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EXHIBIT 99.6
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (including the Schedules hereto,
this "Agreement"), dated as of July 14, 1997, among ▇▇▇▇▇▇'▇ FOOD SYSTEMS,
INC., a North Carolina corporation (the "Company"), CKE RESTAURANTS, INC., a
Delaware corporation ("Buyer"), and FAST FOOD MERCHANDISERS, INC., a Colorado
corporation ("Distributor"),
W I T N E S S E T H :
WHEREAS, the Company desires to designate Distributor, and
Distributor desires to be designated, an approved non-exclusive distributor (an
"Approved Distribu-tor") of dairy products, meats, frozen and refrigerated
foods, canned and dry goods, beverages, paper and disposables, cleaning
supplies, test products, premium and promotional items and certain other
non-food products requiring frequent replacement, but in any such case
excluding fresh baked goods (such goods, supplies, products and items
collectively, the "Products") to the Franchised Restaurants (as hereinafter
defined); and
WHEREAS, the Company desires to purchase Products from
Distributor, and Distributor desires to sell and supply Products to the
Company, each in quantities constituting the total requirements of all Company
Restaurants (as herein-after defined); and
WHEREAS, Imasco Holdings, Inc., a Delaware corporation
("Seller"), the Company and Buyer have entered into that certain Stock Purchase
Agreement, dated as of April 27, 1997 (the "Stock Purchase Agreement"),
pursuant to which, inter alia, Buyer has agreed to purchase, take up and assume
from Seller, and Seller has agreed to sell, transfer and assign to Buyer, each
on the terms and conditions therein stated, all of the outstanding capital
stock of the Company; and
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WHEREAS, pursuant to and as a condition precedent to the
Closing contemplated by the Stock Purchase Agreement (the "Closing"), Buyer has
agreed to, and Seller has agreed to cause the Company and Distributor to, enter
into this Agreement;
NOW THEREFORE, in consideration of the premises, and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth or referenced below:
"Affiliate", with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common
control with such Person. With respect to Buyer, the term "Affiliate" shall
not include any Person in which Buyer, directly or indirectly, is the
beneficial owner of less than 50% of such Person's voting securities.
"Agreement" shall have the meaning set forth in the Preamble.
"Approved Distributor" shall have the meaning set forth in the
Recitals.
"Branded Products" shall mean Products bearing any Trademark.
"Breach" shall have the meaning set forth in Section 20.
"Closing" shall have the meaning set forth in the Recitals.
"Company Restaurants" shall mean, collectively:
(a) all restaurants owned or operated by the Company or its
subsidiaries on the date of this Agreement; and
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(b) all restaurants from time to time during the term of this
Agreement operated or wholly owned by Buyer or the Company or any of their
respective Affiliates which:
(i) offer to customers any Branded Products; and
(ii) are located east of the Mississippi River and offer to
customers hamburger, chicken or breakfast products, except restaurants
operated or wholly owned by CBI Restaurants, Inc. or Summit Family
Restaurants Inc. and their current subsidiaries;
provided, however, that "Company Restaurants" shall not include restaurants
operated or owned by Persons acquired by, or who become Affiliates of, Buyer or
the Company which are parties to existing contractual distribution
arrange-ments covering products similar to the Products.
"Counted Restaurants" shall mean, for purposes of clause (z)
of Section 10(a), all restaurants, other than the Restaurants, that are both
(a) covered by a distribution agreement or arrangement with Distributor; and
(b) are owned and operated by any Person (other than a Franchisee or its
Affiliates) which participates in a cooperative purchasing distribution program
administered by the Buyer or its Affiliates.
"Discontinued Product" shall mean a Product as to which the
approval for use in the Restaurants has been withdrawn, or as to which the
related "limited time offer", test period or promotional period has terminated.
"Franchised Restaurants" shall mean all restaurants, other
than Company Restaurants, which, either as of the date of this Agreement or
from time to time during the term of this Agreement, are licensed by the
Company to offer to customers any Branded Products.
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"Franchisees" shall mean, collectively, the several owners
and/or operators of the Franchised Restaurants.
"Notice of Dispute" shall have the meaning set forth in
Section 13.
"Overpayment" shall have the meaning set forth in Section 13.
"Person" shall mean any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Restaurants" shall mean all Franchised Restaurants and
Company Restaurants.
"Seller" shall have the meaning set forth in the Recitals.
"Similar Product" shall mean, with respect to any particular
Product shipped from a particular distribution center, any product that is both
(a) substantially similar to such Product, and (b) shipped to such distribution
center from the same origination point and on the same shipping terms
(excluding invoice payment terms) as such Product is shipped to such
distribution center.
"Stock Purchase Agreement" shall have the meaning set forth in
the Recitals.
"Suspension" shall have the meaning set forth in Section 20.
"Trademark" shall mean any Hardee's(R) trademark, service
▇▇▇▇, tradename or trade dress.
"Truckload" shall mean a delivery of inbound goods to
Distributor consisting of a gross weight of 40,000 pounds or more or 2,000 or
more cubic feet.
