Exhibit 10.1
DISTRIBUTION SERVICE AGREEMENT
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Commissary Operations, Inc., 2629 Eugenia Avenue, Nashville, Tennessee
37211, a Tennessee corporation ("COI") and Captain D's Seafood, a division of
Shoney's, Inc., a Tennessee corporation (the "Customer") enter into this
distribution service agreement as of the 18th day of November, 1999,
effective as of the 28th day of November, 1999 ("Effective Date").
Whereas, COI performs buying, order placement, warehousing,
transportation and distribution services for the food service industry; and
Whereas, Customer operates the establishments listed in Schedule A (the
"Customer Locations"), and
Whereas, Customer desires to contract with COI as its "Primary
Distributor" for the product categories described on Schedule B (the
"Products") to all of its Customer Locations and COI desires to perform these
services, and
In consideration of the mutual covenants and obligations set forth in
this agreement, and other good and valuable consideration, the receipt and
sufficiency of which each party hereby acknowledges, the parties agree as
follows:
1. APPOINTMENT OF DISTRIBUTOR.
Customer appoints COI to serve as its "Primary Distributor" to the
Customer Locations of the Products. "Primary Distributor" shall be defined
to mean that Customer is required to purchase no less than ninety percent
(90%) of Customer's requirements for the Products from COI. Upon request,
COI agrees to offer services to franchisees of Captain D's, subject to the
terms and conditions negotiated between COI and the Captain D's franchisee.
2. PRODUCTS COVERED BY THIS AGREEMENT.
The Products covered by this agreement are listed on Schedule B attached
hereto. Customer also acknowledges that COI may substitute the brand(s) of
the Products subject to Customer's prior written consent. Should a
substitution be approved, COI will ship a comparable product at a price
pursuant to paragraph 7.
3. PURCHASE AND SALE.
3.1 During the term of this Agreement, COI agrees to sell and deliver
and Customer agrees to accept and pay for the goods described on Schedule B
attached hereto. The parties acknowledge and agree that COI regularly sells
goods other than the Products and COI may allow Customer to buy goods other
than the Products;
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provided, however, that COI shall only be obligated to sell and deliver the
Products pursuant to the terms of this Agreement. Based on written
instructions received from Customer, COI will maintain only one ordering
template for each distribution center servicing the Customer Locations.
3.2 Proprietary Products and Special Order Products
(a) Stocking and Minimum Purchase Requirements for Proprietary
Products and Special Order Products. COI acknowledges Customer's desire to
purchase certain Products bearing Customer's trademarks, logos, or trade name
("Proprietary Products") as well as certain packer or national brand Products
designated by Customer from time to time ("Special Order Products"). COI
will stock Proprietary Products and Special Order Products upon written
request by Customer subject to an increased mark-up on them of an additional
one percent (1%), provided however, that Customer will be entitled to five
(5) Proprietary Products at no charge. COI will not have an obligation to
carry a Proprietary Product or Special Order Product if: (i) Customer
purchases less than five cases per week of that Proprietary Product or
Special Order Product or (ii) the sales volume of such Proprietary Product or
Special Order Product from Customer results in less than twelve turns of the
inventory of that Proprietary Product or Special Order Product in any 12
month period. However, there will not be any additional mark-up increase for
fish or shrimp products. Upon notification from COI that Customer has failed
to meet its minimum purchase requirements, COI will discontinue the
Proprietary Product or Special Order Product and Customer shall be obligated
to purchase all remaining Proprietary Products and Special Order Products
that did not meet the minimum purchase requirements within one hundred twenty
(120) days of COI's notification that it will no longer carry that
Proprietary Product or Special Order Product, except all perishable
Proprietary Products or Special Order Products shall be purchased by Customer
within seven (7) days. At the end of the seven (7) day or one hundred twenty
(120) day period, whichever is applicable, if Customer has failed to purchase
the remaining inventory of Proprietary Product or Special Order Products,
COI, at its option, may return them to the vendor or sell them at a reduced
price and invoice Customer for any loss between cost as defined in paragraph
9 and the delivered sales price obtained.
(b) Insurance and Indemnity for Proprietary Products and Special Order
Products. COI's policy is that all suppliers provide indemnity agreements
and insurance coverage for products bought by COI. Therefore, COI will have
no obligation to stock Proprietary Products or Special Order Products if the
supplier of such Proprietary Products or Special Order Products will not
provide COI with indemnity and insurance satisfactory to COI.
