EXHIBIT 10.24
MASTER DISTRIBUTOR
AGREEMENT
FOR
NATHAN'S FAMOUS SYSTEMS, INC.
XXXXX XXXXXXX
PRESIDENT & COO
XXXXX XXXXXX
VICE PRESIDENT OF PURCHASING
FEBRUARY 5, 2003
MASTER DISTRIBUTION AGREEMENT
THIS MASTER DISTRIBUTION AGREEMENT (THE "AGREEMENT") IS MADE AS OF THE
16TH DAY OF SEPTEMBER 2002 BY AND BETWEEN U.S. FOODSERVICE, INC., d/b/a U.S.
FOODSERVICE(TM), A DELAWARE CORPORATION WITH ITS PRINCIPAL PLACE OF BUSINESS
LOCATED AT 0000 XXXXXXXX XXXXX XXXXX, XXXXXXXX, XX 00000, ON ITS OWN BEHALF AND
ON BEHALF OF ITS SUBSIDIARIES ("USF") AND NATHAN'S FAMOUS SYSTEMS, INC.
("NATHAN'S FAMOUS"), A DELAWARE CORPORATION, NF ROASTERS CORP. ("NFR"), A
DELAWARE CORPORATION, AND MIAMI SUBS CORPORATION ("MSC"), A FLORIDA CORPORATION.
AS USED IN THIS AGREEMENT, "NATHAN'S" IS MEANT TO REFER COLLECTIVELY TO NATHAN'S
FAMOUS, NFR AND MSC. NATHAN'S MAINTAINS ITS PRINCIPAL PLACE OF BUSINESS LOCATED
AT 0000 XXX XXXXXXX XXXX, XXXXXXXX, XX 00000.
RECITALS:
A. WHEREAS, NATHAN'S OWNS AND OPERATES, AND GRANTS FRANCHISES TO
THIRD PARTIES TO OWN AND OPERATE, RESTAURANTS UNDER THE MARKS
"XXXXX XXXXXX ROASTERS", "MIAMI SUBS", AND "NATHAN'S FAMOUS"
("UNITS");
2. WHEREAS, Nathan's desires to designate a Master Distributor to
perform a substantial portion of the purchasing, warehousing
and distribution functions for food and related non-food
products for Nathan's and its franchisees;
3. USF carries or is willing to carry certain products required
by the Units; and
D. WHEREAS, USF desires to perform the functions of purchasing,
warehousing and distributing certain products for and to the
Units.
NOW, THEREFORE, in consideration of the agreements and promises herein
contained, and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties agree as follows:
AGREEMENT:
1. SUBJECT MATTER OF AGREEMENT. Nathan's hereby appoints USF as its Master
Distributor in the United States, and USF hereby accepts such
appointment. In connection therewith, Nathan's agrees to purchase from
USF, and USF agrees to purchase, warehouse, sell and distribute to the
Units certain products in accordance with the terms and conditions
contained herein. A summary of program assumptions ("Assumptions") used
to create the Master Distributor Program as described herein and a list
of Units to be serviced by USF are outlined on ATTACHMENT A. The
service benefits defined for this program are automatically extended to
any area that is currently serviced by the distribution centers
identified on ATTACHMENT A provided all parameters and requirements of
the program are met.
2. PRODUCTS:
1. Product Categories. USF shall supply the Units with items
ordered by the Units that are within the categories of
products as Nathan's and USF may agree to in writing
(collectively, "Specified Products"). With respect to the
categories of products to be distributed to the Units, USF
offers a wide variety of Private and Signature Brand Products
that offer quality and value. A list of these items can be
found on ATTACHMENT B.
2. Specified Products. USF will maintain an appropriate inventory
of all Specified Products under the following conditions:
i. The Units purchase from USF a minimum of five (5)
cases per week per item, per distribution center or
twelve (12) turns per year with the following
exceptions:
- TEN (10) SLOW-MOVING ITEMS (LESS THAN FIVE CASES
PER WEEK) WILL BE PERMITTED AT NO ADDITIONAL
CHARGE AT EACH DISTRIBUTION CENTER.
- ANY ADDITIONAL SLOW-MOVING ITEMS (LESS THAN FIVE
CASES PER WEEK) UP TO A MAXIMUM OF TEN ITEMS
WILL BE ALLOWED TO REMAIN IN INVENTORY FOR AN
ADDITIONAL $1.00 PER CASE FEE WHICH WILL BE
ADDED TO THE DELIVERED COST OF THE PRODUCTS,
INCLUDING THE AGREED UPON 10.5% MARGIN.
2. A minimum of thirty (30) days written notice is
required for new products to be brought into USF
inventory for distribution.
iii. Nathan's will notify USF at least fourteen (14) days
in advance of special promotions that may cause
unusual or excessive demand on inventory. Nathan's
will make all reasonable efforts to communicate with
maximum lead time, and USF will use all reasonable
efforts to expedite promotional product information
and inventories.
iv. If USF does not presently transact business with a
supplier/packer designated by Nathan's, a complete
Seller's Agreement from that supplier/packer is
required before any product is brought into
inventory. This process may take up to sixty (60)
days. The current insurance requirement under the
Seller's Agreement of $2,000,000 is intended to
protect Nathan's and the Units and USF from costs
associated with product defect and other third party
acts or omissions.
3. Nathan's contracts with manufacturers and
manufacturer representatives will be honored by USF.
