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EXHIBIT 10.8
AMENDED AND RESTATED
AGREEMENT
THIS AGREEMENT
is executed as of the 21st day of May, 2004, and made
effective as of February 1, 2004, by and
between CARL KARCHER ENTERPRISES, INC.,
a California corporation ("CKE") and PIERRE
FOODS, INC., a North Carolina
corporation (the "Company").
CKE desires to
purchase from the Company and the Company desires to sell to
CKE and any distributors, licensees,
franchisees or other persons designated
from time to time by CKE in writing
(collectively, all such entities other than
CKE shall hereinafter be referred to as
"Distributor") the products (the
"Products") described in the "Detailed
Product Schedule" (the "DPS"), in
accordance with the terms and conditions
hereof.
In consideration
of the mutual promises contained herein the parties hereby
agree as follows:
1. PURCHASE AND SALE. CKE shall
purchase from the Company and the Company
shall produce the Products in accordance
with its proprietary formula (the
"Formula", attached as Exhibit A to the
Amended and Restated Formula Development
Agreement of even date) and with CKE's
Finished Product Specifications attached
to this Agreement and sell to CKE and
Distributor the Products set forth in the
DPS, as amended from time to time, in the
amounts set forth in the DPS.
2. DISTRIBUTOR AND RELATED
PARTIES.
(a) This Agreement
shall not to be construed in any manner to be
binding upon any Distributor of CKE or upon
any affiliate, parent or subsidiary
corporation of CKE or any individual
signing on behalf of CKE.
(b) It is expressly
agreed and acknowledged that the Company has
entered into a certain Amended and Restated
Agreement of even date effective
December 1, 2002 with HARDEE'S Food
Systems, Inc. ("HARDEE'S"), which Agreement,
and any amendments and attachments thereto
(the "HARDEE'S Agreement), grant to
HARDEE'S the right to purchase products
similar to the Products in accordance
with the terms and conditions therein.
Notwithstanding anything herein to the
contrary, CKE acknowledges that the rights,
privileges, and options of HARDEE'S
under the HARDEE'S Agreement, and the terms
thereof, shall not be deemed a
violation of this Agreement, the Amended
and Restated Formula Development
Agreement, or any agreements delivered
therewith.
(c) The parties hereto
acknowledge that CKE designation of a
Distributor shall not constitute a
representation by CKE regarding such
Distributor's ability to pay, and that the
Company shall look solely to the
entity submitting a purchase order
hereunder for payment. The Company reserves
the right to decline to provide goods
and/or services to any Distributor it
reasonably determines is not credit
worthy.
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3. VOLUME COMMITMENT.
(a) During each
Contract Year (as defined below), CKE and/or
Distributor and HARDEE'S and/or HARDEE'S
Distributor (as defined in the HARDEE'S
AGREEMENT) will together purchase in the
aggregate from the Company and the
Company shall sell CKE and HARDEE'S, and/or
their respective Distributors, ***
of the annual aggregate pound usage of the
Products (as defined in this
Agreement and in the HARDEE'S Agreement) by
CKE, HARDEE'S, and their respective
Distributors up to an aggregate total of
*** pounds of total Product per
Contract Year (the "Volume Requirement").
Provided, if Company acquires (by
buying or building) an additional plant at
a location satisfactory to CKE which
provides additional production capacity
which is capable, in the reasonable
determination of HARDEE'S and CKE, of
supplying all of their aggregate pound
usage of the Products, then the foregoing
limitation of *** pounds shall be
disregarded. Notwithstanding the foregoing,
however, the Volume Requirement
shall be pro-rated for any Contract Year
consisting of less than 12 months (i.e.
if the final Contract Year consists of 7
months, then the Volume Requirement for
that Contract Year shall be 7/12ths of the
original Volume Requirement).
It is expressly
understood that non-compliance with the Volume Requirement
will be deemed a material breach of this
Agreement even if the Purchase
Threshold is met under the Formula
Development Agreement executed herewith.
(b) The Volume
Requirement of the Products from the Company will be
reasonably allocated over the 12 month
period of each Contract Year (or over the
actual number of calendar months in a
Contract Year, if less than 12), to the
extent demand on CKE Product permits such
allocation.