(c) Customer Responsibility for Proprietary Products and Special
Order Products on Termination. If COI and Customer cease doing business for
any reason, Customer will purchase, or cause a third party to purchase, all
remaining Proprietary Products and Special Order Products in COI's inventory
at Landed Cost as defined in paragraph 9, FOB, COI's shipping dock. In such
event, Customer will purchase or cause to be purchased by a third party all
perishable Proprietary Products and Special
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Order Products within seven (7) days of the termination of this Agreement,
and all other Proprietary Products and Special Order Products within fifteen
(15) days of the termination of this Agreement. In the event a third party
purchases the inventory, Customer hereby unconditionally guarantees payment
for such Proprietary Products and Special Order Products purchased by the
third party designated by Customer.
3.3 Customer Responsibility for Discontinued Products Carried for
Customer. If Customer is the only buyer of any Product, whether a
Proprietary Product or Special Order Product or not, and Customer
discontinues using that Product ("Discontinued Product"), COI will have no
further obligation to carry the Discontinued Product and Customer will
continue to purchase all remaining Discontinued Product in COI's inventory
within one hundred twenty (120) days of notification by COI that the Product
is a Discontinued Product, except all perishable Discontinued Products shall
be purchased by Customer within seven (7) days of notification by COI. At
the end of the seven (7) day or one hundred twenty (120) day period,
whichever is applicable, COI can return the Discontinued Product to the
vendor or sell the Discontinued Product at a reduced price and invoice
Customer for any loss from Landed Cost as defined in paragraph 9 and
delivered sales price obtained.
4. TERM. This Agreement shall continue in effect for five (5) years from
the Effective Date written above ("Initial Term"). This Agreement shall
automatically renew itself for successive terms of one (1) year each unless,
at least six (6) months prior to the date of any such renewal, either party
hereto gives written notice to the other party of its intention that this
Agreement not be renewed.
5. QUANTITY.
5.1 COI agrees to provide all of Customer's requirements of the
Products during the term of this Agreement for use at Customer Locations.
Customer agrees to purchase the Products from COI as Customer's Primary
Distributor (as defined in paragraph 1), except for emergency run out items
purchased locally by the Customer Locations. COI will carry in its
distribution centers an inventory adequate to service Customer's
requirements. COI will carry at its expense up to six (6) weeks average
inventory for each fish and shrimp product. Storage and carrying charges for
any excess inventory will be added to the price of the products sold. COI
will charge carrying costs, which include interest expenses, only to the
extent that COI has incurred these types of charges. For all items, other
than fish and shrimp products, customer may request COI in writing to carry
inventory in excess of four (4) weeks average usage and all storage and
carrying charges will be added to the selling price, only to the extent that
COI has incurred these types of charges.
5.2 Customer agrees to allow COI to use a qualified independent party to
audit the purchasing records of the Customer to ensure compliance with
paragraphs 1 and 5.1. COI can request this audit no more than once in any
consecutive six (6) month period. The cost of this audit will be equally
paid by Customer and COI.
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5.3 COI shall allow Customer or Customer's representatives to inspect
COI's records pertaining to Customer's purchases from COI at reasonable times
and upon reasonable notice. COI will provide information pursuant to such
request to the extent it is reasonably available. Such inspections shall be
limited to no more than once in any consecutive six (6) month period.
6. TERMINATION.
6.1 Subject to the provisions of Paragraph 6.2, Customer, at its
option, may terminate this Agreement if in servicing the Customer Locations,
COI does not maintain a fill order rate of ninety seven percent (97%) of
Products available to COI or actual delivery times within one (1) hour of the
scheduled delivery times, excluding back order or delays in delivery caused
by reasons beyond COI's control.
6.2 Prior to being able to terminate this Agreement, Customer must give
two hundred forty (240) days written notice to COI specifying the reason for
termination and giving COI twenty eight (28) days to cure the deficiency in
service or provide Customer with a reason why the deficiency cannot be cured.
6.3 COI, at its option, may terminate this Agreement upon written
notice to Customer, if Customer defaults in the payment of its account when
the same becomes due and payable, and shall fail to pay such amount within
ten (10) days after receiving notice of such default.
6.4 After completion of the first year of the Initial Term of the
Agreement, COI and Customer agree to negotiate a case fee for products
shipped to Customer that will yield the same total gross profit per case
earned by COI during the first year of the Agreement. This change shall not
yield a price increase for COI or a price decrease for Customer.
