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Sample Business Contracts

Custom Distribution Agreement - Bertucci's Restaurant Corp. and Ferraro Foods Inc.

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                                   BERTUCCI'S
                      B R I C K   O V E N   P I Z Z E R I A(R)






                           BERTUCCI'S RESTAURANT CORP.

                               CUSTOM DISTRIBUTION

                                 AGREEMENT WITH

                               FERRARO FOODS INC.

                                  MAY 13, 1998




   14 Audubon Road o Wakefield, MA 01880 o (781) 246-6700 FAX: (781) 246-2224




                                TABLE OF CONTENTS

                                                                      PAGE NO.

1.  CUSTOM DISTRIBUTION CONTRACT DOCUMENTS....................................5
   RECITALS...................................................................5

2.  SCOPE OF AGREEMENT........................................................6
   2.1 PRODUCT CATEGORIES.....................................................6
   2.2 SERVICE LEVELS AND OPERATIONAL PERFORMANCE.............................6
   2.3 SERVICE LEVEL REPORTING................................................7

3.  SERVICE AGREEMENT.........................................................7
   3.1 SUPPORT PERSONNEL/ASSIGNMENTS BY FERRARO...............................7
   3.2 COMMUNICATIONS.........................................................7

4.  DELIVERY SCHEDULES........................................................8
   4.1 DELIVERY FREQUENCY.....................................................8
   4.2 DELIVERY PARAMETERS/WINDOWS............................................9
   4.3 EMERGENCY DELIVERIES...................................................9
   4.4 DELIVERY CRITERIA......................................................9
   4.5 DELIVERY DRIVER AND HELPER RESPONSIBILITY.............................10
   4.6 FUEL CHARGES..........................................................10

5.  ORDERING PROCEDURES......................................................10
<PAGE>
 
   5.1 ORDER GUIDE...........................................................10
   5.2 CUSTOMER SERVICE REPRESENTATIVE.......................................11
   5.3 ORDER FREQUENCIES.....................................................11
   5.4 ORDER CONFIRMATION....................................................11
   5.5 ELECTRONIC ORDER ENTRY................................................11
   5.6 INVOICING REQUIREMENTS................................................12

6. PRICING POLICIES AND FORMULATIONS.........................................12
   6.1 DEFINITION OF DISTRIBUTOR COST........................................12
   6.2 CALCULATION OF DISTRIBUTOR SELL PRICE.................................13
   6.3 FORMULATION...........................................................14
   6.4 MARKET SENSITIVE COMMODITIES/CONTRACT PURCHASES.......................14
   6.5 PRICE ADJUSTMENTS.....................................................14

7.  DISTRIBUTOR BUYING AND RECEIVING SERVICES................................15
   7.1 BUYING SERVICES.......................................................15

8.  FERRARO: MANUFACTURER/PACKER VENDOR & BERTUCCI'S RELATIONSHIP............16
   8.1 PAYMENT OBLIGATIONS...................................................16
   8.2 VENDOR LEAD TIME/STOCK LEVELS.........................................16

9.  VERIFICATION/AUDIT PROCEDURES............................................16
   9.1 PRICING...............................................................16
   9.2 FACILITY..............................................................16

10.  TERMS AND CONDITIONS....................................................17
   10.1 PAYMENT TERMS........................................................17
   10.2 GUARANTEE............................................................17
   10.3 CREDITS..............................................................17
   10.4 DEFINITIONS..........................................................18
   10.5 SUBSTITUTIONS........................................................19

11.  REPORTING SERVICES......................................................19
   11.1 REPORTING............................................................20

12.  INSURANCE...............................................................20
   12.1 CERTIFICATE OF INSURANCE.............................................20
   12.2 INDEMNIFICATION......................................................21
   12.3 HOLD HARMLESS AGREEMENT AND GUARANTY/WARRANTY OF PRODUCT.............21

13.  PROPRIETARY/CONTRACT PRODUCT AGREEMENT..................................21

14.  OTHER INCOME............................................................22
   14.1 REBATES/VOLUME DISCOUNTS/MASTER JOBBER
        DISCOUNTS/BROKERAGE AND ALLOWANCES...................................22
   14.2 CASH DISCOUNTS - VENDOR..............................................22

15.  RECALLS.................................................................22

16.  TERM....................................................................22
   16.1 TERM OF AGREEMENT....................................................22
   16.2 OPTION PERIOD........................................................23

17.  TERMINATION.............................................................23
   17.1 TERMINATION BY BERTUCCI'S FOR CAUSE..................................23

18.  COMPLIANCE WITH INDUSTRY STANDARDS/LAWS.................................23
   18.1 SANITATION STANDARDS.................................................23
   18.2 REGULATORY REQUIREMENTS..............................................23
<PAGE>
 
19.  TRADEMARKS AND CONFIDENTIALITY..........................................24

20.  NOTICES.................................................................24

21.  ASSIGNMENT..............................................................25

22.  MISCELLANEOUS...........................................................25
   22.1 TRAINING.............................................................25
   22.2 NATIONAL ACCOUNT REPRESENTATIVE......................................25
   22.3 ANNUAL HOLIDAY GIFT BOX PROMOTION....................................25
   22.4 ROLL-OUTS............................................................26
   22.5 COMPETITIVE RESTRICTIONS.............................................26
   22.6 INITIAL INVENTORY....................................................26
   22.7 BEVERAGE PROGRAM.....................................................26

23.  PRESS RELEASE...........................................................26

24.  GOVERNING LAW...........................................................27

25.  ENTIRE AGREEMENT........................................................27
26.  EXHIBIT INDEX.............................................................
         I.       Bertucci's Locations/Addresses/Phone Numbers Personnel
         II.      Product List by Category
         III.     Product List by Vendor
         IV.      Hold Harmless Agreement
         V.       Non-Disclosure Agreement
         VI.      Current "Sample" Invoice
         VII.     Fiscal 1998 Calendar
         VIII.    Current "Sample" Order Guide
         IX.      Vendor Address List
         X.       Current Truk Routing
         XI.      Pricing Worksheet
         XII.     Insurance Certificate(s)
         XIII.    Vendor Incident Report




                         1. CUSTOM DISTRIBUTION CONTRACT
                                    DOCUMENTS




THESE DOCUMENTS ARE PROPRIETARY IN NATURE AND ARE SUBJECT TO THE
NON-DISCLOSURE AGREEMENT EXECUTED BETWEEN THE PARTIES.


