Product Manufacture and Supply Agreement - Hansen Beverage Co. and Seven-Up/RC Bottling Co. of Southern California Inc.
PRODUCT MANUFACTURE AND SUPPLY AGREEMENT
(The "Agreement")
This Agreement made this 15th day of April 2003 by and between Hansen Beverage
Company, a Delaware corporation, having a principal place of business at 1010
Railroad Street, Corona, CA 92882, ("Purchaser") and Seven-Up/RC Bottling
Company of Southern California, Inc., a Delaware corporation, having a principal
place of business at 3220 East 26th St., Los Angeles, CA 90023 ("7UP/RC").
WHEREAS, the Purchaser desires 7UP/RC to manufacture and supply Purchaser with
Monster Energy Drink in 16 oz. packages and 7UP/RC agrees to manufacture and
supply such products under the terms and conditions contained herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter expressed,
the parties agree as follows:
I - DEFINITIONS
1.1 "FDA" means the United States Food and Drug Administration.
1.2 "Product(s)" means an energy drink, more fully described in Exhibit A,
meeting Purchaser's specifications and manufactured for Purchaser by
7UP/RC in finished form suitable for use by the consumer, packaged and
labeled under the Purchaser's trademark for marketing by Purchaser or
its subsidiaries in the United States, its territories and
possessions.
1.3 "Specifications" mean the written specifications for Product
including, but not limited to, written formulations, specifications,
process instructions, bottle quantity, packaging and labeling
instructions, which are attached as Exhibit A.
1.4 "Branded Materials" means all finished Product and raw materials which
are unique to Product and may only be used by 7UP/RC to produce
Product.
II - PURCHASE AND SALE OF PRODUCTS
2.1 Obligations of Parties. Purchaser shall purchase Products from 7UP/RC
from time to time on the terms and conditions set out in this
Agreement, during the Term of this Agreement. 7UP/RC shall process,
test, label, store, and sell Products to Purchaser in accordance with
the terms and conditions set out in this Agreement, during the term of
this Agreement.
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7UP/RC agrees that it shall not use the Equipment referred to in 2.8
below for the production, at its Buena Park, California facility, of
any competitive energy drinks without Purchaser's prior written
approval; provided however that if Purchaser fails to purchase _______
cases of Products with a tolerance of 20% i.e., a minimum of _______
cases, per year from 7UP/RC during the term of this Agreement, 7UP/RC
shall thereafter be entitled to use the Equipment for the production
of other energy drinks provided that in such event 7UP/RC shall be
obliged to make payment to the Purchaser of an agreed royalty fee in
respect of such other energy drinks on a per case basis until the
Purchaser is reimbursed for the costs incurred by it to purchase the
Equipment concerned.
2.2 Forecasts. Prior to the beginning of each calendar quarter, Purchaser
shall provide to 7UP/RC a written forecast of the number of cases of
Product by flavor and package size expected to be ordered in the
following three (3) month period. Based on the forecast, 7UP/RC shall
purchase raw materials (sodium citrate, citric acid), in amounts, in
7UP/RC's reasonable opinion, are required to fill orders during such
period. All other raw materials shall be supplied by Purchaser at its
expense including the expense of delivering raw materials to 7UP/RC's
facility for production of Product. Purchaser shall be financially
responsible for all out-of-date Product and raw materials.
2.3 Orders. Purchaser shall fax a purchase order for Product to 7UP/RC at
least ten (10) business days prior to the expected delivery date.
Product will be scheduled for production by 7UP/RC at the earliest
possible date. All orders shall be for full truckload quantities of
Product. The terms and conditions contained in any order form issued
by Purchaser under this Agreement shall be null and void and entirely
surpassed by the terms and conditions of this Agreement except for
those terms proposed by Purchaser and specifically accepted by 7UP/RC.
2.4 Rejected Products/Shortages. Purchaser shall notify 7UP/RC in writing
of any claim relating to damaged, defective or nonconforming Product
or any shortage in quantity of any shipment of Product. In the event
such rejection or shortage is due to 7UP/RC fault, error or neglect,
7UP/RC shall replace the rejected Product or make up the shortage in
the next production run following receipt of such notice at no cost to
Purchaser and shall make arrangements with Purchaser for the
disposition of any rejected Product.
2.5 Title and Risk of Loss. Purchaser shall assume title and risk of loss
for Product ordered upon delivery of Product to transport.