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"Unbranded Products" shall mean Products which are not Branded
Products.
2. Approved Distributor. (a) The Company hereby designates
Distributor as an Approved Distributor of the Products to the Franchised
Restaurants during the term of this Agreement.
(b) No provision of this Agreement shall be construed to
require Distributor to sell Products to any Franchised Restaurant or any
Franchised Restaurant to purchase Products from Distributor. Distributor shall
extend the service, pricing and other terms and conditions offered to the
Company under this Agreement to any Franchised Restaurant which (i) is located
in any geographic market in the contiguous United States in which any Company
Restaurant or Franchised Restaurant is located as of the date of this
Agreement, and (ii) purchases 92% or more of such Franchised Restaurant's total
requirements of the Products in the 12-month period preceding the date of this
Agreement or the second, fourth and sixth anniversary of this Agreement,
whichever date shall at any time be the most recent; provided that the related
Franchisee meets Distributor's credit standards as they may from time to time
be amended. In no event shall the Company be responsible for the debts of the
Franchisees.
(c) Subject to Sections 20 and 21, no provision of this
Agreement shall be construed to prohibit or restrict Distributor from selling
any Product to any Franchised Restaurant at any time during the term of this
Agreement.
(d) The Company agrees that Distributor shall remain the sole
national Approved Distributor of Products to the Franchised Restaurants in the
United States during the term of this Agreement. No provision of this Agreement
shall be construed to prohibit the Company from designating additional Approved
Distributors; provided that in the event the Company decides to approve more
than two Approved Distributors in any geographic area of the United States, the
Company shall provide notice of such decision to
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Distributor at least 90 days prior to the implementation of such approval.
(e) The Company shall not hereafter enter into any agreement
(other than with the Distributor) which is in conflict with the rights granted
to Distributor by this Section 2. Each party agrees that it will not take any
action the sole purpose of which is to evade or circumvent its obligations
under this Agreement.
3. Exclusive Requirements Purchase Agreement. On the terms
and subject to the conditions set forth herein, the Company hereby agrees to
purchase exclusively from Distributor, and Distributor agrees to supply and
sell continuously to the Company, in quantities constituting the total
requirements of all Company Restaurants during the term of this Agreement, all
Products, other than certain premium and promotional products.
4. Restaurants. Schedule 1 hereto contains a list of all
Restaurants as of the date hereof. During the term of this Agreement, the
Company shall promptly notify Distributor if any establishment or other unit
not set forth on Schedule 1 shall become a Restaurant.
5. Term and Termination. Subject to Section 20, the term of
this Agreement shall commence at the Closing and shall continue for a period of
seven (7) years from the Closing Date. Such term shall automatically be
extended for consecutive periods of two (2) years from the expiration thereof
and from the expiration of each subsequent extension period, as the case may
be, unless Distributor or the Company shall have given, either to the other,
not less than three months prior to such expiration, written notice of its
desire to terminate this Agreement as of such expiration.
6. Products. (a) The Company shall give Distributor prompt
written notice of its approval or suspension of approval of any Product for use
in the Restaurants and shall provide Distributor with a written list of
approved Products from time to time upon the reasonable request by Distributor
therefor.
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(b) Distributor shall not sell, supply, distribute or
otherwise transfer Branded Products to any Person, except (i) pursuant to this
Agreement, (ii) Franchisees or Franchised Restaurants, (iii) in connection with
the destruction or final disposal of such Branded Products, or (iv) with the
written consent of the Company.
(c) Distributor shall use commercially reasonable efforts
to sell to third parties any Discontinued Products which are Unbranded Products
promptly after the suspension of approval of such Discontinued Products for use
in the Restaurants or the termination of the related "limited time offer", test
period or promotional period, as the case may be. Within 30 days following the
suspension of approval or termination of the "limited time offer", test period
or promotional period with a respect to any Discontinued Product which is an
Unbranded Product, the Company shall (a) reimburse Distributor for the excess,
if any, of the Cost of such quantity of such Discontinued Product as has been
sold to third parties over the net proceeds of such sale, and (b) purchase
Distributor's entire remaining stock of such Discontinued Product at Cost, plus
applicable freight F.O.B. Distributor's distribution center(s). Within 30 days
following the suspension of approval or termination of the "limited time
offer", test period or promotional period with respect to any Discontinued
Product which is a Branded Product, the Company shall purchase Distributor's
entire stock of such Discontinued Product at Cost, plus applicable freight
F.O.B. Distributor's distribution center(s). Notwithstanding the previous two
sentences, in no event shall the Company be required to purchase the amount of
Distributor's stock of any Discontinued Product or to reimburse Distributor for
the excess of the Cost of the amount of Discontinued Product sold to third
parties over the net proceeds of such sale which, in the aggregate, exceeds
three (3) weeks inventory of such Product (based on total sales of such Product
to the Company Restaurants during the immediately preceding 12-month period) if
such stock as exceeds such three (3) weeks' inventory was not purchased to fill
orders placed by the Company Restaurants; provided, however, that this sentence
shall not apply to Discontinued Products purchased by Distributor in reliance
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on the Company's sales projections with respect to "limited time offers."