Under no circumstances will USF implement
manufacturer deviated pricing without written
confirmation from the specific
manufacturer. If Nathan's has contracts with a given
manufacturer for products not stocked by USF,
Nathan's will give consideration to similar products
stocked by USF provided that the stocking
manufacturer will equalize the pricing.
c. Proprietary or Special Order Products. At Nathan's direction,
USF will maintain an appropriate inventory of proprietary or
special order products under the following circumstances:
5) Nathan's will be responsible for the disposition
of items showing no movement for thirty-five
(35) days ("Dead Inventory"), if USF has sent
Nathan's adequate prior written notice that
there is Dead Inventory. If such Dead Inventory
is not distributed within ten (10) days
thereafter, and the Dead Inventory has been
warehoused in accordance with industry standard,
USF will be reimbursed for any loss on the cost
of said product that is returned to vendors or
disposed of in any manner other than
distribution through normal channels. If said
product is distributed through normal channels,
the normal xxxx-up will apply. Nathan's and the
Units will be responsible for re-stocking
charges or freight cost incurred.
6) USF will notify Nathan's in writing of items
moving less than five (5) cases per week ("Slow
Inventory"). Nathan's and the Units shall have
thirty (30) days to increase movement of such
Slow Inventory to five (5) cases per week. If
such movement does not occur, Nathan's and the
Units will discontinue the use of Slow Inventory
and use an alternative item stocked by USF or
consider an alternative procurement option
(e.g., Next Day Gourmet, direct shipping from
manufacturer, etc.).
7) In the event this Agreement is terminated,
Nathan's will remain liable for proprietary or
special order products purchased at its
direction. In such instance, Nathan's will
coordinate the transfer of such products to the
new distributor, or make full payment to USF for
such products, within twenty-one (21) days after
the last delivery to Nathan's. Nathan's shall
not be responsible for products that are shared
items with other customers of USF, such as Coke
products, sugar packets and other "generic"
products that the center carries for the
majority of their customers. Nathan's
responsibility for final inventory will be based
on Nathan's request for the item and more than
80% of the total usage in the center over the
previous three months.
The items that are identified as proprietary will vary in
each distribution center and from time to time, as products
are implemented and discontinued. As of the date of this
contract, Nathan's has approximately 300 proprietary,
designated or contract items, with or without logo's, that
are used throughout the Nathan's restaurants. USF reserves
the right to increase the margin
structure on proprietary items should the number of
proprietary items be significantly greater than 300.
Nathan's will be required to complete the New
Product/Special Order Notification and Agreement attached
hereto as ATTACHMENT C for all proprietary or special order
products.
d. Substitutions. If a Specified Product is out of stock or
otherwise can not be delivered as ordered, the following
procedures shall be followed:
i. In the event of any substitutions, USF shall promptly
contact Nathan's of the proposed substitution. Any
substitutions shall only be made with prior approval
from Nathan's. Units may not approve substitutions or
additional products.
ii. If a substitution is necessary due to a failure by
USF to provide products and is approved by Nathan's,
the cost of the substitute product to the Unit will
be no more than the authorized original products.
e. Title and Risk of Loss. Title to all goods shall pass upon
delivery to the Unit's receiving dock and acceptance by the
Unit's authorized representative, subject to rejection of
certain items by notation on the invoice. All deliveries may
be checked in jointly by the driver of the delivery vehicle
and the Unit's authorized representative, both of whom shall
note on the invoice any shortages and damaged or rejected
goods. The Unit shall have twenty-four (24) hours from the
time of delivery to notify USF of any concealed damage or
rejected goods with respect to products not jointly checked
in, to note any shortages, damages, or rejected goods. USF
shall ensure that all xxxxxxxx reflect all shortages and
damaged or rejected goods noted on the invoice. The Unit shall
make arrangements through USF order department for any goods
to be returned to USF. USF shall issue a receipt to the Unit
for any goods picked up for return to ensure that the Unit
receives a proper credit therefore. USF shall bear all risk of
loss, damage, or destruction until title passes to the Unit.
3. SERVICE ARRANGEMENTS. Order, delivery and credit memo procedures have
been included as ATTACHMENT D hereto.
a. Deliveries. USF and each Unit shall mutually agree upon a
delivery schedule for the Unit. Units may be charged
restocking fees at a rate of 15% of the case value if, after
three warnings of which the Unit and Nathan's are notified, in
writing, the Unit continues to repeatedly and unnecessarily
return merchandise.
i. Delivery Windows: USF will work with the Units' needs
to provide delivery times that are mutually
agreeable. Plus or minus one (1) hour to the targeted
delivery time will be considered an "on-time
delivery". USF will use reasonable efforts to, in
most cases, emulate the current delivery times
provided by Nathan's current distributor. USF will
target 6:00 a.m. to 11:00
a.m. and 1:30 p.m. to 5:00 p.m. as normal delivery
windows with the availability to deliver those
24-hour Units at other times that are agreeable. USF
must deliver to each Unit within one (1) hour of the
prearranged and mutually agreed upon delivery window.
USF may not deliver to any Unit between the hours of
11:00am and 2:00 pm (local time).