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2.6 Price and Payment. 7UP/RC shall charge Purchaser and Purchaser shall
pay for Product as specified in Exhibit A, unless 7UP/RC and Purchaser
agree in writing to a different price. Such prices shall be fixed
during the term of this Agreement except as provided by Paragraph 2.7
below. 7UP/RC shall invoice Purchaser for each shipment of Product and
Purchaser shall receive a 2% discount to the extent such invoice is
paid within ten (10) days from the invoice date with all amounts due
within thirty (30) days of the invoice date.
2.7 Pass Through Costs. At any time during the term of this Agreement,
7UP/RC may pass through and otherwise charge Purchaser for any cost
increases for raw materials, labor or as a result of changes in
specifications. Further, if any law or regulation is enacted or
imposed anywhere, the effect of which is to impose upon or to cause
7UP/RC to incur any cost or expense (which did not exist on the date
of this Agreement) with respect to container deposits, used or empty
container collection, container recycling or disposal, beverage or
package labeling requirements, any tax or duty in the nature of an
excise tax or otherwise, upon or with respect to Product or the
performance of 7UP/RC services, 7UP/RC shall be entitled to increase
the price of Product by an amount sufficient and in such manner and to
such extent that none of the burden of such costs or expenses is borne
by 7UP/RC. If requested by Purchaser, 7UP/RC shall provide Purchaser
with suitable evidence establishing that a cost increase did occur.
2.8 Equipment. Purchaser shall purchase the equipment specified in Exhibit
B (the "Equipment') at its sole cost and expense. All payments for the
Equipment shall be made by Purchaser directly to the Equipment
supplier. Exhibit B is only an estimate of the Equipment costs.
Purchaser shall be responsible for the actual cost of the Equipment.
Purchaser shall also be responsible for all property taxes on the
equipment. 7UP/RC agrees to supervise and direct the procurement and
installation of the Equipment. 7UP/RC shall perform routine
maintenance on the Equipment and shall be financially responsible for
minor repairs. 7UP/RC agrees not to use the Equipment for the
production, at its Buena Park, California facility, of any other
energy drink reasonably similar to Product without Purchaser's prior
written approval. At the end of the term of this Agreement, 7UP/RC may
use the Equipment to produce Products as well as other energy drinks.
Should this Agreement terminate early, 7UP/RC shall have the right but
not the obligation to purchase the Equipment at the fair value thereof
at that time.
III - TERM AND TERMINATION
3.1 Term. This Agreement will commence on April 1, 2003 and shall continue
until March 31, 2008 unless sooner terminated pursuant to paragraph
3.2 herein.
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3.2 Termination. This Agreement may be terminated prior to the end of its
term (i) upon written notice by either party to the other party in the
event that the other party breaches any material provision of this
Agreement and fails to remedy the breach prior to expiration of the
thirty (30) day period or (ii) following notice by either party to the
other upon the insolvency or bankruptcy of the other party.
IV - RAW MATERIALS
4.1 Purchase of Raw Materials. 7UP/RC shall acquire and store, at its sole
cost and expense, the raw materials identified in Section 2.2 herein
to meet the quarterly forecast.
4.2 Branded Materials. Purchaser shall reimburse 7UP/RC for any finished
Product and Branded Materials which remain in 7UP/RC possession
following the termination of this Agreement or a change in
Specifications or other decisions of Purchaser which render such
Branded Materials obsolete or not useable by 7UP/RC.
4.3 Pallets. 7UP/RC shall ship Product using pallets and a pallet pattern
reflected in Exhibit A. Pallets shall be exchanged upon delivery of
Product or purchased by Purchaser of 7UP/RC standard cost if pallets
are not exchanged.
4.4 Shells. To the extent requested by Purchaser, Product shall be shipped
to Purchaser in plastic shells. Purchaser shall pay 7UP/RC a deposit
equal to 7UP/RC standard rate which shall be refunded to Purchaser
when the shells are returned.
V - PRODUCT ANALYSIS AND MANUFACTURING COMPLIANCE
5.1 Product. 7UP/RC shall test or cause to be tested each batch of Product
purchased pursuant to this Agreement before delivery to Purchaser.
Such testing shall be conducted according to 7UP/RC established
practice and procedures, which Purchaser has reviewed and deemed
suitable.