Distributor and the Company shall also negotiate in good faith an equitable
arrangement concerning Distributor's remaining stock of such Discontinued
Product based on an agreed level of inventory for sales to the Franchised
Restaurants.
(d) With respect to any Product which, in the course of
its ordinary or intended use, is not likely to be noticed or come to the
attention of customers of the Restaurants, the Company will use commercially
reasonable efforts either to ensure that such Product is an Unbranded Product
or to approve for use in the Restaurants a replacement or substitute Product
that is an Unbranded Product; provided, however, that the Company shall not be
required to ensure that such Product is an Unbranded Product or to approve any
such replacement or substitute Product if the Company is able to purchase the
same Product, as a Branded Product, at a reduced cost.
(e) No provision of this Agreement shall be construed to
amend, modify or restrict the absolute right of the Company, at its sole
discretion, to add, modify or delete menu items with respect to Restaurants,
whether as a group or on an individual basis, or to approve or disapprove
Products for use in the Restaurants.
(f) No provision of this Agreement shall be construed to
prohibit or restrict Distributor from selling Unbranded Products to purchasers
other than the Company, the Company Restaurants or the Franchised Restaurants.
7. Shortages. (a) Distributor shall promptly notify the
Company of any short-term inability on its part or anticipated short-term
inability on its part to supply a particular Product in any or all geographic
area or areas and shall indicate the reason for such inability and the expected
duration. Following receipt of any such notification, the Company may enter
into alternative arrangements as may be reasonably necessary to purchase from
sources other than Distributor any of its requirements of such Product in such
geographic area or areas, but only during the period of
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such inability to supply; provided, however, that Distributor shall reimburse
the Company for its reasonable out-of-pocket costs incurred in connection with
covering any such inability to supply which is the proximate result of
Distributor's failure to timely order Products from suppliers to fill orders
previously placed by Company Restaurants. The Company shall be obligated to
purchase all of its requirements for such Product in any such geographic area
or areas from Distributor upon advance written notice to the Company that such
Product will thereafter be supplied in such geographic area or areas.
Notwithstanding the foregoing, Distributor's obligation to supply Restaurants
shall be subject to its right, during any emergency shortage of any Product, to
allocate sales of such Product among the Restaurants in any affected geographic
area or areas based upon the relative percentages of Distributor's total sales
of such Product to them during the immediately preceding 12-month period, or
such shorter period for which Distributor has historical sales data.
(b) From and after the Closing, the Company shall use its
best efforts to secure and maintain suppliers with respect to all of the
Products. The Company shall give Distributor prompt written notice of the
termination of any material purchase order or the termination of any material
supply relationship with the supplier of any Product. Distributor agrees to
assign all of Distributor's rights and obligations under all purchasing
contracts with other Persons to which Distributor or its Affiliates is a party
and pursuant to which Distributor currently purchases products solely for
distribution to the Restaurants. To the extent that the assignment of any such
purchasing contract is prohibited by the terms thereof, the parties shall not
effect any such assignment or assumption, and Distributor shall instead make
the benefits of such purchasing contract available to the Company during the
term thereof. The Company agrees to indemnify, defend and hold harmless
Distributor and its Affiliates against any losses, damages, liabilities, costs
and expenses (including reasonable attorneys fees and expenses) sustained or
incurred arising out of or relating to Distributor's performance of its
obligations pursuant to the previous sentence.
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8. Delivery. (a) Distributor shall comply with the delivery
standards set forth in Schedule 2 (the "Delivery Standards"); provided,
however, that promptly following each of the second, fourth and sixth
anniversaries of the Closing, on a date mutually agreeable to the Company and
Distributor, the Company and Distributor shall meet and negotiate in good faith
any adjustments to the Delivery Standards as may be equitable under the
circumstances.
(b) Distributor shall maintain a sufficient inventory to
provide reasonably timely delivery of Products to each Restaurant as required;
provided, however, that, with respect to any particular Product, Distributor
shall not in any event be required to order more than the lesser of (i) three
(3) weeks' inventory of such Product, based on total sales of such Product to
the Restaurants during the immediately preceding 12-month period and (ii) a
quantity of such Product equivalent to one full Truckload of such Product.
(c) All items shall be delivered by Distributor's employees
or agents on a "tailgate" basis, with delivery vehicles parked in the parking
lot adjacent to or alongside the sidewalk fronting the premises of each
Restaurant. Distributor shall use its reasonable best efforts to place the
tailgate as close to the door of each Restaurant as is permitted by restaurant
management.
9. Ordering and Invoicing Facilities. (a) Dis-tributor shall
continue to provide such ordering and invoicing facilities, systems and
functions as were provided by Distributor to the Company and the Restaurants
prior to the Closing, in the manner and with the same level of service and
efficiency provided by Distributor to the Company and the Restaurants prior to
the Closing.
