Document:

Exhibit 10.9

 

AMENDED AND RESTATED

 

FORMULA DEVELOPMENT AGREEMENT

 

THIS FORMULA DEVELOPMENT AGREEMENT is executed this 21st day of May,
2004, and made effective as of February 1, 2004, by and between CARL KARCHER ENTERPRISES, INC., a
California corporation (“CKE”) and PIERRE
FOODS, INC., a North Carolina corporation (“Vendor”).

 

RECITALS

 

1.                                       CKE
desires to introduce new products in its restaurant systems.

 

2.                                       Vendor
is in the business of developing formulations and producing and manufacturing
products of the type and kind contemplated by this Agreement.

 

3.                                       VENDOR
has developed a product which CKE desires to consider for use in its restaurant
systems.

 

NOW, THERFORE, in consideration of the mutual promises herein made, the
parties agree as follows:

 

1.                                       Vendor
has developed specifications and desired elements or characteristics for the
following products (individually each a “Product” and collectively the “Products”):

 

Angus Beefsteak Patty 5.65 oz. Item #9598

 

2.                                       Simultaneously
with the execution of this Agreement, the parties entered into an Amended and
Restated Agreement for the Products (the “Product Contract”).

 

3.                                       So
long as the Purchase Threshold (as defined herein) is met, Vendor grants CKE,
together with its parent, subsidiary and affiliate corporations, an exclusive
right to purchase the Products.  It is
expressly understood that Vendor will process and manufacture the Products
utilizing certain proprietary processes, methods, ingredients and formulas
(collectively, the “Formula”) described on Exhibit A attached hereto and in
accordance with CKE’s Finished Product Specifications attached to the Product
Contract.  The parties agree and
acknowledge that Vendor has ownership of the Formula.  Other than for the rights granted herein to
CKE by Vendor, CKE, together with its parent, subsidiary and affiliate
corporations, will not by virtue of this relationship acquire or claim any
proprietary interest in: (i) the Formula of Vendor utilized in the manufacture
and production of the Products, (ii) any patents, patent applications,
proprietary information, processes or methods containing confidential
information of Vendor and belonging to Vendor, (iii) any software, trade
secrets or other proprietary information, methods or processes licensed by
third parties to Vendor, or (iv) any other products, recipes, formulas,
techniques, procedures, or processes of the Vendor and belonging to Vendor.

 

	
   

  	
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  Omitted
  portions are indicated by [***].

  	
  filed
  separately with the Commission.

  

 

 

4.                                       CKE
acknowledges that it is aware that Vendor presently manufactures various
protein and sandwich products substantially similar to the Products for third
parties and for its own branded sandwiches. 
This Agreement shall not limit the right of Vendor to continue the
manufacture and sale of any products and/or branded items as they are presently
or hereafter may be constituted or to develop and process other branded items
or products for itself or others; provided, however, that
notwithstanding the foregoing, so long as the Purchase Threshold is met, Vendor
may not:

 

(i)                                     manufacture for or
sell to any third party, except under the HARDEE’S Agreement (as herein
defined), or for its own use any Angus Beef Burger Product that uses the same
proprietary spices in the Angus meat block formula used in the manufacture of
the Product, or

 

(ii)                                  manufacture for or
directly sell to any Competitor of CKE (as defined herein) any Angus Beef
Burger Product confusingly similar to a Product.  “Angus Beef Burger Product” means a beef
patty consisting of more than 51% of black cattle beef with a raw weight range
and with respect to a Product (so long as the Product is subject to the Product
Contract) within .3oz., plus or minus, of the raw weight of such Product.

 

5.                                       For purposes of
this Agreement, the term “Competitor of CKE” shall mean any national or
regional chain of “quick” service restaurants or food shops with one hundred
(100) or more restaurants or shops operated under the same tradename in which
food is prepared on-premises and sold at an inside counter, table service or
drive-thru window, intended for immediate on-premises, off-premises, or
in-vehicle consumption.