5.2 Manufacturing Compliance. While manufacturing, bottling, canning,
labeling, packaging and storing Product, 7UP/RC shall conform strictly
with the formula, methods of manufacture, standards of quality and
sanitation, bottling, canning, labeling, package design and packaging
instructions and other specifications and instructions which Purchaser
shall furnish from time to time. 7UP/RC shall also:
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(a) maintain and operate its bottling and canning plants at all times
in good and sanitary operating order, condition and repair and in
compliance with any standards required by applicable law, with
sufficient production and storage capacity to fully and
faithfully to perform its obligations under this Agreement;
(b) date and production code each production run of the Product by a
legible means to identify at least the date when and the packing
such Product were produced, and keep Purchaser fully apprised of
the coding systems used and all changes therein; and
(c) package all Product in accordance with manufacturing standards
(if any) specified by Purchaser and to such standards as are
required by applicable law.
VI-PRODUCT RECALLS
In the event (a) any government authority issues a request, directive or
order that Product be recalled, or (b) a court of competent jurisdiction orders
such a recall, or (c) 7UP/RC reasonably determines after consultation with
Purchaser that Product should be recalled, the parties shall take all
appropriate corrective actions. In the event that such recall results from any
cause or event arising from defective manufacture of the Product by 7UP/RC,
7UP/RC shall be responsible for all expenses of the recall. For the purposes of
this Agreement, the expenses of recall shall include, without limitation, the
expenses of notification and destruction or return of the recalled Product and
Purchaser's cost for Product recalled but not the expense or service fee
associated with sales representatives' or management's time which shall be borne
by Purchaser.
VII - WARRANTIES
7.1 Compliance with the Federal Food, Drug and Cosmetic Act. 7UP/RC
warrants that all Product delivered to Purchaser pursuant to this
Agreement will at the time of such delivery not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic
Act, as amended, ("Act") or within the meaning of any applicable state
or municipal law in which the definitions of adulteration and
misbranding are substantially the same as that contained in the Act,
as such Act and such laws are constituted and effective at the time of
delivery and will not be an article which may not, under the
provisions of such Act, be introduced into interstate commerce.
7.2 Conformity with Specifications. 7UP/RC warrants that Product sold and
delivered pursuant to this Agreement will conform when delivered to
the Specifications.
7.3 Extent of Warranty. Except as provided in Paragraphs 7.1 and 7.2
herein, 7UP/RC does not make any warranty of any kind, express or
implied, with respect to Product including, without limitation, any
warranty of fitness for a particular purpose or merchantability.
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VIII - FORCE MAJEURE
Failure of either party to perform its obligations under this Agreement
(except the obligation to make payments) shall not subject such party to any
liability to the other if such failure is caused by acts such as, but not
limited to, acts of God, fire, explosion, flood, drought, war, riot, sabotage,
embargo, strikes or other labor trouble, failure in whole or in part of
suppliers to deliver on schedule materials, equipment or machinery, interruption
of or delay in transportation, compliance with any order or regulation of any
government entity acting with color of right or by any other cause beyond the
reasonable control of the parties.
IX - CONFIDENTIALITY
7-Up/ RC shall not be liable for indirect, special, incidental, consequential or
penal damages, based on or attributable to the formulation of Product, but this
limitation shall not apply to or have any effect in respect of any damages based
on or attributable to any defects in the manufacture of Product or the packaging
thereof.
X - CONFIDENTIALITY
10.1 Confidentiality. Each party hereto shall not disclose any confidential
information received by it pursuant to this Agreement without the
prior written consent of the other. This obligation shall not apply
to:
(a) information which is known to the receiving party at the time of
disclosure and documented by written records made prior to the
date of this Agreement;
(b) information disclosed to the receiving party by a third party who
has a right to make such disclosure;
(c) information which becomes patented, published or otherwise part
of the public domain or information from a third person obtaining
such information as a matter of right.
This obligation will continue for a period of three (3) years after termination
of this Agreement or any extension thereof.
10.2 Disclosure to Government. Nothing contained in this Article shall be
construed to restrict Purchaser or 7UP/RC from disclosing confidential
information as required:
(a) for regulatory, tax, customs or other governmental reasons;
(b) for audit purposes;
(c) by court order;
(d) from using such confidential information as is reasonably
necessary to perform acts permitted by this Agreement.
