EXHIBIT 10.14
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Agreement") is made and entered into as of
the 20th day of August, 1993, by and among XXXXXXX FOODS OF TEXAS, INC., a
Nevada corporation (herein referred to as "Xxxxxxx") and XXXXXXX'x FOOD
MARKETS, INC., a Texas corporation (herein sometimes referred to as
"Randall's") and XXX THUMB FOOD & DRUGS, INC., a Delaware corporation (herein
sometimes referred to as "Xxx Thumb" and together with Randall's herein
sometimes collectively referred to as "Retailer"), with reference to the
following circumstances:
(i) Xxxxxxx is engaged in business as a full-line wholesale
supplier of food, grocery and related products to the retail trade in the
State of Texas and elsewhere; and
(ii) Effective as of the date of this Agreement, in accordance with
the Distribution Center Purchase Agreement dated as of the 31st day of July,
1993 (the "Purchase Agreement"), Xxxxxxx acquired certain Garland, Texas real
property and improvements (the "Warehouse Property") upon which is located a
distribution center for food, grocery and related products (the "Warehouse");
and
(iii) Randall's is engaged in business as a retailer of food,
grocery and related products and operates those stores described on Exhibit
"A" hereto (the "Randall's Stores") and Xxx Thumb, a wholly-owned subsidiary
of Randall's, is engaged in business as a retailer of food, grocery and
related products and operates those stores described on Exhibit "B" hereto
(the "Xxx Thumb Stores" and together with the Randall's Stores herein
sometimes collectively referred to as the "Retailer Stores"); and
(iv) Randall's contemplates acquiring and/or developing additional
stores (the "Randall's Additional Stores") and Xxx Thumb contemplates
acquiring and/or developing additional stores (the "Xxx Thumb Additional
Stores" and together with the Randall's Additional Stores herein sometimes
collectively referred to as the "Retailer Additional Stores") from time to
time during the term of this Agreement and desire that the Retailer Additional
Stores be subject to this Agreement; and
(v) The Xxx Thumb Stores are designated herein as the "Category I
Stores," the Randall's Stores are designated herein as the "Category II
Stores" and the Retailer Additional Stores shall be designated Category I
Stores or Category II Stores as provided herein; and
(vi) Xxxxxxx intends (i) to supply the Category I Stores from the
Warehouse, its GMD Dallas distribution center (the "Dallas Facility") and
from its San Antonio, Texas distribution center (the "San Antonio Facility")
and (ii) to supply the Category II Stores from its Houston, Texas
distribution center (the "Houston Facility") and the San Antonio Facility,
all in accordance with this Agreement, the parties recognizing that Xxxxxxx
may supply Category I Stores and the Category II Stores from any of its
distribution centers;
(vii) Retailer acknowledges that but for this Agreement Xxxxxxx
would not have acquired the Warehouse Property and other assets it purchased
under the Purchase Agreement; and
(viii) Retailer desires to benefit in services, predictability of
supplies and pricing through a long-term supply arrangement with Xxxxxxx.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants provided for herein, the parties agree as follows;
1. Supply. Throughout the term of this Agreement, Retailer shall
purchase from Xxxxxxx for the Retailer Stores and the Retailer Additional
Stores that Randall's or its affiliates operate and Xxxxxxx shall sell to
Retailer food, grocery, dairy, meat, frozen food and related products,
supplies and health and beauty care ("HBC") and general merchandise ("GM")
which Xxxxxxx offers for sale to its affiliated retailers (the "Products").
2. Retailer Additional Stores. Upon the development or acquisition by
Retailer of a Retailer Additional Store or Retailer Additional Stores, such
store(s) shall be, upon the completion of construction or acquisition, as the
case may be, (i) supplied by Xxxxxxx with Products under this Agreement and
(ii) designated Category I Store(s) unless such store(s) is (are) located
within a radius of 100 miles of the Houston Facility in which event it (they)
shall be designated Category II Store(s); provided, however, any Retailer
Additional Store(s) may be designated Category I Store(s) or Category II
Store(s) regardless of location upon agreement in writing by Xxxxxxx and
Retailer.
