EXHIBIT 10-A
AMENDMENT TO EXCLUSIVE DISTRIBUTION AGREEMENT
AMENDMENT dated as of February 28, 1997 (the "Amendment") to
EXCLUSIVE DISTRIBUTION AGREEMENT dated June 6, 1995, as heretofore amended
(the "Pre-Amendment Agreement"), between LINCOLN SNACKS COMPANY, a Delaware
corporation with a principal place of business at 0 Xxxx Xxxxx Xxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000 (hereinafter "Lincoln"), and PLANTERS COMPANY, a
unit of NABISCO, INC., a New Jersey corporation with a principal place of
business at 000 XxXxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxx Xxxxxx 00000 (hereinafter
"Planters").
W I T N E S S E T H:
WHEREAS, except to the extent contemplated by the Amendment,
Planters and Lincoln do not intend to renew the Initial Term of the
Pre-Amendment Agreement and Lincoln and Planters desire to effect a smooth
transfer back to Lincoln of the business of the distribution of the
Products; and
WHEREAS, for the purposes of effectuating the foregoing, the
parties desire to amend the Pre-Amendment Agreement to effect the changes
set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, it is hereby agreed as follows:
1. Effective Date of the Amendment.
The Amendment shall take effect on March 1, 1997 (the "Effective
Date").
2. Defined Terms.
For the purposes of the Amendment, unless the context otherwise
requires or unless otherwise amended by the Amendment, terms used herein
which are defined in the Pre-Amendment Agreement, shall have the respective
meanings ascribed to them in the Pre-Amendment Agreement.
3. Termination of Right to Distribute Screaming Yellow
Zonkers.
Effective May 1, 1997, Planters shall have no further right or
obligation to distribute Lincoln's product known as Screaming Yellow
Zonkers ("Screaming Yellow Zonkers Product"), provided, however, that until
August 1, 1997 Planters shall have the right to liquidate any Screaming
Yellow Zonkers Product at the liquidation outlets set forth on Exhibit A
attached hereto (and such other outlets as shall be mutually agreed in
writing), with the shelf life of such units to be no older than 270 days.
Planters shall use reasonable efforts to prevent diversion of such Screaming
Yellow Zonkers Product into non-liquidation channels.
4. Amendment of Definition of "Territory" and "Product".
All references to Planters' right to distribute the Product on
and after the Effective Date shall mean the product known as Fiddle Faddle
and, with respect to the remainder of the Term, as extended by the Extension
Period, all references to the "Territory" shall mean the United States of
America (including Puerto Rico and United States territories and
possessions).
5. Term
The exclusive right granted to Planters by the Pre-Amendment
Agreement to distribute the Product during the Term shall be extended for an
additional six month period ending on December 31, 1997 (the "Extension
Period") and accordingly the Term shall expire on December 31, 1997. All
references in the Pre-Amendment Agreement to a Renewal Term following
expiration of the Initial Term are hereby deleted, no Renewal Term is
contemplated by the parties hereto.
6. Purchase Requirements
Planters minimum purchase obligations set forth in Section 2.2
of the Pre-Amendment Agreement are hereby replaced with the purchase
obligations hereinafter set forth.
(a) During the six month period commencing January 1, 1997
and ending June 30, 1997, Planters agrees to purchase, and
acknowledges that it shall be billed at the transfer price for,
an aggregate of not less than 926,674 Equivalent Cases of
Product as follows: (x) at least 375,000 Equivalent Cases shall
be manufactured within each quarter and billed and paid for
within 15 days of production and (y) the additional 176,674
Equivalent Cases (which Equivalent Cases represent Product
previously manufactured) to the extent not purchased prior to
the Effective Date shall be purchased and paid for within 15
days following the Effective Date. Accordingly, the parties
hereto acknowledge and agree that a total of 1,950,000
Equivalent Cases shall have been purchased at the transfer price
during the twelve month period commencing on July 1, 1996 and
ending on June 30, 1997, which amount represents a shortfall of
300,000 Equivalent Cases from the 2,250,000 Equivalent Cases
required to have been purchased during such period pursuant to
the Pre-Amendment Agreement. With respect to such shortfall,
Planters acknowledges and agrees that it shall be billed for and
shall pay Lincoln on June 30, 1997 a non-reimbursable amount of
$720,000 (which amount represents $2.40 times 300,000) and such
amount shall not be applied against any other amount due under
this Amendment.