8. COD: Units will always require a skip-day order
placement to have Certified Funds or Checks available
for payment on delivery. No cash COD payments will be
accepted. Should a COD check or credit order be short
on delivery of any item, the deduction for that item
can be taken immediately. The Certified check COD
account's delivery must be paid in full at the time
of delivery and a credit slip will be issued
immediately to be taken on the following delivery.
iii. USF will make necessary delivery within 24 hours of
any critical or proprietary items that are out of
stock and/or short on truck or damaged en-route but
are vital to the Unit's continued operation.
iv. Units will have 48 hours from receipt of goods to
notify USF of hidden damages.
b. On-Line Order Entry System. USF's order entry system through
USF's Customer Service Departments or USF's direct order entry
system provides complete order information, including
confirmation and reservation of inventory as well as
notification of out of stock products, prior to completion of
an order.
c. Order/Delivery Schedule. A next day or skip-day order delivery
schedule will be mutually determined by USF and each Unit to
achieve optimum service levels. Skip day will not be more than
one day between order and delivery and will allow the location
to add to their order by noon on the day in between the order
and delivery, except in special situations.
d. Special Arrangements. Should a Unit request the use of a
"loaner" truck, USF will make every attempt to accommodate
supplying a truck for special occasions. The cost associated
with use of the truck, the condition of the truck and driver
wages will be the responsibility of the Unit.. Customer will
be required to sign a hold harmless agreement prior to its use
of the truck.
4. PRICING STRUCTURE. Nathan's Corporate national contracts with
manufacturers and manufacturer representatives will be honored by USF.
Growth programs and performance incentives earned by USF from
manufacturers will have no impact on Nathan's manufacturer direct
contracts landed cost of goods. USF's definition of "cost" is as
follows:
9. Cost. The price of Products to Nathan's Units shall equal
USF's invoice costs (as hereinafter defined) plus the agreed
upon margin on cost as outlined below. USF's
invoice cost is defined as the manufacturer's (supplier or
packer) delivered cost or f.o.b. unit price plus normal
freight (as hereinafter defined) to USF's distribution center,
less off-invoice discounts or off-invoice allowances. Invoice
cost shall not be adjusted for, and Nathan's and Nathan's
Units shall not be entitled to, promotional allowances, cash
discounts, prompt pay discounts, growth programs or any other
supplier incentives. Normal freight is defined as manufacturer
or common carrier published rates charged to deliver similar
quantities of product for similar distances. It is expressly
acknowledged and agreed that USF may utilize its internal
logistics or branch generated back-haul program, provided that
freight cost charged to the Units does not exceed normal
freight (as defined above).
10. Price Structure. The price structure margin for this Agreement on
the following product categories shall be:
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CATEGORY MARGIN
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Commodity meat, poultry & seafood 10.5%
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Prepared meat, poultry & seafood 10.5%
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Deli meats 10.5%
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Cheese 10.5%
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Other refrigerated 10.5%
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Dry groceries 10.5%
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Produce 10.5%
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Potatoes 10.5%
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Frozen groceries 10.5%
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Beverage w/o service & equipment 10.5%
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Beverage w/ service & equipment 10.5%
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Janitorial 10.5%
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Paper supplies 10.5%
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E&S TBD
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Contract Design TBD
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Broken case fee N/A
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Margins will be reviewed annually to ensure the program will
generate a 10.5% margin for USF and to ensure the
effectiveness of margin structure for Nathan's, as well.
CUSTOMER PROFILE:
Estimated annual sales: $56,000,000
Number of stores: 289 as of Sept. 2002
Number of deliveries: Two (2) times per week; some
locations once per
Average cases per delivery: 80
Average dollar per delivery: $1,912
Average Case Cost: $21.73
11. Price Guarantees and Adjustments. Pricing will be guaranteed
for one (1) month, effective the first calendar day of each
month. Exceptions to monthly pricing will include eggs, dairy,
fresh produce, oil and oil based products, seafood, meat,
poultry and other items mutually deemed as commodity in
nature, which will be priced weekly. In the event extreme or
volatile market conditions develop, USF may request pricing
consideration from Nathan's. Price increases and decreases
will be limited to the amount of cost change and/or freight
changes only, with no change in the agreed upon margin
percentage.
12. Fuel Adjustment. Should the price of fuel as published by the
Department of Energy exceed an average of $1.50 per gallon for
14 consecutive days, USF will impose a delivery surcharge at
the rate of $2.00 for every ten (10) cents per gallon that the
price of diesel exceeds $1.50 per gallon. When the price of
diesel fuel falls below an average of $1.50 per gallon for 14
consecutive days, the fuel surcharge will be removed from each
delivery invoice.
13. Pricing Structure Review. Review will be conducted annually to
assure program yield to be not less than 10.5% margin based
upon a case cost of $21.73. This process will be included as
part of the annual program review. Should there be significant
deviation in the customer profile as stated in Section 4(b)
necessary adjustments to the program can be made upon mutual
agreement.
f. Consumer Price Index. The 10.5% margin could be subject to
change should there be significant increase in the CPI and the
ECI.1. Any such change to the 10.5% margin would be mutually
agreeable between Nathan's and USF.
1. Growth Incentive. Upon completion of the first year of
business (first year will begin November 4, 2002 and will
conclude at the end of 52 weeks. Payment will be made to
Nathan's by December 15th after each year), USF will offer to
pay to Nathan's corporate 1% of sales over the established
base on an annual basis (exclusive of any acquisition of
current USF customers; however, any acquisition will be
included in that year's final numbers that will be treated as
next year's base).
*FIRST YEAR BASE - $56,000,000 (*TO BE VERIFIED)
EXAMPLE: ACTUAL SALES $66,000,000
$56,000,000 LESS BASE
$10,000,000 SALES OVER BASE
$ 100,000 PAY OUT!
