DISTRIBUTION AGREEMENT
This
Distribution Agreement (the "Agreement") is entered into this 9th day of July,
2008, by and between Cono Italiano, Inc. ("Cono"), a Delaware corporation,
having its principal place of business at 000 X. Xxxxx Xxx, #000, Xxxx Xxxxxx,
XX 00000, and Xxxx Gelato, Inc. ("Xxxx"), a South Carolina corporation, having
its principal place of business at 0000 Xxxxxxx Xxxxxx Xxxxxxx, Xxxxxxx at
Xxxxxxx, Xxxxx X 0, Xxxxxx Xxxx, Xxxxx Xxxxxxxx 00000. Cono holds an sole
license to produce and distribute a cone shaped pizza (the "Pizza Cono") in the
United States, Canada, and Mexico and the parties desire to and hereby do, enter
into a distributor/supplier relationship for the retail sale of the Pizza Cono
and for sales of franchises pursuant to the terms and conditions set forth in
this Agreement.
1.
DISTRIBUTION RIGHTS
1.1
TERRITORY. Cono grants and licenses to Xxxx
the sole rights to sell and distribute the Products (as defined below) through
Retail Channels (as defined below) in the United States, Canada, and Mexico.
Xxxx shall also have the exclusive rights to sell franchises to franchisees
which shall use the name "IPCono" (if a standalone Pizza Cono franchise) or Xxxx
Gelato and which shall sell the Products through Retail Channels.
1.2 PRODUCTS.
The "Products" shall mean, but not be limited to, the original pizza cone (Pizza
Cono) and any related items developed and produced by Cono.
1.3 PATENTS;
NON-INFRINGEMENT; GOOD STANDING. (a) The Products are protected by patent number
_PCT/IT/000408_. Cono represents warrants and covenants to Xxxx that the
Products do not and will not infringe any third party's proprietary rights,
including, but not limited to, any trade secret or domestic or foreign patents.
Cono shall indemnify, defend and hold Xxxx and its affiliates and each of their
employees, shareholders, officers, directors, managers, agents, and
representatives harmless from and against any and all liabilities and damages
and claims for damages, suits, proceedings, recoveries, judgments, executions,
losses, costs, penalties, fines or expenses (including but not limited to
litigation costs and expenses and reasonable attorneys' fees) which may be made,
had, brought or recovered by reason or on account of any actual or claimed
infringement of any proprietary rights with respect to the
Products.
(b) Cono
represents and warrants that Cono and Xxxxx Xxxxx are each in good standing and
have not breached any agreements with Cono Italiano. Cono also represents and
warrants that Cono and Xxxxx Xxxxx have not breached any other agreements with
any other person or entity relating to the Products.
(c) Xxxxx
Xxxxxxxxx represents and warrants that (i) to the best of his knowledge, the
representations and warranties in section 1.3(b) are true and accurate and (ii)
he and any affiliates or other entities with which he is employed or has an
ownership interest in are in good standing and have not breached any agreements
between Cono Italiano and Pizza Hands/P-Group that gave Xxxxx Xxxxxxxxx and/or
his affiliates and employers the rights to distribute, sell, and manufacture the
Products in the United States, Canada, and Mexico.
1.4 PRODUCT
PRICING. Xxxx shall pay Cono's actual cost to source Products from Italy, but
Xxxx'x price for any unfilled pizza cones that Cono sources from Italy shall be
no more than fifty two cents ($.52) per cone with a 4 weeks lead time by sea,
including freight; provided the cost for shipping do not increase for Cono(Euro
exchange rate), however, that such costs per cone may increase up to the amount
of Cono's actual and verifiable additional costs of raw materials. Cono must
verify such raw materials increases by providing copies of actual invoices to
Xxxx. The parties acknowledge and agree that the goal of Cono building
production capacity in the United States is to decrease the price of the
Products. Cono represents and warrants that it believes that it will be able to
decrease the price of an unfilled cone to a price that is materially less than
fifty-two cents ($0.52) per cone.
