Exhibit 10.73
TCBY SYSTEMS, LLC
Distribution Service
Agreement
with Pate Dawson
Company
August 1, 2006
1
DISTRIBUTION AGREEMENT
THIS AGREEMENT is
made and entered into as of the 1st day of August, 2006, by and
between TCBY SYSTEMS, LLC, a Delaware limited liability
company (“COMPANY”) and PATE DAWSON COMPANY, a
North Carolina Corporation (“DISTRIBUTOR”). DISTRIBUTOR
will commence distribution services under this Agreement on
September 25, 2006 (the “Effective Date”) unless
otherwise mutually agreed upon by the parties.
RECITALS
A .
The COMPANY is engaged in the worldwide business of franchising or
licensing retail TCBY Stores and other related concepts
(“Franchised Stores”). COMPANY also has several
COMPANY-owned stores that it supports directly (“Company
Stores”). The Franchised Stores and or individual
franchisees (the “Franchisees”) function as independent
companies and are individually and solely responsible for the
activities at each location, including purchasing needed products
and supplies, which includes responsibility for purchasing from
DISTRIBUTOR. COMPANY is responsible for activities at its
Company Stores. Company Stores and Franchised Stores are
jointly referred to herein as “Stores”, the Franchisees
and individuals responsible for Company Stores are jointly referred
to as (“Operators”) and the combined efforts of the
COMPANY and its Franchisees is referred to as the
“System”. COMPANY takes steps to assist Stores to
meet its purchasing needs and has the right to designate
distributors and suppliers for the System.
B.
The DISTRIBUTOR is engaged in the business of purchasing, selling,
distributing and delivering food service products (including the
Products, as defined below). In connection therewith, the
DISTRIBUTOR manages, controls, prepares and furnishes reports to
its customers concerning the inventories of products and supplies
the DISTRIBUTOR purchases, manages and controls for sale,
distribution and delivery to its customers.
C.
COMPANY wishes to appoint DISTRIBUTOR as a distributor of certain
approved proprietary food and related products to the Stores
located within the Territory (as defined below), and DISTRIBUTOR
wishes to accept such appointment, all on the terms and conditions
hereinafter set forth.
2
AGREEMENT
NOW, THEREFORE, in
consideration of the mutual covenants herein set forth and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1.
Appointment - Subject to all terms and conditions of
this Agreement, COMPANY hereby appoints DISTRIBUTOR as a
distributor of the products within the product categories listed in
Schedule 1 (the “Products”), to the Stores in
the territory serviced by DISTRIBUTOR’s distribution center
located in Goldsboro, North Carolina (the “Territory”)
as reflected in the map depicted in Schedule 2 and
DISTRIBUTOR hereby accepts such appointment. Subject to Section
2.02, COMPANY may appoint DISTRIBUTOR as a distributor of Products
to Stores outside of the Territory and DISTRIBUTOR may agree to
such designation.
2.
Distribution of Products
2.01
Products - DISTRIBUTOR will maintain in its inventory of
Products the following: (i) Products designated by COMPANY that
contain the proprietary trademarks, service marks, logos or labels
of COMPANY or any of its affiliates or that are made pursuant to
specifications provided by COMPANY, its affiliates, or licensors
for limited distribution to Operators (defined below) or other
entities licensed by COMPANY, its affiliates or licensors
(“TCBY Branded Products”), and (ii) other supplies or
other national or regional branded Products designated or
contracted for by COMPANY to be maintained in inventory by
DISTRIBUTOR for distribution to COMPANY, its affiliates and the
Operators. (Collectively, Products described in clauses (i)
and (ii) are referred to as “Proprietary
Products”). DISTRIBUTOR will also maintain in its
inventory non-proprietary Products which DISTRIBUTOR stocks in its
inventory for sale to COMPANY, its affiliates and its Operators.
DISTRIBUTOR shall not be required to maintain more than two hundred
(200) Proprietary Products in inventory at any time. All Coca
Cola Products carried for COMPANY shall be excluded from the
calculation of the number of Proprietary Products.
