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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 13, 1994
HUDSON FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-9050 71-0427616
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1225 HUDSON ROAD
ROGERS, ARKANSAS 72756
(Address of principal executive offices)
(501) 636-1100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
On October 12, 1994, Hudson entered into a five-year, cost-plus supply
agreement with Boston Chicken, Inc., a franchisor and operator of food service
stores specializing in complete meals featuring rotisserie roasted chicken. The
agreement provides for Boston Chicken to purchase 100% of the capacity of two
Hudson chicken processing plants. One plant in Dexter, Missouri will be
expanded to process approximately 650,000 chickens per week and is expected to
begin production for Boston Chicken in the spring of 1995. The other plant will
be part of an integrated chicken processing complex to be built near Henderson
Kentucky. The Henderson plant is expected to begin production for Boston
Chicken in the spring of 1996, with initial production averaging 325,000
chickens per week. When the Henderson plant reaches full capacity, scheduled
for 1998, its production is expected to average 1.3 million chickens per week.
The Company currently processes approximately 4.3 million chickens per week.
The Company is nearing completion of a hamburger processing plant in Columbus,
Nebraska. The Burger King system has committed to purchase for a multi-year
period a majority of the capacity of this facility. These sales will be made to
the Burger King system at a formula price plus raw material costs.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
(B) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(C) EXHIBITS.
1. Purchase and Supply Agreement, dated October 12, 1994, between Hudson
Foods, Inc. and Boston Chicken, Inc.
2. Supplier Agreement, dated April 26, 1994, between Hudson Foods, Inc.
and Restaurant Services, Inc., as purchasing agent for the Burger
King System.
3. Press Release, dated October 12, 1994.
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ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
HUDSON FOODS, INC
Dated October 13, 1994 By: /s/ Tommy D. Reynolds
-----------------------------
Tommy D. Reynolds
Secretary/Treasurer
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EXHIBIT 1
CONFIDENTIAL TREATMENT
PURCHASE AND SUPPLY AGREEMENT
This PURCHASE AND SUPPLY AGREEMENT ("Agreement") is made this 12th day of
October, 1994, by and between Hudson Foods, Inc., a Delaware corporation (the
"Supplier"), and Boston Chicken, Inc., a Delaware corporation (the "Company").
WHEREAS, the Supplier has the capability to produce poultry products for
distribution and retail sale by the Company, which products and their
specifications are described in Exhibit A (the "BC Products"); and
WHEREAS, the Company desires to assure a continuing supply of the BC
Products and the Supplier desires to supply the Company with a portion of its
requirements of the BC Products; and
WHEREAS, the Supplier is willing to dedicate the entire chicken products
production of its chicken processing facility at Dexter, Missouri (the "Dexter
Facility") and, upon commencement of operations, the entire chicken products
production of its chicken processing facility (exclusive of the protein plant
associated therewith) currently under construction near Henderson, Kentucky (the
"Henderson Facility" and, together with the Dexter Facility, the "Facilities")
for sale hereunder to or for the account of the
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Company, and the Company desires to purchase or have sold for its account the
entire chicken products production of the Facilities;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises set forth herein, the parties hereto agree to the following:
1. PRODUCTION AND SALE OF PRODUCTS.
a. The Supplier agrees to sell to the Company, or cause to be sold for the
Company's account, the entire chicken products production (the "Products," which
term shall include the BC Products) of (i) the Dexter Facility, commencing on
April 1, 1995, or such earlier date as is mutually agreed upon in writing by the
parties (the "Commencement Date"), and (ii) the Henderson Facility, commencing
as of the date such Facility is first available for commercial production, as
certified by the Supplier in writing to the Company (the "Henderson Facility
Commencement Date"), and the Company agrees to purchase such Products. The
Supplier further agrees to use its reasonable best efforts to (i) cause the
Dexter Facility to be converted from its current operations and ready to begin
production under this Agreement not later than April 1, 1995 and (ii) cause the
Henderson Facility to be constructed and ready to begin initial production under
this Agreement not later than May 1, 1996. The Supplier will (i) cause the
Dexter Facility to
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process a minimum average of 487,000 chickens per week from April 1, 1995
continuously to June 1, 1995, and continuously thereafter until termination of
this Agreement to process a minimum average of 650,000 chickens per week, and
(ii) cause the Henderson Facility to process a minimum average of 325,000
chickens per week from the Henderson Facility Commencement Date continuously to
January 1, 1997, and from January 1, 1997 continuously to May 1, 1997 to process
a minimum average of 650,000 chickens per week, and from May 1, 1997
continuously to January 1, 1998 to process a minimum average of 975,000 chickens
per week, and continuously thereafter until termination of this Agreement to
process a minimum average of 1,300,000 chickens per week. All minimum average
targets specified in this Section 1(a) shall be computed on a rolling twelve-
week basis (or such lesser number of weeks as has elapsed since the Commencement
Date or the Henderson Facility Commencement Date, as appropriate), but actual
chickens processed in any week (exclusive of any week in which a holiday is
observed) cannot be less than 85% of the weekly minimum average target. In the
event that the production of the Facilities does not meet the targeted minimum
averages set forth in this Section 1(a), whether by reason of lower than
expected production rates, closure or production limitations imposed by law,
partial condemnation or destruction, or otherwise,
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the Supplier shall use its reasonable best efforts to purchase sufficient
Products from third-party suppliers ("Third-Party Products") to achieve the
targeted minimum averages and shall sell such Third-Party Products to the
Company at a price equal to the Facilities Cost (as defined herein) plus
* (with the Facilities Cost being measured on a per-pound basis for
purposes of setting the selling price for Third-Party Products) for such
Products during the last period such minimum average was met. At the request of
the Company, the Supplier shall increase production at the Facilities to levels
not inconsistent with prudent business practices; provided, however, that the
cost of such increases shall be included in the computation of the Facilities
Costs.