(b) The Company shall maintain the Company's current data
processing system, or a successor electronics system which provides services to
the Restaurants of the same degree. Distributor shall continue to provide to
the Company, in electronic format, without charge to the Company, such summary
cost and usage data concerning the
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Company Restaurants as was provided to the Company prior to the Closing,
including the reports specified in Schedule 3, in a manner and with the same
frequency provided by Distributor to the Company prior to the Closing.
(c) The Company shall provide to Distributor the reports
and notifications specified in Schedule 4.
(d) In the event that the Company should make available
or cause to be put into general use by the Restaurants or the Company any
ordering, payment, data processing, inventory management or information
technology systems that would require capital expenditures on the part of
Distributor, Distributor and the Company shall promptly meet and negotiate in
good faith to effect an equitable reimbursement of Distributor for its
out-of-pocket costs incurred in connection with its interface to and
interconnection with such systems, giving due regard to any reductions in
Distributor's general and administrative expenses expected to be realized as a
result of the implementation of such systems. In any such event, the Company
shall afford Distributor a reasonable period of time in which to adapt to,
interface to or interconnect with any such system prior to the final
implementation thereof.
(e) In the event that Distributor should make available or
cause to be put into general use by the Restaurants or Distributor any
ordering, payment, data processing, inventory management or information
technology systems that would require capital expenditures on the part of the
Company, Distributor and the Company shall promptly meet and negotiate in good
faith to effect an equitable reimbursement of the Company for its out-of-pocket
costs incurred in connection with its interface to and interconnection with
such systems, giving due regard to any reductions in the Company's general and
administrative expenses expected to be realized as a result of the
implementation of such systems. In any such event, Distributor shall afford
the Company a reasonable period of time in which to adapt to, interface to or
interconnect with any such system prior to the final implementation thereof.
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10. Pricing. (a) The prices to be paid by the Company to
Distributor and the prices to be made available by Distributor to the
Franchisees for each Product (other than soft drink Products) shall be the Cost
of such Product, as defined below, plus the Delivery Fee for such Product set
forth on Schedule 5 (each, a "Delivery Fee" and, collectively, the "Delivery
Fees"). The prices to be paid and made available for each softdrink Product
shall be as set forth on Schedule 5. "Cost" as used herein shall mean (x) the
supplier's actual invoice price for the quantity of the Product purchased and
sold by Distributor (or, in the case of a distributor "buy in" in advance of a
price increase announced by the supplier thereto, the price paid by Distributor
(applied to the quantity so delivered) for the quantity of such Product which
is the lesser of (i) three (3) weeks' inventory of such Product, based on total
sales of such Product to the Restaurants during the 12-month period immediately
preceding Distributor's delivery of the Product, and (ii) a quantity of such
Product equivalent to one full Truckload of such Product); less (y) all vendor
discounts or concessions applicable to purchases of such Product so purchased
and sold for the Restaurants, including but not limited to volume discounts and
promotional discounts, made available by the supplier of such Product to
Distributor, excluding from this Clause (y) any early payment, prompt payment,
cash and similar discounts and any other discounts or concessions allowed by
suppliers in respect of the prompt payment of invoices, regardless of the
characterization or nomenclature used to describe such discounts or
concessions; plus (z) freight costs based on the cost to ship a quantity of
such Product equivalent to the lesser of (i) a quantity of products equivalent
to the sum of (A) three weeks' inventory of such Product at the applicable
distribution center attributable to the Restaurants and the Counted Restaurants
(based on the
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aggregate actual usage of such Product by the Restaurants and the Counted
Restaurants in such distribution center's service area during the 12- month
period immediately preceding Distributor's delivery of the Product), and (B)
three (3) weeks' inventory of each Similar Product at the applicable
distribution center attributable to the Restaurants and the Counted Restaurants
(based on the aggregate actual usage of such Similar Product by the Restaurants
and the Counted Restaurants in such distribution center's service area during
the 12-month period immediately preceding Distributor's delivery of the Similar
Product), and (ii) one full Truckload of such Product, at the lowest published
freight rate of national common carriers that would be applicable to the
transportation of such Product from such Product's supplier to the applicable
distribution center, notwithstanding whether such common carrier is used or
utilized. Any contrary provision in this Agreement notwithstanding,
Distributor shall not be required to stock or supply the Products or any other
products (including Similar Products) in or from any particular distribution
center or centers.
(b) The Delivery Fees shall be adjusted in accordance with
Section 10(c) to reflect reasonable increases or reasonable decreases, as the
case may be, in (i) the wages and benefits provided by Distributor to its
employees, (ii) Distributor's energy costs, (iii) the costs of funds used by
Distributor (iv) any substantial changes in the nature of a Product, a material
alteration in the Product mix, or a substantial change in the geographic mix of
the Company Restaurants that, in any such case, materially alters the
distribution handling costs associated with such Product, and (v) any other
items that materially alter the distribution handling costs associated with
such Product. Such increases and decreases in the Delivery Fees shall be
referred to collectively as "Delivery Fee Adjustments". The parties
acknowledge that any change in the number or product mix of the Restaurants may
materially alter the distribution handling costs associated with the Products.