2.02
Approved Operators - DISTRIBUTOR shall sell and deliver
to Franchisees and Operators of Stores approved by COMPANY and
located within the Territory such quantities of the Products
(subject to minimum Product order requirements) as the Operators
may order from time to time during the term of this Agreement.
DISTRIBUTOR shall cease selling TCBY Branded Products to any
Operator not later than three (3) days following receipt of written
notice from COMPANY advising DISTRIBUTOR that such Operator is no
longer approved by COMPANY and shall,
3
within such timeframe,
further cease selling, under the terms of any supplier agreement
negotiated by COMPANY, all Proprietary Products to such Operators
referenced in such notice. In addition, DISTRIBUTOR shall have the
right to immediately cease the sale and distribution of Products to
any Operator (a) who is in default of its obligations to
DISTRIBUTOR, , or (b) who has filed a voluntary petition in
bankruptcy or under any other similar insolvency or debtor relief
law or who has had such a petition filed against it, or who has
made a general assignment for the benefit of its creditors. COMPANY
shall also have the right to reinstate delivery to any Operator
that COMPANY previously stopped selling by providing written notice
to DISTRIBUTOR and DISTRIBUTOR shall provide such delivery as soon
as mutually agreed between the parties.
A list of the present
Operators with Stores located within the Territory and approved by
COMPANY and their respective Store locations is attached hereto as
Schedule 3 . During the term of this Agreement,
COMPANY shall maintain and provide to DISTRIBUTOR a current list of
all Operators with Stores within the Territory who have been
approved by COMPANY for distribution of the Products under this
Agreement. DISTRIBUTOR shall have the right to rely upon such list,
as amended or modified by COMPANY in writing from time to time, in
performing its obligations under this Agreement. COMPANY shall
notify DISTRIBUTOR of new Stores within the Territory not less than
twenty-one (21) days prior to the desired date of first shipment of
Products to any such new Stores. In addition, provided and to the
extent that COMPANY and DISTRIBUTOR mutually agree in writing,
DISTRIBUTOR shall provide distribution services to Stores located
outside the Territory, as designated by COMPANY.
COMPANY represents and
warrants that the terms of this Agreement, as and if amended in the
manner permitted under this Agreement, are binding upon and shall
govern DISTRIBUTOR and COMPANY’s obligations with respect to
distribution services performed by DISTRIBUTOR hereunder and that
each Franchisee that is an owner or operator of a Franchised Store
within the System shall be bound by the terms of this Agreement, as
it may hereafter be amended, upon such Operator’s purchase of
Proprietary Products from DISTRIBUTOR.
2.03
Product Orders - All
Product orders shall be submitted by the Operators to DISTRIBUTOR
and shall specify the location of the Operator’s Stores, the
type of Product, and the quantity desired. Operators must
place orders electronically (“Electronic Orders”) or if
placed by telephone or fax to DISTRIBUTOR’s customer service
center in accordance with the guidelines detailed below, such order
will be subject to a [CONFIDENTIAL](1) surcharge pursuant to
the provisions of this section 2.01. All shipment expenses from
DISTRIBUTOR’s distribution center to the Operator’s
location shall be at DISTRIBUTOR’s expense unless otherwise
noted elsewhere in this
(1)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
4
Agreement. Product
order guides will be provided by DISTRIBUTOR to the Operators
monthly via DISTRIBUTOR’s website and with a hard copy
delivered to each Store, with availability of such order guides to
be made prior to the beginning of the month, only if requested by
the individual location, but only after review and approval of the
order guide by COMPANY. The order guides will be organized by
Product categories and will include, among other things, the
Product Sell Price (as defined herein), Product units and new
Products. DISTRIBUTOR will assign one product code number to each
stock-keeping unit (“SKU”) of each Product, which will
be common throughout its entire distribution system and will be
used on all documents such as order guides, invoices, monthly
reports, etc. SKU’s, and, accordingly, the assigned product
code number, must differ for equivalent Products supplied by
different suppliers. DISTRIBUTOR will use its best efforts to
utilize the existing TCBY product item numbers. Only Products
approved for sale to its Operators by the COMPANY will be listed on
this order guide. Electronic Orders will be placed by internet
using DISTRIBUTOR’s automated order entry system. All
orders are subject to the standard order cut-off time of 4:00 p.m.
two (2) days prior to their scheduled delivery day.