RECITALS

WHEREAS, Bertucci's Restaurant Corp., (herein after referred to as "Bertucci's")
operates Bertucci's Brick Oven Pizzeria's throughout certain regions of the
United States, as more particularly described on Exhibit "I" attached hereto and
made a part hereof this Agreement.

WHEREAS, Bertucci's is desirous of entering into a "Custom Distribution
Agreement", with Ferraro Foods, Inc., (herein after referred to as Ferraro)
pursuant to the terms and conditions as defined and contained herein, for the
purpose of procuring for it's existing and contemplated Bertucci's Brick Oven
<PAGE>
 
Pizzeria's, with such products as described in the Bertucci's Comprehensive
Products List, attached hereto and made a part hereof, this Agreement, as
Exhibit II.

Ferraro shall sell only the products authorized by Bertucci's for the Bertucci's
operations. Bertucci's proprietary products and agreements with manufacturers,
distributors and importers shall remain confidential between Ferraro and
Bertucci's.



                              2. SCOPE OF AGREEMENT


2.1      PRODUCT CATEGORIES:

         Products covered under this Agreement shall be listed into the
         following product categories:

         o Cheese (all)
         o Dairy
         o Dry Groceries
         o Meat, Poultry, Seafood
         o Paper, Plastics, Disposables
         o Beverages
         o Beverages: Syrup Post Mix
         o Prepared Foods
         o Desserts
         o Cleaning Supplies
         o Smallwares
         o Store Operating Supplies


2.2      SERVICE LEVELS AND OPERATIONAL PERFORMANCE

         The following Service Level Performance Tracking table and Operational
         Performance Standard shall be used in measuring the effectiveness of
         Ferraro. The benchmarks set forth shall be the minimum acceptable
         levels allowed by Bertucci's for servicing it's operations.

         2.2.1 SERVICE LEVELS: All levels are listed as a percentage of total
         pieces ordered.
         (TOTAL PIECES ORDERED = 100%)

Shortage on Truck                                               0.15%
Damaged Product at Receiving                                    0.05%
Wrong Product Selected                                           0.1%
Product Ordered Wrong                                           0.05%
Concealed Damage                                                0.05%

Service Level (PIECE COUNT                                     99.6%*
FILL RATE)


         2.2.2. OPERATIONAL PERFORMANCE: The benchmark for 100% complete orders.
         Listed as a percentage of overall deliveries made based on approved
         delivery schedule. (EXCLUDES CORRECTIVE DELIVERIES RESULTING FROM
         DISTRIBUTOR ERROR)
<PAGE>
 
                   "100% COMPLETE" OPERATIONAL BENCHMARK        90%*

         Failure to maintain these minimum standards (*) may result in
         termination of this Agreement as described herein.


2.3      SERVICE LEVEL REPORTING

         All reporting shall be pursuant to Bertucci's Fiscal Calendar reporting
         periods provided herein, attached hereto as Exhibit VII.


                              3. SERVICE AGREEMENT


3.1      SUPPORT PERSONNEL/ASSIGNMENTS BY FERRARO

         Ferraro shall assign personnel to the following key positions for the
         purpose of managing the Bertucci's account:

            o  Customer Service Representative/Account Coordinator 
               (Store Activity - day/day)
            o  National Account Representative (shall visit 5 stores
               /month at random and follow with a Corporate visit)
            o   MIS Director
            o  Purchasing/Material Management Director
            o  Traffic/Dispatch Supervisor
            o  Emergency Contact (24 hours/7 days)

         The above referenced positions are considered essential for the
         successful execution of this Agreement. PERSONNEL ASSIGNED MUST BE
         IDENTIFIED IN THE AGREEMENT. It is encouraged that these positions be
         filled with personnel experienced in managing multiunit operations.
         Furthermore, turn-over of personnel in these positions would be
         considered a hindrance to the successful operations of Bertucci's.
         Ferraro shall provide cross-training in these positions to ensure
         continuity of' operations in the case of vacations, sickness or
         turn-over. Ferraro shall provide a one-time quarterly update following
         the commencement date for this agreement and biannually subsequent to
         the initial update on personnel cross-training programs concerning
         these positions.


3.2       COMMUNICATIONS

         3.2.1 Ferraro shall provide a Personnel Contact Directory to each
         Bertucci's location. The directory shall include all Ferraro
         departments, personnel, phone numbers, extensions, emergency phone
         numbers, a dedicated Bertucci's beeper, facsimile numbers, and
         after-hour/weekend/holiday phone numbers, including personnel on call
         during these periods.

         3.2.2 Ferraro shall cooperate with the requirements to provide all
         labor, material, software, equipment, training for its part in the
         current and contemplated on-line communications activity not limited to
         the following:

              A.  Electronic Order Entry, Electronic Order Confirmation, E-mail,
                  Electronic Transfer of Funds, Invoices and Credit Memo's,
                  Electronic Download for monthly pricing update and Order Guide
<PAGE>
 
                  maintenance.
              B.  Ferraro shall activate all systems required by Bertucci's on
                  July 1, 1998 or pursuant to a schedule submitted by
                  Bertucci's. In support of the initial transition of this
                  transaction, Ferraro shall cooperate with Bertucci's personnel
                  or their assigns in the implementation of any system.
              C.  Electronic Communication capability is considered essential to
                  this Agreement.
              D.  Bertucci's at its sole discretion, may implement this or any
                  other electronic commerce system pursuant to a schedule
                  developed by Bertucci's and subject to change exclusively at
                  the discretion of Bertucci's.
              E.  Any Ferraro cost incurred in the implementation of these
                  support systems shall be born solely by the Ferraro.
              F.  Bertucci's shall be responsible for all costs related to its
                  Corporate and Unit Level expense.
              G.  Bertucci's shall not be obligated to participate in a
                  proprietary system in order to meet the requirements of this
                  clause.
              H.  If a third party provider is essential to execute the
                  necessary implementation,  Bertucci's shall
                  participate fully in the selection process of this
                  party.  Bertucci's reserves the right to select the
                  party independently if that decision is essential to
                  support the corporate goals of Bertucci's. Ferraro
                  agrees to coordinate with that provider without
                  prejudice.
              I.  Costs related to a third party provider shall be allocated by
                  mutual consent of the parties.