 

6.                                       For
the purposes of this Agreement, “Purchase Threshold” means the purchase under
the Product Contract by CKE and its parent, subsidiary, and affiliate
corporations of *** pounds aggregate of Products from Vendor during each
rolling twelve (12) month trailing period, the first test period ending
fourteen (14) months after the month in which first delivery of Products is
made under the Product Contract.  If less
than *** pounds is available in any such period for sale by Vendor, then such
lesser amount available shall be the Purchase Threshold.

 

7.                                       CKE
agrees as a condition of this Agreement that CKE will not contract with more
than two (2) other manufacturers (other than Vendor) at any one time to
manufacture and produce the Products for CKE, said other manufacturers to be
the same manufacturers as mutually agreed by CKE and HARDEE’S (herein defined)
and designated under the HARDEE’S Agreement. 
Vendor agrees that as a condition of this Agreement that Vendor so long
as the Purchase Threshold is met will enter into agreements without royalty or
fee with such other manufacturers (designated under the HARDEE’S Agreement) to
license the use of Vendor’s proprietary Formula for the Products to said
manufacturers solely for the purpose of manufacturing and producing the
Products for CKE.  Provided,
notwithstanding the foregoing sentence, Vendor agrees that CKE may engage one
or two of the aforesaid designated manufacturers which Vendor will license to
use the Formula during the time period beginning as

	
   

  	
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  separately with the Commission.

  

2

 

of the date of this Agreement
until the Purchase Threshold is first tested. 
Failure by Vendor to enter into a license agreement with a designated
manufacturer within a reasonable time, through no fault of the designated
manufacturer, shall constitute a material default under this Agreement.  It is expressly understood and agreed by the
parties that other than licensing the use of the Formula, Vendor shall have no
further role in the relationship between CKE and the other said manufacturer.

 

8.                                       Vendor
represents and warrants that it owns the formulations and specifications to
manufacture the Products free and clear and has the right to enter into this
Agreement and grant CKE and its parent, subsidiary, and affiliate corporations
the exclusive right to purchase the Products pursuant to Section 3 and the
right to license its proprietary formulas and specifications for the production
and manufacture of the Products under Section 7.

 

9.                                       It
is expressly acknowledged that the Vendor in consideration of the premises
herein and other consideration received, the legal sufficiency of which is
acknowledged, does hereby grant CKE the right of first refusal hereinafter
described.  Upon the occurrence of any
one of the following events, CKE upon written notice to Vendor shall have the
right of first refusal to purchase the Formula, and all rights of ownership
thereto, from the Vendor for a purchase price and purchase terms provided in
writing by Vendor to CKE within fourteen (14) calendar days following the
occurrence of any such event.  CKE shall
have fourteen (14) calendar days after receiving the purchase price and
purchase terms notice within which to accept or decline Vendor’s proposal.  If CKE declines to purchase the Formula
during such time period, then Vendor shall be free to contract with and sell to
any third party the Formula unencumbered without restriction, but not on
different terms than those offered to CKE without giving CKE a fourteen (14)
day right of first refusal concerning the same. 
From the date of the occurrence of any one of the events until the date
on which the Formula is purchased by CKE or by a third party under this
provision, Vendor shall permit CKE, or any manufacturer designated by CKE, to
produce the Products for CKE under the terms of the standard license agreement
set forth in Section 7 hereunder.