3. Price and Other Terms of Sale.
(a) The Sell Plan. Except as hereinafter provided, the Products
sold to Retailer pursuant to this Agreement shall be priced, and other terms
of sale shall be established, at levels described in the "Randall's/Xxx Thumb
Sell Plan dated June 9, 1993" which has been reviewed with Retailer and is
attached hereto as Exhibit "C," as amended from time to time by Xxxxxxx (the
"Sell Plan"), provided such amendments shall be applicable
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to all similarly situated customers of Xxxxxxx purchasing Products pursuant
to such Sell Plan.
(b) Transportation. Transportation costs from Xxxxxxx'x Houston
Facility, San Antonio Facility and from the Warehouse or any other
distribution center shall be reflected in the Sell Plan and shall be based on
cost/truckload and not rate/CWT.
(c) Category I Volume Discount Rebate and Category I Supplemental
Fee. Retailer and Xxxxxxx agree with respect to the Category I Stores that
supplementary to the payment provisions set forth in the Sell Plan, Xxxxxxx
shall rebate to Retailer 1% of the amount of the annual transfers (the
"Category I Annual Transfers") in excess of the amounts set forth in Table I
below (the "Category I Volume Discount Rebate") for each fiscal year of
Retailer which end on the last Saturday in June of the year indicated (the
"Fiscal Year(s)"), which payments shall be made thirty (30) days following
the close of each of Retailer's Fiscal Years during the term of this
Agreement. Retailer and Xxxxxxx further agree that Retailer shall pay Xxxxxxx
a supplemental fee (the "Category I Supplemental Fee") if the Category I
Annual Transfers do not meet the targeted amounts for each Fiscal Year of
Retailer as set forth in Table I below, such Supplemental Fee to be 1% of the
short fall from the amounts of Category I Annual Transfers set forth in Table
I payable thirty (30) days after the close of Retailer's Fiscal Year during
the Initial Term (as defined in paragraph 5(a) hereof) of this Agreement. The
Category I Annual Transfers shall include and the Category I Volume Discount
Rebate and the Category I Supplemental Fee shall apply as to all Products
delivered to the Category I Stores. During the Initial Term of this Agreement
the sum of the amount of transfers of Products to the Category I Stores shall
be known as the "Category I Transfers."
TABLE I
Retailer
Fiscal Grocery/Frozen/ Category I
Year Meat/Dairy HBC/GM Transfers
-------- --------------- ------------- ---------------
1994 $ 223,000,000 $ 26,000,000 $ 249,000,000*
1995 241,000,000 28,000,000 269,000,000
1996 261,000,000 31,000,000 292,000,000
1997 281,000,000 33,000,000 314,000,000
1998 303,000,000 37,000,000 340,000,000
1999 326,000,000 39,000,000 365,000,000
2000 351,000,000 42,000,000 393,000,000
2001 372,000,000 45,000,000 417,000,000
--------------- ------------- ---------------
Totals $2,358,000,000 $281,000,000 $2,639,000,000
*The Category I Volume Discount Rebate or the Category I Supplemental Fee,
whichever shall be applicable, shall be determined on a pro rata basis for
the fiscal year ending June 25, 1994.
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4. Quantities.
(a) Category I Minimum Purchase Level (Initial Term). During the
Initial Term (as defined in subparagraph 5(a) hereof), subject to the
provisions of subparagraph (e) of this paragraph 4, Retailer shall purchase
for delivery to the Category I Stores during each Fiscal Year of this
Agreement the minimum of quantities of grocery/frozen/meat/dairy and HBC/GM
Products set forth in Table I of paragraph 3(c) from Xxxxxxx (the Category I
Minimum Purchase Level"); provided, however, that the Category I Minimum
Purchase Level shall be prorated for the period beginning on the Effective
Date and ending on June 25, 1994; and provided further, however, that
notwithstanding Xxxxxxx'x intention to supply the Category I Stores from the
Warehouse, the Dallas Facility and the San Antonio Facility, the Category I
Minimum Purchase Level shall be calculated based upon Products delivered to
such stores, regardless of the distribution center from which such Products
are in fact delivered. In addition, during the Initial Term (as defined in
subparagraph 5(a) hereof), subject to the provisions of subparagraph (e) of
this paragraph 4, Retailer shall continue to purchase Products for the
Category II Stores substantially in quantities that Retailer purchased from
Xxxxxxx during the twelve months prior to the date of this Agreement.
