Primary Distribution Agreement - Maines Paper & Food Service INc. and NE Restaurant Co. Inc.
PRIMARY DISTRIBUTION AGREEMENT
Primary Distribution Agreement dated May 13, 1999, between MAINES PAPER & FOOD
SERVICE, INC. (MAINES), and NE RESTAURANT COMPANY, INC. (NERCO).
BACKGROUND
A. Maines performs purchasing, warehousing, product research &
development, transportation and distribution services for foodservice
customers.
B. NERCO currently operates the establishments listed in Exhibit "A" (all
such establishments operated by NERCO, and open for business are
collectively referred to herein as the "Customer Locations").
C. NERCO desires to contract with Maines as its primary distributor for
foodservice products to all of its Customer Locations and Maines
desires to perform these services.
In consideration of the mutual obligations set forth below, the parties agree
as follows:
1. APPOINTMENT OF DISTRIBUTOR
NERCO appoints Maines to serve as its primary distributor to NERCO's
locations for foodservice products within the product categories described in
Article 2 ("Products"). The service benefits for this program are
automatically extended to any other NERCO System Restaurant Concept(s) that
are developed in the future, provided all parameters and requirements of the
agreement are met. Mark-up schedules however, will need to be discussed and
mutually agreed upon in advance for these new concepts.
2. PRODUCTS COVERED BY THIS AGREEMENT
Bertucci's Brick Oven Pizzeria Chili's Grill & Bar/On the Border
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Cheese, including frozen mozzarella Cheese
Dairy Dairy
Dry Groceries Dry Groceries
Refrigerated Refrigerated
Meat, Poultry, Seafood Meat, Poultry, Seafood
Paper, Plastic & Disposables Paper, Plastic & Disposables
Beverages, including Coke Syrups Beverages, including Coke Syrups
Prepared Foods Prepared Foods
Desserts Desserts
Chemical & Cleaning Supplies Chemical & Cleaning Supplies
Store Operating Supplies Store Operating Supplies
Economics Laboratories Economics Laboratories
Equipment & Smallwares Equipment & Smallwares
Produce Produce
Products will include Maines Brand, National Brand, and other products
as specified by NERCO and stocked by Maines.
All products in any of the product categories specified in Section 2
will be priced using the mark-up schedule set forth in Exhibits "B" & "C" for
that product category.
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2.1 SALE AND DISTRIBUTION OF PRODUCE FOR BERTUCCI'S LOCATIONS -
Maines will begin the distribution of produce provided Maines
meets quality and distribution standards for all Bertucci's
locations within Maines primary distribution territory
(excludes Atlanta/Chicago locations), within thirty days of
the execution of this agreement.
3. SERVICE OBLIGATIONS OF MAINES
3.1 ACCOUNT EXECUTIVE - Maines will assign a dedicated Account
Executive and Customer Service Representatives to service
NERCO accounts. The Account Executive and the Customer Service
Representatives will maintain contact with NERCO Corporate
offices on a monthly basis to review service requirements.
3.2 POLICIES AND PROCEDURES - A policies and procedures guide will
be provided by Maines to all Customer Locations, as mutually
agreed upon. Reasonable notice will be given to Customer
Locations when policies and procedures are changed by Maines.
Credits, pick-ups, re-stocking charges, and other requests for
service will be initiated by location personnel according to
the guide. The mutually agreed upon guide will become part of
this agreement when executed by both parties.
3.3 DAMAGES, SHORTAGES AND ERRORS ON DELIVERY - Any damage,
shortage, or error shall be noted on the invoice and signed by
Customer Location receiving personnel. Credit for damages,
shorts, or errors will be noted by Maines delivery personnel
and will be final. All reasonable efforts will be expended in
determining the root cause of the damage, shortage, or error.
If the error is determined to be that of Maines, Maines will
be responsible for the cost of replenishing that product to
the respective location as soon as the next delivery is
scheduled. If the situation is determined to be the error of
NERCO personnel, NERCO will be responsible for replenishing
that product at their cost, with authorization at NERCO
Corporate if delivery cost exceeds $150.00. For purchases that
are returned for credit that are determined to be the result
of a Customer Location's excessive ordering or other ordering
errors, a 15% re-stocking fee will be assessed with advanced
notice to NERCO Corporate.
3.4 SHIPMENT OF PRODUCTS NOT APPROVED BY NERCO - Any products not
approved at NERCO Corporate Offices cannot be sold to the
individual Customer Locations by Maines.