 

a.                                       The
Vendor ceases to manufacture or is unable to manufacture the Product for any
reason for a period of thirty (30) consecutive calendar days excepting a Force
Majeure (as defined in the Product Contract) provided Vendor shall cooperate in
good faith in such event with CKE and its then designated manufacturers and any
other temporary designated manufacturer appointed by CKE to ensure appropriate
supply of Products until Vendor can resume production and supply of the
Products as contemplated under the Product Contract, at which point the rights
and obligations of the parties under the Product Contract shall resume.  In such a Force Majeure event, until Vendor
is able to resume its supply obligations under the Product Contract, the
Purchase Threshold and Volume Requirements (as defined in the Product Contract)
shall be waived;

	
   

  	
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3

 

b.                                      Excepting
by reason of delay or default of persons outside the control of Vendor, the
Vendor fails to perform or observe any portion of its obligations under Section
7 herein at any time;

 

c.                                       The
Vendor ceases to do business as a manufacturer of beef products for any reason;
and

 

d.                                      The
Vendor (i) voluntarily commences any proceeding or file any petition seeking
relief under any Federal, state or foreign bankruptcy, insolvency,
receivership, liquidation or similar law, (ii) consents to the institution of,
or fails to contravene in a timely and appropriate manner, any such proceeding
or the involuntary filing of any such petition, (iii) applies for or consents
to the appointment of a receiver, trustee, custodian, or similar official of
itself or of a substantial part of its property, (iv) files an answer admitting
the material allegations of a petition filed against it in any voluntary
or involuntary bankruptcy proceeding, (v) makes a general assignment for the
benefit of creditors, (vi) becomes unable, admits in writing its inability or
fails generally to pay its debts as they become due or (vii) takes any
corporate or other action for the purpose of effecting any of the
foregoing.  Provided in the event of a
Chapter 11 reorganization, if the trustee affirms the Product Contract and the
associated agreements, and the Vendor affirmatively shows its ability to produce
and supply, and so long as it does so, the Products in accordance with the
Product Contract, such event so long as in Chapter 11 status, or a complete
discharge therefrom, shall not be deemed an event under this subsection (d).

 

10.                                 The
parties recognize the unique nature of this Agreement due to the uniqueness of
the Product, the health and liability issues integral to the Product and the
effect of the Product on the reputation of CKE and Vendor.  Accordingly, the parties agree that this
Agreement is personal in nature and that neither party may assign or otherwise
transfer its rights and obligations under this Agreement to another party
without the express prior written consent of the non-transferring party which
consent will not be unreasonably withheld. 
This Agreement shall be binding on and inure to the benefit of the
parties hereunder and their respective approved successors and assigns.

 

11.                                 This
Agreement shall be governed by the laws of the State of California. The parties
consent to the exclusive jurisdiction of the state and federal courts of the
State of California for the adjudication of matters arising out of this
Agreement; and neither party will assert forum  non  conveniens
with respect to such venue. This Agreement, and all Exhibits, are only valid if
and when duly signed by authorized representatives of both parties.  No third party is authorized to amend or
waive, on behalf of CKE, any provision of this Agreement.

 

12.                                 There
are no understandings, agreements, or representations, express or implied, not
specified herein.  This Agreement amends,
restates and supercedes that certain Formula Development Agreement pertaining
to the subject matter hereof executed by the parties on February 1, 2004.  This Agreement may not be amended except in a
writing signed by the parties.

	
   

  	
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  Omitted
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4

 

13.                                 It
is expressly agreed and acknowledged that Vendor has entered into a certain
Amended and Restated Agreement dated of even date and effective December 1,
2002 with HARDEE’S Food Systems, Inc. (“HARDEE’S”), which agreement, and any
amendments and attachments thereto including the Amended and Restated Formula
Development Agreement between HARDEE’S and the Vendor, dated of even date and
effective as of December 1, 2002 (all the “HARDEE’S Agreement), grant to HARDEE’S
the right to purchase products similar to the Products in accordance with the
terms and conditions therein. 
Notwithstanding anything herein to the contrary, CKE acknowledges that
the rights, privileges, and options of HARDEE’S under the HARDEE’S Agreement,
and the terms thereof, shall not be deemed a violation of the Product Contract,
this Agreement, or any agreements delivered therewith.

 

Executed the 21st day of May, 2004 and effective as of February 1,
2004.

 

	
  CARL KARCHER
  ENTERPRISES, INC.

