Distribution Agreement - Alliant Foodservice Inc. and New England Restaurant Co. Inc.
June 25, 1997
Mr. Paul Seidman
Director Food & Procurement
New England Restaurant Company Inc.
300 Pond Street
Randolph, MA 02368
Dear Paul:
Based upon the terms of this letter agreement, Alliant Foodservice, Inc.
(sometimes "we" or "Alliant") offer to sell to your unit(s) products carried by
the Alliant Foodservice, Inc. distribution centers serving your account, subject
to the availability of product, for the term of this agreement.
The conditions of our offer to sell are as follows:
The average order size per unit per delivery will be $4500 per drop. We
recognize that there will be exceptions; however, this program is based on the
condition that the average order size over a reasonable period of time will be
maintained at $4500 per drop. Upon thirty (30) days advance notice to you and
your failure to correct the deficiency within such time period, Alliant reserves
the right at any time to adjust the terms of this agreement, including margins,
upon prior notice if there is a significant change in product mix or a failure
to regularly meet the average order size measured in dollar value per drop. The
above parameters are based on information which you have provided to us. This
proposal is also based upon an "open time window" of (6:00 AM to 11:00 AM) and
(1:00 PM to 4:00 PM). "Key Drop" deliveries are available upon request.
Alliant will receive 80% of the purchases made by you in each category
referenced under the "PRICING" section of this agreement. If Alliant does not
receive 80% of your purchases in a referenced category, then Alliant may convert
that category to a different margin schedule at Alliant's option.
II. All Other Products -
Invoice cost or local market replacement cost, at Alliant Foodservice's option,
plus freight (where applicable). Cost may include a fee for national procurement
activities which provide procurement leverage, order consolidation and
administration, product marketing and quality assurance. Forward purchases and
consigned products may include applicable storage and finance charges or shall
be based on local market replacement cost, at Alliant's option. For purposes of
this paragraph, local market replacement cost will reflect invoice cost. Invoice
cost will be the invoice issued by the vendor or Alliant's Central Logistical
Services Department.
III. Produce -
Total market cost plus freight (where applicable). Total market cost is set by
the respective Alliant Foodservice distribution center on a district-wide basis
and is intended to reflect the local market replacement cost or current market
average cost of procured products.
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SUBSIDIARIES - This agreement expressly excludes City Meat and Provisions
Company, Inc., a subsidiary of Alliant Foodservice, Inc. and any other
subsidiaries or affiliates of Alliant which are manufacturers, fabricators or
processors (collectively, "manufacturing subsidiaries"). In the event you wish
to purchase products from manufacturing subsidiaries, those products' cost shall
be determined by the manufacturing subsidiaries' price lists. A distribution
fee, if applicable, may be added to the manufacturing subsidiaries' price list
amount.
FREIGHT - Unless in-bound freight is included in vendor's delivered pricing,
freight charges will be based on market conditions and will not exceed the
freight rate normally payable by the Alliant Distribution Center for inbound
shipments of regular quantity requirements of such products. Freight charges may
include common or contract carrier charges by the product vendor or a carrier,
or charges billed by Alliant for its freight management service.
PRICE CHANGES -
Prices are subject to change monthly except for certain categories that are
subject to volatile cost fluctuations (i.e. meat, poultry, coffee, oils, sugar,
flour, etc.), which will be priced weekly or as market conditions dictate. In
the event of any significant market cost changes resulting in a reduction of our
margin by more than 3.0 percent, we reserve the right to immediately reestablish
selling prices by applying applicable margins against the increased cost of the
product.
PROMOTIONAL ALLOWANCES -
Only promotional allowances exclusively negotiated by you or on your behalf will
be passed through to you. There will be no promotional allowances given on
Kraft-Branded products under this agreement. Alliant shall be entitled to cash
discounts and other supplier incentives. Because of the competitive nature of
our pricing and other terms of sale, Alliant has no additional marketing monies
to fund special customer requests (for example, customer-sponsored events,
donations to customer-directed causes, etc.). Alliant does agree to assist in a
product or monetary donation for New England Restaurant Association's Annual
Picnic.
METHODS
MARGINS - defined as a percent reflect a percent markup over cost. To
accommodate minimum handling expenses, Alliant reserves the right to impose a
minimum fee of $.87 per unit of sale transaction.
ROUNDING - To simplify pricing, receiving and inventory valuation, Alliant
rounds all prices with calculated penny fractions to the next highest penny per
unit of sale.
SUBSTITUTIONS - will be priced in accordance with the applicable category margin
with same or lower delivered cost adjusted for pack size variance. Alliant
reserves the right in the event that New England Restaurant Company specified
vendors cannot meet product demand to price per contract mark up.
SPLIT CASE SURCHARGE - To help defray additional handling expenses and increased
damage loss experience, products sold in amounts less than manufacturer's
standard containers shall be upcharged $.50 per unit.
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JOINT BUYING DECISIONS - Forward purchases made with your concurrence will be
priced to you as follows: During the first calendar month the product is in
Alliant's warehouse, the price will be Landed Cost plus the applicable category
margin. During each additional calendar month that the product remains in
Alliant's warehouse, the price will be increased by an amount determined by
mutual consent on a per event basis.
