Exhibit 10.71
TCBY SYSTEMS, LLC
Distribution Service
Agreement
with Kaleel Brothers,
Inc.
March
1, 2006
1
DISTRIBUTION AGREEMENT
THIS AGREEMENT is
made and entered into as of the 1 st day
of March, 2006, by and between TCBY Systems, LLC, a Delaware
limited liability company (“COMPANY”) and Kaleel
Bros, INC., an Ohio Corporation (“DISTRIBUTOR”).
DISTRIBUTOR will commence distribution services under this
Agreement on March 6, 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 Youngstown, Ohio (the “Territory” as
reflected in the maps depicted in Schedule 2 ) and
DISTRIBUTOR hereby accepts such appointment. To the extent that
conflicts arise between the maps and the Territory description in
Schedule 2 , the maps shall prevail. 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
3
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 Stores 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
seven (7) 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.
2.02
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
4
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. 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.
two (2) days prior to their 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, one (1) day before their order
shipping day to modify or add-on to their order (Friday at 5:00
p.m. for Stores whose deliveries will leave DISTRIBUTOR’s
facility on Monday). 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 of at least fourteen (14)
days before routing changes. Wherever reasonably possible,
DISTRIBUTOR will include no more than three (3) “skip
days” between the date of order and date of delivery. For
example, orders scheduled for delivery on Friday will be placed no
earlier than Monday. Orders scheduled for delivery on Tuesday will
be placed on Friday. In the event DISTRIBUTOR must include more
than four (4) “skip days” between the date of order and
date of delivery it will notify COMPANY in advance. In no
event will there ever be more than four (4) “skip days”
permitted without the prior written approval of COMPANY.
DISTRIBUTOR may schedule deliveries on any day of the week.
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
Commencing ninety (90)
days after the Effective Date, DISTRIBUTOR agrees that at an
overall average of 75% of all regularly scheduled deliveries will
be made within a four (4) hour window, meaning no earlier than two
(2) hours before and no later than two (2) hours after the
scheduled delivery time. If a delivery is anticipated to fall
outside of this four (4) 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 to DISTRIBUTOR for
subsequent occurrences. The penalty fee will be determined
via mutual agreement between DISTRIBUTOR and COMPANY. 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 the earlier of 12:00 p.m.
local time or one hour after the normal Store opening 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 1,000
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
|
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 2.08, 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](1) . Where possible, a store
may order up to [CONFIDENTIAL](2) 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 once 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
(1)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(2)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
7
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 work diligently
with COMPANY and Operator to process emergency orders for all
Stores for the first thirty (30) days following the commencement of
distribution service at no additional charge from DISTRIBUTOR,
subject to the minimum order requirements and applicable handling
fees, if any, as set forth in Section 5 of this Agreement and any
charges incurred from a 3 rd
party which will be paid by Operator. In addition,
during the term of this Agreement, DISTRIBUTOR will also work
diligently with COMPANY and Operator to 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 and any charges incurred
from a 3 rd
party which will be paid by Operator.
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 the earlier
of 12 p.m. or one hour after the normal Store opening 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.
For attended deliveries, all cakes and pies must be inspected at
the time of delivery by Operator. DISTRIBUTOR will not be
obligated to issue subsequent credits for cakes and pies for such
attended deliveries unless reimbursed by the supplier. 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, DISTRIBUTOR error or remaining shelf life below agreed
upon parameters will be subject to a [CONFIDENTIAL](3)
restocking charge to be paid by Operator. In the event that
the
(3)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
8
shorted, defective or
damaged Product is a Kill Item, then DISTRIBUTOR will remedy the
situation in accordance with Section 3.02.
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](4) if any, attributable to the Product, plus
[CONFIDENTIAL](5) , if any, attributable to the Product,
plus any applicable Sourcing Fees (defined below) shall be the
“Cost” of the Product. Products governed by
such
(4)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(5)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
9
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 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. 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](6) days historical usage for all
Proprietary Products and will also have an additional
[CONFIDENTIAL](7) 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](8) 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.
(6)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(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.
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](9) , and at
least [CONFIDENTIAL](10) 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
(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.
11
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](11)
days after notice from DISTRIBUTOR or by the expiration date of the
Proprietary Products, whichever is earlier, and all nonperishable
Proprietary Products within [CONFIDENTIAL](12) 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
ten percent (10%) 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
[CONFIDENTIAL](13) 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 Swedesboro, New Jersey and Columbus, Ohio and in
quantities not to
(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.
(13)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
12
exceed a
[CONFIDENTIAL](14) supply of such Products, in the aggregate
for each location listed above, 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
[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) 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
(14)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(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
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, plus (c) the Sourcing Fees, 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, the total amount of
[CONFIDENTIAL](19) invoiced to the Operator for that
particular delivery, applicable taxes, the date of the ACH debit
and other summary line items as detailed elsewhere in this
Agreement.
DISTRIBUTOR may also charge a
[CONFIDENTIAL](20) delivery surcharge fee for each delivery
made to an Operator in the states of Connecticut, Rhode Island,
Maine, Massachusetts, New Hampshire and Vermont as well as to
Operators located in the five (5) buroughs of New
(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.
14
York City and on Long Island, New York and the
portion of Indiana west of Highways US 231/431 and south of US
Highway 50. This [CONFIDENTIAL](21) surcharge shall be
shown as a separate line item on each applicable
invoice.
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](22) : malt, maraschino
cherries, medium spoons, taster spoons, straws, water, chocolate
sprinkles and assorted sprinkles.
In
addition, DISTRIBUTOR agrees to reduce the Markup to each Operator
any time they place an order greater than [CONFIDENTIAL](23)
cases according to the following schedule (“Large Order
Credit”):
|
Order Size
|
|
Large Order Credit
|
|
|
|
|
|
[CONFIDENTIAL](24)
|
|
|
This Large Order Credit shall be shown as a
separate line item on the invoice.
4.02
“Cost” for Contracted Products/ True-Up
Methodology – 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. COMPANY
shall have the right to adjust the Markup for individual Products
(not including the fuel surcharge or the [CONFIDENTIAL](25)
mark-up on the items listed in Section 4.01 above) from time to
time to an amount that is more or less than the agreed upon Markup
per case. If COMPANY exercises its right to lower
DISTRIBUTOR’s Markup on any Products, it will simultaneously
and correspondingly increase the Markup on other Products so as to
provide DISTRIBUTOR continuously with an average overall Markup of
[CONFIDENTIAL](26) per case, again subject to the other
provisions of this Agreement. DISTRIBUTOR will provide a report by
Tuesday of each week for all delivery activity of the preceding
week showing the total number of cases delivered for that week,
DISTRIBUTOR’s total case fees charged, the average case fee
charged and the difference for the week and quarter-
(21)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(22)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(23)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(24)
Confidential treatment has been requested for the redacted
portion. The confidential, redacted portions have been filed
separately with the SEC.
(25)
Confidential treatment has been requested for the redacted
portion. The co