  	
  PIERRE
  FOODS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  John Dunion

  	
   

  	
  By:

  	
    /s/
  Robert C. Naylor

  	
   

  
	
   

  	
  John Dunion

  	
   

  	
  Robert C.
  Naylor

  
	
   

  	
  Executive
  Vice President

  	
   

  	
  Senior Vice
  President-Sales

  
								

	
   

  	
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  Omitted
  portions are indicated by [***].

  	
  filed
  separately with the Commission.

  

 

5

 

EXHIBIT A

 

***

	
   

  	
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  Omitted
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  separately with the Commission.Exhibit 10.10

 

FIRST AMENDMENT AGREEMENT

 

THIS FIRST AMENDMENT AGREEMENT (“Amendment”) is executed as of the 27th
day of June, 2004, by and between CARL KARCHER ENTERPRISES, INC., a California
corporation (“CKE”) and PIERRE FOODS, INC., a North Carolina corporation (the “Company”).

 

RECITALS

 

1.                                       CKE
and Company are parties to a certain Amended and Restated Agreement dated May
21, 2004 (the “Original Agreement”).

 

2.                                       CKE
and Company are parties to a certain Amended and Restated Formula Development
Agreement dated May 21, 2004 (the “Original FDA”).

 

3.                                       CKE
and Company are parties to a certain Amended and Restated Confidentiality
Agreement dated May 21, 2004 (the “Original Confidentiality”).

 

4.                                       CKE
and Company desire to amend the Original Agreement and Original FDA and
memorialize the amendment in writing.

 

5.                                       All
capitalized terms herein not otherwise defined shall have the meaning ascribed
to such terms in the respective Original Agreement or Original FDA, as the
content may require.

 

NOW, THEREFORE, IN CONSIDERATION of the
mutual covenants contained herein for other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged, the parties
agree as follows:

 

1.               Amendments.

 

A.           The
Original Agreement is amended as follows:

 

(a) Paragraph 3(a) is amended by the addition
of the following two new paragraphs to be inserted immediately following the
first paragraph thereof:

 

Company agrees and acknowledges that it shall
commence building an additional plant in a *** location as soon as its
production output increases by at least *** pounds (*** of which must be on a
***) per year of flame cooked broiled protein from its production output as of
the date of this Amendment.  Provided
that such additional plant is in a location agreeable to CKE and meets CKE’s
standards and specifications, CKE agrees that some of the production capacity
of the Products currently in Company’s current plant may be moved to the
additional plant.  CKE will determine
such amounts of production capacity to be moved based on business
considerations in its sole discretion.

 

Company shall exercise commercially
reasonable efforts to fulfill all the supply requirements of CKE for the
Products.  To the extent of any plant
capacity constraints, the

 

	
   

  	
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Company shall fulfill the supply requirements of CKE prior to the
fulfillment of any product requirements of a Competitor of CKE (as defined in the
Amended and Restated Formula Development Agreement).

 

(b) Paragraph 4(a) is amended by the addition
of the following new paragraphs as follows:

 

It is acknowledged that in the event Company
shall enter into a binding supply agreement, written or oral, with a Top Ten
QSR (as herein defined), other than CKE or CKE’s parent or affiliate companies,
including without limitation, Hardee’s Food Systems, Inc., or its appointed
purchasing agent for the supply of a burger product consisting of more than 51%
of black cattle beef (a “Major Contract”), the Company should realize plant
efficiencies and other economies. 
Therefore, in the event Company shall enter into a Major Contract and so
long as and only so long as at least one Major Contract shall remain in
effect, the Company agrees to ***

 

During the term of such Major Contract,
Company further agrees that (1) the net prices on a poundage basis for the
Products hereunder shall not be greater, (2) the payment terms hereunder shall
not be worse, and (3) the fixed costs charges hereunder shall not be more, and
(4) to the extent the product Company is producing under such Major Contract is
comparable in size to and with similar cost components as the Products
hereunder, the cook yields, and process yields hereunder shall not be less,
than those being provided under such Major Contract for similar product items,
as determined on a poundage basis so that CKE is treated on a so-called “most
favored nations” basis.