(b) Pursuant to the terms of this paragraph, during the
six month period commencing July 1, 1997 and ending December 31,
1997, Planters agrees to pay for an aggregate of 750,000
Equivalent Cases to be billed at a rate of 125,000 Equivalent
Cases per month. With respect to its obligations under this
paragraph (b), Lincoln will xxxx Planters on the first day of
each month during such period, and Planters will pay Lincoln
within 15 days thereof, an amount of $300,000 (which amount
represents $2.40 times 125,000). On the last day of each month,
Lincoln will xxxx Planters (at the transfer price per Equivalent
Case less $2.40) and Planters will pay Lincoln, within 15 days,
for the number of cases manufactured during such month in
accordance with the monthly production schedule. In the event
Lincoln produces less than 375,000 Equivalent Cases in the third
quarter, Lincoln shall be under no obligation to make up for any
such shortfall in the subsequent quarter. In the event that
Lincoln is required to vary its production schedule to meet
Planters' desired inventory level of approximately 250,000
Equivalent Cases of Product on December 31, 1997, such that
Planters fails to purchase an aggregate of 750,000 Equivalent
Cases during this six month period, Planters hereby agrees to
reimburse Lincoln within 15 days of receipt of invoice for any
raw materials and packaging obligations entered into on behalf
of Planters pursuant to and in accordance with the 90 Day
Rolling Forecast. Lincoln will not xxxx Planters at the end of
the Term for any raw materials and packaging obligations entered
into on behalf of Planters pursuant to the 90 Day Rolling
Forecast which Lincoln subsequently intends to use or
reasonably could use within the following three month period.
(c) In the event that during the calendar year ending
December 31, 1997, Planters has not sold at least 1,500,000
Equivalent Cases in non-liquidation channels, Planters shall pay
Lincoln, prior to January 15, 1998, an amount equal to (x)
1,500,000 minus (y) the amount of Equivalent Cases sold through
non-liquidation channels times (z) $3.20. Lincoln and Planters
agree that the amount contemplated by the previous sentence to
be paid by Planters, to the extent Planters fails to sell at
least 1,500,000 Equivalent Cases in non-liquidation channels, is
a reasonable estimate of the amount of damages Lincoln would
suffer as a result of Planters failure to sell such cases and
constitutes a fair and reasonable amount of compensation for any
such failure.
(d) Lincoln and Planters hereby agree that title to the
Product will pass upon completion of production of the Product.
7. Liquidation of Product.
For a period of six months following expiration or termination
of the Term (the "Liquidation Period"), Planters shall have the right to
liquidate up to 250,000 Equivalent Cases of Fiddle Faddle at the liquidation
outlets set forth on Exhibit A attached hereto, the shelf life of such
Product shall be no older than 270 days. Planters shall use reasonable
efforts to prevent diversion of such Product into non-liquidation channels.
Planters will not sell, ship or consign any such Product for export from the
Territory, and will use efforts to avoid an unintentional sale, shipment or
consignment for export comparable to the efforts used by Planters in
connection with its other products. All other inventory remaining unsold at
the termination or expiration of the Term shall be destroyed or donated to
Second Harvest. Lincoln shall be permitted to enter into an inventory
liquidation agreement during the Term. In the event that Lincoln enters
into such an agreement, Planters' will be permitted to liquidate the Product
thereunder during the Term and will be permitted to liquidate up to 250,000
Equivalent Cases thereunder during the Liquidation Period.
8. Right to Use Planters Trademarks.
Planters, through its parent company and affiliated companies,
agrees to negotiate in good faith with Lincoln an agreement under which
Lincoln will be licensed to use the Planters Trademarks. The parties will
use their best efforts to cause such agreement to be signed and delivered on
or before March 14, 1997, and such agreement shall contain normal and
customary provisions relating to quality control and the protection of the
Planters Trademarks and shall embody economic terms including the following:
(a) Lincoln shall be granted, for a five year period following
termination or expiration of the Term, the right to use the Planters
Trademarks in the United States (including Puerto Rico and United States
territories and possessions) in connection with ready-to-eat caramelized
popcorn. In consideration of the grant of such rights to Lincoln, Lincoln
shall agree to pay the trademark owner a royalty of 0% of annual Net Sales
(as hereinafter defined), for two years, through normal retail channels of
distribution in the United States, 1% of annual Net Sales, for years three
to five, through normal retail channels of distribution in the United States
to the extent that sales have not exceeded 2,250,000 Equivalent Cases in any
year, 2% of annual Net Sales, for years three to five, through normal retail
channels of distribution in the United States to the extent that sales have
exceeded 2,250,000 Equivalent Cases in any year. For the purposes of this
section 8 the term "Net Sales" shall mean sales less cash discounts and
returns. Lincoln and the trademark owner may in their unfettered discretion
mutually agree to any extension of the five year period contemplated by this
section for additional five year periods at least 30 days prior to the time
when the five year period (or extended period, as the case may be) would
otherwise expire.