3.5 PROPRIETARY PRODUCTS - Maines will not sell or deliver any
NERCO proprietary products to any location not approved by
NERCO Corporate.
3.6 MAINES CURRENT VENDOR BASE - NERCO agrees to review Maines
current vendor base for future product needs or product
changes where possible.
3.7 INVENTORY - Maines will inventory and deliver NERCO items as
requested. Inventory of these items shall not exceed five
weeks on-hand inventory, which will be regulated by Maines
based on supplied or actual usage figures. In the event the
level exceeds this period, NERCO will be notified. If any
product requested by NERCO results in greater than four weeks
on-hand inventory a definitive action plan will be provided to
Maines from NERCO's Corporate Purchasing Management. The
written plan will detail the actions that will be taken to
lower the level to a maximum of four weeks supply within
twenty-one days of notification. For inventory that remains
on-hand thirty days after notification, Maines will charge
NERCO the current fair market storage fee then in effect.
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4. DELIVERY OBLIGATIONS OF MAINES
4.1 NO SKIP DAY DELIVERIES - There will be no skip day deliveries
for any Chili's or On the Border locations, with the exception
of: West Lebanon, NH, and S. Portland, ME. All skip day
deliveries for the Bertucci's locations in New England will be
eliminated by December 15, 1999.
4.2 Maines will establish a delivery schedule acceptable to NERCO
for each Customer Location and will use reasonable good faith
efforts to make on time deliveries. Mutually agreed windows
for non-key drop locations will be 6:30 am until 11:00 am and
2:00 pm until 5:00 pm. Deliveries must be completed, and
delivery equipment off premises by close of window.
4.3 TWO DELIVERIES PER WEEK - Each Customer Location will be
serviced by Maines with two deliveries per week utilizing one
Maines driver. The exception to this delivery schedule are the
Bertucci's locations in the Chicago and Atlanta Markets. These
units will receive one delivery per week. The Chicago and
Atlanta trucks will also have a delivery surcharge of three
thousand six hundred seventy eight dollars ($3,678) per
trailer per week.
4.4 DELIVERY SCHEDULE CHANGES - Maines reserves the right to make
changes to existing or proposed delivery schedules by
providing fourteen days notice to the appropriate NERCO
Corporate Personnel, the affected NERCO Regional Managers and
the affected Customer Location Managers. All such changes must
keep to the provisions outlined in Section 4.1 of this
Agreement and must be acceptable to NERCO.
5. INFORMATION SYSTEMS TECHNOLOGY OBLIGATIONS OF MAINES
5.1 FOR CHILI'S AND ON THE BORDER
a. Upon Maines review and approval of NERCO's lease agreement with
Alliant of 40 computers and associated peripherals, Maines
shall buy-out the remaining lease. As of March 1, 1999 Maines
is told that amount is $71,548. At the time of start-up (May
17, 1999), this amount is expected to be reduced. Maines will
then accrue one-half (1/2) of this final amount from NERCO by
offsetting the expense against the 0.5% discount for off-day
deliveries, as outlined in Section 6.4. The cost of this lease
buy-out will be amortized over a five-year period based on a
straight line method. In the event this agreement is terminated
before this period, the remaining balance will be due from each
restaurant will be paid Maines within 30 days of termination of
this agreement.
b. Maines agrees to have the REMACS interface testing in place for
Chili's and On the Border by August 1, 1999.
c. Maines agrees to have the REMACS interface system complete and
usable for all Chili's and On the Border locations by September
1, 1999.
d. Maines agrees to provide the funding for PC hardware for any
new Chili's and On the Border locations. Each window-based
pentium PC will include the following configuration:
- Pentium 300 MHZ or above processor
- 32 Meg of Ram Memory
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- 2.5 Gig of Hard Drive or larger
- 56 BPS Modem
The cost of this hardware will be amortized over a
five year period based on a straight line method. In the event
this agreement is terminated before this period, the remaining
balance due from each restaurant will be paid to Maines within
thirty (30) days of termination of this agreement.
e. Any Y2K upgrades for existing Chili's or On the Border units
will be the responsibility of NERCO.
f. Maines will pay for the actual per unit cost for items 5.1,
a-d, which is not to exceed $1,500.00.
g. Maines agrees to provide periodic reporting of Chili's data to
NERCO in the same format and frequency as the current
Bertucci's reporting.
h. All PC maintenance and repair costs will be the responsibility
of NERCO. i. All REMACs (help desk) support and maintenance
costs will be the responsibility of NERCO.
