EXHIBIT 10
DISTRIBUTION AGREEMENT
This Agreement is made and entered into this 29th day of July, 1998,
between Xxxxx Foodservice, Inc., and Illinois corporation, with
headquarters at 000 Xxxxxx Xxxxxx, Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
(hereinafter, "XXXXX") and SUBperior Distribution Systems, Inc.,
(hereinafter, "SDS"), a wholly owned subsidiary of Tubby's, Inc., a
Michigan corporation, with headquarters at 0000 00xx Xxxx Xxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000 (hereinafter "TUBBY'S").
WITNESSETH
WHEREAS, XXXXX distributes food, paper and chemical products to the food
service industry.
WHEREAS, TUBBY'S is a restaurant chain which uses large quantities of
food, produce, paper, chemical, fountain, dough and dough products in
its restaurant units.
WHEREAS, SDS desires XXXXX to inventory and distribute certain
quantities of food, paper, and chemical products on its behalf and XXXXX
desires to inventory and distribute such food, paper and chemical
products on behalf of SDS to TUBBY'S restaurant units.
WHEREAS, XXXXX will be obligated to make substantial capital
improvements in its facilities and fleet to handle the increased volume
of such food, paper and chemical products.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and for other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, XXXXX and SDS hereby
agree as follows.
one: GENERAL OBLIGATIONS. Xxxxx agrees that it will order, on behalf of
SDS, the product necessary to meet the needs of TUBBY'S restaurant
units. All purchase orders will be reviewed with SDS. Furthermore,
XXXXX agrees to receive such product, inventory such product, take
orders from, ship such product, and xxxx each TUBBY'S restaurant, on
behalf of SDS, for the product that each restaurant orders.
XXXXX agrees to provide customer service representatives on behalf of
SDS between the hours of 8:30 a.m. and 5:00 p.m., Monday through
Friday, to take orders and resolve issues relative to delivery,
products, and collections, etc., and to reschedule special
deliveries. SDS agrees that it will negotiate and approve all product
and product specifications, rebate, growth and price programs
directly with its vendors and pay such vendors for the product
ordered by XXXXX for TUBBY'S restaurant units.
two: WAREHOUSING. XXXXX agrees to inventory the product purchased by,
and owned by, SDS. Such product while in the care, custody and
control of XXXXX shall be handled in a manner which is consistent
with the standards of the food service industry: freezer temperatures
shall be maintained at 0(Degree) F or below; cooler temperatures
shall be maintained between 32(Degree) and 40(Degree) F; product
shall be properly rotated to ensure freshness; and code dates shall
be recorded as received. Out of date code product shall be promptly
discarded and XXXXX shall identify all receiving times to SDS.
If product owned by SDS and inventoried by XXXXX must be discarded
because of improper ordering by XXXXX, then XXXXX shall issue to SDS
a credit for such product.
SDS, however, shall be responsible for discarded product if SDS
requests additional inventory in excess of the normal ordering
sequence of XXXXX. Any excess inventory requests (those made in
excess of XXXXX'X normal ordering sequence) by SDS must be made in
writing to XXXXX. If such excess inventory request by SDS results in
out of date product that must be discarded then no credit shall be
issued to SDS.
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three: DISTRIBUTION. XXXXX agrees to distribute to the TUBBY'S
restaurant units product which has been inventoried by XXXXX for SDS.
XXXXX agrees that such distribution shall occur between the hours of
7:30 a.m. and 5:30 p.m., Monday through Friday. Routes identifying
the dates and approximate times for delivery to TUBBY'S restaurant
units are attached as Exhibit "A".
XXXXX, furthermore, agrees that such distribution shall be consistent
with the standards of the food service industry: trucks and tractor
trailers shall be reefer equipped; drivers shall be properly licensed
and trained; and product shall be delivered within 48 hours of
receipt of an order. Drivers shall wear T- shirts and/or sweatshirts,
with a TUBBY'S/SDS logo, supplied by XXXXX. Trucks solely dedicated
to such TUBBY'S business shall bear the TUBBY'S/SDS logo.
