EXHIBIT 10
WAREHOUSING AND DISTRIBUTION AGREEMENT
This Warehousing and Distribution Agreement (hereinafter the
"Agreement"), made and entered into this 5th day of November, 1997, in
the City of Sterling Heights, State of Michigan, by and between Sun Valley
Foods Company, d/b/a AAA Warehouse & Cold Storage Company, a Michigan
Corporation ("AAA"), and Subperior Distribution Systems, Inc., a Michigan
corporation (hereinafter referred to as "SDS").
RECITALS
A. AAA has facilities available for public warehousing services,
inventory certification services, and other inventory control services for
fresh and frozen foods, fountain and bottled beverages and dry goods intended
for human consumption, as well as paper, plastic, small wares and cleaning
supplies. AAA operates a warehouse consisting of 150,000 square feet, and a
fleet of 20 delivery trucks and three tractor-trailer trucks.
B. SDS, a wholly owned subsidiary of Tubby's, Inc., in connection
with the conducting of Tubby's ordinary business affairs, desires to employ
AAA to perform warehousing and distribution services for SDS. As of the date
of this Agreement there are 85 Tubby's Sub Shops in Michigan, 3 in Ohio, 1 in
Pennsylvania, 2 in Arizona and 1 in Edmonton, British Columbia, Canada (the
"Sub Shops"). SDS anticipates substantial growth in the number of Sub Shops
during the term of this Agreement on a national basis.
C. AAA desires to perform distribution services for SDS to all Sub
Shops located in Michigan and Ohio, and to assist SDS in arranging for
distribution to Sub Shops located in other states and Canada.
D. AAA has the holding capabilities to handle a minimum of 45 days
supply of all products used in the operation of Tubby's Sub Shops and has the
ability to distribute and deliver all products, including perishable food
inventory to Tubby's Sub Shops located in Michigan and Ohio, and to arrange
for the distribution and delivery of all products used in the operation of
the Sub Shops to Sub Shops in other states and provinces in the United States
and Canada, of the inventory warehoused by AAA for SDS.
NOW, THEREFORE, in consideration of the promises and mutual
agreements herein contained and of the payment by SDS to AAA of the sums
hereinafter specified, it is agreed as follows:
1. AAA agrees to furnish and SDS hereby employs AAA to furnish
public warehouse, distribution and delivery services of all products,
including non-perishable and perishable food products used in the operation
of the Sub Shops and employs AAA as SDS's exclusive distributor to franchised
and Company owned Sub Shops. This Agreement is contingent on unit
participation such that there is an average weekly number of delivered cases
of at least 5000 cases at the expiration of the first 6 months after this
Agreement is executed. In the event that the average weekly number of
delivered cases does not exceed 5000 (computed by averaging the last six
weeks deliveries), then either party may terminate this Agreement by
notifying the other Party
within 60 days after the expiration of the first six (6) months, in which
case the parties will work together and exercise their best efforts to
reasonably unwind this project.
2. AAA owns, controls or will procure and agrees to furnish to SDS
warehouse buildings, rooms and/or premises sufficient in number and capacity
for inventory of approximately 400 separate items, for an initial period of
six (6) months, and approximately 250 separate items thereafter (including
extensions) with sufficient inventory to maintain a 4 to 1 ratio of inventory
to weekly sales in amounts sufficient to supply all existing and future Sub
Shops. Said inventory shall be so located as to adequately secure the safety
of the goods and merchandise to be warehoused and to secure the safety of all
persons working in or about the warehouse premises, including providing
adequate safety devices and working conditions. AAA agrees to furnish basic
office space and equipment, including a phone, desk, chair and office
supplies for SDS employees to complete job requirements.
3. AAA shall be obligated to furnish public warehouse services,
inventory certification services or other collateral control services for SDS
under the terms and conditions of this Agreement at the rates and fees agreed
to herein.
4. AAA agrees to maintain the warehouse and agrees to issue its
warehouse receipts upon goods and merchandise which SDS may store or cause to
be stored in said buildings, rooms and/or premises.
5. SDS agrees to promptly pay at net fourteen (14) days from invoice
date for the regular warehouse and delivery services performed by AAA's
agents and employees, pursuant to the Schedule of Charges attached as
"Exhibit A" to this Agreement.
6. AAA agrees to have SDS named as an additional loss payee in all
insurance policies carried by AAA in an amount sufficient to fully cover and
insure all commodities or inventory stored with, or in the custody or control
of AAA pursuant to this Agreement.
7. AAA shall have a continuing warehouseman's lien on all goods and
merchandise of SDS in AAA's warehouse for any amounts owed AAA pursuant to
this Agreement.
8. The attached Schedule of Charges shall remain in effect, and
continue until January 1, 1999. The Schedule of Charges shall then be amended
to reflect increases (or decreases, if any) in expenses (including but not
limited to direct wages, benefits, taxes, insurance, fuel, utilities, and
interest) according to the mutual agreement of the parties on the basis of
audited and verified expenses.
9. AAA hereby agrees to reimburse SDS for any loss of, damage to, or
shortage of any goods or merchandise that may be stored in said warehouse or
with respect to which Warehouse Receipts, Inventory Certificates or other
inventory control documents have been issued to the extent such loss exceeds
two percent (2%) on an annual basis of the average inventory stored, per
annum. For example, if the average value of SDS inventory is $600,000, two
percent (2%) would equal $12,000 and AAA would be responsible for all losses
during each one year period to the extent those losses exceeded $12,000. Any
over deliveries (i.e., inventory delivered to the warehouse which exceeds
inventory ordered) shall be SDS's property and AAA's obligations under this
Agreement shall apply to such additional inventory.
