EXHIBIT 10.4
CONFORMED COPY
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (this "Agreement"), dated as of December 21, 2004,
is made by and between Townsends, Inc., a Delaware corporation ("Townsends"),
and Kahiki Foods, Inc., an Ohio corporation ("Kahiki").
RECITALS
A. Townsends and Kahiki have entered into that certain Note Purchase
Agreement and the related investment documents (collectively, the "Note Purchase
Agreement"), dated as of the date hereof, whereby Townsends has agreed to
purchase up to $2,000,000 in convertible notes (the "Notes") from Kahiki. The
execution of this Agreement is a condition to the closing of the Note Purchase
Agreement.
B. In addition, Townsends and Kahiki have executed a Copacking and Storage
Agreement, dated as of the date hereof (as such agreement may be amended from
time to time, the "Copacking Agreement"), whereby Townsends has agreed to
separately supply Kahiki with raw poultry products and Kahiki has agreed to
supply Townsends with finished poultry products and to temporarily store such
products for Townsends.
C. Kahiki also desires to purchase additional poultry products from
Townsends for processing and resale to its other customers. Townsends desires to
supply such additional poultry products to Kahiki, on the terms and conditions,
and in return for the compensation, hereinafter set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are acknowledged by each of the parties
hereto, the parties hereto hereby agree as follows:
1. AGREEMENT TO SUPPLY AND PURCHASE.
(a) Beginning on January 1, 2005 (the "Effective Date"), Townsends
hereby agrees to supply and sell to Kahiki (i) line run random boneless skinless
chicken breasts ("Skinless Breasts") and/or (ii) 5% and down boneless breast
chunks ("Chunks" and together with the Skinless Breasts, the "Product") on the
terms and conditions set forth in this Agreement.
(b) Beginning on the Effective Date, Kahiki shall be obligated to
purchase and Townsends shall deliver fill orders for Product from Kahiki in a
minimum amount of not less than 20,000 pounds per week (the "Minimum Weekly
Amount") nor more than 40,000 pounds per week (the "Maximum Weekly Amount") of
Product for an average of 30,000 pounds per week, tested immediately following
each calendar quarter. It is the intent of the parties to develop a reasonably
stable and routine order amount among each of the Products. Townsends may obtain
the Product from Townsends' own internal supply or from a third party so long as
such Product meets agreed upon Product specifications. Failure by Kahiki to
purchase and
accept delivery of the Minimum Weekly Amount shall be a material default under
this Agreement.
2. SPECIFICATIONS. Product sold hereunder shall meet the specifications
consistent with industry standards for the Product.
3. TERM. This Agreement shall be in effect for the period from the date
hereof until December 31, 2007 (the "Initial Term"), unless earlier terminated
in accordance with the provisions of this Agreement. Upon the expiration of the
Initial Term, this Agreement shall automatically renew for an additional one (1)
year term (each such term, a "Renewal Term" and together with the Initial Term
and any Renewal Term, the "Term") unless either party notifies the other in
writing at least 12 months prior to the end of the Term of its intent that this
Agreement shall expire without further renewal.
4. PRICE. Pricing shall be as set forth on Exhibit A hereto. Prices for
Product ordered in quantities greater than those specified in Section 1(b)
hereof shall be determined for each Order of such Product at the time such Order
is submitted pursuant to Section 6 hereof.
5. DELIVERY. Townsends shall deliver the Product to Kahiki's facility
located in Gahanna, Ohio at no additional cost, other than as set forth in
Section 4 above. Townsends shall not be required to make more than two
deliveries of Product per week.
6. ORDERS. Kahiki shall submit firm orders for Product to Townsends in
writing at or before 2:00 p.m. on Wednesday of the week preceding the requested
delivery date (each such order, an "Order"). Each Order shall specify the
quantity of Product ordered and the requested delivery date.