SERVICE CHARGE - If invoices are not paid within the terms specified in this
agreement, a service charge will be assessed of 1-1/2% per month, or such lesser
charge if required by law. Unpaid invoice balances and finance charges due to
Alliant will be deducted from any credits due to you.
ALLIANT-LINK - Upon signing of the contract and prior to placement of the first
order this contract is binding on the stipulation that the Remax/AlliantLink
interface has occurred and Alliant will cover all reasonable costs associated
with this interface.
If Alliant agrees to provide you with one or more AlliantLink terminal
installations, any such installations will be conditioned on a continuing
obligation to meet a minimum purchase requirement of $250,000 per year per
installed location. Each Alliant-Link installation will require that you sign
and return a standard AlliantLink contract for each location.
The AlliantLink hardware provided to New England Restaurant Co., Inc. is wholly
owned by Alliant Foodservice, Inc. In the event either party should exit from
the relationship at any time during the first three years of the contract, New
England Restaurant Co., Inc. will be given the opportunity to purchase the
hardware from Alliant Foodservice, Inc. at the current book value. The date of
the three year tenure will commence as of the signing date of the contracted
agreement between New England Restaurant Co., Inc. and Alliant Foodservice, Inc.
Additionally, if an exit does occur and New England Restaurant Co., Inc. decides
not to purchase the equipment, Alliant Foodservice will allow New England
Restaurant Co., Inc. 60 days use of said equipment to assure a smooth transition
to a new system.
Please note the attached depreciation schedule for the AlliantLink hardware.
PRICE SUBSTANTIATION - RIGHT TO AUDIT - Upon reasonable notice and during
regular business hours, but no more frequently than once every six months, you
may examine, at the local Alliant Foodservice, Inc. distribution center
servicing your operations, documentation to support pricing of products sold to
you pursuant to this agreement; provided, however, that any such audit shall be
limited to no more than 25 items with one price point verification per item. If
such documentation is not available at the distribution center office, Alliant's
computer generated reports will be made available to you at the distribution
center office or the audit may be conducted at our processing center, at
Alliant's option. The audited period shall be limited to the thirteen (13) weeks
immediately preceding such audit. The applicable price list for Kraft- Branded
Products and Alliant Exclusive Brands will be made available to you to verify
the contract cost of such products.
PAYMENT - Terms are net EOM - 10 days, measured from invoice delivery date to
date of our receipt of payment. Alliant reserves the right at any time to adjust
the payment terms or take any other appropriate action regarding payment or
terms as it deems appropriate in its reasonable judgment, including the
execution and delivery of a security agreement for extension of credit. We
reserve the right to require the annual or more frequent submission of audited
financial statements, including a statement of cash flow, in order to ensure
confirmation of the approved payment terms. You agree to reimburse Alliant for
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all costs and expenses (including reasonable attorneys' fees) incurred in
enforcing its right to payment hereunder.
EFFICIENCY INCENTIVES
o Transition Allowance - To help defray any costs incurred due to New
England Restaurant Co., Inc. impending transition, Alliant offers a
0.5%, 60 day transitional allowance incentive on all purchases. This
allowance will be off invoice. Additionally, we will offer to double
this allowance if we do not meet your expectation for service as
defined by the Performance Agreement established prior to start-up.
o Prompt Pay Incentive: Your payment terms are net EOM - 10 days. If you
elect to take advantage of this incentive then Alliant will authorize
deductions equal to the specified rebate amount from your designated
margins, off invoice.
Net Payment Days Incentive
15-21 0.30%
10-14 0.50%
9 or less 1.0%
As an example, in order for New England Restaurant Association to take
advantage of the 1.0% rebate opportunity we propose to implement the
following process upon your approval. Weekly statements will be faxed
to your office on Thursdays. These statements will reflect purchases
from Thursday through Wednesday. These invoices must be paid in full
and posted by the following Friday.
o Off Peak Delivery Incentive - Alliant offers a 0.50% rebate for Monday
deliveries (where applicable). Incentive excludes holiday weeks.
TERM - This agreement shall commence as of the date first written above and
shall continue until either party elects to terminate, which shall require
thirty (30) days prior written notice to the other party. Certain circumstances,
such as tardiness in payment, are grounds for immediate termination. Alliant may
discontinue service to one or more of your locations and may terminate this
agreement if an overdue payment is not received immediately upon notification.
Either party may request changes to this agreement by giving thirty (30) days
prior written notice of such request to the other party.
RETAIL-CLASSIFIED PRODUCTS - To the extent that we sell you products packaged
under trademarks owned by Kraft Foods, Inc. and/or its subsidiaries and sold at
retail (excluding Kraft, Inc. foodservice products), you agree, that all such
products are for the sole use within your units as food preparation ingredients
or to be directly served to your patrons, and in any event you agree that such
products will not be resold or exchanged in their original individual or
case-lot packaging.