Notwithstanding the foregoing, Stores scheduled to receive
deliveries on a Monday must have their order placed by 10:00 a.m.
the preceding Friday. Operator will be notified of any
Product shortages at the time of order placement or, in the case of
an Electronic Order, at order placement. If an item is out,
the Operator may choose another at that time. If a shortage occurs
after the order is placed, the location will be notified prior to
the loading of the delivery truck with sufficient time so that an
alternative may be ordered, subject to the provisions of Section
3.02.
Where reasonably possible, DISTRIBUTOR will
schedule ordering days and delivery days that are mutually agreed
upon by and between DISTRIBUTOR and each Operator and will provide
notice to the affected Operator at least fourteen (14) days before
routing changes. On an exception basis, DISTRIBUTOR will consider
shortening the permissible time frames for scheduled deliveries for
those Operators that, given unique and compelling business needs,
require the same.
Commencing [CONFIDENTIAL](2) days after
the Effective Date, DISTRIBUTOR will be permitted to charge an
Operator who places their order via fax or phone a surcharge of
[CONFIDENTIAL](3) which will be shown as a separate line
item on the invoice.
2.04
Deliveries. Delivery vehicles used by
DISTRIBUTOR will only display the marks of DISTRIBUTOR, except for
locations that cannot accommodate delivery by
DISTRIBUTOR’S
(2)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(3)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
5
existing tractor
trailers or in the instances where recovery deliveries are made by
outside services or DISTRIBUTOR has the need for temporary short
term rental equipment.
DISTRIBUTOR agrees
that, excluding key drops (deliveries scheduled to be made during
the period running from one (1) hour or more after the retail
closing time of the Store to deliveries one (1) hour or more before
the retail opening time of the Store), an overall average of 90% of
all regularly scheduled deliveries will be made within a two (2)
hour window, meaning no earlier than one (1) hour before and no
later than one (1) hour after the scheduled delivery time. If a
delivery is anticipated to fall outside of this two (2) hour
window, DISTRIBUTOR will immediately notify the Operator.
DISTRIBUTOR will provide an inside delivery to each Operator in
accordance with Company’s temperature store requirements as
detailed in Section 4.07, placing refrigerated and frozen Products
into their appropriate storage areas, but will not be responsible
for stocking shelves or rotating inventories. COMPANY
acknowledges that Stores scheduled to receive fewer than twenty
(20) deliveries annually pursuant to Section 2.05, may have their
delivery date modified from the originally scheduled day of the
week (but still within that same calender week) to permit
DISTRIBUTOR to maximize the efficiency of its routes. In the
event this occurs, DISTRIBUTOR will notify the Store immediately
upon the placement of the affected order with the new delivery date
and time.
All invoices for
deliveries made during Store’s business hours will be signed
for by the Store’s store manager or other representative
prior to DISTRIBUTOR’s driver leaving the Store. Copies
of invoices for deliveries made after the Store’s regular
business hours will be left at the Store.
The
COMPANY agrees to use its commercially reasonable efforts to cause
Operators to provide keys and security codes for night deliveries
where necessary. In the event Operator refuses to provide
keys and security codes, Operator will promptly meet the delivery
driver at the scheduled appointment time or at such other time as
Operator has been notified in the event of a late delivery.
If the Operator fails to meet the DISTRIBUTOR delivery at the
appropriate time on more than one occasion, the Operator shall be
responsible for payment of a penalty fee of
[CONFIDENTIAL](4) to DISTRIBUTOR for subsequent
occurrences. If DISTRIBUTOR must redeliver the order to the
Operator, the Operator will also be responsible for any Product
that is rendered undeliverable due to the delay. In the event
of a Product shortage or delivery problem that occurs during an
unattended delivery, the authorized representative of the Stores
will contact the distribution center no later than the first
Notification Deadline following such unattended delivery. The
“Notification Deadline” is 4:00 p.m. local time each
day for the affected Stores.