6.5 After completion of the second year of the Initial Term of this
Agreement, COI will review the aggregate mark-up of Products on Schedule C or
case charge and modify the charge for Products if Customer agrees. If
Customer does not agree to the modification of the charge for Products, then
COI at its option, may terminate this Agreement upon six (6) months written
notice to Customer.
6.6 Notwithstanding termination of this Agreement, those provisions of
this Agreement with continuing applicability shall survive and remain in full
force and effect.
7. PRICE.
7.1 The pricing formulas for each category of Products and special
services is set forth on Schedule C, such prices being subject to change
every 28 days (the first day of each COI accounting period), except for
produce and commodity items, which shall be priced as of each Friday for the
following week.
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7.2 Promotional and advertising allowances, discounts and rebates
provided by third party suppliers to COI which are attributable to goods
supplied to Customer by COI (except: (i) cash discounts, (ii) new warehouse
opening allowances, and (iii) allowances that are only available to a
distributor and which are intended to offset costs of performing marketing,
warehousing and distribution functions on behalf of a supplier, as long as
such discounts and allowances, no matter the source or service to which
attributed, do not increase Customer's net delivered cost of product) shall
be paid over to Customer.
7.3 Current established vendor payment terms will not be modified by
Customer during the term of this Agreement without COI's prior written
consent.
8. DELIVERY.
8.1 Delivery Days are:
Sunday through Saturday.
8.2 Delivery Times are:
6:00 AM - 11:00 AM
1:00 PM - 4:30 PM
8.3 All deliveries will be tailgate deliveries. Customer will unload
each shipment in a timely manner.
8.4 Only once a week delivery will be required to Customer Locations
that have an average case volume of less than 100 cases per order.
8.5 COI and Customer agree to make best efforts to regularly review the
route schedule times in order to minimize COI's transportation costs.
Schedule A attached hereto contains the schedule by Customer Location with
times for placing orders.
9. LANDED COST.
"Landed Cost" shall be defined as all costs from the vendor and all costs
incurred by COI to get products from vendor's shipping point to COI's final
distribution center. Landed Cost is not reduced by any cash discounts for
prompt payment available to COI.
10. MANNER AND TIME OF PAYMENT.
10.1 Invoicing and Payment. COI will invoice Customer electronically.
Customer shall pay all invoices on a Net 10 basis (within ten days from the
date of each invoice). In the event that Customer's invoices have not been
paid by the due date, COI reserves the right to: (a) demand payment in full
on delivery or to terminate this Agreement, (b) assess a late charge of one
percent (1%) on all such unpaid invoices and, (c) charge a finance charge of
one and one half percent (1%) per month, or the highest rate allowed by law,
whichever is lesser, on all such unpaid invoices.
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10.2 Cost and Freight Information. COI will provide to Customer, at
no charge, information on cost and freight that is reasonably available on a
weekly basis.
10.3 Financial Information. At the request of COI, Customer will
supply quarterly and annual financial statements, consisting of an income
statement, balance sheet and statement of cash flows to COI's authorized
financial representative including, but not limited to, bankers, private
investors and credit agencies. At the request of Customer, COI will supply
quarterly and annual financial statements, consisting of an income statement,
balance sheet and statement of cash flows to Customer's authorized financial
representative including, but not limited to, bankers, private investors and
credit agencies. This information will be exclusively used to evaluate the
credit and business value related to this Agreement and will be supplied
within forty five (45) days after the end of each applicable accounting
period.
11. SCHEDULES. Schedules A, B C and D may only be modified by COI with
Customer's prior written consent, which consent shall not be unreasonably
withheld.
12. FORCE MAJEURE. If COI is prevented from complying, either totally or
in part, with any of the terms of this Agreement by reason of fire, war,
rebellion, accident, acts of God, strikes, lockouts and/or any other cause of
casualty beyond its reasonable control, then, upon written notice to
Customer, the requirements of this Agreement, or the affected provisions
hereof to the extent affected, shall be suspended during the period of such
disability.
13. BINDING EFFECT. This Agreement shall be binding upon and enforceable
against the parties hereto and their respective successors and permitted
assigns. Neither party may assign any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the provisions of this Paragraph, COI may, with Customer's
consent, assign the Agreement to a party purchasing all or substantially all
of the assets of COI and, further, a sale of all or substantially all of the
equity securities of COI shall not be deemed an assignment of the Agreement.