The parties agree that (i) changes in the number or product mix of Franchised
Restaurants shall be grounds for effecting a Delivery Fee Adjustment only in
respect of deliveries made to the Franchised Restaurants, and (ii) changes in
the number or product mix of Company Restaurants shall be grounds for effecting
a Delivery Fee Adjustment only in respect of deliveries made to the Company
Restaurants.
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(c) Within 30 days of the second, fourth and sixth
anniversaries of the Closing, senior executives of Distributor and the Company
shall meet and negotiate in good faith to effect an equitable Delivery Fee
Adjustment; provided that at any time during the term of this Agreement, in the
event of an increase or decrease in Distributor's costs in respect of the items
enumerated in Section 10(b) equivalent to or greater than one quarter of one
percent (0.25%) of Distributor's total sales to the Restaurants during the
previous 12-month period which results from events or occurrences beyond the
reasonable control of Distributor, such executives shall meet and so negotiate
within 15 days following the Company's receipt of written request by
Distributor therefor. In connection with any such negotiations, Distributor
shall afford the Company reasonable access, upon reasonable notice, to its
books and records to the extent and only to the extent necessary to calculate
and verify Distributor's costs in respect of the items enumerated in Section
10(b). If, within 15 days of the date of such meeting, Distributor and the
Company have not agreed upon the amount of the Delivery Fee Adjustment, if any,
the parties shall submit the matter to arbitration in accordance with Section
13(b).
(d) Distributor shall prepare and distribute to the
Company and the Franchised Restaurants, on a monthly basis, by the first Sunday
of each month, price lists showing the prices of all Products regularly
supplied under this Agreement, which prices shall be calculated in accordance
with this Agreement and shall be in effect as of such first Sunday.
Distributor shall prepare and distribute to the Company and the Franchised
Restaurants, on a weekly basis by each Sunday, written notice of any price
changes, which shall be in effect as of such Sunday.
(e) Neither Buyer nor the Company shall, and they shall
cause their respective Affiliates not to, establish or initiate any action, the
primary purpose of which is to subvert or evade the pricing or adjustment
provisions of this Agreement (including, without limitation, arrangements with
suppliers that subvert or evade the nondeduction
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from Cost of early payment, prompt payment, cash and similar discounts pursuant
to Section 10(a)(ii) hereof).
(f) Distributor shall not, and shall cause its Affiliates not
to, establish or initiate any action, the primary purpose of which is to
subvert or evade the pricing or adjustment provisions of this Agreement
(including, without limitation, arrangements with suppliers that subvert or
evade the deduction from Cost of vendor discounts pursuant to Section 10(a)(ii)
hereof.
11. Prompt Payment. (a) Distributor shall periodically
invoice the Company (which may be effected by electronic transmission of the
invoice to the Company) at the address of its corporate headquarters,
Attention: Director of Cash Management, following delivery to the Company
Restaurants for all Products supplied by Distributor and accepted by the
Company Restaurants hereunder. The prices on invoices for all Products
supplied by Distributor and accepted by the Company Restaurants shall be in
accordance with Section 10 hereof. The terms of payment of each such invoice
shall be "1%/10 days - net 21 days, cash in hand." All payments made by the
Company to Distributor pursuant to this Agreement shall be made by wire
transfer of immediately available funds to a bank account designated by
Distributor not fewer than two days prior to such payment, or the last bank
account used for any such transfer, as the case may be.
(b) Distributor shall periodically invoice the operator
of each Franchised Restaurant in accordance with its usual practices.
12. Title and Risk of Loss. Except in the case of night
deliveries or so-called "key drop" deliveries, title to all Products shall pass
upon a Restaurant's acceptance, subject to the rejection of certain items by
notation on the delivery ticket, of such Products for delivery. With respect
to "key drop" deliveries, title to all goods shall pass at the close of
business on the immediately succeeding business day, unless rejected by the
Restaurant prior thereto. Distributor shall provide credits
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for Products within seven (7) days of notice and shall ensure that subsequent
▇▇▇▇▇▇▇▇ reflect all shortages and damaged or rejected goods noted on delivery
tickets. The Company shall make arrangements through Distributor's order
department for the return of any goods not accepted by the Company consistent
with the reasonable policies of Distributor with respect to the return of
goods. Distributor shall promptly issue a receipt to the Company for any goods
picked up for return and ensure that the Company receives a proper credit
therefor within seven (7) days of pickup. Distributor shall bear all risk of
loss, damage, or destruction until title passes to the Company.
13. Examination.
(a) The Company shall have the right, at its own expense,
not more frequently than once in any 12-month period, upon giving 30 days'
written notice to Distributor, to examine Distributor's books and records
applicable to verifying the proper calculation of the payments due to
Distributor by the Company pursuant to this Agreement during the previous
12-month period. The Company shall be entitled to employ, at its own expense,
an independent auditor to assist it in connection with such examination.