b. Upon receipt of shipping orders from the Company ("Orders"), the
Supplier agrees to ship to the Company or third parties designated by the
Company, from the production of the Facilities or Third-Party Products, any and
all Products that the Company shall request shipment of pursuant to the Orders.
All sales of Products hereunder (including any Outside Sales, as defined below)
are F.O.B., at the producing Facility, with the Company solely responsible for
any costs of shipping the Products. To the extent that the Company's Orders do
not provide for shipment
* Confidential information omitted and filed separately with the
Securities and Exchange Commission
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of all of the Facilities' production of Products, the Supplier shall arrange the
sale or otherwise dispose of such excess Products on commercially reasonable
terms, consistent with efforts to maximize the selling price thereof, for the
account of the Company and apply the proceeds of such sales (less any returns)
to the Aggregate Purchase Price pursuant to Section 3 hereof.
c. The Supplier agrees to invoice all shipments according to the
specifications and directions of teh Company and to remit all payments received
by it to the Company (or credit such payments against the Aggregate Purchase
Price) immediately upon such receipt. All such payments are received by the
Supplier as agent for the Company's benefit.
2. TERM. The initial term of this Agreement shall be a period of five (5)
years, beginning on the Commencement Date and ending on the date that is the
fifth anniversary of the Commencement Date (the "Initial Term"). This Agreement
may be renewed for up to a total of five (5) additional years in terms
(each, a "Renewal Term") of two years, two years and one year, successively, at
the sole option of the Company by giving the Supplier written notice not less
than twelve (12) months prior to the first day of any such Renewal Term.
Notwithstanding the foregoing, the Company or the Supplier may terminate this
Agreement
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prior to the expiration of the Initial Term or any Renewal Term as
provided in Section 10 hereof.
3. PURCHASE PRICE; ESTIMATED PAYMENTS; EXAMINATIONS.
a. The Company shall pay, as the total purchase price for all Products
purchased by the Company hereunder, an amount (the "Aggregate Purchase Price")
equal to (x) the Facilities Cost (as defined below) for the relevant Contract
Year (as defined below) plus * , minus (y) the Outside Sales (as
defined below). "Contract Year" shall mean each whole or partial fiscal year of
the Supplier during the Initial Term or any Renewal Term; in the event that this
Agreement commences on any day other than the first day of a fiscal year of the
Supplier or terminates on any day other than the last day of a fiscal year of
the Supplier, Contract Year shall mean that portion of the Supplier's fiscal
year following the Commencement Date or preceding the termination date, as
appropriate. The "Facilities Cost" shall mean, with respect to the relevant
Contract Year and with respect to the Dexter Facility, from and after the
Commencement Date, and with respect to the Henderson Facility, from and after
the Henderson Facility Commencement Date, all costs and expenses (other than
costs or expenses that constitute Excluded Costs, as defined below) that are (i)
incurred in, or directly
* Confidential information omitted and filed separately with the
Securities and Exchange Commission
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related to, the operation of such Facilities during the Initial Term or any
Renewal Term hereof, or (ii) assigned or allocated by the Supplier to such
Facilities (including, without limitation, a reasonable allocation of the
Supplier's corporate overhead expenses, determined in good faith based upon the
methodology used by the Supplier in the allocation of corporate overhead
expenses to all of its production facilities), less the credits described in the
following sentence. There shall be credited against Facilities Cost (i) an
amount equal to any employee withholding credits allowed the Supplier under the
KREDA program applicable to operation of the Henderson Facility and (ii) an
amount representing the sales or transfers of offal from the Facilities to the
Supplier or affiliates of the Supplier, which amount shall be based on the then-
current Jacobsen Mid-South poultry and feather meal quote as adjusted by the
schedule attached hereto as Exhibit B. "Excluded Costs" shall mean the following
costs or expenses: (i) the cost of shipping Products from the Facilities, (ii)
any payments made by the Supplier pursuant to Section 9(a) hereof or any cost,
expense or liability for which the Supplier has been indemnified, (iii) any
cost, fine, defense expense or judgment relating to any failure of the Supplier
to comply with applicable laws, (iv) any cost incurred in, directly related to,
or assigned or allocated to the protein
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plant at the Henderson Facility, (v) any taxes levied or paid solely with
respect to the Supplier's income, (vi) any amount relating to any action,
occurrence, incident, transaction, omission, claim, contract or liability prior
to the Commencement Date or the Henderson Facility Commencement Date, as
applicable, (vii) any environmental liability or clean-up, remediation or
contribution imposed by applicable environmental law (but not including (A) any
utilities surcharges or (B) any expenditures for preventive measures required by
changes in applicable environmental laws after the date of this Agreement),