The actual sales for the first year will serve as the base for
the second year.
8. Program Marketing Accrual. USF will accrue and pay Nathan's .25%
(one quarter of one percent) of total net sales (paid gross
sales minus any credits) on a quarterly basis. This program
marketing accrual payment will be made to Nathan's as long as
all components of this Agreement (including current accounts
receivable) are met. Sales volume that is past due and not
paid for within credit terms during the 90-day period (i.e.,
1st Quarter) will be deducted from the sales total in the next
quarter (i.e., 2nd Quarter) and not included in the remittance
(i.e., paid in 3rd Quarter) if the past due accounts have not
been resolved and cured. These monies will be disbursed to the
appropriate marketing funds for advertising and/or promotions.
9. Nathan's will indemnify, defend and hold USF harmless from any and
all expenses (including reasonable attorneys' fees),
liabilities, claims, costs, demands, actions and causes of
action in any way related to or arising out of the payment to
Nathan's of the Growth Incentive or the Program Marketing
Accrual.
10. USF will be responsible for transferring all agreed upon saleable
proprietary inventory from the current distribution centers.
These products will be absorbed into the current inventories
at USF and sold to the units. If any transferred product is
priced on a xxxx-back basis to the vendor, USF will be
responsible for billing back the supplier to the net cost and
will pay the current distributor the current full product cost
(list price).
11. USF will assign a full-time account representative to work with
Nathan's corporate office. This representative will be
responsible for day-to-day issues, reports, price verification
and contract management. USF will also provide all necessary
information for Instill Purchasing Systems.
12. Only approved products will be distributed to Units. There will be
no substitutions or additions to any delivery without the
express consent of Nathan's corporate office.
13. USF will carry a minimum of two weeks rolling inventory on all
proprietary items (excluding perishable products) with no less
than one week of inventory.
n. PRICING. CONTRACT PRICING INFORMATION MUST BE RECEIVED 15 DAYS
BEFORE AN ACTUAL CHANGE IS TO TAKE EFFECT. USF INVENTORY IS
PRICED AND MANAGED ON AN FIFO BASIS. THEREBY, USF WILL ASSURE
CONTRACT PRICING TO BE REFLECTED IN CONCERT WITH THE PUBLISHED
EFFECTIVE DATE UNLESS EXCESSIVE INVENTORY WOULD DETERMINE, BY
MUTUAL CONSENT, A DELAY IN THE EFFECTIVE DATE OF THE PRICE
CHANGE. THIS PRICING PROCESS IS APPLICABLE TO ALL ITEMS EXCEPT
COMMODITY OR MARKET-BASED ITEMS; SPECIFICALLY HAMBURGERS,
GYROS, CHEESE, DELI MEATS AND DAIRY PRODUCTS.
COMMODITY ITEMS WOULD CHANGE ACCORDING TO PRICE AGREEMENT
DATES, WHICH DO NOT REQUIRE 15 DAYS ADVANCE NOTIFICATION.
5. FINANCIAL. Payment terms are set at a maximum of 21 days, which means
that payment will be received weekly with no invoices aging beyond 21
days, subject to prior and ongoing corporate credit approval. Units
must submit complete applications and credit information prior to any
orders shipping. Any Unit applying for credit and credit terms with
prior unresolved lawsuits, settlements and judgments with USF will not
be considered for credit. In the event a Unit has past due accounts
receivable for which no reasonable, mutually satisfactory resolution
can be reached, such Unit and any affiliated Unit (i.e., common owner)
will be charged up to a 5% additional xxxx-up on all products until the
outstanding accounts receivable is satisfied. Should any account have a
history of bad checks, such Unit and any affiliated Unit (i.e., common
owner) will be charged up to a 5% additional xxxx-up on all products
and must remit payment in advance. Funds must be deposited with USF
prior to any orders being processed. COD terms for this program require
certified funds or check rather than cash payments. Nathan's and Units
agree to provide USF with quarterly financial information to enable USF
to evaluate Nathan's and Units' ongoing creditworthiness. Nathan's and
the Units shall be financially responsible only for the product that is
ordered and received by each respective Unit. USF reserves the right to
charge interest on all monies due beyond the agreed upon credit terms.
Interest will be charged at 1.5% or the highest rate permissible by
law.
Uniform Sales & Tax Certificate. Units agree to complete the Uniform
Sales & Tax Certificate (ATTACHMENT E) where applicable.
Notwithstanding anything contained herein or in any other agreement to
the contrary, to the extent there is any change in Nathan's or a Unit's
creditworthiness or financial capabilities, or to the extent Nathan's
or a Unit experiences other circumstances which affect its ability to
meet the payment terms established hereunder, as determined by USF in
its good faith discretion, USF shall have the right to change the
Unit's payment terms. USF will continue to provide service to the Unit
as long as the Unit agrees to "special arrangements" established by
both USF and the Unit that includes COD terms and provisions to make
payment on prior outstanding balances.