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XI - INDEMNIFICATION
11.1 By Purchaser. Purchaser will indemnify and hold 7UP/RC harmless
against any and all liability, damages, losses, costs or expenses
resulting from any third party claims made or suits brought against
7UP/RC which arise out of the promotion, storage, handling,
distribution, sale of Product by Purchaser, from Purchaser's
negligence or from the negligence of Purchaser's officers, agents or
employees.
11.2 By 7UP/RC. 7UP/RC will indemnify and hold Purchaser harmless against
any and all liability, damages, costs or expenses resulting from any
third party claims made or suits brought against Purchaser which arise
out of the manufacture of Product by 7UP/RC, from 7UP/RC negligence or
from the negligence of 7UP/RC's officers, agents or employees.
11.3 Conditions of Indemnification. The obligations of the indemnifying
party under this Article XI are conditioned upon the written notice to
the indemnifying party with regard to a claim or lawsuit which is
alleged to be covered within fifteen (15) days after the indemnified
party has received notice of said claim or lawsuit. The above
indemnities are further conditioned upon the cooperation of the
indemnified party with the indemnifying party in any regard in the
investigation and defense of any claim or lawsuit alleged to be
covered by the above indemnities. Any indemnity shall be void as to
any claim or legal action for which settlement or any offer of
settlement is made without the prior written consent of the
indemnifying party.
XII - ARBITRATION
Any dispute, controversy or claim arising out of or relating to this Agreement
or the breach or termination hereof shall be settled by binding arbitration
conducted by JAMS/Endispute. ("JAMS") in accordance with JAMS Comprehensive
Arbitration Rules and Procedures (the "Rules"). The arbitration shall be heard
by one arbitrator to be selected in accordance with the Rules, in Orange County,
California. Judgment upon any award rendered may be entered in any court having
jurisdiction thereof. Within seven (7) calendar days after appointment the
arbitrator shall set the hearing date, which shall be within 90 days after the
filing date of the demand for arbitration unless a later date is required for
good cause shown and shall order a mutual exchange of what he/she determines to
be relevant documents and the dates thereafter for the taking of up to a maximum
of 5 depositions by each party to last no more than 2 days in aggregate for each
party. Both parties waive the right, if any, to obtain any award for exemplary
or punitive damages or any other amount for the purpose or imposing a penalty
from the other in any arbitration or judicial proceeding or other adjudication
arising out of or with respect to this Agreement, or any breach hereof,
including any claim that said Agreement, or any part hereof, is invalid, illegal
or otherwise voidable or void. In addition to all other relief, the arbitrator
shall have the power to award reasonable attorneys' fees to the prevailing
party. The arbitrator shall make his or her award no later than 7 calendar days
after the close of evidence or the submission of final briefs, whichever occurs
later.
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XIII - GENERAL PROVISIONS
13.1 Notices. Any notices permitted or required by this Agreement shall be
sent by telex, telecopy, registered mail or other recognized private
mail carrier service and shall be effective when received if sent and
addressed as follows or to such other address as may be designated by
a party in writing:
If to Purchaser: Hansens Beverage Company
1010 Railroad St
Corona, Ca 92882
Attention: Rodney Sacks
Copy to: Hilton Schlosberg
If to 7UP/RC: 3220 East 26th St.
Los Angeles, CA 90023
Attention: Steve Walb
Copy to: Mike Nelson, Esq.
13.2 Entire Agreement, Amendment. The parties hereto acknowledge that this
document sets forth the entire agreement and understanding of the
parties and supersedes all prior written or oral agreements or
understandings with respect to the subject matter hereof. No
modification of any of the terms of this Agreement shall be deemed to
be valid unless it is in writing and signed by the party against whom
enforcement is sought. No course of dealing or usage of trade shall be
used to modify the terms and conditions herein.
13.3 Waiver. No waiver by either party of any default shall be effective
unless in writing, nor shall any such waiver operate as a waiver of
any other default or of the same default on a future occasion.
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13.4 Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors or permitted assigns of each of the parties
and may not be assigned or transferred by either party without the
prior written consent of the other.
13.5 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, U.S.A.
13.6 Severability. In the event that any term or provision of this
Agreement shall violate any applicable statute, ordinance or rule of
law in any jurisdiction in which it is used, such provision shall be
ineffective to the extent of such violation without invalidating any
other provision hereof.
13.7 Heading, Interpretation. The headings used in the Agreement are for
convenience only and are not a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed as of the date first above written.
Seven-Up/RC Bottling Company (Purchaser)
Of Southern California, Inc.
