Exhibit 10.72
TCBY SYSTEMS, LLC
Distribution Service
Agreement
with Cheney Brothers,
Inc.
July
17, 2006
1
DISTRIBUTION AGREEMENT
THIS AGREEMENT is
made and entered into as of the 17th day of July, 2006, by and
between TCBY SYSTEMS, LLC, a Delaware limited liability
company (“COMPANY”) and CHENEY BROTHERS, INC., a
Florida Corporation (“DISTRIBUTOR”). DISTRIBUTOR will
commence distribution services under this Agreement on August 14,
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 centers
located in Ocala, Florida and Riveria Beach, Florida (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 cease the sale and distribution of Products to any
Operator (a) who is in default of its obligations to DISTRIBUTOR,
provided that DISTRIBUTOR has given COMPANY at least three (3)
business days notice of such default before ceasing deliveries to
such Operator, 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
fourteen (14) 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 may
place orders electronically (“Electronic Orders”) or by
telephoning or faxing DISTRIBUTOR’s customer service center
in accordance with the guidelines detailed below. 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 Agreement. Product
order
4
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, 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 via telephone modem or internet using
DISTRIBUTOR’s automated order entry system. All orders
are subject to the standard order cut-off time of 4:00 p.m. local
time, one (1) day prior to their scheduled delivery day for Stores
located in the states of Florida and Georgia and 4:00 p.m. local
time. In no event will Electronic Orders be required more
than two (2) days prior to the scheduled delivery day.
Operators will be notified prior to the time of final order cut-off
if a product is expected to be out of stock so that an alternative
may be ordered, subject to the provisions of Section 3.02.
Operators will have until 5:00 p.m. local time, one (1) day before
their order shipping day to modify or add-on to their order.
Notwithstanding the foregoing, Stores that do not place Electronic
Orders and have scheduled delivery days of Monday in Florida and
Georgia, must have their orders placed by 4 p.m. local time, on the
preceding Friday.
DISTRIBUTOR may schedule deliveries any day of
the week. 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. Operator will be notified of any Product
shortages at the time of order placement or, in the case of an
Electronic Order, one (1) day prior to the loading of the delivery
truck.
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
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.
5
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.
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 (provided
that the driver is not unreasonably delayed). 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](1) to
DISTRIBUTOR for subsequent occurrences. 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.
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 200 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
|
|
(1)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
6
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](2) . Where possible, a
store may order up to [CONFIDENTIAL](3) 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 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)
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.
7
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.
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 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](4) 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
(4)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
8
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
supplier price is not a delivered price, plus
[CONFIDENTIAL](5) , if any, attributable to the Product
shall be the “Cost” of the Product.
[CONFIDENTIAL](6). 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.
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
(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.
9
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. DISTRIBUTOR
further agrees that any Products transported between its Ocala and
Riveria Beach distribution centers will be done so without
increasing the initial landed Cost of the Product. 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](7) days historical usage for all Proprietary
Products and will also have an additional [CONFIDENTIAL](8)
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](9) at any
time, excluding beverage Products and LTO items. COMPANY will
provide a list of Kill Items and other Proprietary Products 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](10) , and at
least
(7)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(8)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(9)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(10)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
10
[CONFIDENTIAL](11)
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 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.
(11)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
11
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](12)
days after notice from DISTRIBUTOR or by the expiration date of the
Proprietary Products, whichever is earlier, and all nonperishable
Proprietary Products within [CONFIDENTIAL](13) 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](14) 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.
3.03
Aged Inventory Notification - DISTRIBUTOR will
immediately notify COMPANY in writing 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 Orlando, Florida and Atlanta, Georgia in quantities not
to exceed a four-weeks’ 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
(12)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(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.
12
distributor for
Products purchased from it, within [CONFIDENTIAL](15) 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](16) days of the date of the invoice. In
the case of a rebate to COMPANY, DISTRIBUTOR shall pay the rebated
amount within [CONFIDENTIAL](17) days of its determination
of the amount to be rebated.
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](18) of Cost 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
(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.
(18)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
13
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 in accordance
with Section 3.01. In no event will the Cost of Contracted
Products include amounts to be rebated to DISTRIBUTOR and
therefore, DISTRIBUTOR will not negotiate off-invoice manufacturer
rebates, labels/promotional allowances or any other “soft
money” received from supplier or freight carriers of
Contracted Products. In order to allow verification of the
foregoing commitment, DISTRIBUTOR agrees to provide documentation
substantiating the Cost of items DISTRIBUTOR purchases from
suppliers and freight carriers. DISTRIBUTOR agrees to limit
its collection of such “soft money” to the
manufacturers of non-proprietary Products. The Cost of
Contracted Products 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. In the case of
Contracted Products, COMPANY agrees to notify DISTRIBUTOR as soon
as practical after a change in Cost has been agreed to with a
supplier.
The
invoice format to be used by DISTRIBUTOR will be approved by
COMPANY and will contain separate lines showing subtotals for
various Product categories, applicable taxes, the date of the ACH
debit and other summary line items as detailed elsewhere in this
Agreement.
Partial case shipments (also known as
“splits”) shall be permitted for the malt, maraschino
cherries, chocolate sprinkles, assorted sprinkles in which
individual units of such Products are separately packaged within
each case.
DISTRIBUTOR and COMPANY agree that the Markup
for DISTRIBUTOR’S services in connection with deliveries to
Stores located outside of the United States shall be the same as
all other Stores located in the Territory when DISTRIBUTOR delivers
product to the freight forwarder or redistributor’s location
and [CONFIDENTIAL](19) of the Markup in the event the
freight forwarder or redistributor picks up the order at the
DISTRIBUTOR’S location.
(19)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
14
4.02
Fuel Cost Adjustments - If the operating costs of
DISTRIBUTOR are increased or decreased as a result of fuel cost
increases or decreases, DISTRIBUTOR may adjust the Markup (as and
if otherwise adjusted pursuant to the terms of this Agreement) to
compensate for such fluctuations in fuel costs, on a monthly basis.
The amount of the adjustment computed in accordance with this
Section 4.02 shall also be added to or subtracted from, as
applicable, the specified price for Contracted Operator Sell Price
Products described in Section 4.10. The method for
determining the fuel surcharge or adjustment will be made quarterly
beginning November 1, 2006 and will be based on the Gulf Coast
Weekly Retail On-Highway diesel fuel price which is compiled by the
Energy Information Administration. The Web site to access this
information electronically is as follows:
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_on_highway_diesel_prices/current/html/diesel.html
If such publication is
no longer published or available, then the parties will mutually
agree upon an acceptable alternative source.
As fuel prices increase
or decrease, the fuel cost adjustments will move according to
changes in the thirteen (13) week average for the Gulf Coast fuel
price brac