XXXXX shall, at its own expense, make special deliveries, if such
deliveries are the result of CLARKS'S mistake. Such deliveries shall
be made within a 24 hour time period. Charges for special deliveries
which are the result of a restaurant units mistake shall be disclosed
to that restaurant unit and added to the invoice for that delivery.
In addition, XXXXX shall offer "cash and carry" for pickups by
restaurant units for a charge to be negotiated between SDS and XXXXX
if such pickups exceed 5 per week.
four: BILLING & COLLECTIONS. XXXXX agrees to create for SDS an invoice
for each order rendered by a TUBBY'S restaurant. XXXXX also agrees to
post such invoices on behalf of SDS and make a reasonable effort to
collect such sums on behalf of SDS. Any invoice which is not
collected within a 14 day period shall be turned over to SDS for
collection. Finally, XXXXX will, upon written request by SDS, make
C.O.D. collections from individual TUBBY'S restaurant units and
deposit such sums into SDS's bank account on a daily basis.
five: TERM. This Agreement shall run for a term of five (5) years. It
shall begin on November 1st, 1998 and end October 31st, 2003. It may
be extended beyond this date for a period of two years at the
discretion of both XXXXX and SDS.
six: COST. SDS agrees to pay to XXXXX a "drop price" according to the
following schedule:
0 - 43 pieces................. $ 75.00
44 - 73 pieces................. $ 85.00
74 - 88 pieces................. $ 90.00
89 - 103 pieces................. $100.00
An additional charge of $5.00 per order shall be added for every 15
pieces per order in excess if 103 pieces. Both XXXXX and SDS agree
that such "drop prices" shall be increased by one and one-half
percent (1 1/2 %) each year at the anniversary date (November 1st)
of this Agreement. However, if XXXXX is able to demonstrate that its
costs have increased by more than such 1 1/2 %, or if SDS is able to
demonstrate that such costs have increased by less than 1 1/2 %,
then, XXXXX and SDS agree to negotiate a reasonable increase or
decrease.
Such "drop prices" are intended to cover labor, trucking,
warehousing, insurance, access to the XXXXX computer system,
billing, tracking, and the movement of goods from the current SDS
warehouse to the XXXXX warehouse in Detroit. "Drop price" is
intended to mean a per stop basis by a XXXXX truck at one of the
TUBBY'S restaurant units.
seven: TERMS. SDS agrees to pay XXXXX all monies owed on the following
terms: net 15 days from date of invoice.
eight: MINIMUM YEARLY XXXXXXXX. SDS agrees that the minimum yearly
xxxxxxxx by XXXXX for services rendered to the TUBBY'S restaurants
shall equal or exceed FOUR HUNDRED AND TWENTY FIVE THOUSAND DOLLARS
($425,000.00). SDS and XXXXX further agree that a failure to generate
the volume necessary to meet such minimum yearly xxxxxxxx by XXXXX to
TUBBY'S will not be resolved by additional payments to equal the
$425,000.00 but shall constitute a termination of this Agreement and
shall trigger provisions of paragraph 9(a) through 9(f) of this
Agreement.
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nine: CAPITAL IMPROVEMENTS. SDS acknowledges that XXXXX will be
obligated to make immediate capital improvements in its warehouse; to
expand its freezer; to expand its cooler; to add new labor; and to
add new refrigerated trucks. SDS also acknowledges that if this
Agreement were terminated before September 1st, 2002, that XXXXX
would not be able to recoup its cost of capital improvements in its
warehouse, its expansion of its freezer/cooler, and its new
refrigerated trucks.
SDS, therefore agrees to pay to XXXXX the following sums of money if
this contract is terminated without cause by TUBBY'S or SDS prior to
September 1st, 2002.
a) Prior to September 1, 1999 - Two Hundred and Twenty Five Thousand
Dollars ($225,000.00).
b) September 1, 1999 to August 31, 2000 - One Hundred and Fifty
Thousand ($150,000.00) Dollars.
c) September 1, 2000 to August 31, 2001 - Seventy Five Thousand and
00/100 ($75,000.00) Dollars.
d) September 1, 2001 to August 31, 2002 - Fifty Thousand and 00/100
($50,000.00) Dollars.
e) September 1, 2002 to October 31, 2003 - Zero ($0) Dollars.