(b) Lincoln shall be granted, for a five year period following
termination or expiration of the Term, the right to use the Planters
Trademarks in Canada in connection with ready-to-eat caramelized popcorn.
In consideration of the grant of such rights to Lincoln, Lincoln shall agree
to pay the trademark owner a royalty of 0% with respect to annual Net Sales,
for two years, through normal retail channels of distribution in Canada, 1%
of annual Net Sales, for years three to five, through normal retail channels
of distribution in Canada to the extent that sales have not exceeded 500,000
Equivalent Cases in any year, 2% of annual Net Sales, for years three to
five, through normal retail channels of distribution in Canada to the extent
that sales have exceeded 500,000 Equivalent Cases in any year. Lincoln and
the trademark owner may in their unfettered discretion mutually agree to any
extension of the five year period contemplated by this section for
additional five year periods at least 30 days prior to the time when the
five year period (or extended period, as the case may be) would otherwise
expire.
(c) In the event royalty payments are due pursuant to
paragraphs (a) or (b) of this Section 8, Lincoln shall be obligated to
provide the trademark owner, within thirty (30) days after the end of each
calendar quarter with respect to which royalties are due, a complete and
accurate statement of its Net Sales for that quarter, which statement shall
be accompanied by any payment due.
(d) Lincoln shall have no obligation to use the Planters'
Trademarks at any time after the termination of the Term.
9. Elimination of Right to Terminate in Event of Change of
Control.
The right to terminate the Term in the event of a Change of
Control as set forth in Section 2.7 of the Pre-Amendment Agreement is hereby
deleted and shall be of no force or effect. Notwithstanding anything to the
contrary contained in Section 11.2 of the Pre-Amendment Agreement, Lincoln
may assign, convey or transfer the Pre-Amendment Agreement and the Amendment
and its rights and obligations hereunder and thereunder in the event of a
Change of Control, provided that Lincoln may not assign, convey or transfer
any of its rights under the trademark license agreements contemplated by
Section 8 hereof without the prior approval of the trademark owner.
10. Sales and Marketing
(a) Planters reaffirms its obligations set forth in Section
3.1 of the Pre-Amendment Agreement and agrees that it will use efforts to
market and develop sales and distribution of the Product during the
remainder of the Term comparable to the efforts it uses in connection with
its other businesses, such efforts shall take into account Lincoln's
paramount interest in maintaining the value of Lincoln's business, the image
of high quality and value of the Product and the Lincoln Trademarks.
Planters shall continue to use such efforts until the expiration of the Term
(as extended by the Extension Period) notwithstanding the impending
expiration of the Term on December 31, 1997.
(b) For the purpose of effecting an orderly transfer back to
Lincoln of the business of the distribution of the Product, Planters will
promptly respond to any requests from Lincoln for customer review contact
and will beginning April 1, 1997 provide Lincoln with (a) a monthly status
report and list, in the form of Exhibit B attached hereto, of Planters top
20 accounts in each region for the most recent month with respect to the
sales of Product during the Term, (b) a monthly report and list of all
accounts in the form currently provided pursuant to the Pre-Amendment
Agreement. Lincoln shall have the right to contact any customer not set
forth in such list of all accounts and not contemplated to be contacted by
Planters and to engage in sales of the Product to such customers, with all
orders obtained by Lincoln to be credited to the amount to be purchased by
Planters with respect to that month.
(c) Planters shall continue to process and handle all consumer
inquiries connected with or relating to the Product until the expiration of
the Term.
(d) On March 15, 1997, Planters shall submit for Lincoln's
prior written approval an Annual Marketing Plan relating to the remainder of
the Term with respect to the Product, which marketing plan shall be in
compliance with Section 3.4 of the Pre-Amendment Agreement and as set forth
on Exhibit C attached hereto.