(c) At all times
during the term of this Agreement and at no
additional cost to CKE, the Company will
maintain a safety stock volume of up to
six (6) weeks of Product based on trailing
six month period average for system
wide availability in the Company's Ohio
storage facilities. CKE reserves the
right to arrange all freight carriers and
to pick up Product at Company's
manufacturing facility and cold storage
warehouses. Addresses for the storage
facilities are as follows:
CSI Brea
Pierre Foods, Inc.
Cincinnati Freezer
2750 Orbitor Avenue
9990 Princeton Road
2881 E. Sharon Road
Brea, California
Cincinnati, Ohio 45246
Cincinnati, Ohio 45241
Attn: Maritza Jimenez Attn: Bill
Kolb
Attn: Don Lucas
714-993-3533
800-543-1604
513-771-3573
(d) The Company
acknowledges that the annual anticipated purchase
volumes set forth in the DPS are estimates
only, and are subject to adjustment
based on actual historical data,
promotional forecasts and other information
furnished to the Company from time to time.
CKE will provide the Company with a
quarterly forecast at least thirty (30)
days prior to the start of each calendar
quarter. Said forecast is an estimate
only.
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(e) In the event the
Company cannot deliver the Products in the
amounts and on the dates required by CKE,
CKE may obtain the Products from
alternate suppliers and test alternate
products. Such alternative sources will
count towards the Volume Requirement as if
purchased from the Company.
(f) The Company
acknowledges and agrees that it is a non-exclusive
supplier of the Products to CKE and
Distributor.
4. PRICING AND PAYMENT.
(a) Prices paid by CKE
will be fixed for all pick-ups and deliveries
on a weekly basis, or, upon election by
CKE, a monthly basis. Prices are
effective at time of shipment date. The
fixed costs components of Total Labor
Cost, Total Packaging Cost, Total Overhead
Cost, and Profit and Corporate
Overhead Cost in the prices paid by CKE
will be fixed as shown on Exhibit I
through April 30, 2004 and thereafter as
set forth on Exhibit I-A for all
purchases through the remainder of the
Term.
(b) FORMULA PRICING.
Pricing will be calculated in accordance with
Exhibits I, I-A, and II, which are
incorporated herein by this reference. The
reference document for raw material pricing
will be given to the Company by CKE
on a weekly basis, pursuant to CKE's
agreement with its raw material supplier
designated from time to time by it
(currently ***). The raw material pricing
shall be on a delivered basis and the
Company agrees to accept the freight cost
set forth in HARDEE'S agreement with such
raw material supplier for all raw
materials being delivered by such supplier
to the Company. The cost basis for
Domestic Angus 85%, 80%, 50%, 73%, 65% and
all Angus chucks shall be determined
pursuant to CKE's Agreement with ***. To
the extent CKE approves imported or
other, alternative Angus trim, then the
cost basis for the Angus trim or any
applicable Angus trim components shall be
provided by CKE and/or by an
authorized agent of CKE. If CKE chooses to
use least cost formulation, pricing
will be adjusted for raw materials and any
effect on yields.
(c) PAYMENT TERMS.
Unless specifically provided otherwise all payments
required herein to be made by Distributor
to the Company shall be net 7 calendar
days from the date of invoice.
(d) VENDOR RETURN. The
Company is responsible for the return of
rejected products due to non-compliance to
specifications from CKE restaurants.
A handling fee in the amount of 11% of the
product cost will be charged to the
Company ($10 minimum, $300 maximum). Any
Company approved disposal costs
incurred by CKE will be billed to the
Company at cost.
(e) FREIGHT RATE. All
Domestic freight rates as noted in the DPS are
guaranteed through September 30, 2004 and
reviewed thereafter, every six (6)
months based upon a mutually agreed-upon
carrier price quotation for the
subsequent six-month period. Agreement must
be made within ten (10) days or end
of each six-month period. If Distributor
elects to have product(s) delivered to
the requested facility, freight will be
handled FOB
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Destination and freight will be added to
the price of each product. Should
Distributor pick up product(s) at the
Company's facility, product(s) will be
purchased FOB Origin as noted on the
DPS's.