(b) Distributor and the Company agree to work together in
good faith to resolve any discrepancy between the amounts invoiced by
Distributor to the Company and the Company's examination. In the event of a
conflict which cannot be resolved, if the amount involved exceeds $100,000.00,
then the Company or Distributor may give the other written notice (the "Notice
of Dispute") which shall specify in detail the nature of any disagreements so
asserted. All matters specified in any Notice of Dispute shall be submitted
for resolution to and reviewed by an arbitrator mutually appointed by the
Company and Distributor in accordance with the (commercial) rules of the
American Arbitration Association. If within ten (10) days of the Notice of
Dispute the parties are unable to agree upon the selection of an arbitrator,
then either party may request the President of the American Arbitration
Association to select an arbitrator who is willing to perform such
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services. The arbitrator selected shall consider only the disputed items set
forth in the Notice of Dispute. The arbitrator shall act promptly to resolve
all disputed matters and its decision shall be final and binding on the
parties. The fees and expenses of the arbitrator shall be shared jointly and
equally by the Company and Distributor.
(c) Within 30 days of the parties' agreement or the
arbitrator's determination, as the case may be, that the amounts paid by the
Company to Distributor with respect to the period for which books and records
were examined pursuant to Section 13(a) either exceeded or were less than the
payments due to Distributor, Distributor shall pay the amount of the excess to
the Company, or the Company shall pay the amount of the deficiency to
Distributor, as the case may be. If Distributor shall become obligated to pay
the Company $500,000.00 or more in respect of any single examination pursuant
to Section 13(a), Distributor shall pay the reasonable fees and disbursements
of the Company's independent auditors incurred in connection with such
examination.
(d) The Company and Distributor agree that the rights and
remedies granted to the Company in this Section 13 are in addition to any other
rights and remedies which may be granted in this Agreement or by law.
14. Trademarks and Confidentiality. (a) Distributor
shall not use, without the prior written consent of the Company, any Trademarks
in any manner whatsoever. Under no circumstances shall the use of any
Trademark be permitted for use as a part of Distributor's trade name. The
delivery vehicles used by Distributor to distribute Products under this
Agreement shall not bear the trademark, trade dress or logo of any restaurant
chain other than the Company.
(b) The Company and Distributor agree that all
information communicated by the Company to Distributor and by Distributor to
the Company, including but not limited to communications relating to the
quantity and price of goods and services provided hereunder, the Products,
Product
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specifications and formulations, promotional events, marketing and restaurant
data, new product introductions and the like, where such information is either
identified to Distributor as "confidential" or is reasonably identifiable by
either party as such, shall be maintained in confidence by the party receiving
such information, except that such information may be provided by either party
to its auditors, consultants and advisors who agree to maintain such
confidentiality or are otherwise bound to restrictions on disclosure and to any
prospective purchasers of all or part of their respective businesses; provided,
however, that such prospective purchasers shall have executed and delivered a
confidentiality agreement in form and substance approved by the Company, which
approval shall not unreasonably be withheld or delayed. The confidentiality
obligations of this Section shall not apply to information:
(i) which either party is compelled to disclose by
judicial or administrative process, or in the opinion of counsel
satisfactory to the other party, by other mandatory requirements of
law;
(ii) which can be shown to have been generally available
to the public other than as a result of a breach of this Section or of
any act or omission of the Company or Distributor or any of their
respective Affiliates prior to the Closing;
(iii) which can be shown to have been provided to either
party by a third party who obtained such information after the Closing
other than as a result of a breach of this Section; or
(iv) which can be shown to have been independently acquired by
either party after the Closing without use of any information provided
hereunder or, with respect to Distributor, without use of information
acquired prior to the Closing.
15. Testing. Distributor shall promptly submit to the
products testing laboratory of the Company or any
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other entity designated by the Company, in accordance with a testing schedule
established from time to time or upon request by the Company, samples of any
Product handled by Distributor. The Company shall reimburse Distributor for
the Cost of such samples plus applicable freight F.O.B. Distributor's
distribution center(s) promptly upon request by Distributor therefor.
16. Insurance. Distributor agrees to maintain, during
the entire term of the Agreement, insurance coverage against such risks as may
be reasonably specified by the Company, in such minimum amounts as may be
reasonably satisfactory to the Company. Distributor shall provide the Company
with certificates of insurance evidencing such coverage promptly upon the
Company's request therefor.
17. Product Recalls. In the event it is deemed necessary
by either the Company or any suppliers of any Product to recall from any
Approved Distributor and/or from the Hardee's(R) System any quantity of any
Product, either as a result of failure of such Product to satisfy the
proprietary manufacturing specifications issued to suppliers by the Company, or
for any other reason bearing on quality and/or safety of such Product,
Distributor shall comply diligently with all Products recall procedures then in
effect, as established from time to time by the Company and applicable law.
The Company shall bear all costs associated with the recall of any Product, and
shall reimburse Distributor for such costs as are incurred by Distributor,
unless such recall is the result of the gross negligence or intentional
tortuous acts of Distributor, in which event Distributor shall bear all costs
and expenses incurred by it and/or the Company in complying with such recall
procedures. In the event Distributor fails or refuses to comply with the
recall of such Products hereunder upon request by the Company, the Company
shall be entitled to take such action as it deems necessary to recall such
Products from the Hardee's(R) System and Distributor shall reimburse the
Company for its out-of-pocket costs and
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expenses incurred in connection with such recall to the extent and only to the
extent that such costs and expenses exceed the costs and expenses which would
have been incurred by Distributor had it complied with such recall.