(b) Category I Minimum Purchase Level. Retailer and Xxxxxxx agree
that the Category I Minimum Purchase Level shall be applicable only during
the Initial Term (as defined in subparagraph 5(a) hereof) and shall not be
applicable during the Renewal Terms (as defined in subparagraph 5(b) hereof).
(c) Mix of Products from all of Xxxxxxx'x Facilities. Retailer
agrees that for the term of this Agreement and during the Renewal Terms it
shall purchase Products for the Category I Stores and the Category II Stores
from Xxxxxxx of a mix (calculated in dollars) among grocery, meat, frozen
food, dairy and GM/HBC generally consistent with the mix (calculated in
dollars) of such Products currently being purchased by Randall's from the
Houston Facility as follows: grocery (63%), meat (6%), frozen food (17.5%),
dairy (2.5%) and GM/HBC (11%). Retailer further agrees that as between the GM
and HBC items the mix (calculated in dollars) will be approximately GM (30%)
and HBC (70%).
(d) Quantities of Products. Retailer agrees that for the term of
this Agreement and the Renewal Terms it shall purchase for the Category I
Stores and the Category II Stores (i) all of its frozen food and dry grocery
requirements with the exception of 800 items ("SKUs") and all Topco grocery
merchandise from Xxxxxxx, and (ii) all of its GM and HBC products with the
exception of 1,800 SKUs and all Topco nongrocery merchandise from Xxxxxxx,
which SKUs will be from time to time identified to Xxxxxxx by Retailer. Items
or SKUs not stocked by Xxxxxxx may be
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added to the numbers of grocery and non-grocery SKUs that Retailer shall not
be required to purchase from Xxxxxxx after Xxxxxxx shall have been afforded
the right to stock and supply Retailer such SKUs.
(e) Force Majeure. Notwithstanding the provisions of subparagraphs
(a) through (d) above, Retailer shall not be deemed in default of this
Agreement if non-performance is determined to be as the result of "a
condition beyond Retailer's control." The term "a condition beyond Retailer's
control" shall mean a situation existing which is not within the control of
Retailer. Examples include, but are not limited to, labor strikes, government
rationing or other regulations, flood, fuel shortages, earthquake, acts of
God, drought or other weather conditions.
5. Term.
(a) Duration. Unless terminated sooner in accordance with this
Agreement, the term of this Agreement shall commence on the day and year
first above written (the "Effective Date"), and shall extend until June 30,
2001 (the "Initial Term"). This Agreement shall be automatically renewed for
successive terms of one (1) year each (the "Renewal Terms"); provided,
however, either party may terminate this Agreement (i) as of the end of the
Initial Term upon written notice of at least ninety (90) days prior to the
end of the Initial Term or (ii) at any time during the Renewal Terms upon at
least ninety (90) days written notice, provided further, however, in no event
shall the term of this Agreement extend beyond twenty-three (23) years from
June 27, 1993.