(4)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
6
2.05
Delivery Frequency/Routing - DISTRIBUTOR will provide
each Operator with a minimum delivery frequency based on annual
case volume as shown below as long as the Operator meets the
minimum order requirements set forth in Section 5 hereof:
|
|
|
Delivery Frequency
|
|
Annual Case Volume
|
|
Summer Routing
|
|
Winter Routing
|
|
Less than
cases
|
|
4
deliveries during a 12 month period
|
|
|
|
200-349
cases
|
|
6
deliveries during a 12 month period
|
|
|
|
350-499
cases
|
|
8
deliveries during a 12 month period
|
|
|
|
500-999
cases
|
|
Every 4
weeks
|
|
Every 4
weeks
|
|
1,000-1,999
cases
|
|
Every 3
weeks
|
|
Every 4
weeks
|
|
2,000-3,499
cases
|
|
Every week
|
|
Every 2
weeks
|
|
Greater than 3,499
cases
|
|
Every week
|
|
Every week
|
This schedule is
intended to serve as a guideline only and DISTRIBUTOR agrees to
provide additional regular deliveries as requested by Operator and
approved by COMPANY in writing. COMPANY will provide
DISTRIBUTOR with the initial delivery frequency for each Store in
Schedule 3 . COMPANY and DISTRIBUTOR will mutually
agree on the exact date for routing changes from summer to winter
and winter to summer but each period will be approximately six (6)
months with summer routing from April through September and winter
routing from October through March.
In the event an
emergency delivery is required based upon the Operator’s
needs and not due to a delivery error by DISTRIBUTOR nor during the
time periods specified in Section 2.06, DISTRIBUTOR will
accommodate the Operator’s request with the most efficient
available delivery method. All additional freight expense will be
at the Operator’s expense and will be billed upon
DISTRIBUTOR’s receipt of the invoice from the shipping agent.
If DISTRIBUTOR is able to schedule such an emergency delivery in
conjunction with a nearby route, the additional freight expense
will be [CONFIDENTIAL](5). Where possible, a store
may order up to [CONFIDENTIAL](6) cases to be delivered to a
nearby store, on that store’s delivery day (and with that
store’s consent) without an additional charge. Products
delivered to a nearby store will be billed on a separate
invoice.
Should the need arise
for an emergency or special delivery due to supplier error,
DISTRIBUTOR and COMPANY will work with the supplier to remedy the
shortage at the supplier’s expense. If supplier fails to pay
the additional freight expense, COMPANY will be required to do so
provided DISTRIBUTOR notifies COMPANY immediately of supplier
non-performance. If an
(5)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(6)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
7
emergency delivery is
necessary due to DISTRIBUTOR error, DISTRIBUTOR will arrange a
special delivery with any additional freight to be paid by
DISTRIBUTOR.
DISTRIBUTOR will arrange its routes to insure
that its delivery trucks will be in all markets (SMSA’s of at
least 250,000 population) within each Territory at least twice a
week where at least twenty-five (25) Stores serviced by DISTRIBUTOR
under this Agreement are located.
2.06
Special Deliveries During Roll-Out and New Operator Openings
- DISTRIBUTOR and COMPANY recognize that during the initial
roll-out phase of the DISTRIBUTOR distribution program, many new
processes will be in place for each of COMPANY, the Operators and
DISTRIBUTOR, including changes in the way the Operators order, the
distance from the DISTRIBUTOR distribution center to the Operators,
and lead times from order day to delivery day for the Operators.
Therefore, DISTRIBUTOR will process emergency orders for all
Operators for the first thirty (30) days following the commencement
of distribution service at no additional charge, subject to the
minimum order requirements and applicable handling fees, if any, as
set forth in Section 5 of this Agreement. In addition, during
the term of this Agreement, DISTRIBUTOR will process emergency
orders for all Operators’ newly added Stores within the first
thirty (30) days following the opening of the new Stores, subject
only to minimum order requirements and applicable handling fees, if
any, as set forth in Section 5 of this Agreement.