18. Force Majeure. Distributor shall not be responsible
for damages caused by its delay or failure to perform, in whole or in part, its
obligations hereunder or by its non-compliance with any of the terms hereof
where such delay, failure or non-compliance is due or attributable to acts of
God, fires, floods, storms, earthquakes, explosions, any inability by
Distributor to obtain timely delivery to Distributor of Products, embargoes,
acts of or compliance with requests of governmental authorities, nuclear or
atomic disasters, national emergencies, wars, riots, strikes, civil
insurrections, or similar events beyond the reasonable control of Distributor
(any such event, a "force majeure". In the event of any such force majeure,
Distributor shall give the Company prompt notice thereof, and thereafter
Distributor's obligations hereunder shall be suspended, in whole or in part,
for the duration of such force majeure. Upon expiration, settlement or other
resolution of the force majeure, Distributor shall resume performance in full
hereunder but shall not be required to make- up for any term of this Agreement.
In the event Distributor's obligations hereunder are suspended during any force
majeure, the Company may enter into other reasonable arrangements with other
distributors to satisfy its requirements hereunder. Such other arrangements
shall be reasonable in scope and duration such that they may be terminated as
soon as possible upon the expiration, settlement or other resolution of the
force majeure. Distributor shall use its best efforts to terminate or cause
the expiration of any force majeure as soon as practicable following its
occurrence.
19. Assignment. (a) Subject to Section 19(b),
Distributor may not assign this Agreement without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed;
provided, however, that nothing in this Section shall preclude Distributor from
employing common carriers, contract carriers, public warehousemen or other
similar parties to temporarily perform its services hereunder.
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(b) Notwithstanding Subsection 19(a), Distributor may
assign its rights and obligations under this Agreement without the Company's
consent to any Affiliate of Distributor or to any purchaser of all or
substantially all of its business or assets; provided that neither Distributor
nor any assignee of Distributor's rights hereunder shall assign its rights
under this Agreement to any party conducting, directly or indirectly, a
significant restaurant business without the consent of the Company, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 19, a change of control or majority ownership of Distributor shall be
deemed to be an assignment of rights under this Agreement.
(c) Any permitted assignment of this Agreement by either
party shall, except as otherwise agreed, be deemed an assignment of all of the
assignor's rights and liabilities under this Agreement accruing, arising or
relating to any period on or after the date of such assignment.
(d) Any assignment made in violation of this Section
shall be null and void.
(e) During the term hereof, (i) if the Company sells 50
or more Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company or any Franchisee (a "Significant Sale"), the Company agrees to use
commercially reasonable efforts to cause such purchaser or group of purchasers
to enter into an exclusive requirements purchase agreement on terms
substantially similar to this Agreement, including Section 3, and (ii) if the
Company sells fewer than 50 Restaurants to any single purchaser or group of
purchasers directly or indirectly controlling, controlled by or under common
control with Buyer, the Company or any Franchisee, the Company agrees to use
its reasonable commercial efforts to cause such purchaser to enter into an
agreement providing for Distributor to act as its distributor for Products.
20. Termination and Suspension. (a) Notwith-standing
Section 5, if any party fails or refuses to comply
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with one or more of its material obligations hereunder, resulting in a material
default which is incapable of being cured or which is capable of being cured
and is not cured within a reasonable period following its receipt of oral or
written notice of such default from the Company (a "Breach"), the nonbreaching
party shall provide the breaching party written notice thereof, describing the
Breach and specifying a date, not less than thirty (30) days following the
breaching party's receipt of such notice, on which this Agreement shall be
terminable at the option of the nonbreaching party unless the Breach has by
that date been substantially cured. If the Breach has been substantially cured
by the date so specified this Agreement shall not be terminable as a result of
such substantially cured Breach.
(b) The Company may temporarily suspend Distributor's
designation as an Approved Distributor and the Company's obligations pursuant
to Section 3 with respect to a particular Product (each such temporary
suspension, a "Suspension") if, but only so long as, Distributor shall fail to
comply with its obligations under this Agreement with respect to such Product
and such failure presents or is likely to present in the immediate future a
danger of imminent harm to consumers or to restaurant employees or is in
material violation of the requirements of applicable government health, safety
or sanitation standards.
(c) Any party's failure to terminate this Agreement upon the
occurrence of one or more Breaches shall not constitute a waiver or otherwise
affect the right of such party to terminate the Agreement for any subsequent
Breach. Any party's failure to exercise any of its rights or remedies
hereunder or to insist on strict compliance by any other party with any of the
terms hereof shall not constitute a waiver of any of the terms or conditions
hereof with respect to any other or subsequent Breach nor shall it constitute a
waiver by such party of its right at any time thereafter to require compliance
with the terms hereof as provided herein. The rights or remedies granted to
the parties herein are in addition to any other rights or remedies which may be
granted by law.