(b) Early Termination (Category I Stores). Notwithstanding anything
to the contrary contained in this Agreement, Retailer shall have the right to
terminate this Agreement (with respect to the Category I Stores only) at any
time upon ninety (90) days written notice to Xxxxxxx (the "Termination
Notice") and compliance with the following conditions: (i) the payment to
Xxxxxxx three (3) days after mailing of such Termination Notice of a fee (the
"Termination Fee") equal to one (1) percent (%) times ($2.639 billion minus
the sum of the Category I Transfers as of the date of the Termination Notice)
and minus the sum of all Category I Supplement Fee payments, if any, and
(ii) the payment to Xxxxxxx of all sums due Xxxxxxx from Retailer pursuant to
this Agreement including payment for the actual amount of Products purchased
during the ninety (90) days from the Termination Notice to the actual
termination date (the "Ninety Day Period") herein called the "Actual 90 Day
Purchase Amount" and any other sums due Xxxxxxx or any of its affiliates with
the exception of Retailer's current (nondelinquent) open account obligation
in respect of the Category II Stores under this Agreement. As soon as
practicable following the termination of
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this Agreement as to the Category I Stores, Retailer and Xxxxxxx, each acting
in good faith, shall determine the Actual 90 Day Purchase Amount and Xxxxxxx
shall reimburse Retailer an amount equal to one (1) percent (%) of the Actual
90 Day Purchase Amount. For example, assuming (i) Retailer elects to
terminate this Agreement as to the Category I Stores as of June 24, 1995 (the
end of Retailer's 1995 fiscal year), (ii) there are no Category I Supplement
Fee payments, (iii) the Category I Transfers have been ordered, delivered and
paid for in accordance with Table I above as of June 24, 1995, and (iv) the
Actual 90 Day Purchase Amount is $65 million, the Termination Fee (giving
effect to the reimbursement) will be $20.56 million (.01 times ((a) $2.121
billion (the remainder of the Category I Annual Transfers as of July 24,
1995) minus (b) $65 million) = $20.56 million) or, assuming Retailer elects
to terminate this Agreement as of March 1, 1997 with $1 billion of Category I
Transfers remaining, $50,000 of Category I Supplemental Fees paid to such
date and the Actual 90 Day Purchase Amount is $75 million, the Termination
Fee (giving effect to the reimbursement) will be $9.20 million (.01 times
($1 billion minus $75 million) minus $50,000 = $9.20 million). All payments
provided for in this paragraph shall be made in cash by wire transfer to an
account designated by Xxxxxxx or Retailer as the case may be.
6. Payment. Payment shall be made by Retailer to Xxxxxxx in accordance
with the terms and provisions of the Sell Plan.
7. Service Levels. Xxxxxxx agrees that absent the occurrence of "a
condition beyond Xxxxxxx'x control", as hereinafter defined, it will use its
best efforts to obtain and maintain at any time an average service level of
at least ninety-five (95%) for the immediate past 18-week period during the
term of this Agreement. The average service level shall be determined by
comparing the gross dollar purchases of Products shipped to Retailer to the
gross dollar purchases of Products ordered by Retailer. The term "a condition
beyond Xxxxxxx'x control" shall mean a situation existing which is not within
the control of Xxxxxxx relating to the acquisition or distribution of
Products. Examples include, but are not limited to: labor strikes, government
rationing or other regulations, flood, fuel shortages, computer malfunction
or failure, equipment failure, earthquake, acts of God, drought or other
weather conditions. In the event Xxxxxxx fails to attain the average service
level of at least ninety-three (93%) for the immediate past 18-week period,
Xxxxxxx shall have a period of forty-five (45) days after notice by Retailer
to Xxxxxxx in writing of such deficiency in service level to attain an
average service level of at least ninety-five (95%) prior to the failure to
attain the required service level being deemed a default by Xxxxxxx hereunder.
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8. Default
(a) Default by Retailer. In the event Retailer fails to
perform any of its obligations hereunder in any material respect, then
Retailer shall be in default and Xxxxxxx shall have the right to immediately
terminate this Agreement by written notice ("Notice of Termination") and
pursue all other remedies available by reason of such default, including
specific enforcement of the obligations of Retailer, all, however, in
accordance with paragraph 9 below; provided, however, that in the event of a
monetary default, Retailer shall have a period of five (5) days from receipt
of the Notice of Termination from Xxxxxxx within which to cure such monetary
default. Other than recovery of actual damages related to a monetary
default, Xxxxxxx shall have no right to recover additional damages (whether
characterized as consequential damages, punitive damages or otherwise).