                              4. DELIVERY SCHEDULES


4.1      DELIVERY FREQUENCY

         Ferraro shall deliver to each Bertucci's location during the term of
         this Agreement, twice a week, with exceptions. Deliveries shall be
         conducted in accordance with the delivery schedule provided herein,
         attached hereto as Exhibit X, dated April 1, 1998. Requests for
         modifications to delivery schedules by Ferraro shall be submitted in
         writing to Bertucci's for approval.

 4.2     DELIVERY PARAMETERS/WINDOWS

         Deliveries will be accepted at the unit level between the hours of 6:00
         am - 5:00 pm, except between the hours of 11:30 am - 1:30 pm.


4.3      EMERGENCY DELIVERIES

         4.3.1 Emergency deliveries as a result of any Ferraro occurrence as
         listed herein (see Article 2.1) shall be delivered to the unit(s) in
         the time frame determined by the Bertucci's Purchasing Department or
         the unit manager in charge. All expenses related to this type of
         delivery shall be borne by Ferraro.

         4.3.2 Emergency deliveries as a result of a Bertucci's
         occurrence shall be delivered to the Bertucci's unit(s) in the time
         frame designated by Bertucci's. All extraordinary expenses associated
<PAGE>
 
         with the delivery shall be charged at cost, with evidence, to the unit
         or account as directed by Bertucci's.

         4.3.3 All such occurrences shall require immediate notification to the
         Bertucci's unit and Corporate.


4.4      DELIVERY CRITERIA

         A.   The Ferraro drivers shall stage their vehicle so as not to
              obstruct traffic, or block customer vehicles or vehicles
              conducting business on Bertucci's property. Should there be an
              occurrence when the above can not be avoided, the Ferraro driver
              shall on demand move or relocate vehicle to the satisfaction of
              the Bertucci's manager in charge.
         B.   The Ferraro driver and helper ("helper" is defined as an employee
              of the Ferraro that accompanies the driver for the purposes of
              assisting with deliveries to Bertucci's locations) shall conduct
              themselves in a professional manner at all times. The Ferraro
              driver and helper shall never confront a guest of Bertucci's.
         C.   The Ferraro driver and helper shall never confront Bertucci's
              personnel in an argumentative manner. Discrepancies not resolved
              at the location level shall be directed to the designated
              Corporate Bertucci's and Ferraro personnel immediately.
         D.   All incidents shall be reported by the Bertucci's unit manager (on
              the Bertucci's Delivery Incident Form attached hereto and made a
              part hereof as Exhibit XV) which will in turn be forwarded to
              Ferraro management for disposition.
         E.   The Ferraro drivers and helpers shall dress in professional
              uniforms representing Ferraro.
         F.   Repeated conduct problems will result in an immediate request for
              personnel change by Bertucci's.
         G.   Ferraro shall change drivers and/or helpers, immediately upon
              request by Bertucci's.
         H.   The Ferraro drivers shall not consume, request, or purchase, any
              products offered by the Bertucci's Restaurant during the delivery.
         I.   Pre- and post delivery purchase and consumption of
              Bertucci's products are allowed.
         J.   Consumption of such products are not allowed inside kitchen,
              dining or common areas of Bertucci's.


4.5      DELIVERY DRIVER AND HELPER RESPONSIBILITY

         The driver and helper shall deliver frozen products first, followed by
         refrigerated products and dry goods. The products shall be rolled or
         carried to the portal or delivery storage area in each designated area
         inside the Bertucci's unit through the designated delivery door or
         pathway. Bertucci's shall provide personnel to check-in product. The
         Ferraro driver and the Bertucci's manager in charge shall be present
         during the final check-in and inspection. All cases shall be factory
         sealed, no re-packs, and without visible damage. Any damage, shortage
         or error shall be noted on the receiving ticket/invoice and counter
         signed by the driver and receiving personnel. Flour and sauce shall be
         rotated and stocked in their appropriate storage space by the driver
         and helper of Ferraro.


4.6      FUEL CHARGES
<PAGE>
 
         In the event of "National Oil Crisis" (relating to Commercial Vehicular
         Transportation Fuel), Ferraro shall, with adequate evidence, submit for
         consideration a fuel surcharge request pursuant to the guidelines
         representative of the Transportation Industry at that time; governed by
         the Department of Energy. Ferraro shall not charge Bertucci's, at any
         time during the term of this Agreement, any additional freight, fuel or
         miscellaneous charges without the written prior approval of an
         authorized designate of Bertucci's. The acknowledgment of this request
         shall not be construed as an approval by Bertucci's, nor shall bind
         Bertucci's to any inferred charges submitted by Ferraro.


                             5. ORDERING PROCEDURES


5.1      ORDER GUIDE

         Ferraro, with assistance from Bertucci's will prepare a specific Order
         Guide to be used by Bertucci's corporate and operating units for
         placing orders. This guide will be issued and distributed every four
         weeks by Ferraro to arrive at least three (3) days prior to the start
         of the next reporting period. A current sample Order Guide is provided
         as Exhibit VIII. The schedule for Order Guide completion is week 3 of
         each 4 week period as outlined in the Bertucci's Fiscal Calendar
         enclosed herein and attached hereto as Exhibit VII.

 5.2     CUSTOMER SERVICE REPRESENTATIVE

         In the event Bertucci's and Ferraro at any time are not
         linked "electronically" for the purpose of "Electronic Order Entry"
         then, Ferraro shall provide adequate "Customer Service
         Representative(s)" to contact each Bertucci's operating unit between
         7:30 am and 10:30 am, twice a week, for the purpose of obtaining
         orders for products covered under this Agreement, more specifically
         identified on Exhibit "II" attached hereto and made a part hereof this
         agreement.