 

For purposes of this Agreement, the term “Top Ten QSR” means any one of
the ten largest hamburger chains ranked by system wide sales based on the Chain
Restaurant Operators Directory.  To the
extent such Directory is no longer published or such information is no longer
provided in such Directory, the basis of determining the Top Ten QSR shall be
based on annual sales as set forth in public filings or other such reliable
sources.

 

(c) Section 4(b) is amended by the addition
of a new paragraph to read as follows:

 

The Company agrees that no raw materials
purchased by or arranged for delivery to Company by and for the account of CKE
from a designated raw material supplier of CKE under contract with CKE,
including beef products purchased by CKE under its contract with ***, may be
used by Company or its agent to produce beef products for any other customer of
Company.  Provided, the foregoing
sentence does not prohibit Company from contracting directly with such
suppliers for raw materials for Company’s other customers nor from accepting
from such suppliers raw materials purchased by or arranged for delivery to
Company for the account of Company’s other customers.  Company agrees that, without the prior
written consent of CKE, only those raw materials purchased by or arranged for
delivery to Company by and for the account of CKE from a designated raw
material supplier of CKE will be used in the manufacturing of the Products.

	
   

  	
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  Omitted
  portions are indicated by [***].

  	
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  separately with the Commission.

  

 

2

 

(d) Section 4(f)(ii) is amended to read as
follows:

 

(ii) Maintenance Books and Records.  During the Term and for a period of at least
two (2) years thereafter, the Company shall maintain such books and records
(collectively, “Records”) as necessary to substantiate that all invoices and
other charges submitted to CKE for payment hereunder are valid and proper and
to verify the Company’s compliance with provisions of this Agreement, the
Amended and Restated Formula Development Agreement and the Amended and Restated
Confidentiality Agreement.  Upon
reasonable request from CKE, the Company shall deliver evidence satisfactory to
CKE for verification of compliance with this Agreement, the Amended and
Restated Formula Development Agreement and the Amended and Restated
Confidentiality Agreement.  All Records
shall be maintained in accordance with generally accepted accounting principals
consistently applied.  CKE and/or its
representative shall have the right at any time during normal business hours,
upon twenty-four (24) hours notice, to examine, inspect and audit said
Records.  Provided, under no
circumstances shall any trade secrets or protected confidential information of
any person be subject to such examination, inspection, or audit.  Company agrees to take all actions reasonably
necessary and available to it (without disclosing such trade secrets or
confidential information) to substantiate, to CKE’s satisfaction, its
compliance with this Agreement, the Amended and Restated Formula Development
Agreement and the Amended and Restated Confidentiality Agreement, including
without limitation, by permitting visual inspection of the Company’s plant to
ensure compliance.  CKE shall bear any
cost related to any such examination, inspection or audit; provided, however,
Company shall be responsible for such cost of audits for inspections upon a
finding based on the results thereof that Company is not in material compliance
with this Agreement.

 

(e) Paragraph 9(b) is amended and restated to
read in its entirety as follows:

 

(b)                                 At
the end of the Term of this Agreement, CKE shall have the right to renew this
Agreement, on the same terms and conditions as set forth herein, for up to five
(5) additional renewal terms of one (1) year each by giving notice of its
intent to renew to Company within ninety (90) days prior to the expiration of
the then current Term or renewal term. 
For the purposes of this Agreement, the term “Term” shall be deemed to
include any renewal terms.

