies while same are in the care, custody or control of the Vendor.
5.2 Risk of damage or loss and title to the Products shall remain with the
Vendor until the same are delivered to the Purchaser at the Vendor's
Facility.
ARTICLE 6. TERM
6.1 This Agreement shall take effect on the date hereof, shall continue in
effect for a term of one year. Notwithstanding the foregoing, this
Agreement may be cancelled or terminated as provided in Article 14
hereof.
6.2 The representations, warranties and guarantees of the Vendor and the
Purchaser contained in this Agreement shall survive the termination
and cancellation of this Agreement for a period of four years.
6.3 The Vendor shall, at the Purchaser's expense for the 90 days following
the termination of this Agreement, take all reasonable actions
requested by the Purchaser to assist the Purchaser in the transition
of the production, packaging, storage and shipping duties described
hereunder from the Vendor's Facility to the Purchaser's facilities,
including make the Vendor's facilities and certain employees (as
mutually agreed between the Vendor and Purchaser) accessible for
purposes of training. During such period, such employees of the
Vendor shall be acting under the instructions of the Purchaser and the
Purchaser shall indemnify the Vendor for loss, damages or claims
against the Vendor arising from any action of such employees during
such period. The Purchaser may request an extension
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of such period and, upon such request, the Vendor and Purchaser
shall discuss the possibility of such extension.
ARTICLE 7. RECORDS AND AUDITS
7.1 The Vendor shall prepare, maintain and retain complete and accurate
books and records relating to the receiving, production, packaging,
testing, product analysis, customer complaints, storage and shipment
of Product Supplies, Products, rejected Product Supplies, rejected
Products and Non-Conforming Products. The Vendor shall also maintain
and retain any other records required to be maintained under this
Agreement or required to be kept by applicable federal, provincial or
local laws, rules or regulations and guidelines or, at Purchaser's
expense, otherwise reasonably requested by the Purchaser.
7.2 All books and records prepared, maintained or retained by the Vendor
pursuant to this Agreement shall be made available to the Purchaser
for its inspection upon reasonable notice to the Vendor during the
Vendor's regular business hours. All such books and records shall be
retained by the Vendor for a period of at least three years or longer,
if required by applicable federal, provincial or local laws, rules or
regulations. Prior to destroying any such books and records, the
Vendor shall first offer to deliver the same to the Purchaser, at the
Purchaser's expense.
ARTICLE 8. CONFIDENTIAL AND PROPRIETARY INFORMATION
8.1 Subject to Section 8.2, all business and technical information,
whether in written or oral form and including, but not limited to,
technical know-how, specifications, recipes, formulae, manufacturing
processes, quality control standards, coding systems, instructions and
procedures associated with the Products, which the Purchaser may
disclose to the Vendor or to any employee, agent or representative of
the Vendor, shall be received and retained by the Vendor and its
employees, agents and representatives as strictly confidential and,
except as provided for herein, may not be disclosed to any third
party. The Vendor shall not disclose any such information to any
officer, director, employee, agent, representative or contractor of
the Vendor not having a need to know such information, and such
persons shall only use such information, in connection with the
performance of the Vendor's obligations herein.
8.2 The Vendor shall not have an obligation of confidentiality with
respect to any information which:
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(a) is in the public domain at the time of receipt from the
Purchaser, or which comes into the public domain without breach
of an obligation assumed hereunder; or
(b) becomes known to the Vendor on a non-confidential and good faith
basis through a third source whose own acquisition and disclosure
were entirely independent of the Vendor, not in breach of any
obligation hereunder and not on a confidential basis;
(c) is approved for disclosure by the Purchaser in writing;
(d) is required by law to be disclosed, or
(e) is known by the Vendor on the date hereof (except to the extent
constituting "Assets" under the Asset Purchase Agreement which
are exclusive to the Purchaser).
8.3 All originals and copies of documented business and technical
information identified or reasonably identifiable as confidential or
proprietary to the Purchaser in the Vendor's possession shall (except
as provided in Section 8.2) be and shall remain the exclusive property
of the Purchaser at all times and shall be returned by the Vendor to
the Purchaser upon the termination of this Agreement.