5.3      ORDER FREQUENCIES

         Orders for products shall be placed twice a week by each Bertucci's
         unit one (1) calendar day before the actual receipt of goods
         corresponding to the contracted delivery schedule. Ferraro shall
         contact at pre-prescribed times each Bertucci's unit, for their
         respective order. Ferraro and Bertucci's will mutually agree on order
         cut-off times and "special order" requests which will be incorporated
         by Addendum to this Agreement. A "checksum" procedure must be
         incorporated in the ordering procedure to insure accurate communication
         of the order from the Bertucci's manager to the Ferraro Customer
         Service Representative. The Bertucci's manager must state the
         checksums, total line items and total units to be ordered, prior to
         commencing the order placement. At the end of the order the Ferraro
         representative will verify the order against these "checksums" for
         accuracy.


5.4       ORDER CONFIRMATION

         In the event of "Electronic Order Entry", immediate Order Confirmation
         via a transmitted unit, "hard copy" in real time, shall be designed
<PAGE>
 
         into the system mutually between Bertucci's and Ferraro.


5.5      ELECTRONIC ORDER ENTRY

         Ferraro will provide at its sole expense, unit level computer
         (Personnel computer type compatible) software to place orders directly
         with Ferraro. Order Entry System shall include as a base minimum
         system, but not limited to the list below:

                  o   Direct Order Entry
                  o   Immediate Order Confirmation at Unit Level
                  o   Suggested Order Levels (established by Bertucci's
                      Management)
                  o   Master Order Template
                  o   Lock-Out Quantity
                  o   Lock-Out of Non-authorized products access 
                  o   Immediate Total Order Cost 
                  o   Immediate Stock Status 
                  o   Corporate level access
                      to Bertucci's data on-line 
                  o   Order/Check summary 
                  o   Year 2000
                      compliant (no later than December, 1998)


5.6      INVOICING REQUIREMENTS

         5.6.1 Ferraro shall provide Bertucci's, two (2) part hard copy delivery
         tickets evidencing the following data in the form acceptable to
         Bertucci's. SAMPLE INVOICE MUST BE INCLUDED IN THE AGREEMENT. Invoices
         must represent the unit order "as placed" and the actual quantity
         shipped.

         5.6.2 Pursuant to the product categories as described herein, under
         Article 2, Ferraro shall categorize the entire invoice, in addition to
         the product recap using these product designators, (provide sample
         invoice, as Exhibit VI).

         5.6.3 In the event Bertucci's and Ferraro operate using "Electronic
         Voucher Matching," the categories described herein shall still be in
         effect for both the delivery tickets and the "Electronic Vouchers."


                      6. PRICING POLICIES AND FORMULATIONS


6.1       DEFINITION OF DISTRIBUTOR COST

         6.1.1 Ferraro's cost shall be defined as manufacturer/packer invoice to
         Ferraro, less manufacturer/packer's promotional allowances plus
         freight, if applicable, for the period of promotion and/or case
         discounts.

         6.1.2 Rebates, volume discounts, master jobber discounts, product
         allowances, and any other incomes not reflected in the product cost on
         the Vendor Invoice shall be subject to guidelines pursuant to Article
         14.

6.2     CALCULATION OF DISTRIBUTOR SELL PRICE
<PAGE>
 
        All "sell" pricing covered under the Term of this Custom
        Distribution Agreement, shall be based on the true landed cost, as
        described above. This agreement is a set formulated Cost Plus
        (mark-up) over the Ferraro landed cost. The "sell" price of each
        product category, under this Agreement shall be determined by the
        formulations as provided herein:

                                                               MARK-UP (%)
                                                              --------------

Cheese                                                             8.5%

Dairy                                                              8.5%

Dry Groceries                                                      8.5%

Meat, Poultry, Seafood                                             8.5%

Paper, Plastics, Disposables                                       8.5%

Beverages                                                          8.5%

Beverages: Syrup                                                   8.5%

Prepared Foods                                                     8.5%

Desserts                                                           8.5%

Cleaning Supplies                                                  8.5%

Smallwares                                                         8.5%

Store Operating Supplies                                           8.5%



                               Overage              Freight             Mark-Up
                               -------              --------            -------
Frozen Shredded Mozzarella      $0.05                $0.015               8.5%


Mozzarella is formula based pricing reflected as a cost per pound over the block
market.


 6.3     FORMULATION

         6.3.1 As part of this Agreement, the formulation basis has been
         provided as indicated, ($) or (%) mark up over base landed cost.

         6.3.2 LANDED COSTS FOR ALL PRODUCTS ARE LISTED ON THE WORKSHEET
         PROVIDED HEREIN, ATTACHED HERETO AS EXHIBIT XI. This cost information
         will verified upon initial delivery of inventory to Ferraro and is
         subject to change in the interim.

         6.3.3 All Bertucci's units shall be charged the same pricing regardless
         of geographic location.
6.4      MARKET SENSITIVE COMMODITIES/CONTRACT PURCHASES
<PAGE>
 
         Contained in the Bertucci's products listing are various items which
         are "Market Sensitive" and "Contracted". These items vary in their
         frequency of procurement and use. Below listed are items which fall in
         one of these categories:

                  LEPRINO MOZZARELLA CHEESE - The weekly sell price to
                  Bertucci's shall be based on the previous Thursday's Block
                  Market close, with pricing implemented on deliveries the
                  following Monday. (i.e. April 6, 1998 Monday pricing is based
                  on the Block Market close of April 2, 1998.)

                  NO ADDITIONAL PRODUCTS HAVE BEEN IDENTIFIED BY FERRARO
                  AS ELIGIBLE "MARKET  SENSITIVE" ITEMS.


6.5      PRICE ADJUSTMENTS

     6.5.1 Price adjustments for the "Contract" purchased inventory shall be as
follows: Mutually, the Bertucci's and the Ferraro buyer will evaluate the on
hand quantities and usage reports to establish a "Run-out" date of the specific
product and/or price concerned in the Ferraro warehouse. Based on a mutually
agreed upon date, and remaining inventories notwithstanding, Ferraro shall
implement pricing to Bertucci's effective on the above referenced date.