(viii) any costs incurred in violation of this Agreement, (ix) cost of Third-
Party Products, (x) all depreciation expense with respect to the Dexter Facility
capital assets listed on Exhibit C hereto accrued during any period prior to the
earlier of the first week that the production of the Dexter Facility reaches
650,000 chickens or June 1, 1995, and (xi), prior to the earlier of the first
week that production of the Henderson Facility reaches 1,300,000 chickens, all
depreciation expense with respect to the Henderson Facility that exceeds the
depreciation expense of the Dexter Facility, measured on a cents-per-pound-of-
production basis. "Outside Sales" shall mean, with respect to the relevant
Contract Year and with respect to the Dexter Facility, from and after the
Commencement Date, and with
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respect to the Henderson Facility, from and after the Henderson Facility
Commencement Date, the proceeds actually received by the Supplier for sales of
Products to any purchasers other than the Company (which purchasers may include
the Supplier or affiliates of the Supplier); provided, however, that for
purposes of computing Outside Sales, (i) no credit will be given for the sales
of products from the protein plant at the Henderson Facility, and (ii) no credit
will be given for any sales proceeds that are payment for or reimbursement of
shipping expenses.
b. The Aggregate Purchase Price for any Contract Year shall be paid in
installments, as invoiced by the Supplier upon the shipment of Orders. Each
such invoice shall be based upon an estimated total cost of the Products shipped
(such estimates to be determined in good faith by the Supplier), plus
* , and shall be adjusted, as necessary, to
reflect the payment or refund of any Balancing Amount computed under Section
3(c). Invoices shall be due and payable within fifteen (15) days of their
respective dates.
c. Not later than thirty (30) days after the end of the first, second and
third of the Supplier's fiscal quarters of each Contract Year, and not later
than forty-five (45) days after the end of the fourth fiscal quarter of each
Contract Year, the
* Confidential information omitted and filed separately with the
Securities and Commission
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Supplier shall provide the Company with a written report showing in reasonable
detail (i) the Facilities Cost plus * calculated for the period
from the first day of such Contract Year through the end of such quarter, (ii)
the sum of (A) the net amount paid in installments toward the Aggregate Purchase
Price plus (B) the amount of Outside Sales, each calculated from the first day
of such Contract Year through the end of such quarter, and (iii) the difference,
if any, between the amounts described in clauses (i) and (ii) (the "Balancing
Amount"). If the Balancing Amount reflects an underpayment or overpayment of the
Aggregate Purchase Price, the Supplier shall, during the subsequent fiscal
quarter, appropriately adjust the invoices provided for in Section 3(b) to cause
the payment or refund of the Balancing Amount during such subsequent quarter. On
the expiration or termination of this Agreement, any portion of a Balancing
Amount that has not been previously reflected in an invoice to the Company shall
be paid by or refunded to the Company, as appropriate. In addition to the
quarterly reports, the Supplier shall provide the Company monthly statements of
operational results.
d. The Company shall be entitled, at its expense, (i) to examine the books
and records of the Supplier that are relevant to the determination of the
Facilities Cost, Outside Sales and
* Confidential information omitted and filed separately with the
Securities and Exchange Commission
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Aggregate Purchase Price, provided that any such examination shall be conducted
during the Supplier's normal business hours and in such a manner as to
reasonably minimize disruption of the Supplier's business, (ii) to participate
in the Supplier's preparation of budgets for the Facilities and, following the
Commencment Date or the Henderson Facility Commencment Date, as appropriate, to
approve any capital expenditure or related series of capital expenditures at
either Facility that exceeds $100,000, (iii) to direct the Supplier with respect
to the purchase of feed for the production of chickens to be processed at the
Facilities, (iv) to review the Supplier's allocation of overhead expenses and
costs and allocation of the Henderson protein plant, (v) to review and approve
all general increases in wages (or bonuses or increases for specific employees
or group not in accordance with past practice) or material changes in working
conditions, benefits and regulation, if such increases or changes are not
generally applicable to the Supplier's other chicken processing facilities, (vi)
to review and approve all self-dealing transactions of the Supplier and its
directors, officers, employees and affiliates affecting the Facilities Cost, if
such transactions are not based on market prices and terms, and (vii) to
determine, jointly with the Supplier, the amounts of bonuses to be paid to the
management
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employees of the Facilities. Any management bonuses so determined shall be paid
by the Supplier and included in the calculation of the Facilities Cost. All
amortization and depreciation of equipment, products and services used in the
computation of Facilities Cost shall be included in Facilities Cost in
accordance with the depreciation and amortization schedules and policies
attached as Exhibit D to this Agreement or as may otherwise be mutually agreed.