7. PAYMENT TERMS. Payment for Product shall be made by wire transfer or
ACH of immediately available funds on each Friday of each week during the Term
of this Agreement, on net 14 day terms from the date of invoice, to accounts
designated by authorized representatives of Townsends. Product sold under this
Agreement will be invoiced separately from any other poultry products provided
to Kahiki under any other arrangement. Failure by Kahiki to provide prompt
payment pursuant to the terms of this Section 7 shall be a material default
under this Agreement.
8. TERMINATION. This Agreement shall terminate at the end of the Term.
This Agreement may also be terminated prior to the end of the Term by: (a)
mutual agreement of the parties, (b) either party hereto upon thirty (30) days
prior written notice to the other party hereto, in the event of breach of this
Agreement by the other party hereto which breach is not cured within such thirty
(30) day period, (c) either party hereto immediately upon written notice to the
other party in the event of the bankruptcy, insolvency or placing of the
business of the other party hereto in the hands of a receiver, (d) Kahiki, if a
Change of Control (as such term is defined in Section 12 of this Agreement)
occurs, upon payment to Townsends of an amount equal to ten cents ($0.10)
multiplied by the total Minimum Weekly Amounts that would otherwise be delivered
to Kahiki during a twelve (12) month period under this Agreement or (e) other
than in relation to a Change of Control, Kahiki at any time upon payment to
Townsends in cash of the amount that would be due to Townsends if Townsends had
performed its obligations
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to deliver all Minimum Weekly Amounts under this Agreement for a period of three
(3) years. Termination for breach shall be in addition to such other rights and
remedies as the terminating party may have under applicable law. In the event of
a termination due to the breach of the other party, the breaching party agrees
to indemnify and hold the non-breaching party harmless from all loss or damage,
other than consequential damages, caused as a result of the breach.
9. FORCE MAJEURE. Delay or failure of performance of either party shall be
excused to the extent that such failure shall be caused by an act of God, strike
or other labor dispute, war or war condition, riot, civil disorder, government
regulation or action, embargo, fire, flood, accident or other casualty not
resulting from negligence of either party hereto (each, a "Force Majeure
Event"). The party invoking the provisions of this paragraph shall give the
other party prompt notice in writing of the occurrence of any Force Majeure
Event. Such excuse shall continue as long as the Force Majeure Event continues,
following which such party shall promptly resume performance hereunder. If any
Force Majeure Event shall continue for a period of more than ninety (90) days,
the non-invoking party shall have the right to terminate this Agreement upon
thirty (30) days written notice.
10. AGENT. This Agreement does not make or constitute Kahiki the agent or
representative of Townsends for any purpose whatsoever. Kahiki shall have no
power or authority to act on behalf of or in the name of Townsends, or to bind
Townsends, either directly or indirectly, in any manner without the express
written authorization of Townsends.
11. INTELLECTUAL PROPERTY. Kahiki will not, without Townsends' written
consent, use any of Townsends' trademarks, brand names, company and/or division
names, facsimiles of packages, letterheads, invoices or any other material
bearing Townsends' name or that of Townsends' subsidiaries in any of Kahiki's
advertising, promotional material or products.
12. ASSIGNMENT. Neither of the parties shall assign or transfer or purport
to assign or transfer any of its rights or obligations hereunder without the
prior written consent of the other party, such consent not to be unreasonably
withheld or delayed. Notwithstanding the foregoing, in the event that Kahiki
engages in any (a) merger or consolidation into or with any other corporation or
entity, (b) sale, conveyance, transfer, license, lease or other disposition of
all or substantially all of the assets of Kahiki or (c) acquisition by any
person of more than 50% of the voting power of all securities of Kahiki
generally entitled to vote in the election of directors of Kahiki (collectively,
a "Change of Control"), this Agreement must remain with, be assumed by or
assigned to the successor entity controlling the operations or assets of Kahiki
after such Change of Control, unless otherwise terminated pursuant to Section
8(d) above. Any default by Kahiki under this assignment provision shall allow
Townsends to terminate the Agreement.
13. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
agreement and understanding of Townsends and Kahiki relating to the subject
matter hereof, and supersedes all other negotiations, agreements,
representations and covenants, oral or written, related to the subject matter
hereof. This Agreement may not be modified, amended or supplemented except by
way of a writing signed by a duly authorized representative of each of the
parties hereto.