     6.5.2 Requests for price adjustments for other than "Market or Contract"
products shall be by notification of at least 30 days in advance by official
correspondence by the Vendor to Bertucci's. This notification allows for
Bertucci's and Ferraro to evaluate the current situation. Ferraro shall respect
"buy in" positions for price protection as directed by Bertucci's and
corresponding to product cycles. Price adjustments other than those prescribed
above shall be prohibited under this Agreement.


                       7. DISTRIBUTOR BUYING AND RECEIVING
                                    SERVICES


7.1      BUYING SERVICES

         7.1.1 Ferraro shall act as "Buying Agent" as/when directed by
         Bertucci's. Ferraro shall perform all functions typical of a
         Distributor/Buying Agent. Bertucci's from time to time may request
         products other than contained herein this Agreement. Those items
         requested by Bertucci's which are not covered under this Agreement,
         Exhibit "II" shall be accompanied by a written requisition approved by
         the Bertucci's buyer.

         7.1.2 Ferraro will provide samples of manufacturers products, as
         requested, for evaluation by Bertucci's.

         7.1.3 Ferraro, as a condition of this agreement, shall purchase, on
         behalf of Bertucci's, the remaining proprietary inventories mutually
         agreed upon by the incumbent distributor and Ferraro.

         7.1.4 The purchase price for these inventories shall be negotiated by
         Bertucci's and the incumbent distributor.
              A.  Bertucci's shall establish the final inventory list.
              B.  Bertucci's shall arrange the transaction date(s)
                  between Ferraro and the current  distributor.
              C.  Ferraro shall arrange to pick-up at Bertucci's current
<PAGE>
 
                  distributor said inventories  and transport to the
                  approved Ferraro warehouse for inventory staging
                  purposes,
              D.  Bertucci's shall bear no costs in the pick-up, transportation
                  and stocking of these products.

         7.1.5 Ferraro shall instruct Bertucci's current distributor as to the
         sequence and palletizing methods it desires (i.e., shrink wrapping,
         etc.). Ferraro shall be obligated to pay Bertucci's current distributor
         net 14 days of invoice pick up date. Ferraro shall merge the Bertucci's
         current distributor inventory, quantities and pricing into the current
         new Ferraro/Bertucci's inventories. The merging of the quantities and
         pricing shall be implemented using the "weighted average" system if
         price is different.


                         8. FERRARO: MANUFACTURER/PACKER
                        VENDOR & BERTUCCI'S RELATIONSHIP


8.1      PAYMENT OBLIGATIONS

         8.1.1 Ferraro, the Manufacturer/Packer(vendor) and Bertucci's are
         independent contractors. Bertucci's shall have no contractual
         obligation to pay vendor(s) directly. Ferraro shall pay all Vendors
         directly within their terms and conditions. There shall be no
         interruption in product flow as a result of credit hold by either
         Ferraro or Vendor.

         8.1.2 Credit hold shall be cause for termination (see Article 17).


8.2       VENDOR LEAD TIME/STOCK LEVELS

         8.2.1 Ferraro and vendor(s) shall communicate to establish acceptable
         stock levels in order to maintain the flow of products that corresponds
         to the replenishment needs of Bertucci's. 

         8.2.2 Ferraro and Vendor shall take into consideration all
         factors affecting products in transit. The guarantee of product
         availability for an "on demand" shipment, pursuant to the acceptable
         Order Completion Benchmark is essential to the success of this
         Proposal. Ferraro shall respect Vendor lead times and maintain a
         proper safety stock level to compensate for potential transportation
         delays due to weather, holidays, etc.


                        9. VERIFICATION/AUDIT PROCEDURES


9.1       PRICING

          9.1.1 Bertucci's shall have the right to verify via audit,
          pricing and product specifications quarterly with a three business day
          written notice. Ferraro shall furnish to Bertucci's, at the Ferraro
          offices, Vendor invoices, freight bills, receiving documents and any
          other supporting documentation pertinent to vendor transactions or as
          requested by the audit team. Discrepancies in favor of Bertucci's
          shall be credited to Bertucci's Corporate account immediately at time
          of discovery.
<PAGE>
 
9.2       FACILITY

          9.2.1 Bertucci's shall have the right during the term of
          this Agreement, to enter the Ferraro warehouses without notice at any
          time, during the normal working hours of Ferraro for the purpose of
          inspecting the inventories, products, facilities and fleet. Facility
          inspection shall be conducted in such a manner as not to interrupt the
          business of Ferraro. A Ferraro representative shall be present at all
          times.

          9.2.2 Ferraro shall maintain its facilities in accordance
          with local, state, and industry standards and codes pursuant to
          Article 18.


                            10. TERMS AND CONDITIONS


10.1     PAYMENT TERMS

         10.1.1 Bertucci's shall remit to Ferraro for all products received in
         good order and invoiced by the Ferraro. Invoices shall be payable via
         Electronic AB routing to the Ferraro bank every 14 days. Payments will
         be executed every Wednesday for all Ferraro invoices from the week
         ended on two Saturdays prior.

         10.1.2 Ferraro must collect and report "all applicable" taxes for each
         state where Bertucci's conducts business. Ferraro must obtain and
         maintain a tax reporting ID number for each of these states as
         required, and submit such evidence to Bertucci's.

         10.1.3 Bertucci's will entertain frequency of payments with appropriate
         cash discounts applicable.


10.2     GUARANTEE

         Non Applicable

10.3     CREDITS

         10.3.1 Credits for the following conditions shall be handled ONLY at
         the time of delivery, by both the Ferraro driver and the Bertucci's
         manager:

              o Shortage on Truck
              o Damaged Product at the Time of Receiving
              o Wrong Product Selected
              o Product Ordered Wrong
              o Concealed Damage

         10.3.2 In the event that any of these occur, the Ferraro driver will
         make the appropriate notation on the delivery invoice ticket, initial
         the changes and require the manager to countersign and date the
         delivery invoice ticket. Ferraro will then be required to make the
         corresponding change at their office. Concurrently Ferraro will
         immediately transmit by hard copy or electronic transfer the exception
         to the invoice for final processing by Bertucci's.
<PAGE>
 
10.4     DEFINITIONS

         10.4.1  SHORTAGE ON TRUCK

                  1.       An item ordered by the Unit but not on the truck
                           at the time of delivery.
                           o  Shorted items shall not be automatically
                              re-shipped.
                           o  Ferraro is obligated to provide next day
                              delivery of all shorted products.