 

(f) Paragraph 29 is amended by the addition
of a new subsection (d) to read as follows:

 

(d) Except with the prior written consent of
the other party, neither party shall disclose the existence of this Agreement
or the subject matter hereof, except on a “need to know” basis in the ordinary
course of its business in dealing with its employees, financing sources, stock
or industry analysts, advisors, and other representatives and as may be
otherwise required by law, including SEC filings.  Provided, however, that subject to the
foregoing, in no event shall either party directly disclose the existence of
this Agreement or the subject matter hereof to any competitor of the other
party (the Competitor of CKE as defined in the Amended and Restated Formula
Development Agreement) or to any affiliate of a competitor of the other
party.  Each party agrees and
acknowledges that such disclosure shall cause irreparable harm to the other

	
   

  	
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3

 

party and entitle the other party to all remedies at law and equity
including without limitation, liquidated damages and injunctive relief.

 

B.   The Original FDA is amended as follows:

 

(a) Paragraph 4 of the Original FDA is amended by (i) spelling the word
“formula” in subsection (i) of Paragraph 4 as “Formula”, (ii) deleting the “.”
at the end of subsection (ii) and inserting “, or” and (iii) the addition of a
new subsection (iii) to read as follows:

 

(iii)
manufacture for or directly sell to any Competitor of CKE any Angus Beef Burger
Product (the term “Angus Beef Burger Product” determined as defined in
subsection (ii) above but without the raw weight range restriction) that is (a)
produced solely according to the Formula and CKE’s complete Finished Product
Specifications, or (b) produced with or resulting in a product with Angus
beef  trimmings and any two (2) of the
following three (3) variables or factors in common with the Product:

 

•                  ***

 

•                  ***

 

•                  ***

 

(b)  A new Paragraph 14 is added
to the Original FDA to read in its entirety as follows:

 

14.                                 At
the end of the initial Term of this Agreement, CKE shall have the right to
renew this Agreement, on the same terms and conditions as set forth herein, for
up to five (5) additional renewal terms of one (1) year each by giving notice
of its intent to renew to Company within ninety (90) days prior to the
expiration of the initial Term or then current renewal term.  For the purposes of this Agreement, the term “Term”
shall be deemed to include the initial Term and any renewal terms.

 

2.  No
change.  Except as otherwise modified
or amended hereby, the Original Agreement, Original FDA, and the Original
Confidentiality and all documents and instruments delivered therewith shall
remain in full force and effect as written.

 

3  No Default.  The Original Agreement, the Original FDA, and
the Original Confidentiality are in full force and effect and, as of the date
of this Amendment and to the best knowledge, information, and belief of each
party without independent investigation by either party, (a) there exists no
default or event of default or event, occurrence, condition or act which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder, (b) neither
party has violated any of the terms or conditions of any of the foregoing
agreements, (c) all of the obligations and covenants to be performed by each
party thereto have been fully performed, and (d) each party acknowledges and
agrees that with respect the relationship between the parties as contemplated
by the aforesaid collective agreements, there have been no violations of
law.  This provision shall not be
construed to

	
   

  	
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4

 

limit either party from making
any future claims for future breach or subsequent wrongful conduct by either
party.

 

4.  Entire Agreement.  This Amendment, together with the Original
Agreement, the Original FDA, and the Original Confidentiality, as may be
amended hereby, shall constitute the complete agreement between CKE and the
Company and shall supersede all prior or contemporaneous proposals,
representations, understandings, and other communications and correspondence
between the parties concerning the matters addressed in this Amendment and the
aforesaid agreements, whether oral or written.

 

5  Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same instrument.

	
   

  	
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  Omitted
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5

 

IN WITNESS WHEREOF, the parties execute this
Amendment in accordance with law the day and year first above written.

 

	
   

  	
  CARL KARCHER ENTERPRISES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Dunion

  	
   

  
	
   

  	
  Name:

  	
  John Dunion

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PIERRE FOODS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert C. Naylor

  	
   

  
	
   

  	
  Name:

  	
  Robert C. Naylor

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President - Sales

  	
   

  
										

	
   

  	
  Confidential
  information redacted and

  
	
  Omitted
  portions are indicated by [***].

  	
  filed
  separately with the Commission.

  

 

6

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