6. ACCOUNT MANAGEMENT.
14. Personnel.
i. USF will assign a Corporate Account Manager to
coordinate the management of Nathan's needs.
ii. USF will also appoint a division Chain Account
Manager to coordinate activities and ensure program
integrity at the unit level.
iii. Each participating division will assign a
non-commissioned telephone Customer Service
Representative to Nathan's.
iv. USF's corporate headquarters in Columbia, Maryland
will serve as a resource for all divisions involved
in this program.
b. Program Review. The parties shall conduct a quarterly,
semi-annual and/or annual review to discuss and monitor the
implementation of this program and evaluate ways of improving
its day to day operation and achieving additional operational
and cost efficiencies. Participants in such reviews shall
include Nathan's designated representative and USF's National
Account representatives, together with other representatives
of both parties as mutually agreed. Should the results of the
review reveal that the parameters of the Program are
significantly different than those outlines on Attachment A,
USF reserves the right to propose a new program, including
margin structure, service arrangements and credit terms, or
terminate the Agreement pursuant to the terms of Section 8(d).
c. MIS Capabilities. Various computer generated reports are
available to Nathan's utilizing USF's data programs and
formats. Three such reports are described below and may be
printed on a monthly and/or quarterly basis.
* PRODUCT USAGE
Ranks products ordered and shipped in descending
dollar sales. Provides number of cases
ordered/shipped, total dollar sales and average
delivered price of each product. Amount totals are
summarized.
* PRODUCT USAGE BY VENDOR
Provides a recap of products shipped and the
associated vendor. Products are sequenced in
descending dollar sales with the number of cases
ordered/shipped reported.
* WEB-BASED REPORTS
Nathan's will have the opportunity to extract and
customize product usage reports on-line via the
XXXX.xxx order entry system. Web-based reports should
be available from all current owned USF distribution
centers by the
end of the first quarter of 2003. Any additional
distribution centers that are acquired will need to
be integrated into a reporting system.
7. PRICE VERIFICATION. USF extends price verification privileges to
Nathan's management. Price verification will be scheduled at a time
that is mutually agreed upon by both parties. The following procedures
apply to a price verification:
15. Nathan's will provide USF with at least four (4) weeks written
notice to include:
i. All products to be verified; and
ii. Time period for price verification, i.e.,
previous month or previous week, depending
on product in question, not to exceed
previous three (3) months.
b. Price verification is limited to twice annually and is limited
to twenty-five (25) items per verification.
c. Only USF and Nathan's management personnel will participate in
the price verification. Nathan's guarantees the
confidentiality of information provided by USF.
d. Credit memos for any undisputed adjustments determined by a
price verification process will be processed at Customer's
direction within one (1) week. Details of this procedure are
listed in ATTACHMENT D hereto.
e. Price verification will not interfere with USF year-end
accounting practices.
16. Any monies due to a particular Nathan's Unit from the price
verification process will be reduced by all monies due to USF
from that Unit that are beyond agreed upon credit terms.
17. In the event Nathan's desires to utilize the services of an outside
consultant to aid Nathan's in the price verification, said
consultant shall be required to execute a confidentiality
agreement with USF as a condition to the consultant's
participation in the price verification.
8. TERM AND TERMINATION.
a. The term of this Agreement shall commence on September 16,
2002 and shall continue for a period of three (3) years
through September 16, 2005, unless sooner terminated in
accordance with the provisions of this Agreement.
b. Upon the occurrence of a Breach (as defined below) of this
Agreement, the non-breaching party may terminate this
Agreement, at its option and upon written notice
of termination to the breaching party, and except as provided
herein, may seek any and all remedies available at law or in
equity in connection with the Breach.
c. A Breach of this Agreement is defined as:
1. USF's or Nathan's, as the case may be, failure to
perform any material term, covenant or agreement
contained herein or in any document or instrument
delivered pursuant to or in connection with this
Agreement, which failure continues uncured for thirty
(30) days after written notice of such failure has
been delivered by the non-breaching party; provided,
however, that if such failure has previously occurred
during the preceding six (6) months, the cure period
shall be fifteen (15) days; provided, further, that
there shall be five (5) days cure period for failure
by a Unit to make timely payments in accordance with
the payment terms established in Section 5 above
(during such five (5) day cure period there will be
no further credit allowed until the Unit is in
compliance with the approved credit terms as
established in Section 5 above); or
ii. Nathan's application for or consent to the
appointment of a receiver, custodian, trustee or
liquidator; inability to pay its debts as such debts
become due; general assignment for the benefit of its
creditors; commencement of a voluntary case under the
United States Bankruptcy Code; filing of a petition
seeking to take advantage of any other law of any
jurisdiction relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or
readjustment of debts or commencement by a third
party of a proceeding commenced for any similar
relief under any law of any jurisdiction relating to
bankruptcy, insolvency, reorganization, winding-up,
or readjustment of its debts, and such proceeding
shall continue undismissed for a period of sixty (60)
days.
18. Either party may terminate this Agreement without cause upon one
hundred eighty (180) days prior written notice.
9. CONFIDENTIALITY. USF and Nathan's agree that all information as to
source, quantity, and price of goods and services shall be maintained
in confidence and shall not be released to any private third party
(information may be shared with franchisees with mutual approval) for
any reason whatsoever other than pursuant to a validly issued subpoena
from a court or governmental authority having jurisdiction over the
party, pursuant to the rules, regulations or requirements of any state
or federal agency or department or pursuant to a discovery request made
under applicable court rules and to which the party is required to
respond or as otherwise required by law.
