Exhibit 10.74
TCBY SYSTEMS, LLC
Distribution Service
Agreement
with The Merchants
Company
September 7,
2006
1
DISTRIBUTION AGREEMENT
THIS AGREEMENT is
made and entered into as of the 7th day of September, 2006, by and
between TCBY SYSTEMS, LLC, a Delaware limited liability
company (“COMPANY”) and THE MERCHANTS COMPANY, a
Mississippi Corporation (“DISTRIBUTOR”). DISTRIBUTOR
will commence distribution services under this Agreement on October
16, 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 Jackson, Mississippi and Clanton, Alabama (the
“Territory”) as reflected in the map depicted in
Schedule 2 and DISTRIBUTOR hereby accepts such appointment.
This Territory includes the entire states of Alabama, Mississippi
and Louisiana as well as the cities of Jonesboro, Arkansas,
Hopkinsville and Bowling Green, Kentucky, and the portion of the
State of Tennessee west of Interstate 65, but excluding the
metropolitan area of Nashville and the cities of Clarksville,
Franklin and Brentwood. 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
3
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, 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
4
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 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 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
internet using DISTRIBUTOR’s web-site. All Electronic
Orders are subject to the standard order cut-off time of 4:00 p.m.
local time, two (2) days prior to their scheduled delivery day for
Stores located in the states of Alabama, Mississippi and Louisiana
and 4:00 p.m. local time, three (3) days prior to their scheduled
delivery day for stores located in the states of Tennessee and
Kentucky. Orders not placed electronically may be subject to
earlier cut-off times than those established above as mutually
agreed upon between COMPANY and DISTRIBUTOR. 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 12:00 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 have a scheduled
delivery day of Monday, must have their orders placed by 12:00 p.m.
local time, on the preceding Friday and will have until 12:00 p.m.
on Sunday to modify or add-on to their order.
DISTRIBUTOR may schedule deliveries at any time
and day of the week. However, 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 in
the case of an Electronic Order and, if not an Electronic Order, no
later than the morning of their order cut-off day.
5
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.
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 4.09, 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:
(1)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
6
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Delivery Frequency
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Annual Case Volume
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Summer Routing
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Winter Routing
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Less than 200 cases
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4
deliveries during a 12 month period
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200-349 cases
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6
deliveries during a 12 month period
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350-499 cases
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8
deliveries during a 12 month period
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500-999 cases
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Every 4 weeks
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Every 4 weeks
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1,000-1,999 cases
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Every 3 weeks
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Every 4 weeks
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2,000-3,499 cases
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Every week
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Every 2 weeks
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Greater than 3,499 cases
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Every week
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Every week
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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.
(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
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.
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.
(4)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
8
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
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
(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
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 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 Jackson, Mississippi and Clanton, Alabama
distribution centers will be done without increasing the Cost of
the Product to the Operator. 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 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.
(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
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 [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
(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.
11
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](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
(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 located in
Atlanta, Georgia in quantities not to exceed a
[CONFIDENTIAL](15) 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 within [CONFIDENTIAL](16) of the
date of the invoice. In the case of a rebate to COMPANY,
DISTRIBUTOR shall pay the rebated amount within
[CONFIDENTIAL](17) 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) 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
(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
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 and, if applicable, the
inter-branch freight cost detailed in Section 3.02, plus (c) the
Sourcing Fees (as later defined in Section 4.06), if any,
attributable to the Product, less (d) 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 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.
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. Notwithstanding anything else contained in this
agreement to the contrary, the Markup for the following items will
be limited to [CONFIDENTIAL](19) : maraschino cherries,
medium spoons, taster spoons, straws, water, chocolate sprinkles
and assorted sprinkles.
(19)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
14
In
addition, DISTRIBUTOR agrees to reduce the Markup to each Operator
any time they place an order greater than [CONFIDENTIAL](20)
cases at the rate of [CONFIDENTIAL](21) /case for each case
ord