(f) BOOKS AND
RECORDS.
(i) INVOICE
DISCREPANCIES. CKE will monitor the Company's
invoices and, in
the event of continual pricing/invoicing errors, CKE may
assess an
administrative charge on all incorrect invoices following
notice.
(ii) MAINTENANCE OF
BOOKS AND RECORDS. During the Term and for a
period of at
least two (2) years thereafter, the Company shall maintain
such books and
records (collectively, "Records") as are necessary to
substantiate
that all invoices and other charges submitted to CKE for
payment
hereunder were valid and proper. All Records shall be maintained
in
accordance with
generally accepted accounting principles consistently
applied. CKE
and/or its representatives shall have the right at any time
during normal
business hours, upon twenty-four (24) hours' notice, to
examine said
Records. The provisions of this paragraph shall survive the
expiration or
earlier termination of this Agreement.
5. DELIVERY.
(a) The Products
purchased hereunder shall be delivered on a timely
basis to the locations designated by CKE or
Distributor in the DPS, as amended
from time to time by CKE.
(b) In the event the
Company cannot fulfill any order within the
delivery dates designated by CKE or
Distributor (as applicable), CKE will
invoice the Company for and the Company
shall pay CKE for all additional costs,
other than loss of sale costs, associated
with the out of stock or late
delivery.
(c) The Company is
responsible for reasonable on-time delivery of
orders to CKE and Distributor. In case of
late delivery by the Company or its
carriers in excess of 10% of all deliveries
during the preceding quarter, CKE
will assess a charge of $26/hour for
administrative and receiving labor on all
late deliveries.
6. INDIVIDUAL ORDER TERMINATION. CKE
and/or Distributor may at any time by
written notice terminate any individual
order in whole or in part if the Company
(i) fails to comply with any of the
applicable terms and conditions of the
order; (ii) fails to perform within the
time specified (or if no time is
specified, within a reasonable time); (iii)
delivers any item that is not as
specified; or (iv) so fails to make
progress as to endanger performance of the
order in accordance with its terms. If
individual orders are terminated in whole
or in part because of the Company's failure
to deliver acceptable products in
accordance with the requirements and terms
hereof, a mutually agreed upon
arrangement would be made by both parties
to ensure continued supply of order at
no additional cost to CKE or Distributor,
as applicable.
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7. QUALITY CONTROL/MICRO TESTING. The
Company will establish and
maintain a product safety plan ("Safety
Program") and a products quality program
("Quality Control Program"). Copies of the
Quality Control Program and Safety
Program will be submitted to CKE's Quality
Assurance Department for approval.
The Safety Program will include, without
limitation, safety controls,
monitoring, corrective action and
verification steps to insure that potential
risks are controlled. The Quality Control
Program will include the necessary
controls to assure that all products
shipped to CKE's Distribution Center or
directly to restaurants, meet the current
finished product specifications,
including a hold for release
microbiological program to insure that all
microbiological test results meet standards
prior to its release. CKE agrees to
accept the Company's pathogen results for
product from the Company plant's test
and hold program. Auditing forms, lab
reports and other verification data will
be maintained by the Company and made
available to CKE upon request. CKE may
monitor the Company's production and/or
inspect the Company's facilities at any
reasonable time during the Company's
operating hours. The Company will submit a
manifest of code dates with the
corresponding number of cases on all products
shipped to CKE. The Company shall reimburse
CKE for all reasonable costs
associated with the Company's failure to
deliver acceptable product in
accordance with the product specifications.
In such event, or pursuant to the
Company's request to transfer production to
an unapproved plant, the Company
shall reimburse CKE for all reasonable
costs associated with approving an
alternate or secondary plant or location,
unless approval of the alternate or
secondary plant or location is initiated
solely by CKE for the sole purpose of
providing a lesser cost. Any deviation from
CKE's approved specifications,
including formulation and packaging
changes, will require PRIOR approval from
CKE's quality assurance department. On a
monthly basis the Company shall
complete and submit to the CKE's quality
assurance department specification
summary reports. The Company shall submit
biannually to CKE's quality assurance
department an independent food safety and
GMP systems audit from a CKE's
approved third party auditor. Based on
CKE's product compliance testing program,
the Company's products will be sampled from
approved distribution centers or
from individual restaurants by an
independent auditor or by CKE's personnel for
required analysis at supplier's expense.