8.4 Subject to Section 8.5 the Purchaser acknowledges and agrees that
under this Agreement the Purchaser and its representatives, employees
and agents may learn or come into possession of business and technical
information, whether in written or oral form and including but not
limited to, technical know-how, specifications, recipes, formulae,
manufacturing processes, quality control standards, coding systems,
customer and supplier information, instructions and procedures
associated with the products of the Vendor ("confidential
information") and that the Purchaser, its representatives, employees
and agents shall not disclose or use any such confidential information
other than in connection with verifying the Vendor's compliance with
the terms and conditions of this Agreement, including the Schedules,
or as required by law to be disclosed by the Purchaser.
8.5 The Purchaser shall not have an obligation of confidentiality with
respect to any information which:
(a) is in the public domain at the time of receipt from the Vendor,
or which comes into the public domain without breach of an
obligation assumed hereunder; or
(b) becomes known to the Purchaser on a non-confidential and good
faith basis through a third source whose own acquisition and
disclosure were
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entirely independent of the Purchaser, not in breach of any
obligation hereunder and not on a confidential basis;
(c) is approved for disclosure by the Vendor in writing;
(d) is required by law to be disclosed;
(e) is known by the Purchaser on the date hereof; or
(f) constitutes an "Asset" under the Asset Purchase Agreement.
8.6 All originals and copies of documented business and technical
information identified or reasonably identifiable as confidential or
proprietary to the Vendor in the Purchaser's possession shall (except
as provided in Section 8.5) be and shall remain the exclusive property
of the Vendor at all times and shall be returned by the Purchaser to
the Vendor upon the termination of this Agreement.
ARTICLE 9. PURE FOOD GUARANTEE
9.1 The Vendor warrants that its obligations hereunder shall be performed
in full compliance with all applicable federal, provincial and local
laws, rules, regulations and guidelines. Specifically, but not by way
of limitation, the Vendor warrants that all Products which are
produced and packaged for the Purchaser and all packaging and other
materials which come in contact with the Products will be of the
highest quality (given the nature of the product), merchantable, fit
for their intended purpose and free from any defect in materials and
workmanship and will not at the time of shipment to the Purchaser be
adulterated, contaminated or misbranded by the Vendor within the
meaning of any applicable federal, provincial or local laws, rules or
regulations.
ARTICLE 10. TRADEMARKS
10.1 Unless otherwise instructed by the Purchaser, all the Products shall
be packaged by the Vendor under Purchaser-owned trademarks, trademarks
licensed to the Purchaser or such other trademarks as the Purchaser
may designate.
10.2 Nothing in this Agreement shall give the Vendor any right, title or
interest in (i) any Purchaser-owned trademark, any trademark licensed
to the Purchaser or any private trademark designated by the Purchaser,
(ii) any Purchaser or other trade name or (iii) the goodwill connected
with any such trademark or trade name, except the right to use the
same in strict accordance with this Agreement. The Vendor shall not
contest the validity or ownership of any trademark described in
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Paragraph 10.1 or assist others in contesting the validity or
ownership of any such trademark.
10.3 The Vendor shall promptly notify the Purchaser in writing of any
infringement or potential infringement of any trademark described in
Paragraph 10.1 of which the Vendor becomes aware. Without the express
written permission of the Purchaser, the Vendor shall have no right to
bring any action or proceeding relating to such infringement or
potential infringement or which involves, directly or indirectly, any
issue the litigation of which may affect the interest of the
Purchaser. Nothing in this Agreement shall obligate the Purchaser to
take any action relating to any such infringement or potential
infringement.
10.4 The Vendor shall not adopt any trademark, trade name, trade dress,
labelling or packaging which, in the judgment of the Purchaser, is
deceptively similar to or is likely to cause confusion with respect to
a trademark described in Paragraph 10.1 or with respect to any
Product.
10.5 The Vendor shall not make use of or display any of the trademarks
described in Paragraph 10.1 except for the purpose of fulfilling its
obligations to the Purchaser under this Agreement and only in strict
compliance thereof.
10.6 The Vendor agrees that the Purchaser shall determine all printed
matter on packaging materials and labels in connection with the
Products. The Vendor agrees not to affix any label or use any printed
material in connection with the Products which has not been provided
to the Vendor by the Purchaser or, for which the Vendor has not
received the prior written approval of the Purchaser or, which is not
otherwise required to satisfy applicable legislation.
