Master Co-pack Agreement

EXHIBIT 10.51


SCHEDULE H


MASTER CO-PACK AGREEMENT
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THIS AGREEMENT ("Agreement") is entered into as of August 7, 2000, by and between Schwan's Sales Enterprises, Inc., a Minnesota corporation, its affiliates and subsidiaries, with its corporate offices located at 115 West College Drive, Marshall, MN, 56258 (hereinafter referred to as "SCHWAN'S"), and Overhill Farms, Inc. a Nevada corporation, located at 5730 Uplander Way, Suite 201, Culver City, California 90230-6617 (hereinafter referred to as "CO- PACKER").


SCHWAN'S desires that CO-PACKER produce for SCHWAN'S some or all of the products listed in Exhibit A (as it may be amended from time to time) using SCHWAN'S current and future formulae and specifications ("Schwan's Products") or CO- PACKER's standard products ("Co-Packer's Products") in accordance with the terms and conditions set forth in this Agreement (Schwan's Products and Co-Packer's Products may be referred to collectively as the "Products").


In consideration of the mutual terms, covenants and conditions set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:


1. Products. CO-PACKER shall produce for SCHWAN'S some or all of the Products, as elected by SCHWAN'S, as listed in Exhibit A, which Exhibit A may be amended by SCHWAN'S, at its sole discretion, by drafting and executing an amended Exhibit A to reflect any changes in the Products. Any amendment to Exhibit A to reflect the addition of a product not listed on the then-current Exhibit A which will require CO-PACKER to acquire additional equipment or know- how shall require the written consent of CO-PACKER, such consent to not be unreasonably withheld, and such new product shall be produced on price and terms mutually agreed to by the parties in accordance with Section 4. CO-PACKER agrees that any pricing for any new products shall be competitive with the market for products of similar quality, quantity and terms. Any changes in price of the Products shall be addressed as specified below in Section 4. Said Products will be purchased as dictated by SCHWAN'S with labels which contain SCHWAN'S proprietary trademarks, tradedress, and copyrights. CO-PACKER does not have the right to market any of Schwan's Products.


2. Term and Termination. This Agreement shall commence upon the date of this Agreement as stated above and shall remain in effect for a period of three (3) year(s), or until SCHWAN'S meets the Minimum Purchase Requirement specified in Section 3 below, whichever is earlier (the "Initial Term"). Upon expiration of the Initial Term, this Agreement will be automatically renewed for additional one (1) year periods ("Renewal Terms") thereafter. During any Renewal Term, either party


shall have the right to terminate this Agreement without reason or cause by giving the other party at least ninety (90) days' advanced written notice of such termination. SCHWAN'S shall not be subject to any Minimum Purchase Requirement during any Renewal Term.


Notwithstanding the foregoing, either party may, at its sole option, immediately terminate this Agreement for cause:


(a) in the event the other party shall breach or violate any of the
warranties, representations, agreements, covenants or conditions required
by the terms of this Agreement and fails to remedy the breach or
violation within ten (10) days after receipt of written notice from the
terminating party; or


(b) in the event the other party shall make an assignment for the benefit
of its creditors, commit any act of bankruptcy, have a receiver
appointed, or otherwise admit to its inability to pay its material debts
as they mature.


In addition, SCHWAN'S, at its sole option, may immediately terminate this Agreement for cause in the event CO-PACKER does not correct any quality assurance inspection issues as reasonably prescribed by a SCHWAN'S inspector.