Provided, the cost assessed to the
Company with respect to the two foregoing
sentences shall not exceed $30,000 in
the aggregate for such expenses arising out
of this Section 7 and Section 7 of
the HARDEE'S Agreement per calendar year.
When and if quality problems occur,
the Company shall implement a temperature
tracking and recording program for
temperature sensitive products that are
delivered with a radius greater than two
(2) hours or one hundred (100) miles from
the nearest distribution center.
8. COMPLETE AGREEMENT.
(a) The following
attachments (the "Attachments") are incorporated
herein by this reference and are part of
this Agreement and a breach of any
terms thereunder shall constitute a breach
hereunder: (i) CKE Items #9598
Formula Pricing Exhibits I and I-A, (ii)
*** Angus Formula Pricing and Freight
Costs for Pierre Foods Exhibit II, (iii)
Detailed Product Schedule (DPS), (iv)
CKE Quality Assurance Department Finished
Product Specification, QA approved
label, Mold Plate Data Sheet, Visual
Standards, and CKE's Label/Case Printing
Requirements, (v) CKE Microbiological
Testing Program, (vi) Amended and Restated
Formula Development Agreement, and (vii)
Amended and Restated Confidentiality
Agreement. By
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execution of this Agreement, the Company
and CKE acknowledge receipt and
acceptance of all Attachments.
(b) This Agreement together with all
Attachments hereto, shall
constitute the complete agreement between
CKE and the Company and shall
supersede all prior or contemporaneous
proposals, representations,
understandings, and other communications
between the parties concerning the
matters addressed in this Agreement and the
Attachments, whether oral or
written, unless specifically incorporated
herein by reference.
(c) The issuance of
information, advice, approvals, or instructions by
a party's technical personnel or other
representatives shall be deemed
expressions of personal opinions only and
shall be of no force or effect and
shall not affect such party's rights and
obligations hereunder, unless the same
is in writing and signed by an authorized
officer of such party and delivered to
the other party.
9. TERM AND RENEWAL.
(a) The term of this
Agreement shall commence as of February 1, 2004
and unless sooner terminated in accordance
with the provisions hereof, shall
expire at 12:00 midnight Eastern time on
July 31, 2007 (the "Term").
(b) CKE and the
Company agree that prior to six (6) months before
expiration of the Term, the parties shall
negotiate in good faith for a one (1)
year renewal (the "Renewal Term") of this
Agreement; provided, in the event the
parties are unable to mutually agree upon
the terms and conditions for the
Renewal Term at least one hundred and fifty
(150) calendar days prior to the
expiration of this Agreement, this
Agreement shall expire as of the original
Term, unless terminated earlier. For the
purposes of this Agreement, the term
"Term" shall be deemed to include any
Renewal Term.
(c) Every consecutive
twelve (12) calendar month period commencing on
February 1 during the Term shall be
referred to as a "Contract Year" with the
final period beginning on February 1 and
ending on July 31 (whether or not the
Renewal Term is included pursuant to
Section 9(b)) also being considered a
Contract Year except that the Volume
Requirement shall be adjusted pursuant to
Section 3(a) above.
10. TERMINATION
OF AGREEMENT.
(a) Either party may
terminate this Agreement at any time, effective
upon the other party's receipt of
termination notice, without prejudice to any
other legal rights to which the terminating
party may be entitled, upon the
occurrence of any one of the following:
(i) Upon ten
(10) days written notice to the breaching party
describing with
detailed specificity a material breach of this Agreement
that is not
cured to the non-breaching party's satisfaction within such ten
(10) days
period.
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(ii) upon a default by
a party in the payment of any monetary
obligation
payable to the other hereunder and such default continues for
ten (10) days
after the payee party gives the payor party written notice of
such
non-payment.