ARTICLE 11. WARRANTY AND INDEMNITY
11.1 In the event of consumer, customer or governmental agency complaints,
demands, claims or legal actions alleging illness, injury, death or
damage as a result of the consumption or use of any Products produced,
packaged, stored or shipped by the Vendor to the Purchaser, the Vendor
shall indemnify and hold the Purchaser and its representatives and
affiliates harmless from and against any and all liability, loss,
damage, cost or expense (including court costs and attorney's fees),
of whatsoever nature and by whomsoever asserted, arising out of,
resulting from, or in any way connected with such complaint, demand or
legal action, except that the Vendor shall not be responsible for, and
shall not be required to indemnify or hold the Purchaser and its
representatives and affiliates harmless against any liability for
illness, injury, death or damage attributable to defects in Products
which (i) independent investigation discloses originated after the
Product left the care, custody and control of the Vendor and was not
attributable to any act or omission
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of the Vendor prior to such Product leaving the custody and control
of the Vendor or (ii) arises from defective Product Supplies
furnished by the Purchaser to the Vendor. The Vendor shall assume
full responsibility for, and the expense of, the investigation,
defence, settlement and payment of all such complaints, demands,
claims and legal actions for which Vendor is responsible, provided
that the Purchaser may, at its expense, participate in any legal
action through counsel of its own choice. The Purchaser shall
promptly notify the Vendor of any such complaint, demand, claim or
legal action and shall reasonably co-operate in the defence
thereof. The Purchaser shall assume full responsibility for, and
shall indemnify and hold the Vendor harmless from any loss, damage
or expense Vendor suffers arising from Products produced with
defective Product Supplies furnished by the Purchaser to the Vendor.
11.2 The Vendor shall maintain comprehensive general liability insurance
(including contractual liability), with limits of not less than
$10,000,000 per occurrence for claims arising from bodily injury or
death to any person or persons and loss and damage to any property.
Such insurance shall be carried with an insurance company acceptable
to the Purchaser, and shall include product liability coverage and an
endorsement naming the Purchaser as an additional insured. The terms
and conditions of such policy shall not be changed and shall not be
altered or cancelled until at least 12 months after the termination of
this Agreement. A certificate of such insurance coverage shall be
furnished by the Vendor to the Purchaser at the closing of the Asset
Purchase Agreement and thereafter from time to time upon the
Purchaser's request.
ARTICLE 12. FORCE MAJEURE
12.1 All consequences, direct or indirect, of a labour dispute, fire, war
and circumstances beyond the control of either of the parties hereto
shall excuse performance of such party's obligations hereunder to the
extent performance has been prevented by any such force majeure
events. However, in the event that either party shall be unable to
perform any part of its obligations and duties hereunder, or in the
event that either party anticipates that it may become unable to
perform any of its obligations and duties hereunder, it shall
forthwith advise the other party of the extent of its inability to
perform. In the event that such inability is a significant inability
of one party to perform and shall continue for a period of 90 days,
the other party shall have the right to terminate this Agreement on
giving 30 days' prior written notice to the party unable to perform
its obligations hereunder.
ARTICLE 13. RELATIONSHIP
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13.1 The relationship which the Vendor holds as to the Purchaser is that of
an independent contractor. This Agreement is not intended to create
and shall not be construed as creating between the Purchaser and the
Vendor the relationship of principal and agent, joint venturers,
partners or any similar relationship, the existence of which is hereby
expressly denied, nor shall the Vendor be considered in any sense an
affiliate or subsidiary of the Purchaser. The Vendor shall not have
any authority to create or assume in the Purchaser's name or on the
Purchaser's behalf any obligations, expressed or implied, or to act or
purport to act as the Purchaser's agent or legally empowered
representative for any purpose whatsoever. Neither party shall be
liable to any third party in any way for any engagement, obligation,
commitment, contract, representation, transaction, act or omission to
act of the other, except as expressly provided herein.
13.2 Except as otherwise provided in this Agreement, the Vendor shall have
exclusive control over the production, packaging and storage of the
Products and shall direct and be responsible for the performance of
all operations at the Vendor's Facility. The Vendor shall retain
exclusive legal responsibility for the performance of and the
compliance with all of the terms and conditions of this Agreement
which are to be performed or complied by the Vendor.