(b) Default by Xxxxxxx. In the event Xxxxxxx fails to
perform any of its obligations hereunder, them Xxxxxxx shall be in default
and Retailer shall have the right to immediately terminate this Agreement by
written notice ("Notice of Termination") and pursue all other remedies
available by reason of such default, including specific enforcement of the
obligations of Xxxxxxx, all, however, in accordance with paragraph 9 below;
provided, however, that in the event of a monetary default, Xxxxxxx shall
have a period of five (5) days from receipt of the Notice of Termination from
Retailer within which to cure such monetary default. Other than recovery of
actual damages related to a monetary default, Retailer shall have no right to
recover additional damages (whether characterized as consequential damages,
punitive damages or otherwise).
9. Disputes; Arbitration. The parties hereto agree that all
disputes between them relating to this Agreement are to be resolved by
arbitration as provided herein. This agreement to arbitrate shall survive
the rescission or termination of this Agreement. All arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of the American
Arbitration Association except as herein may be provided. The panel used
will be selected from, if available, the "Food Industry Panel" employed by
the American Arbitration Association and the decision of the arbitrators will
be final and binding on all parties. All arbitration will be undertaken in
the city of Dallas, Texas pursuant to the Federal Arbitration Act, where
applicable, and the decision of the arbitrators will be enforceable in any
court of competent jurisdiction.
In any dispute where a party seeks $50,000 or more in damages,
three arbitrators will be employed. All costs attendant to the arbitration,
excluding attorneys' and experts' fees, will be borne equally by the parties.
Each party will bear its own
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attorneys' and experts' fees. The arbitrators will not award punitive,
consequential or indirect damages. Each party hereby waives the right to
such damages and agrees to receive only those actual damages directly
resulting from the claim asserted. In resolving all disputes between the
parties, the arbitrators will apply the law of the State of Texas, except as
may be modified by this Agreement. The arbitrators are by this Agreement
directed to conduct the arbitration hearing no later than three (3) months
from the service of the statement of claim and demand for arbitration unless
good cause is shown establishing that the hearing cannot fairly and
practically be so convened.
Except as needed for presentation in lieu of a live appearance,
depositions will not be taken. Parties will be entitled to conduct document
discovery by requesting production of documents. Responses or objections
will be served twenty days after receipt of a request. The arbitrators will
resolve any discovery disputes by such prehearing conferences as may be
needed. All parties agree that the arbitrators and any counsel of record to
the proceeding will have the power of subpoena process as provided by law.
From related transactions in connection with this Agreement, the
parties may be in a debtor/creditor relationship, which may include the
granting of security interests in goods and/or fixtures, or in a relationship
as lessor and lessee. The parties recognize that these kinds of
relationships could give rise to the need by one or more of the parties for
emergency judicial relief to regain possession of goods and/or fixtures, to
prevent the sale or transfer of goods and/or fixtures, to protect real or
personal property from injury or to obtain possession of real estate. The
parties agree that either shall be entitled to pursue such remedies for
emergency or preliminary injunctive relief in any court of competent
jurisdiction, provided that each party agrees that it will consent to the
stay of such judicial proceedings on the merits of both this Agreement and
the related transactions pending arbitration of all underlying claims between
the parties immediately following the issuance of any such emergency or
injunctive relief.
10. Attorneys' Fees and Costs. In the event suit is brought to
enforce any of the terms of this Agreement, the losing party shall pay to the
prevailing party its reasonable attorneys' fees and costs incurred in any
proceeding to enforce the terms of this Agreement.
11. Amendment or Waiver. Except for the Sell Plan as provided in
paragraph 3 hereof, this Agreement shall not be amended, nor shall any of its
terms be deemed to have been waived by either party, unless such amendment or
waiver shall be in writing and signed by the parties hereto.
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12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
13. Counterparts. This Agreement may be executed in multiple
counterparts, which taken together shall constitute one instrument and each
of which shall be considered an original for all purposes.
14. Time is of the Essence. The parties agree that time is of the
essence under this Agreement.
15. Notices. All communications required or permitted under this
Agreement shall be in writing, and sent to the following addresses or to such
other address requested by the parties by notice as herein provided:
(a) Notices to Xxxxxxx:
Xxxxxxx Foods of Texas, Inc.
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx
President
With a copy to:
McAfee & Xxxx
A Professional Corporation
Xxxxx Xxxxx, Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxx, Esq.