No cost incurred in violation of this Agreement shall be included in Facilities
Cost.
e. At the commencement of the second Contract Year, both parties, in good
faith, will outline and implement a program to reduce costs (the "Cost
Improvement Program"). The Cost Improvement Program will include a sharing of
the benefits of cost improvements (reductions) other than feed costs from the
prior year's base cost on an equal basis. The intent is to lower costs while
maintaining or improving quality, service and productivity. The Cost
Improvement Program will be ongoing and refocused from time to time as the
Supplier and the Company deem appropriate and advantageous. The Cost
Improvement Program will also be a component in establishing objectives for
Facilities management as a basis for the management performance bonus program.
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4. SPECIFICATIONS AND INSPECTION.
a. The BC Products shall be produced according to the quality and
production standards as set forth on Exhibit A hereto.
b. The Facilities and the Products shall be subject to inspection and test
by the Company to the extent practicable at all times and places, including
during the period of manufacture and, in any event, prior to final acceptance by
the Company or other purchaser.
c. The Supplier shall provide and maintain a quality control system
covering any Products sold to the Company or for the Company's account. Records
of all inspection work by the Supplier shall be kept complete and available to
the Company during the performance of an Order.
5. SUPPLIER'S COVENANTS.
a. The Supplier covenants that, during the term of this Agreement, it
shall:
i. operate the Facilities in compliance with all applicable laws and
regulations;
ii. use its best efforts, consistent with industry practices, to minimize
the Facilities Cost;
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iii. cooperate in good faith with the Company in any investigation or
health or other inspection relating to the Facilities or the Products; and
iv. process and package the BC Products as specified by the Company from
time to time.
b. The Supplier covenants that, during the term of this Agreement, it
shall not, without the prior consent or approval of the Company, which consent
or approval shall not unreasonably be withheld:
i. produce at the Facilities any product other than the Products sold to
the Company pursuant to this Agreement (except protein plant products at the
Henderson Facility);
ii. following the Commencment Date or the Henderson Facility Commencment
Date, as appropriate, make any capital expenditure or related series of capital
expenditures at either Facility in excess of $100,000;
iii. depreciate any of the Facilities' capital assets in a manner
inconsistent with the manner in which the Supplier has depreciated comparable
capital assets at its other production facilities in the past, as set forth in
Exhibit D;
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iv. take any hedging position with respect to any feed grain or other
commodity that would be included in the calculation of the Facilities Cost; or
v. change its current method of corporate overhead allocation (based upon
an imputed interest expense at an interest factor that may vary during any of
the Supplier's fiscal years).
6. ORDERING AND LOGISTICS. The Supplier and the Company hereby undertake
to establish jointly an efficient ordering, shipping and inventory procedure
within ninety days after the date of this Agreement.
7. FORCE MAJEURE. Neither the Supplier nor the Company shall be liable
for, or deemed to be in default hereunder or subject to any remedies of the
other party as a result of, delays or performance failures due to fire or other
acts of God, strikes, riots or similar causes beyond such party's reasonable
control, and without the fault or negligence of the Company or the Supplier;
provided, however, that when the Supplier has reason to believe that deliveries
of BC Products will not be made as scheduled, written notice setting forth the
cause of the anticipated delay shall be given immediately to the Company and the
Supplier shall use reasonable efforts to facilitate the Company in securing
alternative supplies of BC Products.
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8. WARRANTIES.
a. The Supplier represents and warrants that:
i. the Supplier is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware;
ii. the execution, delivery and performance by the Supplier of this
Agreement are within the Supplier's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene the Supplier's charter
or by-laws or any law or contractual restriction binding on or affecting the
Supplier;
iii. there is no pending or threatened litigation challenging the
Supplier's authority to enter into and perform under this Agreement;
iv. each and every Product and its packaging: (A) will not be adulterated
or misbranded within the meaning of any applicable federal, state or local law,
or any rules and regulations promulgated thereunder; (B) will be produced in
accordance with the quality and production standards set forth on Exhibit A
hereto; and (C) will comply in with applicable federal, state and local laws,
and the rules and regulations promulgated thereunder; and
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v. the production of Products at the Facilities does not infringe any
patent, copyright, trade secret or other proprietary right or process.
b. The Company represents and warrants that:
i. the Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware;
ii. the execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene the Company's charter
or by-laws or any law or contractual restriction binding on or affecting the
Company;
iii. there is no pending or threatened litigation challenging the
Company's authority to enter into and perform under this Agreement.
9. INDEMNITY.
a. The Supplier agrees to protect and indemnify and hold harmless the
Company and its customers, shareholders, officers, directors, employees,
franchisees, joint venturers, agents and affiliates from any claim, demand,
loss, damage, liability, cost or expense, directly or indirectly arising out of,
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or in connection with, or resulting from, the willful or negligent acts or
omissions of the Supplier, or any of its employees, agents or contractors,
relating to the manufacture, sale, use or consumption of any article of food
sold or delivered by the Supplier to the Company. In the event the Company is
required to conduct a recall or notification campaign due to an alleged defect
in the Supplier's Products, the Supplier will conduct the same or pay the
Company's costs and expenses thereof at the Company's option.
b. The Company agrees to protect and indemnify and hold harmless the
Supplier, its shareholders, officers, directors, employees, joint venturers,
agents and affiliates from any claim, demand, loss, damage, liability, cost or
expense, directly or indirectly arising out of, or in connection with, or
resulting from, the willful or negligent acts or omissions of the Company, or
any of its employees, agents or contractors, relating to the sale, use or
consumption of any article of food sold or delivered by the Supplier to the
Company.