1.5 RETAIL
CHANNELS. (a) “Retail
Channels” shall mean any store, establishment, or other distribution channel
where the person(s) who purchase(s) the products do(es) so for immediate
personal consumption. Retail Channels includes all airports, including those
serviced by Westfield’s
and HMS Host, but does not include locations serviced by Aramark or Centerplate
(other than airports), US Food's distribution to Disney properties, or the sale
of Products on a wholesale basis to grocery stores, convenience stores, and
other similar establishments which do not resell the Products to customers in a
restaurant, snack bar, kiosk, or other similar setting. By way of example, Cono
Italiano shall retain the rights to sell the Products on a wholesale basis to
Wal-Mart, Target, Rite Aid, CVS, Sam's Club, Costco stores, 7-11 stores, Wawa,
Quick Check, or drug chains that sell "frozen" packaged products, so long as
such entity does not then resell the Products in an in-store restaurant, snack
bar, kiosk, or other similiar setting.
(b) The
foregoing notwithstanding, Cono understands that Xxxx is currently in
discussions with certain groups regarding distribution and sales rights in
several areas and by written mutual agreement, the parties may make special
exceptions to the foregoing definition of Retail Channels.
2.
TERM AND TERMINATION
2.1 TERM.
Subject to the termination rights set forth in section 2.2 below, this Agreement
will have an initial ten (10) year term. This Agreement shall automatically
renew for additional 10-year terms. If either party is in material breach of
this Agreement at the end of the initial term or any additional term, then the
non-breaching party may send the breaching party a notice that it intends to
terminate this Agreement as of the end of the initial term or additional term
unless the breaching party cures its breach within thirty (30) days following
its receipt of such notice.
2.2 TERMINATION.
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(a)
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Xxxx
may terminate this Agreement at any time during the first twelve (12)
months without cause. In the event of such termination, Cono shall not be
responsible for the return of any funds previously paid by
Xxxx.
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(b)
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Upon
breach by one party of any material term of this Agreement (other than any
payment provisions, which are covered by section 2.2(d) below), the other
party shall give written notice of such breach and, in the event such
breach is not cured within thirty (30) days, the party giving notice shall
have the right to terminate the
Agreement.
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(c)
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If
there is a breach in either (i) any of the agreements between and/or among
Cono Italiano, Xxxxx Xxxxx, and Total Luxury Group related to Xxxxx’x and
Cono’s rights to the Products in the United States, Canada, and Mexico
(the “Xxxxx Documents”) or (ii) any of the agreements between Cono
Italiano and Pizza Hands/P-Group that gave Xxxxx Xxxxxxxxx (and any
affiliates or other entities with which he is employed or has an ownership
interest in) the rights to distribute, sell, and manufacture the Products
in the United States, Canada, and Mexico (the “Xxxxx Documents”), then
Xxxx shall give written notice of such breach and, in the event such
breach is not cured within thirty (30) days, Xxxx shall have the right to
terminate the Agreement.
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(d)
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In
the event one party fails to pay any undisputed amounts due under this
Agreement, the other party shall give written notice of such breach and,
in the event such breach is not cured within thirty (30) days, the party
giving notice shall have the right to terminate the
Agreement.
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(e)
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In
the event one party becomes insolvent, files a petition in bankruptcy,
makes an assignment for the benefit of creditors, or otherwise becomes
incapable of performing its duties and responsibilities, the other party
may terminate the Agreement.
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(f)
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In
the event Cono is unable to meet Xxxx'x forecasted demands for the
Products or if Cono is unable to provide Products of reasonable commercial
quality, and either of such inabilities continues for a period of thirty
(30) days after Xxxx provides notice of either situation to Cono, Xxxx may
terminate the Agreement.
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(g)
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Xxxx
may terminate this Agreement immediately if there is a breach in the
non-infringement representation and covenant set forth in section 1.3 or
if there is ever an adjudication, arbitration ruling, settlement agreement
which materially reduces or terminates the rights of Cono to manufacture,
distribute and / or sell the
Products.
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3.