ARTICLE 14. TERMINATION
14.1 The Purchaser reserves the right to immediately terminate this
Agreement (subject to Paragraph 14.2) in the following circumstances:
(a) Where the Vendor has failed to perform or meet any material term
or condition hereof and has failed to correct the same within 10
days after written notice of such failure by the Purchaser unless
Vendor is diligently attempting to cure such failure or such
failure to perform or comply is subject to a bona fide dispute
between the parties;
(b) Where (i) the Vendor fails to vacate an involuntary bankruptcy,
insolvency or re-organization petition or petition for an
arrangement or composition with creditors filed against the
Vendor within 60 days after the date of such filing, or files
such a petition on a voluntary basis, (ii) the Vendor makes an
assignment or deed of trust for the benefit of creditors, (iii)
the Vendor fails to vacate the appointment of a receiver or
trustee for Vendor or for any interest in the Vendor's business
within 60 days after such appointment, (iv) the Vendor permits an
attachment to be levied against and remain outstanding on any of
its equipment or plant for more than 30 days, (v) the Vendor
ceases to do business as a going concern or ceases to conduct its
operations in the normal course of business,
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14.2 The Vendor agrees that, in case any of the events set forth in
Paragraph 14.1 should occur, the Purchaser may, at its sole option,
elect to terminate this Agreement (i) immediately or (ii) up to 60
days from the date of the Purchaser's notice of termination to the
Vendor, it being understood that during such notice period, the Vendor
shall continue to produce, package, store, ship and sell Products to
the Purchaser in accordance with the terms and conditions of the
Agreement.
14.3 Notwithstanding any other provision of this Agreement, the Purchaser
may elect to terminate this Agreement immediately in the event the
Vendor fails to meet the Purchaser's Monthly Production Orders for
three consecutive months or four months in the term.
14.4 The Vendor reserves the right to terminate this Agreement on not less
than 60 days prior written notice to the Purchaser in the following
circumstances:
(a) Where the Purchaser fails to make any payment due to the Vendor
hereunder within 10 days of the due date, unless the amount in
issue is subject to a bona fide dispute between the parties;
(b) where the Purchaser has failed to perform or comply with any
material term or condition hereof and has failed to cure such
nonperformance or noncompliance within 30 days after receipt of
written notice of such failure from the Vendor unless Purchaser
is diligently attempting to cure such failure or such failure to
perform or comply is subject to a bona fide dispute between the
parties;
(c) Where (i) the Purchaser fails to vacate an involuntary
bankruptcy, insolvency or re-organization petition or petition
for an arrangement or composition with creditors filed against
the Purchaser within 60 days after the date of such filing, or
files such a petition on a voluntary basis, (ii) the Purchaser
makes an assignment or deed of trust for the benefit of
creditors, (iii) the Purchaser fails to vacate the appointment of
a receiver or trustee for Purchaser or for any interest in the
Purchaser's business within 60 days after such appointment,
(iv) the Purchaser permits an attachment to be levied against and
remain outstanding on any of its equipment or plant for more than
30 days, (v) the Purchaser ceases to do business as a going
concern or ceases to conduct its operations in the normal course
of business.
14.5 Any failure by either party to notify the other party of a violation,
default or breach of this Agreement, or to terminate this Agreement on
account thereof, shall not constitute a waiver of such violation,
default or breach or a consent,
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acquiescence or waiver of any late violation, default or breach,
whether of the same or a different character.
14.6 Except as otherwise provided herein, upon termination of this
Agreement, the Vendor shall discontinue all use of the trademarks
referred to in Article 10 hereof and shall return to the Purchaser all
originals and copies of all information proprietary to the Purchaser,
subject to Article 8 hereof, but such termination shall not affect any
obligation or liability incurred by the Vendor prior to termination.
14.7 Upon termination of this Agreement, the Purchaser agrees to purchase
from the Vendor all Products and Product Supplies purchased by the
Vendor for the sole purpose of producing and packaging the Products
but not in excess of inventory levels based on the Annual Forecast
(provided that in no event shall the Purchaser be obligated to
purchase more than the average of the most recent three months of
inventory levels). In the case of the Products the price shall be as
provided herein and, in the case of Product Supplies, the price shall
be invoiced cost.
14.8 Upon termination of this Agreement, the Vendor shall provide to the
Purchaser a complete and accurate list of the ten largest suppliers of
the Product Supplies (in terms of dollar volume of purchases from such
supplier during the preceding year).