10. TERMINATION OF AGREEMENT. Notwithstanding anything to the contrary
herein stated, this Agreement shall terminate prior to the expiration of the
term provided for in Section 2 hereof:
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a. at the option of the Company, upon the filing of a voluntary bankruptcy
or insolvency petition by the Supplier or an involuntary bankruptcy or
insolvency petition against the Supplier which is not vacated within 30 days
from the date of filing, or the entry of an order for relief in any bankruptcy
proceeding in which the Supplier is a defendant; the appointment of a receiver
or trustee for the Supplier; the execution of an assignment for the benefit of
creditors of the Supplier or the execution of a composition with creditors or
any agreement of like import by the Supplier; or
b. at the option of the Supplier, upon the filing of a voluntary
bankruptcy or insolvency petition by the Company or an involuntary bankruptcy or
insolvency petition against the Company which is not vacated within 30 days from
the date of filing, or the entry of an order for relief in any bankruptcy
proceeding in which the Company is a defendant; the appointment of a receiver or
trustee for the Company; the execution of an assignment for the benefit of
creditors of the Company or the execution of a composition with creditors or any
agreement of like import by the Company; or
c. at the option of the Supplier, in the event that the Company is in
default in the performance of any of the terms or
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conditions of this Agreement (including payment obligations, or the Company
shall breach any representation or warranty of the Company set forth in this
Agreement in any material respect), provided that such default or breach is not
cured within thirty (30) days after written notice to the Company by the
Supplier of such default or breach;
d. at the option of the Company, in the event that the Supplier is in
default in the performance of any of the terms or conditions of this Agreement,
or the Supplier shall breach any of its representations or warranties set forth
in this Agreement in any material respect, provided that such default or breach
is not cured within thirty (30) days after written notice to the Supplier by the
Company of such default or breach; or
e. upon a change in control of (i) the Supplier, at the option of the
Company, or (ii) the Company, at the option of the Supplier.
If this Agreement is terminated pursuant to Section 10(c), the Company
agrees that it will purchase from the Supplier at the Supplier's net out-of-
pocket cost, or reimburse the Supplier for its net out-of-pocket cost, for all
packaging materials purchased by the Supplier for the Products and which have
been rendered unusable because of such termination.
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11. INSURANCE. The Supplier shall at all times maintain commercial
general liability insurance, including product liability and contractual
liability coverage, the coverages, amounts and deductible levels of such
policies to be consistent with industry standards. Such policies shall name the
Company as additional insured and the Supplier shall provide the Company with
certificates of insurance evidencing these insurance coverages providing for 30
days' advance written notice to the Company of any material change or
termination of these coverages.
12. REMEDIES UPON DEFAULT. Termination of this Agreement by either party
pursuant to Section 10(c) or (d) shall not limit or otherwise affect the
remedies of the nondefaulting or nonbreaching party against the defaulting or
breaching party. In the event that either party is in default under any of the
terms or conditions of this Agreement or has materially breached any of its
representations or warranties in this Agreement, the nondefaulting or
nonbreaching party shall be entitled to pursue, in addition to any remedies
specifically provided herein, all further remedies then available under the
applicable state Uniform Commercial Code or otherwise available at law or in
equity.
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13. PROPRIETARY INFORMATION.
a. The Company and the Supplier acknowledge that they have previously
executed and delivered a Confidentiality Agreement, dated June 23, 1994, and
such Confidentiality Agreement is incorporated herein, as if fully set forth,
and shall be effective during the term of this Agreement.
b. In the event of a breach or threatened breach of the obligations of the
either party pursuant to the Confidentiality Agreement, the breaching party
agrees that in addition to any other legal rights or remedies that the other
party may have, the other party shall be entitled to injunctive and/or other
equitable relief to prevent or remedy such breach or threatened breach.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto, which consent shall not unreasonably
be withheld.
15. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be (i) mailed by
first class registered or certified mail, postage prepaid, (ii) delivered by a
nationally recognized overnight courier service, or (iii) transmitted by
confirmed
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facsimile or other confirmed electronic transmission, addressed as
follows:
If to the Company:
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Facsimile: (303) 384-5335
Attn: Donald J. Bingle
General Counsel
If to the Supplier:
Hudson Foods, Inc.
1225 Hudson Road
Rogers, Arkansas 72756
Facsimile: (501) 631-5400
Attn: Michael T. Hudson
President
or to such other address with respect to a party as such party shall notify the
other party in writing as above provided.
16. ENTIRE AGREEMENT; AMENDMENT. This Agreement (including attachments,
exhibits and materials incorporated by reference) represents the entire
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. Any amendment of
this Agreement shall be in writing, signed by both parties.