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(d) The obligations of Distributor pursuant to this Agreement
shall be terminable, at Distributor's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against the Company under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law to
be adjudicated a bankrupt or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of the Company; (iii) any
assignment for the benefit of creditors of the Company; or (iv) if the Company
shall admit in writing its inability to pay its debts as they become due.
(e) The obligations of the Company pursuant to this Agreement
shall be terminable, at the Company's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against Distributor under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law to
be adjudicated a bankruptcy or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of Distributor; (iii) any
assignment for the benefit of creditors of Distributor; or (iv) if Distributor
shall admit in writing its inability to pay its debts as they become due.
(f) Upon termination or expiration of this Agreement, (i)
Distributor's designation as an Approved Distributor shall terminate and be of
no further force and effect; (ii) Distributor shall not thereafter identify
itself as an Approved Distributor to the Hardee's(R) System or use any of the
Company's trade secrets, the Confidential Information and/or other proprietary
information of the Company; (iii) Distributor shall cease to use, in any manner
whatsoever, any of the Trademarks; and (iv) Distributor shall sell to the
Company, and the Company shall purchase from Distributor, within 30 days of
such termination or expiration, all Products in Distributor's inventory, at the
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Cost of such Products, plus applicable freight F.O.B. Distributor's
distribution center(s); provided, however, that the Company shall not be
required to purchase the amount of Distributor's stock which exceeds three (3)
weeks' inventory of such Product (based on total sales of such Product to the
Restaurants during the immediately preceding 12-month period) if such stock as
exceeds such three (3) weeks' inventory was not purchased to fill orders placed
by the Company Restaurants.
21. Compliance With Laws. Distributor warrants that all
Products distributed by it to the Restaurants shall be received, handled,
stored, shipped, delivered and sold by Distributor in compliance with all
applicable (a) federal and state laws, (b) rules and regulations of all
governmental and quasi-governmental agencies having jurisdiction, and (c)
municipal ordinances. Upon its receipt of any citation issued by any
governmental or other regulatory authority (or of process or citation issued by
any court of law or equity) which might result in any interruption in service
to any Restaurant, Distributor shall promptly send written notice thereof to
the Company and to all Franchised Restaurants which may be affected thereby.
22. No Partnership. Distributor acknowledges that it is
an independent contractor and no party is or shall be construed as an agent,
partner, joint venturer or employee of another. No party shall have the
authority to bind or otherwise obligate any other party in any manner and no
party shall represent to anyone that it has a right to do so.
23. Waivers. No waiver or waivers by any party of any
provision of this Agreement, whether by conduct or otherwise, shall be deemed
to be a further or continuing waiver of the provision or any other provision of
this Agreement.
24. Attorneys' Fees. If it is necessary for either of
the parties to institute suit to enforce any of the provisions of this
Agreement, then the prevailing party in such suit shall be entitled to collect
and receive
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reasonable outside attorneys' fees and court costs through and including
appellate litigation, and the other party shall pay for same.
25. Notices. All notices hereunder shall be deemed given
if in writing and delivered personally or sent by telex or telecopier or by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses as shall be specified by like
notice):
(a) If to the Company or Buyer, to:
▇▇▇▇▇▇'▇ Food Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
With copies to:
CKE Restaurants, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(b) If to the Distributor, to:
Fast Food Merchandisers, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Any notice given by mail shall be effective when received.
Any notice given by telecopier shall be effective when the appropriate
telecopier confirmation is printed by the telecopier used to transmit such
notice.
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26. Captioned Headings. The section headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
27. Governing Law and Venue. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY
HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY
CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED
IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR
IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE
COUNTY OF NEW YORK (THE "CHOSEN COURTS") AND (I) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY OBJECTION TO
LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS, (III)
WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR DO NOT
HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV) AGREES THAT SERVICE OF PROCESS
UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE
IS GIVEN IN ACCORDANCE WITH SECTION 25 OF THIS AGREEMENT.
28. Amendment and Waiver. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, the Company and
Distributor, or in the case of a waiver, by the party against whom the waiver
is to be effective. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
29. Counterparts. This Agreement and any amendments hereto
may be executed in one or more counterparts, each of which shall be deemed to
be an original by the parties executing such counterpart, but all of which
shall be considered one and the same instrument.
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30. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability.
31. Third-Party Rights. Notwithstanding any other
provision of this Agreement, this Agreement shall not create benefits on behalf
of any third party or person other than the parties hereto or their permitted
assignees (including without limitation any broker, finder, supplier or
customer), and this Agreement shall be effective only as between the parties
hereto, their successors and permitted assigns.
32. Entire Agreement. This Agreement (including all
Annexes and Schedules hereto) contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
▇▇▇▇▇▇'▇ FOOD SYSTEMS, INC.
By:
--------------------------
Name:
Title:
CKE RESTAURANTS, INC.
By:
--------------------------
Name:
Title:
FAST FOOD MERCHANDISERS, INC.
By:
--------------------------
Name:
Title:
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