(iii) If any of the representations or warranties made by the
other party in
this Agreement or any of the Attachments shall prove to be
untrue or
inaccurate in any material respect.
(iv) The other party
(i) ceases to conduct its operations in the
normal course of
business; (ii) is unable to meet its obligations as they
mature; (iii)
makes an assignment for the benefit of creditors, or has
proceedings in
bankruptcy or insolvency brought against it; or (iv) applies
for or suffers
the appointment of a receiver.
(v) A party
provides a sixty (60) days written notice to the
other party, in
the event CKE makes significant specification changes to,
or deletes from
the menu of its CKE restaurants all of the items listed in
the DPS. In the
event of significant specification changes, CKE will allow
the Company a
reasonable opportunity to become an approved supplier of the
newly defined
item(s) upon mutually agreeable terms. Significant
specification
changes do not include size, shape, weight (provided no raw
cost increase
without mutual pricing adjustment), minor formulation or
minor production
procedure changes; provided, such change does not require
the Company to
incur material re-tooling or line/machine set up costs.
(b) If, within a
reasonable time after having received a written
notice describing with specificity the
failure to comply with product
specifications, the Company continues to
fail to comply with product
specifications, CKE may terminate this
Agreement by providing the Company thirty
(30) days written notice. Following such
notice of termination, CKE may return
goods in inventory which fail to comply
with product specifications for full
reimbursement, due and payable by the
Company within seven (7) days of the date
of such return.
(c) Termination of
this Agreement for any reason provided herein shall
not relieve either party from its
obligation to perform up to the effective date
of termination or to perform such
obligations that may survive termination.
(d) Promptly following
the date of termination, the Company will
return to CKE and CKE will purchase at cost
any unused packaging and labeling
supplies and raw materials on hand, and all
finished products on hand complying
with the specification; provided, the
Company shall not be required to return
and CKE shall not be responsible for
purchasing more than sixty (60) days worth
of raw materials (including packaging) and
finished products, as determined by
the forecast submitted by CKE, unless
specifically directed by CKE in writing to
increase inventory levels. The purchased
raw materials and unused packaging and
labeling supplies shall be at the Company's
cost and the purchased finished
products shall be at the price set forth
herein, all with payment within seven
(7) days after return.
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11.
MODIFICATION. This Agreement may be modified only by a written
agreement signed by both parties. This
Agreement amends, restates and supercedes
that certain Agreement pertaining to the
subject matter hereof executed by the
parties on February 1, 2004.
12.
INDEMNIFICATION. Company shall indemnify, defend and hold harmless
CKE,
and its parents, affiliates, subsidiaries,
and all of their respective officers,
directors, employees, agents,
representatives and stockholders, and any designee
or customer of CKE (collectively, the
"Indemnified Parties") from and against
any and all losses, claims, actions,
damages, expenses or liabilities,
including, without limitation defense costs
and attorneys' fees, resulting from,
arising out of or connected with any or all
claims arising from (i) the use of
the products supplied by Company and/or
services provided hereunder, including,
but not limited to, any claim for death or
personal injury or damage or loss of
property which shall have been caused or
alleged to have been caused, in whole
or in part, by any action or failure to act
on the part of Company, its
shareholder, directors, officers,
employees, contractors or agents, any defect
in the materials or workmanship used to
manufacture the products, or any claim
under a theory of strict liability, and
(ii) the breach by Company of any
representation, warranty, covenant or
obligation of Company hereunder. In the
event any third party asserts any claim
with respect to any matters as to which
any guarantee or indemnity in this
Agreement (or given pursuant to this
Agreement) relate, the Indemnified Party or
Parties shall give prompt notice
written to Company, and Company shall have
the right at its election to take
over the defense or settlement of the third
party claim at its own expense by
giving prompt notice to the Indemnified
Party(ies). If Company does not give
such notice and does not proceed diligently
so to defend the third party claim
within 30 days after receipt of the notice
of the third party claim, Company
shall be bound by any defense or settlement
that the Indemnified Party(ies) may
make to those claims and shall reimburse
the Indemnified Party(ies) for its
expenses related to the defense or
settlement of the third party claim. Nothing
in this Agreement shall be construed to
hold Company liable for any losses,
claims, damages, expenses or liabilities
including, without limitation, defense
costs and attorneys' fees, to the extent
such loss, claim, damage, expense or
liability results from or arises out of
CKE's or Distributor's misconduct or
negligence.