14. CONSTRUCTION. The captions, headings and arrangements used in this
Agreement are for convenience only and do not affect, limit or amplify the
terms and provisions hereof and shall not be used in the interpretation of
this Agreement. When used in this Agreement, references to the singular
shall include the plural and vice versa as the context may require.
15. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing, executed by an officer of the party giving
notice, and shall be deemed to have been duly given when personally
delivered, or upon receipt if delivered by express mail or other similar
method or by facsimile transmission, or certified U.S. mail, with postage
prepaid to the addresses set forth below, or by e-mail sent by an officer of
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the party giving notice to an officer of the other party, or such other
address as the parties shall furnish in writing:
Commissary Operations, Inc. Customer:
ATTN: President and COO Captain D's
2629 Eugenia Avenue ATTN: President and COO
Nashville, TN 37211 1717 Elm Hill Pike, Suite A-1
(615) 231-4444 Nashville, TN 37210
haney_long@shoneys.com (615) 231- 2326
ron_walker@captainds.com
16. GOVERNING LAW. The terms of this Agreement shall be interpreted and
construed in accordance with the laws of the state of Tennessee. The federal
and state courts in Davidson County, Tennessee shall constitute the proper,
sole and exclusive venue and forum for any action arising out of or in any
way related to this Agreement. Each party to this Agreement hereby consents
to any of those courts' exercise of personal jurisdiction over the party in
that type of action and expressly waives all objections the party otherwise
might have to that exercise of personal jurisdiction.
17. PERISHABLE AGRICULTURAL COMMODITIES. This Agreement may cover sales
of "perishable agricultural commodities" as those terms are defined by
federal law. Generally, all fresh and frozen fruits and vegetables which
have not been processed beyond cutting, combining, and/or steam blanching are
considered perishable agricultural commodities, as are oil blanched french
fried potato products. All perishable agricultural commodities sold under
this Agreement are sold subject to the statutory trust authorized by Section
5(c) of the Perishable Agricultural Commodities Act, 1930 (7U.S.C. 499e(c)).
The seller of these commodities retains a trust claim over these commodities
and all inventories of food or other products derived from these commodities
until full payment is received.
18. ARBITRATION. All actions, disputes, claims or controversies of any
kind between the parties to this Agreement, including, but not limited to any
action, dispute, claim or controversy arising out of the delivery by COI of
any Products to Customer ("Dispute") shall be resolved by binding arbitration
in Nashville, Tennessee, administered by the American Arbitration Association
(the "AAA") in accordance with the Commercial Arbitration Rules of the AAA
(the "Rules") and, to the maximum extent applicable, the Federal Arbitration
Act, as supplemented by the Tennessee Arbitration Act. Arbitrations shall be
conducted before one arbitrator mutually agreeable to Customer and COI. If
the parties cannot agree on an arbitrator within thirty (30) days after the
request for arbitration, then the arbitration shall take place before an
arbitrator selected in accordance with the Rules. The arbitrator shall not
have the power (a) to alter, modify, amend, add to, or subtract from any term
or provision of this Agreement or (b) to grant interim injunctive relief
prior to the award. Judgment of any award rendered by an arbitrator may be
entered in any court having jurisdiction. All fees of the arbitrator and
other costs and expenses of the arbitration shall be paid by COI and Customer
equally unless otherwise awarded by the arbitrator; provided, however, that
the non-prevailin
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party in an arbitration shall pay all reasonable attorneys' fees and expenses
incurred by the prevailing party in connection with the Dispute and the
arbitration. In addition to the grounds set forth in Section 29-5-313 of the
Tennessee Arbitration Act, any court described in paragraph 16 of this
Agreement may vacate an award of the arbitrator, in whole or in part, to the
extent the award is contrary to applicable law or contrary to the clear and
convincing evidence otherwise presented to the arbitrator. The court shall
have the authority to reverse an award (in whole or in part) or vacate and
remand the award (in whole or in part) for rehearing by the arbitrator.
19. AMENDMENTS. This Agreement may only be amended by a written document
signed by each of the parties.
20. DATA PROCESSING. COI will provide Order Exceptions Reports and
Product Usage Reports including all available information on price of goods
sold, cost of goods sold and freight, to Customer weekly at no charge to
Customer during the term of this Agreement. Upon written request by
Customer, COI will provide additional reports to Customer at no charge,
provided no additional programming effort is required. COI does not provide
computer hardware systems to Customer. COI will provide direct order entry
software selected by COI which will enable Customer Locations to place orders
directly with COI. Customer must supply whatever personal computer hardware
and communication connections necessary to enable Customer to utilize such
order entry software. Some reports will not be available until COI has fully
implemented its new distribution systems.