ARTICLE 15. MOULDS AND EQUIPMENT
15.1 Upon the termination of this Agreement, the Vendor agrees to sell to
the Purchaser, for an aggregate purchase price of $1.00, the
following:
(a) all moulds exclusively used to manufacture Laura Secord products;
and
(b) all printing plates, films and dies exclusively used to
manufacture Laura Secord products.
15.2 Upon the termination of this Agreement and for a period of 3 years
thereafter, the Vendor agrees that in the event it decides to sell any
of the following equipment located at the Birchmount Facility:
(a) the Hutt/Whetstone/Wrapper Line;
(b) the NID Moulding/Cooling Tunnel (Line A or B);
(c) the Forgrove Foil Wrapper; and
(d) the vacuum form mould and original die form;
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then the Vendor shall first offer to the Purchaser the right to
negotiate with the Vendor, for a period of 30 days, with respect to
the purchase by the Purchaser of any of the above listed equipment.
ARTICLE 16. SEVERABILITY AND GOVERNING LAW
16.1 In the event that any provision of this Agreement is declared invalid
or contrary to any applicable law, rule, regulation or public policy,
all remaining provisions hereof shall continue in full force and
effect.
16.2 The validity, enforceability and interpretation of this Agreement
shall be determined in accordance with the laws of the Province of
Ontario. The parties hereto agree to be subject to the jurisdiction
of the courts of the Province of Ontario.
ARTICLE 17. NOTICES
17.1 Any notice or other communication required or permitted to be given
pursuant to this Agreement shall be in writing and shall be deemed to
have been sufficiently given if (i) delivered personally, (ii) sent by
prepaid courier service or registered mail, or (iii) sent by facsimile
with the original to follow, in each case to the applicable address
below:
if to the Vendor:
Nestle Canada Inc.
25 Sheppard Avenue West,
Toronto, Ontario
M2N 6S8
Attention: Terrence Ellwood (Senior Vice-President and General
Counsel)
Facsimile: (416) 218-2677
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if to the Purchaser:
Archibald Candy Corporation
1137 West Jackson Blvd.
Chicago, Illinois 60607
Attention: Ted A. Shepherd (President and Chief Operating Officer)
Facsimile: (312) 243-3992
17.2 All notices or other communications required by this Agreement in
respect of the recall, seizure, withdrawal or destruction of any of
the Products shall be addressed as follows:
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if to the Vendor:
Nestle Canada Inc.
25 Sheppard Avenue West,
Toronto, Ontario
M2N 6S8
Attention: Martha Leyburn (Nestle Quality Assurance)
Telephone: (416) 218-3030
Facsimile: (416) 218-2677
if to the Purchaser:
Archibald Candy Corporation
1137 West Jackson Blvd.
Chicago, Illinois 60607
Attention: Ted A. Shepherd (President and Chief Operating Officer)
Facsimile: (312) 243-3992
17.3 Either party may from time to time change its address, telephone
number or facsimile number or the addressee under this Article 17 by
notice to the other party given in the manner provided by this
Article.
ARTICLE 18. MISCELLANEOUS
18.1 The Vendor shall not assign, convey or transfer this Agreement or any
part of its rights or delegate any of its obligations under this
Agreement without the express written consent of the Purchaser. In
the event such written consent is obtained, the holder or holders
through assignment, transfer or conveyance of this Agreement or the
rights granted hereunder shall be bound by all of the terms and
conditions thereof.
18.2 This Agreement, including all schedules attached hereto, constitutes
the entire understanding between parties relating to the subject
matter hereunder and supersedes and cancels any and all previous
contracts or agreements between the parties with respect to the
subject matter hereunder. This Agreement may not be altered, amended
or modified except by written instrument executed by duly authorized
officers of the Purchaser and of the Vendor.
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18.3 The headings contained herein are inserted for convenience only and
shall not be deemed to have any substantive meaning.
18.4 The parties hereto agree that this Agreement is to be drafted in the
English language.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their duly authorized officials on the day and year first above
written.
NESTLE CANADA INC.
By: /s/ James M. Singh
-----------------------------------
Name: James M. Singh
Title: Executive Vice-President and
Chief Financial Officer
ARCHIBALD CANDY CORPORATION
By: /s/ Ted A. Shepherd
-----------------------------------
Name: Ted A. Shepherd
Title: President and Chief Operating
Officer