Such sums of money shall be paid by SDS to XXXXX within thirty (30)
days of such termination.
ten: CONFIDENTIAL INFORMATION/TRADE SECRETS. SDS acknowledges that some
of its employees will be trained in, and given access to , certain
XXXXX procedure manuals, certain XXXXX inventory programs, and
certain XXXXX MIS programs and procedures used in areas of accounts
receivable, accounts payable, inventory control, and inventory
ordering. SDS further acknowledges that much of the information,
manuals, procedures and programs that XXXXX will share with SDS is
confidential in nature and proprietary to XXXXX. SDS also
acknowledges that such confidential and proprietary material gives
XXXXX a competitive advantage over other companies which do not have
access to this information and these programs.
SDS therefore agrees that it will not at anytime, in any form,
fashion or manner, either directly or indirectly, divulge, disclose,
or communicate to any person, firm or corporation in any manner
whatsoever any information of any kind, nature, or description
concerning any matters affecting or relating to XXXXX'X business,
customer lists, or any "trade secrets", confidential information
and/or proprietary information regarding Xxxxx.
"Trade secrets" as used herein shall mean any information, process or
idea that is not generally known in the industry, that XXXXX
considers confidential and that gives XXXXX a competitive advantage.
Examples of trade secrets include, but are not limited to, the
following:
a) purchasing techniques and sources;
b) information relating to sales programs;
c) customer lists and records;
d) management tools and problem solving techniques SDS understands
that the above list is intended to be illustrative and that other
trade secrets, which shall also be held confidential, may
currently exist or arise in the future.
SDS agrees that upon termination of this Agreement, for whatever
reason, SDS will surrender to XXXXX all confidential and proprietary
information and data, in whatever form it may exist. Finally,
subsequent to the termination of this Agreement, SDS agrees not to
use any trade secrets of XXXXX.
In return, XXXXX agrees and acknowledges that some of its employees
will be trained and given access to certain SDS procedure manuals,
inventory programs, procedures and customer lists and that these
documents, programs and procedures are confidential in nature and
proprietary to SDS. XXXXX further acknowledges that such confidential
and proprietary material gives SDS a competitive advantage over other
companies who do not have access to this information or these
programs.
XXXXX therefore agrees that it will not at any time, in any form,
fashion or manner, either directly or indirectly, divulge, disclose
or communicate to any person, firm or corporation in any manner
whatsoever any information of any kind, nature, or description
concerning any matters affecting or
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relating to SDS business, customer lists, or any "trade secrets",
confidential information and/or proprietary information regarding
SDS. Examples of "trade secrets" include, but are not limited to, the
following:
a) Food preparation techniques
b) Product specifications
c) Product prices
d) New product research and development
e) New market development
f) Merger and/or acquisition information
g) Co-branding relationship information
"Trade Secrets" as used herein shall mean any information,
process or idea that is not generally known in the industry, that SDS
considers confidential and that gives SDS a competitive advantage.
XXXXX understands that the above list is intended to be
illustrative and that other trade secrets, which shall also be held
confidential may currently exist or arise in the future.
XXXXX agrees that upon termination of this Agreement, for
whatever reason, XXXXX will surrender to SDS all confidential and
proprietary information and data, in whatever form it may exist.
Finally, subsequent to the termination of this Agreement, XXXXX
agrees not to use any trade secrets of SDS.
eleven: DEDICATED SPACE. XXXXX agrees to dedicate approximately 2,500
square feet of currently vacant warehouse space which shall be
equipped with a desk, a chair, and a terminal connected to XXXXX'X
mainframe. Such space may be used to create a prototype TUBBY'S
franchise store. TUBBY'S may use this prototype store for
informational and training services for potential franchisees. XXXXX
agrees to dedicate the offices in this space for SDS and TUBBY'S use.