10. WARRANTY AND LIMITATION OF LIABILITY. USF shall use reasonable efforts
to obtain warranties or representations from its suppliers that the
goods to be furnished hereunder are pure, unadulterated, and of first
rate quality and that they shall be merchantable and fit for the
ordinary purpose for which they are intended. EXCEPT AS SPECIFICALLY
SET FORTH IN THIS SECTION 10, ALL WARRANTIES, GUARANTEES, AND
REPRESENTATIONS, EITHER EXPRESSED OR IMPLIED, WHETHER ARISING UNDER ANY
STATUTE, COMMON LAW, USAGE OF TRADE, COURSE OF DEALING OR OTHERWISE,
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE HEREBY EXCLUDED. USF SHALL IN NO WAY BE LIABLE
FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR
RELIANCE DAMAGES, EVEN IF USF IS ADVISED OF THE POSSIBLITY OF SUCH
DAMAGES.
11. NOTICE. All notices required or permitted to be given hereunder shall
be in writing and sent by an overnight delivery services, which
provides a return receipt or by United States registered or certified
mail, postage prepaid, return receipt requested, addressed to the
parties as follows:
TO Nathan's: TO USF:
Nathan's Famous Systems, Inc. U.S. Foodservice
0000 Xxx Xxxxxxx Xxxx Xxxxx Xxxxxx & Xxxxx Xxxxxxx
Xxxxxxxx, XX 00000 X.X. Xxx 000
Attn: Xxxxx Xxxxxx Xxxxxxx, XX 00000
Vice President, Purchasing Attn: Xxx Xxxxxxx
Vice President,
National Accounts
With Copy to: With Copy to:
Nathan's Famous Systems, Inc. U.S. Foodservice
0000 Xxx Xxxxxxx Xxxx 0000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx Attn: Xxxx Xxxxxx
President Senior Vice President
Business Development
U.S. Foodservice
0000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
General Counsel
Or to such other addresses as the parties may direct by notice given as
hereinabove provided. Notice shall be deemed given when received as
evidenced by the return receipt or the date such notice is first
refused, if that be the case.
7. MISCELLANEOUS.
a. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and may not be modified except
by an agreement in writing executed by the parties hereto.
This Agreement supersedes all prior agreements between the
parties hereto governing the supply of products to the units,
and all purchase orders submitted after the effective date
hereof shall be subject to the terms of this Agreement,
conflicting terms contained in any invoice to the contrary
notwithstanding.
b. Force Majeure. Neither party will be in default in the
performance of its obligations under this agreement if such
performance is prevented or delayed because of war,
hostilities, revolution, civil commotion, strike, labor
dispute, epidemic, shortage in supply, fire, wind, earthquake
or flood, use of any law, order, proclamation, regulation or
ordinance of any government, or of any subdivision thereof,
because of Acts of God or for any other cause, whether similar
or dissimilar to those enumerated, that is beyond the
reasonable control and without the fault or negligence of the
party whose performance is affected. If a force majeure event
prevents USF from supplying all of the product needs of its
customers, USF shall allocate such product as is available to
USF among its customers in such manner as USF reasonably
determines. No force majeure event shall excuse Nathan's or
any Unit from its payment obligations contained herein.
c. Choice of Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the
State of Maryland without reference to the conflicts of laws
principles thereof.
d. Attorneys' Fees. In the event this Agreement is breached, the
breaching party shall pay any and all reasonable attorneys'
fees and relevant costs incurred by the non-breaching party as
a result of the breach.
e. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other, which consent
shall not be unreasonably withheld; provided, however, that
USF may assign this Agreement to any current or after-acquired
affiliate without the consent of Nathan's. In the event this
Agreement is assigned, the assignor shall in no event be
relieved of or be released from its obligations contained
herein.
6. No Agency. Nothing contained in this Agreement shall be
construed or interpreted as creating an agency, partnership,
co-partnership or joint venture relationship between the
parties.
7. Non-Discrimination. USF is an equal opportunity employer. It is the
policy of USF to comply with all applicable state and federal
laws prohibiting discrimination in employment based on race,
age, color, sex, national origin, disability, religion or
other protected classification. Nathan's acknowledges that it
is also an equal
opportunity employer and that it will comply with all
applicable state and federal laws prohibiting discrimination
in employment based on race, age, color, sex, national origin,
disability, religion or other protected classification.
NOW THEREFORE, the parties, intending to be legally bound, have entered into
this Agreement on the date first written above.
NATHAN'S
By: /s/ Xxxxxx X. Xxxxxx Date:_____________________
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
Company: Nathan's Famous Systems, Inc.
U.S. FOODSERVICE, INC.
By: /s/ Xxx Xxxxxxx Xx. Date: 2/5/03
-------------------
Name: Xxx Xxxxxxx Xx,
Title: Vice President National Accountrs
Company: U.S Foodservice, Inc.
ATTACHMENT A
SUMMARY OF ASSUMPTIONS
Minimum of 90% of purchases to be directed to USF
Average number of cases per delivery: 80
Average case cost: $21.73
Average dollar per delivery of $1,912
Annual purchases of $56,000,000
Deliveries per unit per week: Two (2) times per week; some locations once per
week. Optionfor three (3)
Number of units as of Sept. 2002: 289
Nathan's does not guarantee that a certain number of restaurants will be
operated.
Servicing Divisions:
- CHARLOTTE NORTH WOULD SERVE NATHAN'S CAROLINA MARKET FOR
NATHAN'S, MIAMI SUB'S AND KRR.
- PORT ORANGE WILL SERVICE NATHAN'S, MIAMI SUBS AND KRR STORES
IN FLORIDA.
- LAS VEGAS/LA MIRADA WILL CONTINUE THEIR SAME SERVICE LOCATIONS.