         10.4.2  DAMAGED PRODUCT AT THE TIME OF RECEIVING

              A.  Product damaged prior to loading, in transit, or
                  during the unloading process.
              B.  Acceptance of the product is at the Unit Manager's discretion.

                  o  Damaged items shall not be automatically re-shipped. 

                  o  Ferraro is obligated to replace the product
                     in accordance with the requirements of the Manager on duty.
              C.  Ferraro shall remove or leave the product at the sole
                  discretion of Bertucci's.

         10.4.3  WRONG PRODUCT SELECTED

              A.  Product picked in error instead of the item originally
                  ordered. Acceptance of the incorrect product is at the Unit
                  Manager's discretion.
              B.  If the Unit Manager accepts the incorrect product, it must
                  properly be noted on the Invoice, countersigned by both
                  parties (see Article 10.3.2). 
                  o  Originally ordered items shall
                     not be automatically shipped. 
                  o  Ferraro is obligated to replace the product in
                      accordance with the requirements  of the Manager on
                      duty.

         10.4.4   PRODUCT ORDERED WRONG

              A.  Product improperly ordered by the Unit Manager.
              B.  Acceptance of the incorrect product is at the Unit
                  Manager's discretion.
              C.  If the Unit Manager accepts the incorrect product, it must be
                  properly noted on the Invoice, countersigned by both parties
                  (see Article 10.3.2). 
                  o  Originally ordered items shall not be
                     automatically shipped. 
                  o  Ferraro is obligated to replace the
                     product in accordance with the requirements
                     of the Manager on duty at Bertucci's expense.
               D.  Ferraro shall communicate estimated shipping
                   costs to the Manager for approval  prior to the
                   shipping and record those costs on the Invoice.

         10.4.5    CONCEALED DAMAGE

              A.  Damage not apparent at time of delivery.
<PAGE>
 
              B.  Ferraro shall pick-up for inspection, products that
                  are found with hidden damage or defects with notification by
                  Bertucci's for disposition by the Ferraro.
              C.  Disposition shall not be considered a credit memo.
              D.  After evaluation, Ferraro shall advise Bertucci's of
                  it's decision, and if warranted,  issue a credit memo.
              E.  Bertucci's may appeal all dispositions.
              F.  Credits or pick-ups shall be authorized by Ferraro on
                  products delivered within  the prior five (5) days.
              G.  In the event Bertucci's over orders, then Bertucci's
                  has the right to return a  specified quantity for a
                  re-stocking charge.
                           RE-STOCKING CHARGE          $2.00 PER UNIT


10.5     SUBSTITUTIONS

         10.5.1 Product(s) available that have been approved by Bertucci's
         Corporate are acceptable for substitution if the following condition(s)
         exist:

                  A.  Manufacture/packer defect.
                  B.  Manufacture/packer recall.
                  C.  Unavailability of original product through no
                      fault of Ferraro.

         10.5.2 Ferraro has the obligation to advise the Bertucci's manager of
         the problem either at the time of order or the day of shipment of the
         conditions above if they exist.

         10.5.3 All substitutions must be reported to Bertucci's Corporate prior
         to the order shipping or immediately thereafter.

         10.5.4 Substitutions are subject to a "back order" penalty for the
         purposes of Service Level Tracking.

         10.5.5 The Invoice must show the original product ordered and the item
         substituted.


                             11. REPORTING SERVICES


All reporting shall coincide to Bertucci's Fiscal Calendar reporting periods
provided herein, attached hereto Exhibit VII.

11.1     REPORTING

         Ferraro shall provide Bertucci's the following reports as part of it's
         Information Transmittal obligation under this Agreement. The list below
         represents the information required by Bertucci's. The requirements may
         change from time to time. Bertucci's shall provide input regarding the
         format of all reports.

         11.1.1 PERIOD PRICING, PRODUCT AND INVENTORY GUIDES - Color coordinated
         and dated. Period Pricing Guide will be distributed by Ferraro to the
         units three (3) days prior to the first day of the period or effective
         date of new pricing. In addition Ferraro shall provide as needed the
         period order template for use at the unit level in electronic order
         entry.
<PAGE>
 
         11.1.2 USAGE REPORTS BY BERTUCCI'S UNIT - This report is by period
         providing usage for the previous period. This report is due to
         Bertucci's corporate by the 10th day of the following period.

         11.1.3 USAGE REPORT BY VENDOR - This report is by period providing
         usage for the previous period. This report is due to Bertucci's
         corporate by the 10th day of the following period.

         11.1.4 DESCENDING DOLLAR/PRODUCT REPORT - This report is by period
         providing usage by descending dollar/product. This report is due to
         Bertucci's corporate by the 10th day of the following period.

         11.1.5 FERRARO INVENTORY ON HAND REPORT BY PRODUCT - This report
         encompasses product on hand weekly in the Ferraro warehouse. This
         report shall be submitted by Facsimile to Bertucci's Corporate every
         Friday by 4:00 p.m.

         11.1.6 PRODUCT VELOCITY/CONSUMPTION REPORTS - This report illustrates
         the movement of all Bertucci's products for a given period. This report
         is due to Bertucci's on the 10th day of the following period.

         11.1.7 EXCEPTION REPORTS - As designed and as needed by
         Bertucci's.


                                  12. INSURANCE


12.1     CERTIFICATE OF INSURANCE

         12.1.1 Ferraro shall provide evidence of insurance on a Certificate of
         Insurance form, with companies acceptable to Bertucci's, with the
         following coverage, naming in all cases Bertucci's, Inc., et al. as
         additional insured.

         12.1.2 Comprehensive general liability insurance, including
         automobile/truck liability coverage for owned, non-owned, leased or
         rented to be used in the performance of this Agreement, with minimum
         limits of Two Million Dollars ($2,000,000) combined single limit per
         occurrence. Such liability insurance shall provide Blanket Broad Form
         contractual coverage. Property damage insurance shall include a policy
         endorsement providing an extension of the policy for Broad Form
         Property Damage coverage.