(e) Planters' obligation, set forth in Section 4.4 of the
Pre-Amendment Agreement, to deliver to Lincoln a written non-binding
semi-annual forecast of Planters' requirements of the Product is hereby
eliminated. Planters will continue to provide a written ninety (90) day
rolling forecast of its expected purchase of the Product for the next ninety
(90) days. In addition, Planters shall be required to deliver a monthly
production schedule which schedule shall be consistent with and sufficient
to meet Planters' minimum monthly purchase obligations set forth herein and
shall facilitate consistent and even production of the Product. Planters
agrees to accept shipment of the volume of Product set forth in the monthly
schedule within 30 days of production. Lincoln and Planters hereby agree
that title to the Product will pass upon completion of production of the
Product by Lincoln. If Lincoln is required to store Product beyond 30 days
after production, Planters shall pay Lincoln for storage at then prevailing
market rates. Planters may increase the volume of Product contemplated in
the monthly schedule by up to 20% or decrease the such volume by up to 10%
at any time up to forty-eight (48) hours prior to production, in which event
any additional costs incurred by Lincoln associated with any such
modification shall be borne by Planters.
11. Elimination of Lincoln's Covenant Not to Compete
Section 9.2 (a) of the Pre-Amendment Agreement is hereby deleted
and shall be of no force and effect. Notwithstanding anything to the
contrary contained in the Pre-Amendment Agreement or in the Amendment,
Lincoln shall at all times have the right to enter into any and all
manufacturing agreements and co-pack arrangements relating to ready-to-eat
popcorn. Lincoln agrees, however, not to manufacture prior to September 30,
1997 any private label product on behalf of a retailer, if and only if such
retailer was not previously selling such product.
12. Elimination of Right of First Refusal
The provisions relating to a "Right of First Refusal" set forth
in Section 13.1 of the Pre-Amendment Agreement and any other references to
such a right set forth in the Pre-Amendment Agreement are hereby deleted and
shall be of no force and effect.
13. Miscellaneous
(a) Notwithstanding anything to the contrary contained herein
or in the Pre-Amendment Agreement, Lincoln shall at all times after the
Effective Date have the right to market and distribute the Product in tins.
(b) All provisions of the Pre-Amendment Agreement to the extent
not amended or superseded by and not inconsistent with the Amendment shall
remain in full force and effect.
(c) The headings contained herein are inserted for convenience
only and shall not be deemed to have any substantive meaning.
(d) The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
(e) The "Planters Non-Competition Period" set forth in Section
9.1(a) and (b) shall be co-terminous with the term of the license of the
Planters' Trademarks granted to Lincoln hereby.
(f) This Amendment is intended to resolve any issues Lincoln
may have regarding Planters performance under the Pre-Amendment Agreement,
as amended. Lincoln agrees that if Planters performs in accordance with the
terms set forth in this Amendment, Lincoln will release Planters from all
liability stemming from any failure by Planters to perform under the
Pre-Amendment Agreement, as amended. Lincoln further agrees that it shall have
no claim or cause of action against Planters, including, but not limited to,
any claim for damages or compensation for losses or expenses incurred,
including attorneys fees, or for lost profits, arising in any fashion from
the lawful and proper termination of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officials on the day and
year first above written.
LINCOLN SNACKS COMPANY
By: /s/Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Chairman and Chief Executive Officer
PLANTERS COMPANY, a unit of
NABISCO, INC.
By: /s/Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President
EXHIBIT A
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Approved Liquidators
--------------------
Canned Foods
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
West Coast Liquidators (MacFrugal's)
00000 Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxxx, XX 00000
T P I - Dollar Bill's
0000 Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Xxxxxx'x, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Bargain Wholesale/99 cent Stores
0000 & Xxxxx Xxxxxxx
Xxxx xx Xxxxxxxx, XX 00000
Odd Lots/Big Lots
Consolidated Stores Corp.
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
EXHIBIT B
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Blank matrix for Fiddle Faddle Top 25 Accounts showing current listings
indicating size and promotional activity.
EXHIBIT C
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Blank matrix for Fiddle Faddle and Screaming Yellow Zonkers 5oz. Trade and
10oz. Trade showing January through December 1997 Promotional Plan.