- USF METRO WILL SERVICE MIAMI SUBS, NATHAN'S AND KRR LOCATIONS
IN THE NORTHEAST AND MID-ATLANTIC.
- THE MIDWEST MARKET WILL BE SERVICED VIA METRO OR ANOTHER TO-BE-
DETERMINED USF HOUSE. *
NUMBER OF PROPRIETARY ITEMS: AS STATED IN PARAGRAPH 2C, ITEM IV.
CREDIT TERMS: 21 DAYS
CIS REQUIREMENTS: INSTILL DATA FEED
NATHAN'S SHALL ENCOURAGE PARTICIPATION WITH THIS AGREEMENT BY ITS FRANCHISEES;
PROVIDED, HOWEVER, THAT NATHAN'S MAKES NO REPRESENTATIONS, IS NOT RESPONSIBLE
FOR, DOES NOT GUARANTEE AND SHALL NOT BE IN ANY MANNER WHATSOEVER RESPONSIBLE
FOR ITS FRANCHISEES' DECISION TO PURCHASE (OR NOT TO PURCHASE) PRODUCTS IN ANY
QUANTITY. ALTHOUGH THERE ARE REFERENCES TO VOLUMES IN THIS AGREEMENT, THERE HAVE
BEEN NO GUARANTEES MADE REGARDING SALES VOLUME ANTICIPATED.
SHOULD ON-GOING PERFORMANCE REVIEW REVEAL SIGNIFICANT DIFFERENCES FROM OUR
ASSUMPTIONS, THE SPECIFIC CAUSE OF THE DIFFERENCE WILL BE IDENTIFIED AND THE
PARTIES WILL AGREE ON A PLAN OF ACTION TO EITHER CORRECT THE CAUSE OR MODIFY THE
PROGRAM, AS NECESSARY.
LIST OF CUSTOMER UNITS (SEE ATTACHMENT F)
ATTACHMENT D
OPERATING PROCEDURES
FOODSERVICE DISTRIBUTION
PROGRAM
FOR
NATHAN'S FAMOUS SYSTEMS, INC.
ORDERING, DELIVERY, RECEIVING PROCEDURES
ORDERING PROCEDURES
1. TO FACILITATE ORDERING, A PRE-PRINTED, STANDARDIZED ORDER/INVENTORY
CONTROL FORM WILL BE PROVIDED FOR THOSE PRODUCTS/CATEGORIES SO DEFINED
AND DISTRIBUTED AT THE BEGINNING OF EACH MONTH. ALL WEEKLY PRICE
CHANGES WILL BE MAILED, FAXED OR ELECTRONICALLY SENT TO YOUR UNITS.
2. YOUR USF CUSTOMER SERVICE REPRESENTATIVE WILL INITIATE THE ORDER
PROCESS WITH EACH UNIT BY CALLING YOUR UNIT AT A PREDETERMINED ORDER
DAY AND HOUR. PLEASE HAVE YOUR ORDERS READY TO ALLOW FOR PROPER
PROCESSING.
3. IT ASSISTS USF IN THE SCHEDULING OF OUR VEHICLES WHEN YOU ORDER A
"DELIVERY TO DELIVERY" CONSISTENT NUMBER OF CASES, AS BUSINESS PERMITS.
4. THE FOLLOWING ORDERING PROCEDURES SHOULD BE USED WHEN PLACING YOUR
ORDERS.
a. CONFIRM THE DATE OF THE CURRENT ORDER FORM AND CONTROL NUMBER.
YOUR ORDER GUIDE CONTROL NUMBER IS VERY IMPORTANT.
b. ORDER BY LINE ITEM NUMBER.
c. STATE QUANTITY DESIRED.
d. THE CUSTOMER SERVICE REPRESENTATIVE WILL VERIFY YOUR ORDER BY:
- RECAPPING THE ORDER BACK BY GIVING LINE NUMBER,
PRODUCT AND QUANTITY; OR
- GIVING ONLY TOTAL LINES AND CASES.
e. NO SUBSTITUTIONS WILL BE OFFERED WHEN THERE ARE OUT OF STOCKS
UNLESS AUTHORIZED BY NATHAN'S.
f. VERIFY THE EXPECTED DELIVERY DATES FOR THE ORDER.
5. ORDER DAY (S) ORDER TIME (S) DELIVERY DAY (S)
------------- ------------- ---------------
----------- ----------- -------------
----------- ----------- -------------
----------- ----------- -------------
ORDERING, DELIVERY, RECEIVING PROCEDURES
ORDERING PROCEDURES
(CONTINUED)
6. ORDER DATES THAT FALL ON A HOLIDAY WILL BE SCHEDULED BY PRIOR
ARRANGEMENTS WITH CUSTOMER AND USF. NOTIFICATION OF HOLIDAY DELIVERY
SCHEDULES WILL BE GIVEN PRIOR TO THE HOLIDAY.
7. THE BRANCH ACCOUNT MANAGER IS RESPONSIBLE FOR COORDINATING ISSUES OR
CHANGES TO ORDER SCHEDULES.
DELIVERY PROCEDURE
1. YOUR DELIVERY WILL BE MADE BY USF IN ACCORDANCE WITH A PRE-ARRANGED
DELIVERY SCHEDULE BY CUSTOMER AND USF.
2. AT THE TIME OF DELIVERY, THE UNIT MANAGER, THE ASSISTANT MANAGER OR A
DESIGNATED PERSON SHOULD RECEIVE THE SHIPMENT AND SIGN FOR THE PRODUCT.
