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