3. Minimum Purchase Requirement / Estimated Purchase Volume / Supply Commitment by CO-PACKER / Accrual towards Minimum Purchase Requirement.


a. Minimum Purchase Requirement: During the Initial Term of this
Agreement, SCHWAN'S shall purchase from CO-PACKER at least twenty-six
million (26,000,000) pounds of Product(s) (the "Minimum Purchase
Requirement"). The parties acknowledge and agree that at all times from
and after the expiration of the Initial Term, SCHWAN'S shall not be
obligated to purchase any minimum quantity of Products from CO-PACKER.


b. Estimated Purchase Volume and Supply Commitment by CO-PACKER: On a
weekly basis, SCHWAN'S shall provide its estimated purchase volume
("Estimated Purchase Volume") of Products to be purchased from CO-PACKER
for the following thirteen-week period in order to assist CO-PACKER in
its production planning. The Estimated Purchase Volume may be increased
or decreased at any time by SCHWAN'S, in its reasonable sole discretion,
to reflect changes in its business conditions and is to be considered an
estimate only. However, CO-PACKER shall only be obligated to supply
Product(s) to SCHWAN'S up to the Estimated Purchase Volume plus an
additional twenty-five percent (25%).


c. Accrual towards Minimum Purchase Requirement: In the event that
SCHWAN'S purchases any Products(s) from sources other than CO-PACKER as a
result of (i) noncompetitive pricing by CO-PACKER of any of the Products
not included on the then-current Exhibit A as compared to prices
generally available in the marketplace for similar quantities and quality
of products, (ii) failure of CO-PACKER to comply with any of SCHWAN'S
quality assurance requirements, as reasonably requested, and/or formulae
and specifications of the Products, and/or (iii) insufficient supply of
any of the Products from CO-PACKER relative to its supply commitment
specified in subsection 3.b. above, then the volume of Products acquired
from such other sources by SCHWAN'S shall accumulate towards the Minimum
Purchase Requirement herein. CO-PACKER acknowledges and agrees that
Exhibit A may be amended from time to time by SCHWAN'S to reflect, among
other revisions that the parties shall mutually agree upon, additions or
deletions of various Products, subject to the consent of CO-PACKER with
regard to the addition of new products as set forth in Section 1 above,
and that any purchases from CO-PACKER by SCHWAN'S of either Schwan's
Products or Co-Packer's Products shall accrue towards the Minimum
Purchase Requirement. In the event that purchases by SCHWAN'S from CO-
PACKER during the Initial term do not meet at least twenty million
(20,000,000) pounds, after reconciling for any volumes acquired from
other sources as a result of the circumstances described above, then (I)
SCHWAN'S shall reimburse CO-PACKER for any costs, expenses and losses
associated with the lack of purchases, including, but not limited to,
lost profits, labor, materials and overhead costs associated with the
shortfall in purchases by SCHWAN'S relative to the twenty-million pound
threshold, and (ii) only $0.06 per pound as applied to the shortfall from
twenty million (20,000,000) pounds to twenty six million (26,000,000)
pounds. In the event that purchases by SCHWAN'S from CO-PACKER during
the Initial Term meet or exceed twenty million (20,000,000) pounds but do
not meet or exceed the Minimum Purchase Requirement, after reconciling
for any volumes acquired from outside sources as a result of the
circumstances described above, SCHWAN'S sole liability and CO-PACKER'S
sole remedy, shall be compensation to CO-PACKER by SCHWAN'S in the amount
of $0.06 per pound as applied to the shortfall in purchasing by SCHWAN'S
relative to the twenty-six-million pound threshold. During the Initial
Term, in lieu of the above payment in the event of shortfall, the parties
are free to enter into a mutually-acceptable alternative minimum purchase
requirement so as to eliminate any shortfall payment. At any time during
the Initial Term, in the event that SCHWAN'S determines in its sole
discretion that its purchases of the Products from CO-PACKER will not
meet or exceed the Minimum Purchase Requirement, CO-PACKER hereby agrees
to discuss with SCHWAN'S an alternative to this purchase obligation that
is mutually agreeable to both parties.


4. Price. The prices for the Products during the Initial Term shall be as set forth on the attached Exhibit A. Notwithstanding the preceding sentence, the prices set forth in Exhibit A shall be adjusted on a quarterly basis, up or down, based on mu ...