2.07
Return of Products/Credits –Any Products ordered
by Operators which are returned to DISTRIBUTOR for any reason must
be returned no later than the next regularly scheduled delivery
(except that, in the case of Products to be returned as a result of
concealed damage, within the remaining shelf life of such Products)
and all claims for Products to be returned must be made either to
the driver upon check-in of the order, by telephone by 4 p.m. on
the day of delivery following receipt of the Products if an
unattended delivery or, in the case of concealed damage, within
twenty-four (24) hours of discovery of concealed damage by the
Operator. All returned items must be in unmarked original
packaging and must be in suitable condition for resale (unless
damaged or mis-marked Product was the reason for the return).
Subject to the foregoing, DISTRIBUTOR shall provide credit to the
affected Operator for defective, shorted or damaged Products within
twenty-four (24) hours of the driver’s return if brought to
the driver’s attention or noticed by the driver during
delivery or, in any event, within forty-eight (48) hours of
DISTRIBUTOR’s receipt of the Operator’s claim of
damaged, shorted or defective Products (or receipt of product, if
warranted) and will immediately provide documentation on its
website for Operator of such credit if the original order was
placed electronically or via fax or phone if the order was placed
in some other manner. Notwithstanding the foregoing, no
returns will be permitted for cooler or freezer items, or fresh
produce due to misorder by the Operator. Products
8
refused by Operator at
time of delivery for reasons other than damage or remaining shelf
life below agreed upon parameters will be subject to a
[CONFIDENTIAL](7) restocking charge to be paid by
Operator. In the event that the shorted, defective or damaged
Product is a Kill Item, then DISTRIBUTOR will remedy the situation
in accordance with Section 3.02 if so requested by the
Operator.
2.08
Limited Time Offers (“LTO’s”) - In
order to allow DISTRIBUTOR to maintain service levels to the
Operators, COMPANY will provide DISTRIBUTOR with at least
twenty-eight (28) days prior written notice of any and all
LTO’s to be run by COMPANY (subject to availability of LTO
Products from the supplier within the twenty-eight (28) day
period). Such written notices shall include estimated usage for the
Products to be promoted if such usage is expected to deviate
materially from historical levels or if a new Product. Subject to
the above, DISTRIBUTOR agrees to stock sufficient inventory for any
new Proprietary Products to be used in national LTO promotions and
other key items, as reasonably requested by COMPANY. Unless
retained on the Operator’s menu at the instruction of the
COMPANY or mutually agreed to between COMPANY and DISTRIBUTOR, all
LTO Products must be removed from the DISTRIBUTOR distribution
centers no later than sixty (60) days after the completion of the
LTO and COMPANY shall purchase all remaining inventory of such LTO
as provided in Section 3.02. The sale of LTO Products by
DISTRIBUTOR is final and LTO Products may not be returned to
DISTRIBUTOR, unless the return is necessitated due to a DISTRIBUTOR
error or due to Product damage not caused by the Operator.
3.
Suppliers of Products; Inventory of Products.
3.01
Suppliers/Contracted Products - The Proprietary Products
to be distributed to the Operators under the terms and conditions
of this Agreement shall be purchased by DISTRIBUTOR, on its own
account, from the suppliers (including COMPANY) selected by
COMPANY, pursuant to terms and conditions as are agreed upon by and
between DISTRIBUTOR and such suppliers (including COMPANY). In the
event COMPANY enters into direct contracts with suppliers, the
terms and conditions of such contracts that obligate DISTRIBUTOR
shall be provided to DISTRIBUTOR for its business and legal review
and, if the business and legal terms of the proposed contract that
apply to DISTRIBUTOR are reasonably acceptable to DISTRIBUTOR,
DISTRIBUTOR will approve the supplier contract. The guaranteed
supplier price provided under such supplier contract (net of
billbacks by DISTRIBUTOR, if any), plus applicable freight if
the
(7)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
9
supplier price is not a
delivered price, plus [CONFIDENTIAL](8) , if any,
attributable to the Product, shall be the “Cost”
of the Product. Products governed by such supplier contracts
negotiated by COMPANY are referred to herein as “Contracted
Products.” The freight charges for Contracted Products will
be an amount negotiated with the supplier by COMPANY.