         12.1.3 Workers' compensation insurance in a form prescribed by the laws
         of the Commonwealth of Massachusetts and the states(s) where Ferraro is
         located.


12.2     INDEMNIFICATION

         12.2.1 Ferraro shall indemnify Bertucci's from and against any and all
         claims, suits, judgments, damages, losses and expenses (including
         attorney's fees) of any nature whatsoever arising directly or
         indirectly out of, or resulting, either in whole or in part from this
         Agreement.

     12.3 HOLD HARMLESS AGREEMENT AND
          GUARANTY/WARRANTY OF PRODUCT
<PAGE>
 
         12.3.1 Ferraro shall request from each and every Bertucci's appointed
         or designated vendor and each and every Ferraro vendor doing business
         with Bertucci's currently or contemplated, a Hold Harmless Agreement in
         the form acceptable to Bertucci's, as illustrated on Exhibit "IV"
         attached hereto and made a part hereof, this Agreement. This is a
         prerequisite for all vendors doing business with Bertucci's. Bertucci's
         will not defend Ferraro or vendor against any claim.


                        13. PROPRIETARY/CONTRACT PRODUCT
                                    AGREEMENT


Bertucci's has provided Ferraro with written evidence of existing agreements
with product manufacturers, in which the manufacturers have agreed on prices
they will charge distributors for products to be resold to Bertucci's. The
Vendors are identified in Exhibit "II" attached hereto and made a part hereof,
this Agreement. This list will be updated by the Bertucci's buyer as changes
warrant.


                                14. OTHER INCOME


14.1  REBATES/VOLUME DISCOUNTS/MASTER JOBBER
      DISCOUNTS/BROKERAGE AND ALLOWANCES

         14.1.1 All Vendors which offer rebates/volume discounts/master jobber
         discounts and allowances for Bertucci's products shall pass them
         directly to the benefit of Bertucci's from the Vendor in a manner
         designated by Bertucci's.

         14.1.2 Any product which includes one of the above programs during the
         term of this agreement, involving a product which Bertucci's uses and
         may not have full knowledge of, shall be offered to Bertucci's.


14.2     CASH DISCOUNTS - VENDOR

         14.2.1 Discounts offered by Vendors and successfully achieved by
         Ferraro. 14.2.2 Ferraro shall retain such discounts as long as a cash
         discount is not a "catch-all" for other allowances.


                                   15. RECALLS


In the event of a product recall, for ANY reason, Ferraro shall at it's sole
expense retrieve product from Bertucci's units at no cost to Bertucci's. Ferraro
will notify all Units of the lot codes subject to the recall and convey
instructions regarding the proper disposition of the product. If product should
be required to be returned to the vendor then any expenses incurred shall be
handled between the Vendor and Ferraro. As "recalls" are sometimes critical.
"Time is of the Essence" with regards to this situation.


                                    16. TERM
<PAGE>
 
16.1     TERM OF AGREEMENT

         The term of this Agreement shall be for a period of four (4) years,
         which shall commence on July 15, 1998, hereafter referred to as the
         Commencement Date.

16.2     OPTION PERIOD

         Provided this Agreement is not in default hereunder Bertucci's shall
         have the right to extend this Agreement for an additional two (2) years
         pursuant to the terms and conditions contained herein and in effect at
         the time of option notification. To be effective Bertucci's must by
         evidence of a written notice advise Ferraro of it's intent to option an
         additional two years with a 90 day written notice. Should however
         Ferraro wish not to enter into the option under the same terms and
         conditions then Ferraro shall advise Bertucci's within 10 days of
         receipt of option notice by Bertucci's.


                                 17. TERMINATION


17.1     TERMINATION BY BERTUCCI'S FOR CAUSE

         If Ferraro should become insolvent, file any bankruptcy proceedings,
         make a general assignment for the benefit of creditors, suffer or allow
         appointment of a receiver, refuse, fail or be unable to make prompt
         payment to Vendors, disregard applicable laws, ordinances, governmental
         orders or regulations or the instructions of Bertucci's, or if Ferraro
         should otherwise be guilty of a violation of, or in default under, any
         provision of this Agreement, then Bertucci's may, without prejudice to
         any other right or remedy available to Bertucci's, and after giving
         Ferraro 30 days written notice, terminate this Agreement, take
         possession of any products or materials in which title by virtue of
         valid invoice has been passed to Bertucci's.


                          18. COMPLIANCE WITH INDUSTRY
                                 STANDARDS/LAWS


18.1     SANITATION STANDARDS

         The Ferraro warehouses shall maintain standards acceptable to the
         American Institute of Bakeries with a score of (900+), the National
         Sanitation Foundation, Local Health Departments, any federal, state and
         local inspecting agency having jurisdiction over this type of facility.

18.2     REGULATORY REQUIREMENTS

         Ferraro shall comply with all applicable federal, state and local laws
         and executive order and regulations issued pursuant hereto, including
         without limitation all laws relating to equal employment opportunity.

         All Ferraro vehicles will meet or exceed the requirements of the U.S.
         Department of Transportation and display applicable Road Tax permits on
         Ferraro vehicles as required
         by each state.
<PAGE>
 
                       19. TRADEMARKS AND CONFIDENTIALITY


Ferraro acknowledges that during the term of this agreement information
concerning Bertucci's may be obtained which may include valuable, proprietary
and confidential matter or information relating to trade secrets, recipes,
concepts, formulas, product configurations, designs, specifications,
manufacturing processes, operational processes, equipment, suppliers, customers,
employees, research projects, inventions, engineering, marketing, merchandising,
purchasing, finances, and other information of a valuable and confidential
nature which are owned by Bertucci's and which are the basis for Bertucci's
business ("Confidential Matter") and shall be used by Ferraro only pursuant to
the terms and for purposes of this Agreement. Ferraro shall comply with
reasonably prudent procedures designed to maintain in confidence, safeguard as
Bertucci's property, not use except consistent with this Agreement or in any
other manner agreed to by Bertucci's in writing and prevent disclosure to others
of, Confidential Matter. Ferraro has executed a Disclosee and Confidentiality
Agreement provided by Bertucci's and executed by Ferraro on March 11, 1998,
found on Exhibit "V" attached hereto and made a part hereof this Agreement and
will remain in effect as described in the Disclosee Confidentiality Agreements.