3. DELIVERY DATES THAT FALL IN A HOLIDAY WEEK WILL BE RESCHEDULED BY PRIOR
ARRANGEMENTS WITH USF AT LEAST TWO WEEKS IN ADVANCE.
4. THE BRANCH ACCOUNT MANAGER IS RESPONSIBLE TO COORDINATE ISSUES OR
CHANGES TO DELIVERY SCHEDULES.
RECEIVING PROCEDURES
1. YOU WILL RECEIVE A COMPLETELY PRICED EXTENDED ORIGINAL AND TWO (2)
DUPLICATE COPIES OF YOUR INVOICE WITH YOUR ORDER, WHICH SHOULD BE
CHECKED BY AN AUTHORIZED PERSON UPON RECEIPT.
2. ALL COPIES OF THE INVOICE MUST BE SIGNED. THE DRIVER WILL KEEP ONE (1)
DUPLICATE COPY AND YOU ARE TO RETAIN THE ORIGINAL AND ONE (1) DUPLICATE
FOR YOUR RECORDS.
3. FREEZER AND REFRIGERATED PRODUCTS SHOULD BE STORED IMMEDIATELY UPON
RECEIPT.
4. MAKE SURE THAT ALL CASES ARE COUNTED BEFORE YOU SIGN THE INVOICE.
ONCE YOU HAVE SIGNED FOR A SPECIFIC QUANTITY OF CASES AND THE DRIVER
HAS LEFT THE PREMISES, THE SHIPMENT IS YOUR RESPONSIBILITY. YOU WILL
NOT BE GIVEN CREDIT FOR ANY SHORTAGES ONCE THE INVOICE HAS BEEN SIGNED
AND THE DRIVER HAS GONE.
ORDERING, DELIVERY, RECEIVING PROCEDURES
RECEIVING PROCEDURES
(CONTINUED)
5. PLEASE ASSIST IN PROVIDING A CLEAR PATH FOR THE TRUCK TO GAIN ENTRANCE
TO THE DESIGNATED LOADING AREA.
6. DUE TO INSURANCE REQUIREMENTS AND YOUR OWN SAFETY, CUSTOMER EMPLOYEES
ARE NOT PERMITTED ON THE USF TRUCK.
UNLOADING PROCEDURES
1. THE DRIVER WILL UNLOAD AND PLACE ALL ORDERS IN DESIGNATED AREAS.
2. THE DRIVER IS NOT RESPONSIBLE FOR PLACING CASES ON STORAGE SHELVES.
PAYMENTS-CREDITS
SHORTAGES/VISIBLE DAMAGE
AT THE TIME OF DELIVERY, SHOULD ANY PRODUCT ORDERED BE SHORTED OR DAMAGED, THE
DRIVER WILL ISSUE AN INSTANT CREDIT BY NOTATION ON THE ORIGINAL INVOICE OF
SHORTAGES, DAMAGED OR RETURNED GOODS.
CONCEALED DAMAGE
IF YOU SHOULD DISCOVER DAMAGED MERCHANDISE AFTER THE DRIVER LEAVES, YOU SHOULD
NOTIFY YOUR USF CUSTOMER SERVICE REPRESENTATIVE WHEN PLACING YOUR NEXT ORDER.
DAMAGED OR DEFECTIVE MERCHANDISE SHOULD NOT BE DISPOSED OF AS USF MAY NEED TO
INSPECT.
PLEASE INDICATE THE FOLLOWING:
1. INVOICE NUMBER UNDER WHICH THE PRODUCT WAS DELIVERED.
2. PRODUCT CODE NUMBER.
3. QUANTITY OF ITEM.
4. PRICE OF PRODUCT DELIVERED.
5. DESCRIPTION OF PRODUCT.
ORDERING, DELIVERY, RECEIVING PROCEDURES
PICK-UPS AND/OR RETURNS
1. PICK-UPS AND/OR RETURNS MAY OCCASIONALLY BE NECESSARY. IN ORDER FOR
CREDIT TO BE ISSUED, PRODUCT MUST BE IN THE ORIGINAL SHIPPING CARTON
AND IN REASONABLE CONDITION, UNLESS THERE IS CONCEALED DAMAGE. IN THE
EVENT THAT A PICK-UP AND/OR RETURNS ARE IN ORDER, ADVISE THE CUSTOMER
SERVICE REPRESENTATIVE AT THE TIME THE NEXT ORDER IS PLACED. BE
PREPARED TO PROVIDE THE FOLLOWING INFORMATION:
a. REASON FOR THE RETURN. (CONCEALED DAMAGE TO THE PRODUCT, ETC.)
b. INVOICE NUMBER FOR THE DELIVERED PRODUCT.
c. PRODUCT CODE NUMBER, QUANTITY, PRICE AND DESCRIPTION.
OUT-OF-STOCKS/SHORTS/SUBSTITUTIONS
CONTACT THE CUSTOMER SERVICE REPRESENTATIVE SO THE CORRECTIVE STEPS CAN BE TAKEN
ALL CREDIT MEMOS WILL BE PROCESSED AT DIRECTION WITHIN ONE (1) WEEK.
WE THANK YOU FOR THE OPPORTUNITY TO
PROVIDE YOU WITH THE TYPE OF SERVICE YOU
HAVE COME TO KNOW AND EXPECT.