DISTRIBUTOR agrees that Cost for any Contracted Products will not
include any unloading costs for palletized and slipsheet loads,
except in those cases where the Contracted Products are not
delivered on pallets or if the pallet ti-hi is larger than the
standard established by DISTRIBUTOR and must be broken down for
proper storage
3.02
Inventory - During the term of this Agreement,
DISTRIBUTOR shall maintain an inventory of the Products in
quantities necessary to provide the Operators with an adequate
supply of such Products based upon initial usage projections by
COMPANY, future historical usage of such Products by the Operators,
and the fill rate performance requirements detailed below.
DISTRIBUTOR agrees to work with COMPANY, to attempt to maximize the
quantities of Products purchased to efficiently reduce the cost of
Products purchased, and to maximize Product inventory turns. In
addition, DISTRIBUTOR agrees to order Products in the quantities
indicated on the inbound quantity matrix attached hereto as
Schedule 5, as amended by COMPANY to reflect the growth in
the number of Stores serviced by DISTRIBUTOR in the Territory from
time to time(9). To further insure DISTRIBUTOR’s ability to
comply with the performance requirements detailed later in this
Section 3.02, DISTRIBUTOR will also maintain at each distribution
center servicing Operators “safety stock” of not less
than [CONFIDENTIAL](10) days historical usage for all
Proprietary Products and will also have an additional
[CONFIDENTIAL](11) days historical usage of white chocolate
mousse, chocolate and vanilla frozen yogurt on the road at all
times. DISTRIBUTOR agrees that all Products delivered to Operators
will have at least one-third of their original shelf-life remaining
as of the date of delivery.
COMPANY categorizes
Products into three classes:
Proprietary Products
that Operators must have (“Kill Items”), which Kill
Items will not number more than [CONFIDENTIAL](12) at any
time, excluding beverage Products and LTO items. COMPANY will
provide a list of Kill Items and other Proprietary
Products
(8)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(9)
Provided that any items on schedule 5 currently from Distributor
non-stocking vendors that will require Distributor to purchase
greater than [CONFIDENTIAL] on hand inventory per order will be
reviewed with Company for alternate items/vendors or will be
purchased through DOT or other redistributors utilized by
Distributors.
(10)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(11)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(12)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
10
to DISTRIBUTOR, which
list will be updated by COMPANY from time-to-time. The
initial list of Kill Items is attached as Schedule 4
.
Other Proprietary
Products that can be substituted in an emergency.
Non-proprietary
Products, including, any produce items that DISTRIBUTOR may agree
to provide.
DISTRIBUTOR will
achieve a 100% fill rate on Kill Items with overnight emergency
delivery, if requested, an overall aggregate “fill
rate” for all Products of [CONFIDENTIAL](13) , and at
least [CONFIDENTIAL](14) of all invoices issued by
DISTRIBUTOR to the Operators will be completely accurate at the
time of initial issuance, with all of the above measured
quarterly. The “fill rate” equals the percentage
of Products or Kill Items, as the case may be, obtained by dividing
the total number of Products or Kill Items shipped by DISTRIBUTOR
and received by the Operators at the time of delivery for the
month, by the total number of Product or Kill Items ordered by the
Operators from the DISTRIBUTOR for that same month. All fill
rate measurements (and invoice accuracy requirements) will be net
of supplier-related issues such as shortages and delayed deliveries
to DISTRIBUTOR, provided DISTRIBUTOR notifies COMPANY immediately
in the event of supplier non-performance. If emergency delivery is
required due to supplier (including COMPANY) error, costs of
emergency delivery shall be at supplier (including COMPANY)
expense, provided that, if the supplier fails to absorb such
expense, such delivery costs shall be paid by the Operator provided
DISTRIBUTOR has notified COMPANY immediately in the event of such
non-performance and Operator has approved the additional expense in
advance. If the emergency delivery is due to
DISTRIBUTOR error, then DISTRIBUTOR will remedy the situation in as
efficient manner as possible, which may include emergency
deliveries and special freight shipments, at DISTRIBUTOR’S
sole expense. If the emergency delivery is due to Operator error,
the Operator shall pay delivery costs for such emergency
delivery. From the moment of receipt of the Products for
storage by DISTRIBUTOR until the Products have been accepted by
Operator at the Store, DISTRIBUTOR assumes all risk of loss or
damage with respect thereto, shall be directly liable to COMPANY
for any such loss or damage to the Products and the related costs
and expenses for replacing the Products and agrees to obtain and
maintain adequate insurance coverage to insure against such loss or
damage.