By: /s/Charles F. Shanley By: /s/ Rodney C. Sacks
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Name: Charles F. Shanley Name: Rodney C. Sacks
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Title: President Title: Chairman
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By:
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Name:
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Title:
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ADDENDUM TO
PRODUCT MANUFACTURE AND SUPPLY AGREEMENT
BETWEEN
HANSEN BEVERAGE COMPANY
AND
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
DATED APRIL 15, 2003
("The Agreement")
This Addendum to the Agreement ("Addendum) is made this _9th__ day of
December, 2003 by and between Hansen Beverage Company ("Purchaser") and
Seven-Up/RC Bottling Company of Southern California, Inc. ("7UP/RC") with
reference to the following:
WHEREAS:
A. On April 15, 2003 Purchaser and 7UP/RC entered into the Agreement.
B. Pursuant to the Agreement the Purchaser purchased certain equipment
specified in Exhibit B to the Agreement ("Exhibit B") which has been
installed at 7UP/RC and 7UP/RC has commenced with the manufacture and
supply to Purchaser of Monster Energy(tm) drinks in 16 oz. packages
pursuant thereto.
C. Subsequent to the commencement of production, 7UP/RC determined that,
to enable them to meet the Purchaser's volume requirements, it is
necessary that certain further equipment be purchased and installed on
their line and have requested the Purchaser to purchase such equipment
in connection with the Agreement. The Purchaser is agreeable to
purchasing the further equipment concerned and to the installation
thereof on the 7UP/RC line provided that and subject to the Agreement
being amended in accordance with the terms set out in this Addendum
and 7UP/RC is agreeable thereto.
NOW, THEREFORE, it is agreed as follows:
1. The "Products" as defined in the Agreement shall include any
additional energy drinks in 16 oz. packages that the Purchaser may
require 7UP/RC to manufacture and supply to it from time to time in
terms of and during the term of the Agreement.
2. Clause 2.8 of the Agreement is amended by the addition at the end of
that clause of the following: "Purchaser shall, in addition, purchase
and pay for a 30 h.p. 4329 Tri-Blender Tri-Clover machine together
with two 328 Waukesha transfer pumps with 10 h.p. wash down motors,
interconnecting piping, control panels, etc. ("New Equipment") and
assume financial responsibility for the installation and wiring
thereof, in accordance with the estimate from BEECO which is attached
hereto as Exhibit C. Purchaser shall pay for the New Equipment after
confirmation from 7UP/RC that the same has been supplied and duly
installed at 7UP/RC and is fully operational. Purchaser shall also be
financially responsible for all taxes and freight in connection with
the New Equipment. 7UP/RC assumes responsibility to supervise the
installation of the New Equipment and to perform routine maintenance
on the New Equipment and to be financially responsible for all repairs
to the New Equipment during the term of this Agreement.
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3. 7UP/RC represents to the Purchaser that the purchase and installation
of the New Equipment will enable it to produce larger quantities of
Products with less lead time and enable 7UP/RC to meet unexpected and
increased volume demands from Purchaser for the Products including
during Buena Park's peak season and will eliminate conflicts and
achieve more consistent emulsification and result in superior products
being produced by 7UP/RC for Purchaser.
4. The term of the Agreement is extended until March 31, 2009 unless
sooner terminated pursuant to the provisions of Paragraph 3.2 of the
Agreement.
5. 7UP/RC agrees not to use the New Equipment for the production, at its
Buena Park, California facility of any other energy drinks similar to
the Products, without Purchaser's prior written consent.
6. Upon the termination of the Agreement for whatever reason, Purchaser
shall be entitled to remove the New Equipment or, alternatively, to
negotiate the sale of the New Equipment to 7UP/RC at the fair market
value thereof at that time. Should 7UP/RC and the Purchaser agree to
the sale of the New Equipment to 7UP/RC upon the termination of this
Agreement, 7UP/RC shall be entitled to use the New Equipment to
produce other energy drinks as well as Products.
7. Save as aforesaid the Agreement shall be unaffected hereby and shall
continue in full force and effect between the parties.
IN WITNESS WHEREOF, the parties hereto have each caused this Addendum to be
duly executed as of the date first above written.
Seven-Up Bottling Company of Hansen Beverage Company
Southern California, Inc.
By: /s/Charles F. Shanley By: /s/Rodney C. Sacks
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Name: Charles F. Shanley Name:Rodney C. Sacks
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Title:President Title:Chairman of the Board
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