(b) Notices to Retailer, Randall's or Xxx Thumb:
Xxxxxxx'x Food Market, Inc.
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Chairman and Chief
Executive Officer
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With a copy to:
Xxxxx & Xxxxx, L.L.P.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attn: J. Xxxxx Xxxxxxxx, Jr., Esq.
16. Purchase of Store Supplies. Upon the termination of this
Agreement, Retailer shall purchase from Xxxxxxx all store supplies which
Xxxxxxx has purchased or obtained as supplies for Retailer and which, because
of any special design, label, logo, quantity or other feature cannot be sold
promptly by Xxxxxxx to other retailers being served by the Warehouse, the
Houston Facility, the San Antonio Facility, the Dallas Facility or any other
of Xxxxxxx'x distribution centers which services Retailer during the term of
this Agreement at the same prices being paid for such supplies by Retailer at
the time of termination. Retailer shall pay to Xxxxxxx the current price for
such supplies being charged by Xxxxxxx to Retailer. Such amount shall be
paid and such supplies shall be delivered by Xxxxxxx to Retailer within ten
(10) days after termination of this Agreement. Xxxxxxx covenants and agrees
that during the term of this Agreement it will not stock supplies of the type
and kind described in this paragraph 16 in excess of the amount which is
normal and customary except as requested or required by Retailer.
17. Miscellaneous.
(a) Board Authorization. Retailer shall execute and deliver
any and all documents which may reasonably be requested by Xxxxxxx in order
to properly document this Agreement, including, but not limited to, certified
resolutions of the Board of Directors of Retailer authorizing the undersigned
officer to enter into this Agreement.
(b) Binding Effect; No Assignment. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto, their respective
successors and assigns. This Agreement shall not be assignable by either
party hereto without the consent of the other party hereto, which consent
shall not be unreasonably withheld.
(c) Exhibits. Any Exhibit attached hereto is made a part
hereof and is fully incorporated herein by reference.
(d) Entire Agreement. This Agreement embodies the entire
understanding of the parties hereto in relation to the purchase of Products
by Retailer from Xxxxxxx. There are no representations, promises, warranties,
understandings or agree-
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ments, express or implied, oral or otherwise, in relation thereto, except as
expressly referred to or set forth herein. Retailer acknowledges that the
execution and delivery of this Agreement is its free and voluntary act and
deed and except for the provisions contained in recital (vii) above that said
execution and delivery have not been induced by, or done in reliance upon,
any representations, promises, warranties, understandings or agreements made
by Xxxxxxx, or its agents, officers, employees or representatives. No
promise, representation, warranty or agreement made subsequent to the
execution and delivery hereof by either party hereto, revocation, partial or
otherwise, or change, amendment, addition, alteration, waiver or modification
of this Agreement or any of the terms hereof shall be enforceable unless the
same be in writing and signed by the parties hereto.
(e) Headings. Headings or captions of the paragraphs in this
Agreement are for convenience of reference only, and in no way define or
limit or describe the intent of this Agreement or any provision of any
paragraph hereof.
(f) Inconsistency with Sell Plan. In the event any of the terms
and conditions of this Agreement are inconsistent with the terms and
conditions of the Sell Plan, the terms and conditions of this Agreement shall
govern and prevail.
(g) Partial Invalidity. In the event that any of the
provisions or portions thereof of this Agreement are held to be unenforceable
or invalid by any court of competent jurisdiction, the validity and
enforceability of the remaining provisions or portions hereof shall not be
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
XXXXXXX FOODS OF TEXAS, INC.
Date: 8-20-93 By: /s/ Xxxxx X. Xxxxxx
------------------------- ------------------------------
Xxxxx X. Xxxxxx, President
"XXXXXXX"
XXXXXXX'X FOOD MARKETS, INC.
Date: 8-20-93 By: /s/ [Illegible]
------------------------- ------------------------------
XXX THUMB FOOD & DRUGS, INC.
Date: 8-20-93 By: /s/ [Illegible]
------------------------- ------------------------------
"RETAILER"
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