CUSTOMER INVENTORY - To effectively service our customers, Alliant is obligated
to maximize warehouse capacity and limit inventory proliferation. Accordingly,
we reserve the right not to stock any special or proprietary inventory which
does not meet our minimum velocity requirement of 20 cases/unit per four (4)
week period and 12 turns annually. We also request that our customers afford us
the opportunity to present alternatives to customer-requested special and/or
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proprietary products. Upon termination of this agreement for any reason, you
agree to purchase at Cost plus applicable category margin, all products that
Alliant has in inventory, in transit, or for which unconditional orders have
been placed, that have been purchased, transferred or consigned at your request,
or otherwise for your account, including but not limited to customer-labeled or
other proprietary products.
In addition to the foregoing, you agree that at any time, with respect to any
obsolete products purchased specially for you (which includes specially ordered
and proprietary products), you will either purchase such products directly or
advise us how to dispose of such products. In either event, we will be entitled
to the full price, including the applicable normal margin, which we would
otherwise be entitled to under this agreement. For purposes of this agreement,
for each Alliant distribution center, obsolete products shall mean those which
have a sales velocity of less than the above stated minimum velocity
requirement.
Upon 30 days notice from New England Restaurant Co., Inc. regarding elimination
of said items New England Restaurant Co., Inc. will be relieved of this
obligation except for joint buying decisions.
CUSTOMER-SPECIFIED VENDORS - If you specify a particular vendor for your account
which is not currently authorized by Alliant, then such vendor will be required
to complete our standard vendor documentation before purchases can be made by
Alliant for resale to your unit(s).
DEVIATED COST PROGRAMS - Alliant agrees to maintain deviated costing programs in
its contract pricing system when deviated cost(s) has been negotiated directly
between you and vendors. Alliant will only maintain those deviated cost programs
documented by the vendor and communicated to Alliant via notice on vendor
letterhead or by completion of an Alliant "Deviated Cost Program" form. The
communication shall, at a minimum, contain:
o Adequate lead time of ten (10) working days
o Program start/end dates
o Information pertaining to deviated cost type (delivered to
distributor, allowance, f.o.b. origin)
o Information on specific products covered, including manufacturer
product code
o Signature of vendor representative authorized to offer program
o Vendor contact.
Alliant will not be responsible for collection, payment or any reimbursement of
monies due to you as a result of vendors supplying inadequate information,
communication received after program start date, predated or retroactive
programs. Further, as Alliant acts as an administrator regarding negotiated
deviated cost programs negotiated by you, Alliant will not be held liable for
any vendor omissions or errors in maintaining the programs and all such related
recoveries shall be from the involved vendor.
Alliant may impose a charge upon vendors providing deviated costing in part to
help defray additional administrative systems, financing and other costs
incurred by Alliant in handling products subject to cost deviations.
REPORTS/ORDER GUIDES - Alliant will provide the following
reports upon your request:
1. Customized Order/Inventory Guides. One copy will be
furnished to each purchasing location.
2. Monthly or Quarterly Standardized Usage Report. One copy
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will be furnished to the location of your choice.
3. Customized Reports (ie. Fill rate, price change).
FORCE MAJEURE - Either party hereto shall be relieved of its obligations under
this agreement for so long as such party is prevented from fulfilling its
obligations by causes outside its reasonable control, including but not limited
to casualty, labor strikes and serious adverse weather conditions. This
provision shall not be interpreted to relieve either party of its obligations to
make any payments due hereunder.
MISCELLANEOUS - You agree that you will not assign this agreement, in whole or
in part, or otherwise extend the benefits of this agreement to any third party,
without our prior written consent. At Alliant's option, the provisions of this
agreement shall not apply to any unit(s) following the transfer or sale of such
unit(s). This agreement constitutes and contains the entire agreement of the
parties and cancels and supersedes any and all prior negotiations,
correspondence and agreements, whether oral or written, between you and Alliant
respecting the subject matter hereof.
If this offer is acceptable to you, please sign both copies of this agreement
and return one to us. By your signature you represent that these margins/prices
quoted herein are competitive with margins/prices quoted your account by others
for similar products.
NOTICES - Any written notice called for in this agreement may be given by
personal delivery, first class mail, overnight delivery service or facsimile
transmission. Notices given by personal delivery will be effective on delivery;
by overnight services on the next business day, by first class mail three
business days after mailing; and by facsimile when transmission is complete. The
address of each party is set forth below.
GOVERNING LAW - This agreement shall be governed by, and interpreted in
accordance with the laws of the State of Illinois, U.S., except any such law
mandating the application of the law(s) of a different jurisdiction.
Sincerely,
ALLIANT FOODSERVICE, INC.
755 Pierce Road
Clifton Park, NY 12065 By: /s/ David Patterson 9-10-97
Market President
Attention: David Patterson
Telephone: 518-877-3900
Facsimile: 518-877-3929
ACCEPTED:
New England Restaurant Co., Inc. /s/ Paul Seidman
300 Pond Street (Name of Customer)
Randolph, MA 02368
Attention: Paul Seidman
Telephone: 617-986-4600 /s/ Paul Seidman
Facsimile: 617-986-0358 (Customer Signature)
Director of F&B& Purchasing
(Customer Title)
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(Date)