CONSIDERATION
3.1 PAYMENTS
FOR RIGHTS GRANTED TO XXXX. As consideration for the master distribution rights
and license granted to Xxxx, the following payments will be made to
Cono:
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(a)
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$50,000
upon execution of this
Agreement;
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(b)
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$25,000
upon delivery to a warehouse designated by Xxxx all manufacturing
equipment needed to manufacture and package empty cones within the United
States;
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(c)
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$25,000
upon successful installation of production equipment in a manufacturing
site in the United States or upon completion of satisfactory definitive
arrangements and installation of manufacturing equipment with a third
party manufacturer within the United States capable of providing Products
sufficient to meet Xxxx’x reasonable forecasted needs for the Products at
a price not exceeding $0.52 per unfilled cone, including freight (as well
as the reasonable forecasted needs of all wholesale
customers);
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(d)
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$50,000
after Cono concludes ninety (90) days of production of Products in the
United States (at a price not exceeding $0.52 per unfilled cone, including
freight) sufficient to meet the actual demand for Products by Xxxx and
other customers;
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(e)
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$100,000
ninety (90) days after the payment made pursuant to section 3.1 (d) above,
provided that production continues to meet the actual demand for Products
by Xxxx and other customers (at a price not exceeding $0.52 per unfilled
cone, including freight).
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In the
event Cono is unable to establish a production facility in the United States
capable of meeting the actual demand for Products from Xxxx and other customers
on or before a date eight (8) months after the effective date of this Agreement,
then the payments made by Xxxx pursuant to this section 3 shall be refunded to
Xxxx, and all options to purchase common stock granted to Xxxx pursuant to
section 4 below shall be canceled. In the event Xxxx terminates this Agreement
pursuant to (i) section 2.2(g) at any time during this Agreement or (ii) any
subsection of section 2.2, other than section 2.2(a) or section 2.2(g), within
the first three (3) years following the execution of this Agreement, then the
payments made by Xxxx pursuant to this section 3 shall be refunded to
Xxxx.
3.2 PAYMENT
FOR FRANCHISES. Cono shall receive ten percent (10%) of any and all initial
franchise fees received by Xxxx from the sale of Pizza Cono franchises or a
combination of Xxxx Gelato/Pizza Cono franchises. Said payments shall be made
within twenty-one (21) days of the receipt by Xxxx of said initial franchise
fees and shall be reduced by the amount of any returns and/or
rebates.
4
CONO
STOCK
4.1 COMMON
STOCK. As partial consideration for the payments made to Cono pursuant to
section 3 above, Xxxx (or its designee(s)) shall be entitled to receive shares
of Cono's common stock at the rate of two (2) shares for each one dollar ($1.00)
paid. By way of example, Xxxx shall be entitled to receive the following
stock:
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Payment
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Subsection
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Shares
Issued
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| $ | 50,000 | 3.1 | (a) | 250,000 | ||||||
| $ | 25,000 | 3.1 | (b) | 0 | ||||||
| $ | 25,000 | 3.1 | (c) | 0 | ||||||
| $ | 50,000 | 3.1 | (d) | 0 | ||||||
| $ | 100,000 | 3.1 | (e) | 250,000 | ||||||
Said
shares shall be issued in two installments: (i) 250,000 shares shall be issued
simultaneously with Xxxx’x payment of $50,000 pursuant to section 3.1(a) of this
Agreement, and (ii) 250,000 shares shall be issued simultaneously with Xxxx’x
payment of $100,000 pursuant to section 3.1(e). All such shares shall be subject
to the provisions of SEC Rule 144 and other applicable SEC regulations;
provided, however, that all of such shares shall have the same rights as any
shares held by the current shareholders.
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4.2 STOCK
OPTIONS. As further partial consideration for the payments made to Cono pursuant
to section 3 above, on the date of execution of this Agreement Cono shall grant
to Xxxx (or its designee(s)) options to purchase one million (1,000,000) shares
of common stock at an exercise price of thirty cents ($.30) per share. Such
options must be exercised at any time without restriction prior to the
termination of this Agreement; any unexercised options will expire and be
canceled at the end of the 10 year term. At the end of the initial 10-year term,
unless Cono terminates this Agreement due to Xxxx'x breach, Cono shall grant to
Xxxx (or its designee(s)) options to purchase an additional one million
(1,000,000) shares of common stock at an exercise price of one dollar ($1.00)
per share. Upon termination of the renewed agreement, any unexercised portion of
such options will expire and be canceled.