21. CUSTOMER DIRECT PRICING AGREEMENTS. Customer has provided COI with
written evidence of the existence of agreements with Product suppliers in
which the suppliers and Customer have agreed on allowances for Customer
("Supplier Direct Allowances") or the prices the supplier will charge
distributors for Products to be resold to Customer ("Supplier Direct
Prices"), which agreements are identified in Schedule D. COI will use the
Supplier Direct Price on a Product as the Landed Cost of such Product when
calculating its Sell Price. COI also will pass along the agreed Supplier
Direct Allowance for a Product by deducting it from the Sell Price of such
Product calculated in accordance with Schedule C. Customer must provide COI
thirty (30) days written notice of the existence of any additional agreements
of this sort, as well as any modifications, extensions or terminations of any
such existing agreements. COI will not be responsible for the failure to buy
under such additional agreements in the absence of written notice from
Customer and a supplier of the existence of such agreements. COI is not
responsible for errors or omissions by a supplier in maintaining such
programs and Customer's sole remedy for such errors or omissions shall be
against the supplier.
22. ENTIRE AGREEMENT. This Agreement, the attached Schedules and any
delivery tickets and invoices sent or delivered with respect to the Products
sold to Customer constitute the entire Agreement between Customer and COI.
Customer hereby acknowledges and agrees to the terms and conditions to be
contained on such delivery tickets and/or invoices to the extent the delivery
tickets and/or invoices do not
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differ from this Agreement, in which case this Agreement shall be
controlling. No representations, inducements, promises or agreements, oral
or otherwise, which are not embodied herein, shall be of any force or effect.
23. LIMITED LICENSE TO USE TRADEMARKS, SERVICE MARKS AND LOGOTYPES.
Customer hereby grants COI during the term of this Agreement a limited
license to use Customer's trademarks, service marks, and logotypes in
connection with the sale of the Proprietary Products in accordance with the
terms of this Agreement and only to Customer Locations and franchisees of
Customer.
24. CONFIDENTIALITY AGREEMENT. Customer shall maintain the terms and
conditions of this Agreement and the attached Schedules ("Confidential
Information") in strict confidence and shall not disclose any of the
Confidential Information to any person other than employees or agents of
Customer with a need to know or as otherwise required by securities,
franchise or other laws. COI shall maintain the Customer Direct Pricing
Agreements disclosed to COI by Customer in strict confidence ("Confidential
Information") and shall not disclose any of the Confidential Information to
any person other than employees or agents of COI with a need to know or as
otherwise required by securities, franchise or other laws. Customer and COI
shall not use the Confidential Information for any purpose other than in
order to provide the Products and services covered by this Agreement in
accordance with its terms. After the termination of this Agreement, each
party shall return all Confidential Information to the other party, or
destroy it and furnish an affidavit confirming its destruction.
25. INSURANCE. In the event COI and Customer are not owned by the same
parent company, Customer is entitled to request and receive within a
reasonable time period, not to exceed 30 days, a current certificate of
insurance providing COI with a minimum of $1,000,000 in general liability and
products liability insurance listing Customer as an additional insured.
26. NATURE OF RELATIONSHIP. This Agreement shall not create any
partnership, agency or other type of business relationship between COI and
Customer.
27. WAIVER. The failure of a party to insist in any one or more instances
on the performance of any term or condition of this Agreement shall not
operate as a waiver of any future performance of that term or condition.
28. SEVERABILITY. If a court of competent jurisdiction holds any provision
of this Agreement invalid or ineffective with respect to any person or
circumstance, the holding shall not affect the remainder of this Agreement or
the application of this Agreement to any other person or circumstance. If a
court of competent jurisdiction holds any provision of this Agreement too
broad to allow enforcement of the provision to its full extent, the court
shall have the power and authority to enforce the provision to the maximum
extent permitted by law and may modify the scope of the provision accordingly
pursuant to an order of the court.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
dated and effective as first written above.
Commissary Operations, Inc. (COI)
By: /s/ Haney A. Long, Jr.
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Title: President & COO
Customer:
Shoney's, Inc.
By: /s/ Ronald E. Walker
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Title: President & COO - Captain D's Division
By: /s/ J. Michael Bodnar
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Title: President & CEO
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Schedules omitted due to immateriality.