5.2 FOR BERTUCCI'S BRICK OVEN PIZZERIA'S
a. Maines will provide funding for the purchase of DOS REMACS
software for all existing Bertucci's units. Because Maines can
not own the REMACS software, NERCO must be the licensee of
record. Maines will therefore prepare a five (5) year
amortization schedule based on a straight-line method. In the
event this agreement is terminated before this period, any
remaining balance will be paid to Maines by NERCO within thirty
(30) days of termination.
b. Maines agrees to purchase minimum configuration upgrades for
existing PC's at the Bertucci's locations. The cost of these
upgrades will be amortized over a five (5) year period using a
straight line method. In the event this agreement is terminated
before this period, the remaining balance due from each
restaurant will be paid to Maines within thirty (30) days of
termination of this agreement.
c. Maines agrees to provide electronic order entry integrated with
REMACS.
d. Maines agrees to provide electronic price changes to NERCO
Corporate in usable file format for REMACS.
e. Maines and NERCO Corporate IS Management will jointly provide
systems training for Bertucci's unit location managers.
f. Maines will pay for the actual per unit cost for items 5.2 a-e,
which is not to exceed $1,500.
g. Systems testing to be completed by August 1, 1999.
h. Ten units in production by October 1, 1999.
i. All units in production by December 31, 1999.
j. Maines agrees to provide funding for REMACS software for any
new Bertucci's locations with the same provisions as are stated
in item 5.2a.
k. All REMACs (help desk) support and maintenance costs will be
the responsibility of NERCO.
6. PRICING
6.1 DEFINITION OF COST - The price to NERCO for all products sold under
this agreement (the
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"Sell Price") will be calculated on the basis of Cost. "Cost" is
defined as the invoice cost to Maines plus applicable freight. The
invoice used to determine cost will be the invoice issued to Maines by
the vendor. Cost is not reduced by cash discounts for prompt payment
or earned performance allowances available to Maines.
APPLICABLE FREIGHT - In those cases where the invoice cost to
Maines is not a delivered cost, applicable freight charges will be
added to invoice cost. Freight charges may include common or contract
carrier charges by the product vendor or by Maines fleet back-haul,
or by charges billed by third party carriers. Applicable freight for
any product will not exceed the rate charged by nationally recognized
carriers operating in the same market for the same type of freight
service. Earned back-haul efficiencies are retained by Maines and do
not reduce product cost.
6.2. L.I.F.O ACCOUNTING PRINCIPLES - Pricing to NERCO will be based upon
L.I.F.O. Accounting Principles. Pricing for mutually agreed upon market
sensitive items (primarily commodities) will be effective Friday of
each week. Pricing for all other products to NERCO will be set the
first calendar day of each month.
6.3. CALCULATION OF SELL PRICE - The Sell Price for each product sold under
this agreement as provided in Section 2 will equal the Cost of such
product plus applicable freight plus the percentage mark-up as
specified in Exhibits "B" & "C" (pricing schedules).
6.4. DISCOUNT FOR "OFF-DAY DELIVERY - For Chili's and On the Border
locations only, Maines will offer NERCO a 0.5% discount for one
"off-day delivery" per week, per location. An "off-day delivery" is
defined by Maines as a delivery day when there is excess delivery
equipment and/or delivery personnel available for routing deliveries to
NERCO's Chili's and On the Border locations. Maines will establish this
"off-day delivery" information per location and provide it to NERCO
before start up. This 0.5% discount on the one "off-day delivery" per
week will be calculated and accrued by Maines and used as defined in
Section 5.1a to off-set costs incurred by Maines. After the expense is
recovered in Section 5.1a, then this credit will be issued quarterly to
NERCO Corporate Offices. The second "non" off-day delivery is not
eligible for this discount. Maines reserves the right to make changes
to this schedule periodically by providing fourteen days notice to
NERCO Corporate Personnel.
6.5. SUBSTITUTIONS - Should a substitution be necessary and approved by
NERCO, Maines will ship a comparable product at a sell price calculated
using the same percentage of mark-up as on the original product.
6.6. TERMINATION OF AGREEMENT - If Maines and NERCO cease doing business for
any reason, NERCO will purchase, or cause a third party to purchase all
remaining proprietary, special order, and dedicated inventory items in
Maines inventory at Maines cost plus a reasonable transfer and ware
house handling charge. In such an event NERCO will purchase or cause to
be purchased and transferred all perishables within five (5) days of
termination of this agreement and all frozen and dry items within
fifteen days of the termination of this agreement. NERCO further agrees
to pay interest and storage fees in effect at the time of termination
on any or all product(s) not purchased and transferred by the time line
set forth herein. In the event the successor distributor fails to make
payments to Maines within thirty days of transfer of products, NERCO
shall, upon demand, immediately make such payment.