                                   20. NOTICES


Any notice or consent required to be given by or on behalf of either party upon
the other shall be in writing and shall be given by mailing such notice or
consent by prepaid registered mail or certified mail addressed to the other
party at the following address:

         For Bertucci's:            Mr. Edward Buice, Vice-President 
                                      and General Counsel
                                    BERTUCCI'S RESTAURANT CORP.
                                    14 Audubon Road
                                    Wakefield, MA 01880

         For Ferraro:               Mr. Michael Giammarino, President & C.E.O
                                    FERRARO FOODS, INC.
                                    701 Hadley Road
                                    So. Plainfield, NJ 07080


                                 21. ASSIGNMENT


This Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their successors and assigns. Notwithstanding the foregoing,
this Agreement may not be assigned by Ferraro. Bertucci's reserves the right to
assign the Agreement as required.


                                22. MISCELLANEOUS


22.1     TRAINING

         Ferraro shall provide adequate training for all it's personnel effected
         in the event of the acceptance of this Bid. Ferraro shall use all
         available means to insure a transition with minimal problems. This
         training should include but not limited to the following;
<PAGE>
 
                  o   Familiarity of Bertucci's Products
                  o   Warehouse Handling/Receiving of Product
                  o   Driver Routing
                  o   Customer Service
                  o   Purchasing Leadtimes
                  o   MIS Department/Bertucci's Link-up


22.2     NATIONAL ACCOUNT REPRESENTATIVE

         The Ferraro National Account representative responsible for Bertucci's
         shall visit the Bertucci's Corporate office, at 14 Audubon Road,
         Wakefield, Massachusetts no less than once a month or as may be called
         on from time to time to handle situations not easily managed by
         telephone. The representative shall visit five (5) Bertucci's
         locations, at random, per month. (S)he shall also report findings, in
         person, at Bertucci's Corporate once per month.


22.3    ANNUAL HOLIDAY GIFT BOX PROMOTION

         Ferraro shall deliver biannually Bertucci's gift boxes containing
         certificates to each operating unit. Ferraro, shall as part of this
         obligation pick-up at Bertucci's or its assign, deliver as required and
         inventory gift boxes as requested by Bertucci's. Each unit will order
         certificates using a product number assigned to said certificates for
         tracking and order purposes. At completion of promotion The Ferraro
         shall pick-up and re-deliver to Bertucci's all surplus certificates. A
         product control form shall be issued by Bertucci's to manage this
         function. There shall be no cost to Bertucci's as a result of this
         requirement.

22.4     ROLL-OUTS

         Periodically, Bertucci's will engage Ferraro to distribute marketing,
         promotional, and training kits throughout the company. Distribution of
         these kits (referred to as "roll- outs") shall be coordinated by
         Bertucci's Corporate with Ferraro. BERTUCCI'S WILL ACKNOWLEDGE A $1.75
         DRAYAGE CHARGE PER CASE FOR THE DISTRIBUTION OF THESE KITS.

22.5     COMPETITIVE RESTRICTIONS

         Ferraro et al., shall not offer to sell, solicit, engage in
         negotiations or contemplate to enter into any transactions whatsoever
         with Pizzeria Uno, The Italian Oven, or California Pizza Kitchen or its
         subsidiaries and affiliates for the term of this agreement without the
         express written permission of a Bertucci's Corporate Officer.

22.6     INITIAL INVENTORY

         Ferraro, as a condition of this Agreement, shall have all Bertucci's
         inventory as illustrated, in Exhibit II, at the levels designated,
         available for shipment 15 days prior to the commencement date of the
         contract. Specific products which are date sensitive shall be enroute
         during this period. For purposes of this Agreement, this date shall be
         June 30, 1998.

22.7     BEVERAGE PROGRAM
<PAGE>
 
         In the event Bertucci's enters into an Agreement with the Coca Cola
         Company or PepsiCo for the purpose of dispensing their products at
         Bertucci's, then Ferraro shall concurrently enter into a distribution
         agreement with Coca Cola or PepsiCo for stocking and distribution of
         such products to Bertucci's. Vendor allowance paid to Ferraro for
         distribution shall be determined jointly by the Coca Cola Company or
         PepsiCo and Bertucci's.


                                23. PRESS RELEASE


Bertucci's and Ferraro mutually agree to disseminate a press release to the
Industry National Trade Publications concerning the award of this Agreement.
This and any other future press release must be reviewed by Bertucci's prior to
its distribution.


                                24. GOVERNING LAW


The Agreement shall be construed in accordance with and governed by the Laws of
the Commonwealth of Massachusetts.


                              25. ENTIRE AGREEMENT


This Agreement contains the entire understanding between the parties and any
Agreement hereafter made shall be ineffective to change, modify or discharge it
in whole or in part unless such Agreement is in writing and signed by the party
against whom enforcement of the change, modification or discharge is sought.


IN WITNESS WHEREOF, BERTUCCI'S RESTAURANT CORP. AND FERRARO have executed the
Agreement as set forth below, to be effective as of the date first above
written.







WITNESS/ATTEST                                       FERRARO FOODS, INC.


                                                     /S/ Michael GIAMMARINO
                                                     BY: MICHAEL GIAMMARINO

                                                     TITLE:   PRESIDENT & C.E.O

                                                     DATE: May 10, 1998

WITNESS/ATTEST                                       BERTUCCI'S RESTAURANT
                                                      CORP., INC.


                                                     BY:      THEODORE BARBER
<PAGE>
 
                                                     TITLE:   C.O.O

                                                     DATE: May 13, 1998



                          26. EXHIBITS (I THROUGH XIII)





                 (INSERT EXHIBIT XII - CERTIFICATE OF INSURANCE)






                      (INSERT EXHIBIT V1 - SAMPLE INVOICE)