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14. WARRANTY.
(a) Townsends represents and warrants to Kahiki that (i) all of the
Products to be provided hereunder shall be of merchantable quality and fit for
its intended use and consumption as food, (ii) none of the Products as of the
date of their sale to Kahiki shall be adulterated, misbranded or unsafe, within
the meaning of the Federal Food, Drug and Cosmetic Act (the "Act") or the
Poultry Products Inspection Act, with all revisions and amendments pertaining
thereto and/or regulations adopted in accordance therewith or within the meaning
of any substantially similar state or municipal law, (iii) none of the Products
are restricted under such Act or any other law from being introduced into
interstate or intrastate commerce and (iv) the title to the Products conveyed to
Kahiki under the terms of this Agreement shall be good and the Products shall be
delivered free from any security interest, lien or other encumbrance whatsoever.
(b) Townsends hereby agrees to indemnify Kahiki against all
liability, loss, damage or costs including, but not limited to, reasonable
attorney's fees and other costs, involved in any proceeding, suit, or other
dispute arising from any breach of said warranties by Townsends. Notwithstanding
the preceding sentence, this paragraph does not apply to the extent the
liability, loss, damage or cost results from the negligence of Kahiki or for any
consequential damages.
15. SEVERABILITY. All of the provisions of this Agreement are intended to
be distinct and severable. If any provisions of this Agreement is or are
declared to be invalid or unenforceable in any jurisdiction, it shall be
ineffective in such jurisdiction only to the extent of such invalidity or
unenforceability. Such invalidity or unenforceability shall not affect the
balance of such provision, to the extent it is not invalid or unenforceable, or
the remaining provisions hereof, nor render invalid or unenforceable such
provision in any other jurisdiction.
16. NO WAIVER. The failure of either party to this Agreement to insist
upon the performance of any of its terms and conditions or the waiver of any
breach of any terms and conditions of this Agreement, shall not be construed as
thereafter waiving any such terms and conditions, but they shall continue and
remain in full force and effect as if no forbearance or waiver had occurred.
17. CONFIDENTIALITY. The terms, conditions, and provisions of this
Agreement are confidential and shall not be disclosed to third parties without
the written agreement of both parties, except to the extent required by a court
order or other tribunal of competent justice.
18. NOTICES. Any notice provided concerning this Agreement shall be in
writing and be deemed sufficiently given when sent by certified or registered
mail or nationally recognized overnight courier if sent to the respective
address of each party as set forth below.
If to Townsends:
Townsends, Inc.
401 South DuPont Highway
Georgetown, Delaware 19947
Attn: David Burton
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Fax: (302) 777-6660
If to Kahiki:
Kahiki Foods, Inc.
1100 Morrison Road
Gahanna, Ohio 43230
Attn: Julie Fratianne
Fax: (614) 322-3189
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same Agreement. This Agreement may be
executed and delivered via electronic facsimile transmission with the same force
and effect as if it were executed and delivered by the parties simultaneously in
the presence of one another.
20. GOVERNING LAW. The construction, validity and performance of this
Agreement shall be governed in all respects by the laws of the State of
Delaware, without regard to principles of conflict of laws.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
TOWNSENDS, INC.
By: /S/ David Burton
----------------
Name: David Burton
Title: Vice President
KAHIKI FOODS, INC.
By: /S. Michael Tsao
----------------
Name: Michael Tsao
Title: Chief Executive Officer
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EXHIBIT A
INITIAL PRICING
A. URNER-BARRY NE BONELESS/SKINLESS TENDER-OUT PRICES
Urner-Barry White, market price less $0.09 (delivered to Columbus, Ohio)
priced on each Wednesday, which shall be the day of shipment with a delivered
price market ceiling of $1.81 per lb and delivered price market floor of $1.21
per lb).
B. 5% AND DOWN BONELESS BREAST CHUNKS
$1.25 per lb (delivered to Columbus, Ohio).
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