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17. WAIVERS OF JURY TRIAL AND PUNITIVE DAMAGES. THE SUPPLIER AND THE
COMPANY EACH HEREBY IRREVOCABLY WAIVE (A) ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND (B) ALL RIGHT TO SEEK OR RECEIVE PUNITIVE DAMAGES IN ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware and shall be subject to the
Uniform Commercial Code of the State of Delaware to the extent not inconsistent
with the terms hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the
date first above written.
HUDSON FOODS, INC.
/s/ JAMES T. HUDSON
By -----------------------------------
James T. Hudson
Chairman and Chief Executive Officer
BOSTON CHICKEN, INC.
/s/ BRUCE O. BURNHAM
By -----------------------------------
Bruce O. Burnham
Vice President, Purchasing
and Logistics
25
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EXHIBIT 2
CONFIDENTIAL TREATMENT
[LOGO] RESTAURANT
SERVICES
INC.
Burger King(R) Purchasing & Service Co-op
-------------------------------------------------------------------------
April 26, 1994
Mr. James T. Hudson
Chairman/CEO
HUDSON FOODS, INC.
P.O. Box 777
Rogers, AR 72756
SUPPLIER AGREEMENT
------------------
Dear Mr. Hudson:
The purpose of this Supplier Agreement is to express our mutual agreement
regarding a purchase and supply arrangement (the "Supply Arrangement") between
Hudson Foods, Inc. ("Hudson Foods") and Restaurant Services, Inc., as purchasing
agent for the Burger King System (the "BK System").
The terms and conditions of the Supply Arrangement are hereby agreed to be as
follows:
1. The Plant
Hudson Foods will be building a beef production facility (the "Plant") in
Columbus, Nebraska, and is willing to commit a portion of the capacity of the
Plant to the production of formed beef patties ("Product") for the BK System.
Restaurant Services, Inc. ("RSI"), as purchasing agent for the BK System,
desires to obtain such capacity for the BK System, upon the terms and conditions
hereinafter set forth, and such other terms and conditions as the parties hereto
may hereafter mutually agree upon in writing.
2. Term; Quantities
(a) Subject to the provisions of paragraph 2(c) hereof, this Supplier
Agreement shall run for a period of * years (the "Term"), commencing on
the first day of the month first following the later of the Plant (i) becoming
operational, or (ii) being approved by Burger King Corporation ("BKC") as a
supply facility for the BK System (the "Commencement Date"). During the Term of
this Supplier Agreement, Hudson Foods shall sell to the BK System, and RSI, as
purchasing agent for the BK System, shall cause the BK System to purchase from
Hudson Foods, a minimum of * pounds of Product per Contract Year, subject
to the the terms and conditions contained herein. "Contract Year" shall mean
each of the * consecutive 12-month periods occurring during the Term,
with the first Contract Year beginning on the Commencement Date and subsequent
Contract Years beginning on anniversaries of the Commencement Date.
* Confidential information omitted and filed separately with the
Securities and Exchange Commission
<PAGE>
(b) RSI shall cause the BK System to purchase from Hudson Foods an average
of * pounds of Product per week during each Contract Year. However,
the parties understand and acknowledge that the quantity of Product actually
purchased by the BK System in any week during a Contract Year will vary, due to
seasonality or other factors. RSI may, at its discretion, choose to buy
quantities in excess of * pounds of Product per week, up to a maximum
of * pounds of Product (unless RSI and Hudson Foods shall agree to a
larger amount) in any one week. Hudson Foods guarantee weekly production of up
to * pounds of Product should RSI choose to purchase up to that
quantity. RSI further agrees that, should an event contemplated by paragraph 14
hereof render RSI unable to meet its obligations under paragraph 2(a) hereof,
RSI will cause Hudson Foods to be treated no less favorably than any other
supplier of Product to the BK System.
(c) Hudson Foods will not during the Term of the Supply Arrangement sell
Product from the Plant to any other fast food restaurant that features
hamburgers. Such fast food restaurants shall include, without limitation,
McDonalds, Wendy's, Hardee's, and other national chain restaurants with similar
marketing plans. Nothing herein shall prevent Hudson Foods from selling Product
to national chain restaurants not specializing in fast food (such as, without
limitation, Shoney's, Bennigan's, Chili's, Hooters, and other comparable
restaurants), nor shall Hudson Foods be prevented from selling Product to any
customer if the Product is not produced at the Plant. If Hudson Foods should
breach or violate any of the provisions of this paragraph 2(c), then RSI, at
its option, may, without any liability whatsoever to Hudson Foods, terminate
this Supplier Agreement by the delivery of written notice to Hudson Foods.
3. Purchase Price
Hudson Foods will manufacture and deliver the Product FOB the Plant, at a
price per pound composed of the actual cost of raw material, adjusted for actual
shrinkage and inbound freight, plus a manufacturing cost of * per
hundredweight of Product (the "Manufacturing Cost").