In the event of
substitution of a Proprietary Product, the substituted Product must
have been previously approved by COMPANY in writing and, if the
need for substitution was caused due to
(13)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(14)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
11
DISTRIBUTOR error, the
price of the substituted Product will be determined based on the
lower of the Cost (as hereinafter defined) of the substituted
Product or the Cost of the out-of-stock Product that it
replaces. In addition, DISTRIBUTOR will reimburse COMPANY to
the extent that COMPANY would have realized a difference between
its selling price to DISTRIBUTOR and the amount that COMPANY would
have paid for the Proprietary Product from its supplier, unless the
substitution is due to COMPANY’s error. Upon request,
COMPANY shall provide to DISTRIBUTOR copies of invoices and other
documentation reasonably necessary to verify the amount of the
difference claimed by COMPANY. If substitution is due to
supplier (including COMPANY) error, then COMPANY shall cause
supplier to, or if COMPANY is the supplier, COMPANY shall,
reimburse DISTRIBUTOR for any reasonable losses sustained due to
such error.
To the extent that
DISTRIBUTOR is unable to sell to the Operators quantities of the
Proprietary Products in DISTRIBUTOR’s inventory for any
reason whatsoever, including, but not limited to, Product
discontinuation, slow-moving inventory, unused LTO Products,
promotional or seasonal Products or exceeded shelf life due to
sudden decline in Product movement and not due to DISTRIBUTOR
error, COMPANY will purchase, or cause a third party to purchase,
all remaining inventory of such Proprietary Products at
DISTRIBUTOR’s cost, F.O.B. the DISTRIBUTOR distribution
centers plus DISTRIBUTOR’s handling and carrying charges, if
properly approved by COMPANY in advance as outlined below. In
such event, COMPANY will purchase or cause to be purchased all
perishable Proprietary Products within [CONFIDENTIAL](15)
days after notice from DISTRIBUTOR or by the expiration date of the
Proprietary Products, whichever is earlier, and all nonperishable
Proprietary Products within [CONFIDENTIAL](16) days after
notice from DISTRIBUTOR. In addition, if the inventory
re-purchase is necessitated for any reason other than DISTRIBUTOR
error, COMPANY shall reimburse to DISTRIBUTOR all reasonable
out-of-pocket costs and expenses (not to exceed an amount equal to
[CONFIDENTIAL](17) of the Product’s Cost unless
DISTRIBUTOR receives COMPANY’S prior written consent)
incurred by DISTRIBUTOR in selling, returning or otherwise
disposing of such Products. DISTRIBUTOR shall provide COMPANY
with documentation or other proof that any such costs and expenses
were incurred by DISTRIBUTOR. In order to allow COMPANY to
monitor the supply and usage of the Proprietary Products,
DISTRIBUTOR shall provide to COMPANY a monthly obsolete and
slow-moving inventory report.
(15)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(16)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(17)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
12
3.03
Aged Inventory Notification - DISTRIBUTOR will
immediately notify COMPANY in writing via email in the event that
any quantities of its Proprietary Products are within forty-five
(45) days of expiration of product life. If DISTRIBUTOR fails
to do so, COMPANY shall not be required to comply with the
requirements set forth in Section 3.02.