6.7. HOLD HARMLESS AGREEMENT - Maines policy is that all suppliers provide
indemnity agreements and insurance coverage for products purchased by
Maines. In order to protect
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Maines when it stocks propriety/special order items at NERCO's request
and the vendor of such items will not provide an indemnity, NERCO will
defend, indemnify, and hold harmless Maines and its employees, and
officers from all actions, claims and proceedings, and any judgments,
damages and expenses resulting in the delivery, sale, re-sale, use or
consumption of any NERCO proprietary/special order item.
6.8. ADJUSTMENT IN MARGINS FOR UNANTICIPATED PROBLEMS - If the operating
costs of Maines are increased as a direct result of a significant
regional or national economic problem, including but not limited to:
fuel cost increases, and power shortages, Maines may, with the prior
consent and agreement of NERCO, increase the mark-up schedule specified
in Exhibits "B" & "C" to compensate for such increased costs during the
period such increases are experienced. Both parties must agree to any
and all changes.
6.9. VENDOR/NERCO AGREEMENTS - NERCO will provide Maines with written
evidence of existence of agreements with products manufacturers in
which the manufacturers have agreed on prices they will charge Maines
for products to be resold to NERCO. NERCO must notify Maines in writing
of the existence of any additional agreements of this sort. Maines will
not be responsible for the failure to purchase under such additional
agreements in the absence of written notice from NERCO of the existence
of such agreements.
6.10. PAYMENT TERMS - Payment terms will be net fourteen days for all NERCO
locations. Payment will be remitted each Wednesday via ACH Transfer for
invoices according to a fourteen day term schedule. Attached as Exhibit
"D" is a twelve month calendar of invoice weeks and due dates (Example:
Sunday 1st to Saturday 7th, Sunday 8th to Saturday 15th. Payment for
1st - 7th will be remitted by ACH transfer on Wednesday the 18th).
7. PRICE VERIFICATION
NERCO throughout the term of this agreement, will be allowed audit
privileges which will include up to 25 items maximum and can be reviewed
thirteen weeks back with fifteen days written notice to Maines.
8. TERM OF AGREEMENT
The term of this agreement will begin on the first day of deliveries
(May 17, 1999) and continue for five years (sixty months). Unless terminated
earlier as follows:
a. Either party may cancel pursuant to breech of this agreement after sixty day
advance written notice to correct issues, if said issues remain unresolved.
b. Maines may terminate at any time, following thirty day prior written notice,
for non-payment by NERCO of its payment obligations.
c. Due to capital Investments made by Maines in the equipment necessary to
deliver to the Bertucci's locations in the Atlanta/Chicago markets, NERCO
will honor a one-year term from the date of first delivery to the
Atlanta/Chicago Bertucci's units. If NERCO decides to terminate the
deliveries by Maines to the Bertucci's units in Atlanta and Chicago after
the initial twelve months of deliveries, sixty days notice of termination
will be provided by NERCO. If the distribution agreement is terminated in
accordance with the terms stated in Section 8 prior to the completion of the
first twelve months of deliveries to the Atlanta/Chicago locations, NERCO
will remit to Maines a flat rate of $25,000 per month for the period between
the date of termination and the twelve month period from the first delivery
date. NERCO may periodically review delivery charges.
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d. Upon such termination as described in 8, a-c, NERCO agrees to pay its
obligations under this agreement and to pay all outstanding invoices within
fourteen days from the date of the last shipment to each location.
In witness whereof: the parties have hereto caused this agreement to be
executed, delivered, and signed as if under this 13th day of May, 1999 by
themselves or their duty authorized agent or representatives.
As evidence of this agreement:
Signed: /s/ David J. Maines Date: 5/14/1999
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David J. Maines
Title: Executive Vice President
Company: Maines Paper & Food Services, Inc.
Witness: /s/ Amy B. Legg Date: 5/14/1999
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Title: Administrative Assistant
Company:
Signed: /s/ Paul Joseph Seidman Date: 5/13/1999
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Paul Joseph Seidman
Title: Vice President
Company: NE Restaurant Company, Inc.
Witness: /s/ Kathleen M. Gee Date: 5/13/1999
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Title: Executive Assistant
to the President
Company: