Supply Agreement - 329985 Ontario Ltd. and Legacy Brands Inc.
THIS AGREEMENT made this 1st day of March, 1997.
BETWEEN:
329985 ONTARIO LIMITED, c.o.b. under the firm name and style of KISKO
PRODUCTS, a corporation duly incorporated under the laws of the Province of
Ontario and having the registered office in the City of Scarborough, in the
Municipality of Metropolitan Toronto,
(hereinafter called the "Seller")
OF THE FIRST-PART
- and -
LEGACY BRANDS, INC.,
a corporation duly incorporated under the laws of the State of ______________
and having its registered office in Roseville, in the State of California,
United States of America,
(hereinafter called the "Buyer")
OF THE SECOND PART
WHEREAS the Seller manufactures a frozen water ice confection known as a
freeze pop ("product"), which goods shall be finished goods packaged for retail
sale:
AND WHEREAS the Buyer wishes the Seller to sell the product to the Buyer,
such product to be packaged, named and labelled in accordance with the Buyer's
specifications, under the name "GUMBY POPS";
NOW THEREFORE in consideration of the mutual covenants hereinafter
contained, the parties hereto hereby agree as follows:
1. MANUFACTURE AND SALE OF PRODUCT
1.1 The Seller shall manufacture and sell to the Buyer and the Buyer shall
buy from the Seller, the product, under the terms and conditions hereinafter
set forth, and, to the best of the Seller's abilities, in such quantities as
the Buyer may from time to
<PAGE> 2
2
time order.
1.2 The product shall be manufactured in accordance with the
specifications set out in Schedule "A" attached hereto.
2. PACKAGING
2.1 The Seller shall package the product for the Buyer, in accordance
with the specifications outlined in Schedule "A" attached hereto.
2.2 The packaging shall consist of folding cartons, laminated film master
cases which the Seller will provide as specified (the "packaging"). The Seller
will order the packaging from a packaging manufacturer, and shall be
responsible to that packaging manufacturer for payment, but between the parties
hereto, it is agreed that payment for the printing plates, art work and steel
rule dies will be made as follows;
(i) The Buyer shall supply finished art work to the packaging
manufacturer;
(ii) The Buyer shall be limited to reimbursing the Seller for the cost of
certain packaging components represented by cost of art work, film
separation, printing plates and steel rule dies. The costs for these
components is estimated in Schedule "B". If the costs exceed the
estimates, the excess must be approved by the Buyer;
(iii) Such payment shall be in addition to the price of the product and
shall be invoiced by the Seller and paid by the Buyer at the rate of
twenty five ($.25) cents for each case of product sold to the Buyer
until the total cost of the art work, film separation, printing plates
and steel rule dies paid by the Seller to the packaging manufacturer
has been reimbursed to the Seller by the Buyer;
(iv) If on the 30th day of September, 1997, the Seller has not been fully
reimbursed for the cost of the art work and princing plates by the
payment method set out in 2.2(ii), the Buyer shall forthwith pay the
balance of such cost to the Seller.
<PAGE> 3
3
3. DELIVERY
3.1 The Buyer shall submit purchase orders for the product at least three
(3) weeks prior to delivery.
3.2 Delivery of the packaged Product shall be made by the Seller and risk of
loss and damage to the packaged product shall pass to the Buyer upon delivery
of the Product to the Buyer's appointed customer.
3.3 The Seller will be responsible to pay customs duty going into the United
States of America and the relevant customs clearance charges on the Product.
The Buyer appoints the Seller as its agent to arrange and manage the shipping
of the Product according to the Buyer's instructions as to destination. The
Buyer is responsible to pay for all freight charges as set out in Schedule "C".
If the shipping costs exceed the amounts set out in Schedule "C", the increase
shall be approved by the Buyer before shipping the Product.
4. PRICES AND TERMS OF PAYMENT
4.1 The prices to be paid by the Buyer for the product shall be in
accordance with Schedule "D" attached hereto.
4.2 All prices are stated as f.o.b. the Seller's facility in Markham,
Ontario, Canada.
4.3 The Seller shall invoice the Buyer for the product sold, and the Buyer
will, on or before the 30th day following the date on which the product is
invoiced, pay the Seller in full for the product so invoiced. A cash discount
of two (2%) per cent of the invoiced price will be allowed for payment received
by the Seller on or before the 20th day following the date on which the product
is invoiced.
4.4 On the 30th day of September in any year, the Seller shall invoice the
Buyer for all product and packaging which the Seller has on hand and not
delivered, and which has been ordered by the Buyer in its purchase orders.
Payment of such invoice shall be in accordance with paragraph 4.3 hereof. The
Buyer will not be responsible to pay for any Product or Packaging which is not
ordered by the Buyer, PROVIDED it is understood that the Buyer will still pay
for any Packaging which is not
<PAGE> 4
4
ordered by it where the packaging manufacturer has required a standard order
(not a custom order) up to ten (10%) larger.
4.5 All monetary amounts expressed herein shall be in United States dollars.
4.6 The Buyer will not be responsible for any cost not expressly denoted in
the Agreement.
5. FORCE MAJEURE
The Seller shall not be responsible for failing to meet obligations due
to causes beyond its reasonable control.
6. INSURANCE
The Seller shall maintain sufficient product liability insurance to
satisfy any obligation arising as a result of this Agreement and, in any event,
no less than Five million ($5,000,000.00) dollars of insurance coverage and
such insurance policy shall include the Buyer as a co-insured party to the
policy. Upon request, the Seller shall provide the Buyer with certificates of
insurance properly executed showing such insurance to be in full force and
effect.
7. LIMITED WARRANTY
7.1 In providing manufacturing services under the agreement, the Seller
makes no warranties whatsoever, either express or implied, oral or written, in
fact or by operation of law or otherwise, except as expressly stated in this
agreement.
7.2 Subject to paragraph 8.1, the Seller warrants and represents to the
Buyer that the product sold to the Buyer shall, at the time of delivery to the
Buyer's customer, be guaranteed to meet the specifications for manufacture and
packaging of the product, set out in Schedules "A" attached hereto, and shall
be in good, usable and merchantable condition and fit for its intended purpose.
7.3 The remedy of the Buyer for breach of the above warranty shall be limited
<PAGE> 5
5
to the replacement of the defective product or credit against the invoice price
of the defective product, at the option of the Seller. There shall be no
liability for any other claim or loss, whether direct or indirect, incidental
or consequential, or for loss of profit.
8. RELATIONSHIP
Each party in performing its obligations and duties hereunder shall be
conclusively deemed to be an independent contractor and not under the control
and supervision of the other and nothing in this agreement shall be read to
create any partnership, joint venture, trust or other fiduciary relationship
between them.
9. TERMINATION
Either party may terminate this agreement, with or without cause, by
written notice. Termination shall be effective One hundred and eighty (180)
days after receipt of notice. Termination shall not discharge the Buyer for any
amounts due the Seller. Additionally, in the event of termination of this
agreement, provisions which by their terms are intended to continue shall so
survive and shall continue to apply to Products delivered to the Buyer.
10. HEADINGS
The headings of the sections of this Agreement are inserted for
convenience only and do not constitute part of this Agreement.
11. FINAL AGREEMENT
This Agreement expresses the entire and final agreement between the
parties thereto with respect to all of the matters herein set forth; and its
execution has not been induced by, neither do any of the parties hereby rely
upon, not regard as material, any representations or promise whatsoever not
incorporated herein and not made a part hereof; and, it shall not be altered,
amended or qualified except by memorandum in writing signed by the parties
hereto; and any alteration, amendment
<PAGE> 6
6
or qualification thereof shall be null and void and shall not be binding upon
the parties hereto unless made and recorded as aforesaid.
12. GOVERNING LAW
This Agreement shall, in all respects, be governed by and construed in
accordance with the laws of the province of Ontario.
13. NO ASSIGNMENT
This agreement shall not be assigned by either party without the prior
written consent of the other party.
IN WITNESS WHEREOF the parties hereto have respectively executed this
agreement the day and year first above written.
329985 ONTARIO LIMITED LEGACY BRANDS; INC.
Per: Per: /s/ THOMAS E. KEES
------------------------- ------------------------
Name: LESLIE JOSEPHS Name: Thomas E. Kees
-----------------------
Title: President Title: President & CEO
----------------------
Date: Date: 5/28/97
------------------------ -----------------------
<PAGE> 7
SCHEDULE A
Product manufacturing and packaging specifications.
Manufacturing: Product to be manufactured is frozen water ice confections in six
flavors and colors:
<CAPTION>
Color Flavor
----- ------
Red Cherry
Blue Raspberry
Orange Orange
Yellow Tropical
Purple Grape
Green Lime
Formulations are based on existing Klsko flavor and color profiles. All flavors
and colors have been reviewed and approved by Legacy.
Packaging: Product is to be packaged in 1.25 oz. sealed film packets, Eighteen
packets (three each flavor) per carton, 12 carton per shipping case. Cases will
be packed 100 per pallet for shipment.
Approximate dimensions of cartons and cases are as follow:
Carton - 6.75 x 1.5 x 8.75
Case - 18 x 9.25 x 7.75
Pallet - 10 layers x 10 layers
Product is considered to be acceptable if all of the above conditions are met
and product is delivered to customer in good salable condition with leaker rate
of less than 1%.
<PAGE> 8
SCHEDULE B
Estimated cost of packaging components:
Artwork Film Separations & Printing Plates:
Folding carton - $700
Film packets - $720
Art Costs, Printing Plates & Steel Rule Dies:
Shipping container - $1,222
<PAGE> 9
SCHEULE D
Cost of product:
Product - Eighteen 1.25oz packets per carton packed twelve per case
Case cost - $5.46 U.S. Dollars
F.O.B. - Markham, Ontario
<PAGE> 10
SCHEDULE C
Estimated truckload freight rates - shipment of 12/18/1.25oz. Freeze Pops (U.S.
Dollars)
<CAPTION>
Freight Per Total
Cities Rates($) Case Cases($)
------ -------- ---- --------
Indianapolis 752.00 0.34 5.80
Grand Rapids 575.00 0.26 5.72
Boston 972.00 0.44 5.90
Baltimore 1092.00 0.50 5.96
Cleveland 531.00 0.24 5.70
Cincinnati 663.00 0.30 5.76
Columbus 620.00 0.28 5.74
Milwaukee 796.00 0.36 5.82
Pittsburgh 575.00 0.26 5.72
Philadelphia 840.00 0.38 5.84
Reading 840.00 0.38 5.84
Buffalo 398.00 0.18 5.64
Rochester 575.00 0.26 5.72
Syracuse 663.00 0.30 5.76
New York City 972.00 0.44 5.90
California 1729 0.87 6.33