XXXXX agrees to maintain and clean all warehouse space on the same
standards and procedures as XXXXX'X warehouse.
twelve: REPORTS. XXXXX agrees to provide to SDS all monthly sales
reports currently generated by the XXXXX MIS system that pertain to
the SDS business. Such reports shall include the following: inventory
reports; usage reports; vendor lists; stock status reports (re-order
guides); receiving reports; and rebate tracking reports. In the event
of a termination of this Agreement XXXXX shall promptly supply to SDS
a series of final reports that pertain to the SDS business and its
inventory.
thirteen: INSURANCE. XXXXX agrees to maintain insurance for worker's
compensation, fire, property loss, casualty loss and automotive. Such
insurance shall meet or exceed the standards of the food service
industry and shall be acceptable to SDS.
fourteen: OFFER OF EMPLOYMENT. Both XXXXX and TUBBY'S/SDS agree that
neither will offer employment to the others employee(s) during the
term of this Agreement and for a period of twelve (12) months
following the termination of this Agreement.
fifteen: TERMINATION FOR CAUSE. Either party may terminate this
agreement, upon a material breach and significant breach or default
of this Agreement by the other party which is not cured within thirty
(30) days after receipt by the defaulting party of a Notice from the
Non-Defaulting party specifying the nature of such breach or default.
sixteen: FORCE MAJEURE. Each party to this Agreement shall be excused
for failures and delays in performance caused by war, governmental
proclamations, ordinances, or regulations, strikes, lockouts, floods,
fires, explosions, or other events beyond the reasonable control and
without the fault of such party. This section shall not, however,
relieve any party from using reasonable efforts to remove or avoid
any such events, and any party so affected shall continue performance
hereunder as soon as reasonably practicable whenever such causes are
eliminated. Any party claiming any such excuse for failure or delay
in performance shall give notice thereof to the other party.
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seventeen: CONSTRUCTION OF AGREEMENT. Nothing in this Agreement shall be
deemed or constructed to constitute or create between the parties
hereto a partnership, association, joint venture, franchise or
agency. XXXXX is not a legal representative of TUBBY'S nor SDS. XXXXX
agrees not to use the SDS logo(s), trademark(s), or tradename(s) in
any manner which would indicate that XXXXX has any rights in, or to,
such logo, trademark, or tradename.
eighteen: GOOD FAITH. No employee of either party shall solicit, offer
and/or accept any compensation or anything of value from any employee
of the other party, from any vendor, or any other person which is in
any way related to either party's performance under this Agreement,
whether in the form of a kickback, rebate, gift and/or any other
form.
Both parties agree that, in the event they become aware, or have a
strong suspicion, that such a solicitation, offer and/or acceptance
has occurred, they shall promptly notify the other party. A breach of
this provision shall constitute a material breach of this Agreement
and shall be cause to terminate this Agreement pursuant to Section
15.
nineteen: NOTICE. Any notice required or permitted under this Agreement
shall be deemed to have been sufficiently given if mailed by
registered or certified mail, postage prepaid to the other parties
address shown at the beginning of this Agreement.
twenty: GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Michigan.
twenty-one: ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between XXXXX and SDS with respect to the warehousing and
distribution of SDS products.
AGREED TO AND ACCEPTED BY:
XXXXX FOODSERVIC, INC. SDS/DBA SUBPERIOR DISTRIBUTION SYSTEMS, INC.
By: Xxxxxx Xxxxxxx By: Xxxxxx X. Xxxxxxx
-------------- -----------------
Xxxxxx Xxxxxxx Xxxxxx X. Xxxxxxx
TUBBY'S, INC., a New Jersey corporation, by executing this Agreement
agrees to guarantee the obligations of SDS to XXXXX FOODSERVICE, INC.,
pursuant to this AGREEMENT.
In witness whereof, XXXXX and SDS, and TUBBY'S, have caused this
Agreement to be executed by a duly authorized officer on the day and
year first herein written.
XXXXX FOODSERVICE, INC. SUBPERIOR DISTRIBUTION SYSTEMS, INC.
By: Xxxxxx Xxxxxxx By: Xxxxxx X. Xxxxxxx
Its: President Its: President CEO
TUBBY'S, INC.
By: Xxxxxx X. Xxxxxxx
Its: President CEO
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