10. AAA agrees to assist and supply SDS with all inventory control
services and inventory certificates (which may be required by SDS pursuant to
this Agreement), including any extensions thereof, based upon the Schedule of
Charges attached hereto as "Exhibit A". SDS agrees to execute all additional
agreements required by AAA for such inventory control services requested by
SDS to be provided by AAA.
11. This Agreement shall continue in full force and effect for a
period of three (3) years from the date of this Agreement and shall
automatically continue for successive periods of three (3) years each unless
either party gives to the other, written notice to terminate at least twelve
(12) months prior to the expiration of any such three-year periods. In
addition, SDS or AAA may terminate this Agreement at any time provided it
gives at least twelve (12) months notice provided, however, that such notice
shall not be effective unless all charges and expenses owed by the
terminating party have been paid current to terms as of the time the notice
is given (the terms pursuant to which the party was required to pay any
charges or expenses).
12. During the term of this Agreement, the Parties shall hold in
strictest confidence and not disclose to any person, firm or organization any
information, business or customer information, trade secret or any other
secret or confidential matter relating to the services, sales or business of
either party hereto, except as such disclosure may be required or authorized
in connection with the performance of this Agreement. The foregoing
obligations shall not apply to any information which is in the public domain
at the time of disclosure.
13. Each of the parties hereto agrees that during the term of this
Agreement, and for a period of one (1) year thereafter, it will not either
directly or through entities
controlled by or under common control with it, use or make use of any
proprietary information obtained pursuant to this Agreement.
14. Each of the parties hereto agrees that during the term of this
Agreement, and for a period of one (1) year thereafter, neither party may
hire employees that have been employed by the other party during the term of
the Agreement. The Parties agree that the damages for a breach of the
provisions of paragraph 12, 13 or 14 are subject to all direct and
foreseeable damages arising out of a breach of this Agreement.
15. AAA agrees to deliver only products and supplies to franchised
or Company Sub Shops which have been approved through Tubby's Product
Approval Process.
16. AAA shall offer skip-a-day ordering and shall provide order
control forms. Each store will have set day and time windows for delivery and
AAA will use its best efforts to maintain the time windows. AAA will offer a
Voice-Mail ordering system and will provide a cut off time of 2:00 pm two
days prior to each stores shipment date and will provide that adjustments can
be made up until 2:00 pm the day prior to shipment.
17. AAA shall have a goal of zero out-of-stocks and no
substitutions, shall never exceed 2% out-of-stocks and shall provide delivery
up to twice per week to all Tubby's Sub Shop locations as long as AAA orders
the inventory. When SDS staff begins ordering the inventory, AAA shall never
exceed 2% picking error as long as inventories are adequate.
18. In the event that there is an error in any store's order, AAA
shall provide emergency deliveries. If AAA was in error, there shall be no
emergency delivery charge. If the store or SDS was in error, emergency
deliver charges equal to $25.00
per hour for week day deliveries and $45.00 per hour for weekend deliveries
shall be paid in addition to normal rates. Such emergency deliveries shall
only be made to stores located in Michigan. In the event that emergency
deliveries are required by stores located outside of Michigan, if AAA was in
error, it shall be responsible for all emergency delivery costs; if the store
or SDS was in error, SDS shall be responsible for such costs. The parties
shall work together to arrange for out-of-state emergency deliveries.
19. Any and all notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed given
on receipt, if personally delivered or sent by facsimile, or three (3)
business days after mailing if mailed, postage prepaid, to the parties as
follows, or at such other addresses as they may indicate by written notice
given as herein provided:
If to AAA If to SDS, Inc.
--------- ---------------
Sun Valley Food Company, D/B/A
AAA Warehouse & Cold Storage Company SDS, Inc.
X.X. Xxx 00000 Tubby's, Inc.
Xxxxxxx, XX 00000 0000 Xxxx 00 Xxxx Xxxx
Telephone: (000)000-0000 Xxxxxxxx Xxxxxxx, XX 00000
Facsimile: (000)000-0000 Telephone (000)000-0000
Facsimile: (000)000-0000
20. This Agreement, including "Exhibit A" attached hereto, is and
shall be deemed to be the complete and final expression of the agreement
between the parties as to the matters herein contained and relative thereto,
and supersedes any previous agreements between the parties pertaining to such
matters. If any part of this
Agreement is held to be invalid or unenforceable under the laws of any
jurisdiction where this Agreement is to be governed or sought to be enforced,
the remaining provisions shall be enforceable to the maximum extent permitted
by law provided the remaining provisions effectuate the intent of the parties
as manifested herein.
21. This Agreement may only be amended by written agreement executed
by the parties hereto, or their respective successors or assigns. This
Agreement and the entire relationship of the parties hereto shall be governed
by the laws of Michigan and any litigation between the parties shall be
brought only in the Courts of the State of Michigan.
22. The parties acknowledge to each other that AAA will commence
receiving SDS inventories on or about December 31, 1997 and will begin
delivering to the participating franchised and Company owned Sub Shops on or
about January 15, 1998.
23. AAA shall collect payment for deliveries on behalf of SDS at the
time of such deliveries pursuant to individual account credit terms
established by SDS. AAA shall not be required to accept payment in the form
of cash. AAA shall not be liable for collections on deliveries or for bad
receivables debt.
24. Tubby's , Inc., a New Jersey corporation, by executing this
Agreement agrees to guarantee the obligations of SDS to AAA pursuant to this
Agreement.
In witness whereof, AAA and SDS, and Tubby's, Inc., have caused this
Agreement to be executed by a duly authorized officer on the day and year
first herein written.
AAA Warehouse and Cold Storage Company, Subperior Distribution Systems, Inc.
a Michigan Corporation
By: /s/ By: /s/ Xxxxxx X. Xxxxxxx
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Its: President Its: President
Tubby's, Inc.,
a Michigan Corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
Its: President