Should a material change to the USDA rules and regulations or BKC specifications
occur, then this Supplier Agreement will be reviewed by the parties, and if
necessary, the parties will in good faith renegotiate the appropriate provisions
of this Supplier Agreement.
4. Profit Sharing
(a) The parties acknowledge that it is their mutual goal to create a Plant
capable, by means of production and other efficiencies, of producing Product at
or below the price set forth in paragraph 3 above, and that cost savings derived
from the utilization of the Plant for processing products for sale outside the
BK System will be shared with RSI. Consequently, Hudson Foods agrees that if the
ROI (as defined herein) during any Contract Year, except the first two Contract
Years, exceeds * percent, then it will pay to RSI one-half (1/2) of the
amount by which total RSI EBIT (as defined herein) for the Contract Year exceeds
the total RSI EBIT for that Contract Year that would have produced ROI of
* percent. Payments, if any, due under this paragraph 4(a) shall be
* Confidential information omitted and filed separately with the
Securities and Exchange Commission
2
<PAGE>
made within 45 days of the end of each Contract Year. For purposes of this
calculation, the first two Contract Years will be aggregated and treated as one
Contract Year.
(b) Except as provided otherwise in this Supplier Agreement, ROI, RSI EBIT
and RSI Allocated Investment shall be computed in accordance with generally
accepted accounting principles. Terms used in this paragraph 4 shall have the
following meanings:
"ROI" shall mean the return on investment during any Contract Year, and
shall be equal to (x) RSI EBIT with respect to such Contract Year measured as a
percentage of (y) RSI Allocated Investment as of the Investment Calculation Date
for such Contract Year.
"RSI EBIT" shall mean with respect to any Contract Year the Plant's
earnings before interest and income taxes derived from sales to the BK System
under this Supplier Agreement, and shall be the amount (positive or negative)
that equals (x) the Plant's gross sales under this Supplier Agreement during the
relevant Contract Year minus (y) the sum of (A) all costs (other than interest
and income taxes) incurred during such Contract Year exclusively in connection
with production under this Supplier Agreement plus (B) a Pro Rata Portion of any
costs (other than interest and income taxes) incurred during such Contract Year
in connection with operation of the Plant as a whole.
"RSI Allocated Investment" shall mean the net value, measured as of an
Investment Calculation Date, of all assets (which shall include, without
limitation, property, plant and equipment, net of accumulated depreciation,
inventory and accounts receivable) that are allocated to production under this
Supplier Agreement. The assets "allocated to production under this Supplier
Agreement" shall be, as of any Investment Calculation Date, the sum of (x) the
net value of assets dedicated exclusively to production under this Supplier
Agreement plus (y) a Pro Rata Portion of the net value of any assets relating to
the Plant as a whole.
"Investment Calculation Date" shall mean, with respect to the first
Contract Year, the end of the third (3rd) full month immediately following the
Commencement Date, and with respect to any subsequent Contract Year, the first
day of such Contract Year.
"Pro Rata Portion" shall mean, for purposes of calculating RSI EBIT, a pro
rating of costs based upon total sales (in dollars) under this Supplier
Agreement during the relevant Contract Year, measured as a percentage of total
sales (in dollars) for the Plant during such Contract Year, and for purposes of
calculating RSI Allocated Investment as of any Investment Calculation Date, a
pro rating of assets based upon total sales (in dollars) under this Supplier
Agreement during the Contract Year to which such Investment Calculation Date
relates, measured as a percentage of total sales (in dollars) for the Plant
during such Contract Year. The determination of any costs and assets that are to
be pro rated shall be made in accordance with the cost accounting practices
routinely and customarily employed by Hudson Foods.
5. Foreign Beef Purchases
RSI shall have the right (but not the obligation) to have Hudson Foods
purchase, for normal purchasing cycles, at a price negotiated by RSI, foreign
beef directly from
3
<PAGE>
sellers of imported beef that RSI may choose to direct them to deal with. Such
beef shall be shipped to Hudson Foods, as designated by RSI.
6. Inspection Rights
RSI or its designee shall have the right from time to time to inspect the
Plant and to inspect and audit the books, records and accounts of Hudson Foods
to verify Hudson Foods' costs and sales to the BK System and any other
information pertaining to the Supply Arrangement. RSI agrees to regard all
information disclosed by Hudson Foods as confidential and not disclose it.
7. BKC Approval
Hudson Foods acknowledges and agrees that BKC and the USDA must approve the
Plant (which is a BKC- and USDA-approved facility) before product can be
purchased for the BK System. If the Plant does not receive USDA and BKC
approval, then this Supplier Agreement shall terminate.
Should the BKC or the USDA approval of the Plant be suspended during the
Term of this Supplier Agreement, then RSI's obligations under this Supplier
Agreement will be suspended unless and until Hudson Foods receives new USDA and
BKC approvals.
Any RSI approval of the Plant shall be based upon the application, in good
faith, of standards no more stringent than those applied to other suppliers of
Product to the BK System.
8. Confidentiality
In the event of termination of this Supplier Agreement after execution,
each party to whom information is disclosed shall return to the other party all
statements, documents or other written information furnished by such other
party.