4.3 ANTI-DILUTION.
Any stock and stock options issued to Xxxx (or its designee(s)) shall be subject
to all customary protections against dilution, stock splits, recapitalizations,
additional share issuances, etc.
5
GENERAL
PROVISIONS
5.1 NOTICE.
Any notice which either party may desire to give the other party must be in
writing and may be given by (i) personal delivery to an officer of the other
party, (ii) by mailing the notice by registered or certified mail, return
receipt requested, or (iii) by nationally recognized express courier service to
the party to whom the notices directed at the address of the party as set forth
in this Agreement.
5.2 GOVERNING
LAW. This Agreement shall be construed and enforced in accordance with the laws
of the State of NEW JERSEY.
5.3 COOPERATION.
Each party agrees to execute and deliver such further documents and to cooperate
as may be necessary to implement and give effect to the provisions contained
herein. Specifically, Cono will permit Xxxx to conduct reasonable due diligence
on Cono's production processes and plans for making the Products in the US. Such
due diligence shall include, without limitation, (i) Xxxx being able to review
Cono's production agreements and related agreements related to production of the
Products in the Italy, (ii) the production agreements and related agreements
related to production of the Products in the US, (iii) the various agreements
involving Xxxxx Xxxxx, Total Entertainment, and Total Luxury Group, and (iv)
Xxxx being able to review the Xxxxx Documents, the Xxxxx Documents, and any
related documents.
5.4 FORCE
MAJEURE. Neither party shall be liable to the other for any delay or failure to
perform which results from causes outside its reasonable control.
5.5 EXPENSES.
Except as otherwise specifically set forth in this Agreement, each party shall
be responsible for its own fees and expenses related to this Agreement
(including, without limitation, attorneys fees).
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5.6 NO
IMPLIED WAIVERS. If either party fails to require performance of any duty
hereunder by the other party, such failure shall not affect its right to require
performance of that, or any other, duty thereafter. The waiver by either party
of a breach of any provision of this Agreement shall not be a waiver of the
provision itself, a waiver of any breach thereafter, or a waiver of any other
provision herein.
5.7 SEVERABILITY.
A judicial determination that any provision of this Agreement is invalid in
whole or in part shall not affect the enforceability of those provisions found
to be valid.
5.8 CONFIDENTIALITY.
The terms of this Agreement will remain confidential and neither party nor any
of their respective affiliates or representatives will disclose to any third
party any of the terms and/or conditions of this Agreement, without the prior
written consent of the other, unless required, in the opinion of legal counsel,
to be disclosed by law, in which case the parties will discuss the terms of such
disclosure prior to its release. Any press release or other public announcement
regarding this Agreement will be jointly approved in advance by both
parties.
5.9 BINDING
EFFECT/ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective representatives, successors, and
permitted assigns. This Agreement shall not be assignable by either party
without the express written consent of the other party. Any attempted assignment
in violation of this provision will be void.
5.10 ENTIRETY.
This Agreement constitutes the entire agreement between the parties regarding
its subject matter. This Agreement supersedes any and all previous proposals,
representations, or statements, oral or written. Any previous agreements between
the parties pertaining to the subject matter of this agreement are expressly
terminated. Any modifications to this Agreement must be in writing and signed by
an authorized representative of each party.
5.11 COUNTERPARTS.
This Agreement may be executed in one or more counterpart, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
[SIGNATURES
APPEAR ON FOLLOWING PAGE]
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[Signature
Page for Distribution Agreement]
IN
WITNESS WHEREOF, the parties hereby have executed this Agreement.
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Xxxx
Gelato, Inc.
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By
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/s/
Xxxxxxxx X. Xxxxx
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By
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/s/ Xxxxxx Xxxxxxx
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Xxxxxxxx
X. Xxxxx
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Xxxxxx
Xxxxxxx, President
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Chief
Executive Officer
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Date:
July 9, 2008
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Date:
July 9,
2008
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For
purposes of Section 1.3(c) only:
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/s/
Xxxxx Xxxxxxxxx
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Xxxxx
Xxxxxxxxx
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