3.04
Present DISTRIBUTOR’s Inventory - DISTRIBUTOR
agrees to purchase the existing merchantable and saleable inventory
of Proprietary Products from COMPANY’S present distributor
located in Greensboro, North Carolina and in quantities not to
exceed a [CONFIDENTIAL](18) supply of such Products, in the
aggregate, provided that DISTRIBUTOR and COMPANY have been given an
opportunity by the present distributor to inspect any such Product
prior to purchase pursuant to this Section 3.04.
DISTRIBUTOR will pay, via check, the present distributor for
Products purchased from it, within ten (10) days of the later of
DISTRIBUTOR’S receipt of the Products or the receipt of the
invoice approved by COMPANY for the Products. DISTRIBUTOR
shall be responsible for all freight and unloading costs associated
with transporting such inventory from the existing
DISTRIBUTOR’s locations listed above. DISTRIBUTOR will
not be responsible for any handling or other fees charged by the
current distributor in connection with DISTRIBUTOR’s loading
and transferring of such inventory. COMPANY and the current
distributor will be required to provide all reasonable assistance
and cooperation to DISTRIBUTOR in connection with the purchase,
loading and transportation of such inventory from the current
distributor to the DISTRIBUTOR distribution center, including the
scheduling of mutually agreeable inventory inspection and pick-up
times.
In
the event that the Cost of the Product, as purchased from the
existing distributor, exceeds or is less than the Cost that
DISTRIBUTOR would otherwise utilize in determining the Sell Price
for such Products obtained through suppliers, including COMPANY,
DISTRIBUTOR shall utilize the Cost designated by COMPANY in
determining the Sell Price and shall invoice, pay to COMPANY or
charge the Operator, as directed by the COMPANY, in the amount of
the difference. In the event COMPANY directs DISTRIBUTOR to
invoice the COMPANY, COMPANY shall pay such invoiced amount, via
check, so that it is received by DISTRIBUTOR within
[CONFIDENTIAL](19) days of the date of the invoice. In
the case of a rebate to COMPANY, DISTRIBUTOR shall pay the rebated
amount within [CONFIDENTIAL](20) days of its determination
of the amount to be rebated.
(18)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(19)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(20)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
13
4.
Sell Price/Payment Terms/Financial Reporting
4.01
Sell Price - Beginning on the Effective Date and
throughout the entire term of this Agreement, the maximum purchase
price at which DISTRIBUTOR shall sell the Products, (the
“Sell Price”), to the Operators shall be determined by
adding the “Cost” (as hereinafter defined) of the
Product plus [CONFIDENTIAL](21) per case for all deliveries
(collectively, “Markup”), subject to the other
provisions of this Agreement. For purposes of this Agreement,
the “Cost” of a Product other than a Contracted Product
shall be the sum of (a) the cost of the Product as shown on the
invoices to DISTRIBUTOR from the respective supplier, including
COMPANY, plus (b) if the invoiced cost of the Product is not a
delivered price, the applicable freight charges related to shipping
the Product from the supplier to DISTRIBUTOR’S distribution
center, less (c) promotional allowances reflected on supplier
invoices to DISTRIBUTOR. Applicable freight, in those cases where
the invoice cost to DISTRIBUTOR for non-proprietary Products is not
a delivered cost, means that DISTRIBUTOR has added a reasonable
freight charge, agreed to in advance and in writing by COMPANY for
delivering such non-proprietary Products from suppliers to
DISTRIBUTOR. Applicable freight for any non-proprietary
Product will not exceed the rate charged by nationally recognized
carriers operating in the same market for the same type of freight
service. Cost for any non-proprietary Product will not be reduced
by discounts for cash or prompt payment available to DISTRIBUTOR,
breakage allowances or by backhaul revenue. Fuel or other
transportation surcharges indicated on the manufacturer’s or
supplier’s invoice or on freight invoices will increase Cost.
The Cost of a Contracted Product shall be determined