9. Completion Date
Hudson Foods agrees that it will (a) use its best efforts to have the Plant
completed and operational by December 31, 1994 and (b) advise RSI monthly in
writing of progress on construction of the Plant and the anticipated completion
date.
10. Sharing of Information
Hudson Foods agrees that it will share with RSI, and, at RSI's direction,
with other Burger King approved suppliers, and RSI agrees that it will share in
writing and cause other Burger King approved suppliers to share in writing with
Hudson Foods, information with regard to equipment or manufacturing techniques
that are designed to improve cost and/or performance of the Burger King Product
produced. The terms upon which such sharing of information will occur will be
agreed to when the changes or enhancements are identified. Any cost savings
attributable to the information provided will be shared equally by RSI and
Hudson Foods; provided, however, that no payment shall be required under
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<PAGE>
this paragraph 10 with respect to any Contract year as to which any payment is
due RSI under paragraph 4 hereof. Hudson Foods shall have no obligation to
implement any such shared information.
11. Credit Policy
Hudson Foods will sell the Product, as directed and delegated by RSI, to
all approved Burger King distributors under Hudson Foods' established credit
terms and conditions. Credit limits will be established based upon Hudson Foods'
credit analysis. Hudson Foods, at its sole discretion, may decide not to extend
credit to a distributor that does not comply with those credit terms or has
exceeded its credit limits. Hudson Foods' credit policy will be administered
without prejudice among similarly qualified distributors.
12. General Terms and Conditions
The General Terms and Conditions attached hereto as Appendix I are hereby
incorporated herein by reference.
13. Reports
Hudson Foods shall supply to RSI from time to time such information and
reports as RSI may reasonably require.
14. Force Majeure
If Hudson Foods or RSI shall be rendered unable by natural catastrophe or
any other cause not within the reasonable control of the party claiming
suspension to perform any of its obligations in delivery or receipt of Product
hereunder, then the obligations of Hudson Foods or RSI shall be suspended, to
the extent they are unable, in whole or in part, to deliver or receive Product;
provided, however, that the negligence of either Hudson Foods or RSI shall not
excuse its own performance hereunder.
If the foregoing accurately states our agreement, please so indicate by having a
copy of this Supplier Agreement signed in the space provided below and by
returning that copy to the undersigned.
Very truly yours,
RESTAURANT SERVICES, INC.
By: /s/ RONALD CEGNAR
-------------------------------------
Ronald Cegnar
President and Chief Executive Officer
5
<PAGE>
The foregoing correctly
states our agreement:
HUDSON FOODS, INC.
By: /s/ Michael T. Hudson
-------------------------------------
Michael T. Hudson
President and Chief Operating Officer
6
<PAGE>
EXHIBIT 3
[Logo of Hudson appears here]
Contact: Charles B. Jurgensmeyer
Chief Financial Officer
Hudson Foods, Inc.
(501) 631-5103
For Immediate Release
HUDSON FOODS ANNOUNCES SUPPLY CONTRACT WITH BOSTON CHICKEN
AND PLANS TO OFFER STOCK
ROGERS, Ark., Oct. 12--Hudson Foods, Inc. (NYSE:HFI) announced today that it
has entered into a five-year supply agreement with Boston Chicken, Inc.,
(NASDAQ:BOST) a franchisor and operator of food service stores specializing in
complete meals featuring rotisserie roasted chicken. The agreement calls for
Boston Chicken to purchase 100% of the capacity of two Hudson chicken processing
plants. Hudson also announced that it anticipates making a public offering of
shares of its Class A common stock in November 1994.
The Boston Chicken agreement provides for Hudson to begin to supply Boston
Chicken from its Dexter, Missouri processing plant in the Spring of 1995. Hudson
will also produce Boston Chicken products at its new integrated chicken
processing complex to be built near Henderson, Kentucky. Construction on that
complex is expected to begin soon.
The plant in Dexter, Missouri is expected to process, at full capacity,
approximately 650,000 chickens per week for Boston Chicken. The Henderson plant
is expected to begin production for Boston Chicken in the late spring of 1996,
with initial production
[Logo of Hudson appears here]
Hudson Foods, Inc. . P.O. Box 777 . 1225 Hudson Road, Rogers, AR 72756 .
(501) 636-1100
<PAGE>
averaging 325,000 chickens per week. When the Henderson plant reaches full
capacity, its production is expected to average 1.3 million chickens per week.
The Company currently processes approximately 4.3 million chickens per week.
Hudson expects to offer up to 2.5 million shares of Class A common stock
in the proposed stock offering, and believes that certain of its major
stockholders will offer an additional 1.5 million shares. The Company's proceeds
from the proposed sale of stock are intended to be used for capital
expenditures, including the construction of the Henderson plant, and other
corporate purposes. The offering will be made only by means of a prospectus.
Hudson Foods, Inc., one of the nation's largest poultry producers, sells a
variety of chicken and turkey products under the "Hudson" brand name, as well as
poultry, beef and pork products under the "Ohse", "Schweigert," "Pierre" and
"Roegelein" brand names.