13. INSURANCE.
The Company shall furnish to CKE a current certificate of
insurance, which shall include a thirty
(30) day written notice of cancellation
to CKE evidencing the Company has
automobile, comprehensive general liability,
products liability and workers'
compensation insurance or an equivalent. With
the exception of workers' compensation, all
policies shall include CKE, its
parent, affiliates, subsidiaries and
franchisees as additional insureds and
shall include a contractual liability
endorsement to cover the Company's
indemnification obligations hereunder. Such
policies shall state that coverage
as it pertains to CKE shall be primary
regardless of any other coverage which
may be available to CKE and shall be an
occurrence rather than a claims made
basis.
(a) COMPREHENSIVE
AUTOMOBILE LIABILITY, INCLUDING OWNED AND NON-OWNED
AUTOS; BODILY
INJURY, AND PROPERTY DAMAGE: $3,000,000 per occurrence
(aggregate
primary and umbrella coverage).
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(b) COMPREHENSIVE
GENERAL LIABILITY, WITH BROAD FORM PROPERTY DAMAGE,
COMPLETED
OPERATIONS, PERSONAL INJURY, INDEPENDENT CONTRACTORS AND
CONTRACTUAL
LIABILITY: $3,000,000 per occurrence (aggregate primary and
umbrella
coverage).
(c) WORKERS'
COMPENSATION: AT STATUTORY LIMITS WITH EMPLOYERS'
LIABILITY:
$1,000,000 per occurrence.
(d) The Company must
provide to CKE the workers' compensation policy
number prior to
commencing any work for CKE. It is the responsibility of
the Company to
notify CKE of any changes and/or renewals to the Workers'
Compensation
policy number. The Company shall require all subcontractors to
maintain the
required insurance. No work hereunder shall commence until
above insurance
is obtained, a certificate is provided to CKE and CKE has
approved the
certificate in writing.
(e) PRODUCTS LIABILITY
INSURANCE: $3,000,000 per occurrence (aggregate
primary and
umbrella coverage).
14. ASSIGNMENT.
No assignment or subcontract hereof shall be made by either
party without the prior written consent of
the other party, and no delegation of
any obligation or of the performance of any
obligation by the Company shall be
made without the prior written consent of
CKE. Any attempted assignment or
delegation shall be void and ineffective
for all purposes unless made in
conformity with this paragraph. The terms
shall inure to the benefit of, and be
binding on, the successors and assigns of
the parties.
15. CAPTIONS.
Captions and titles of paragraphs contained herein are
for convenience only, and shall not be
construed to limit, expand or otherwise
change the meaning of any provision
hereof.
16. FORCE
MAJEURE. Either party is excused from performance hereunder if
such non-performance results from any acts
of God, war, riots, acts of
governmental authorities, or any other
cause outside the reasonable control of
the non-performing party. Both parties
shall use their best efforts to terminate
or cause the expiration of any Force
Majeure as soon as practical following its
occurrence. If the Company cannot deliver
the Products in the amounts and on the
dates required by CKE during such Force
Majeure event, then CKE may obtain the
Products from the alternate vendors ("FDA
Vendors") set forth in Section 7 of
the Formula Development Agreement between
the parties dated as of even date
herewith. If such FDA Vendors are unable to
deliver the Products in the amounts
and on the dates required by CKE during
such Force Majeure event, then CKE may
obtain Products from and Company shall
license and work with alternate suppliers
and test alternate products. CKE's
purchases from the FDA Vendors and such
alternate sources during the Force Majeure
event will count towards the Volume
Requirement as if purchased from the
Company.
17. GOVERNING
LAW. This contract and all Purchase Orders that may be issued
hereunder shall be construed in accordance
with, and governed by, the laws of
the State of California, including the
Uniform Commercial Code, without
reference to laws or principles regarding
choice of laws. The parties consent to
the exclusive juris
