EXHIBIT 10.13
May 13, 2002
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
1. SERVICE AREA
Based on the terms of this letter agreement, U.S. Foodservice, (formerly Alliant
Foodservice, Inc., sometimes "we", "our" or "U.S. Foodservice") offer to sell to
Kona Grill (sometimes "Shortened Customer Name" or "you") unit(s) (sometimes
"locations" or "units") (collectively "customer") products carried by our
distribution center, subject to the availability of product, for the time period
stated in this agreement. This agreement is binding only upon our distribution
center and does not extend to other U.S. Foodservice locations. An expansion of
this agreement to include markets serviced by other U.S. Foodservice
distribution centers will require written approval by U.S. Foodservice.
2. SERVICES TO CUSTOMER
2.1 Order Entry
Customer orders may be placed via the Internet through our on-line electronic
order entry system, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇(TM). This service provides customer with a
customized order/inventory guide, on-line pricing specific to your account,
invoices, account status and multiple product usage and history reports.
2.2 Internet Access Programs
U.S. Foodservice from time to time may have negotiated Internet access
opportunities that may be available to you. For customer locations equipped with
hardware but not currently on the Internet, U.S. Foodservice may offer a
negotiated access cost to the Internet. For customer locations without hardware,
your U.S. Foodservice representative may arrange to present you with current
leasing programs for various equipment packages. These programs are subject to
change at any time.
2.3 Operations Manual
After reviewing local service parameters, customer and U.S. Foodservice will
develop a procedure information booklet for distribution to individual customer
locations. The content will provide customer locations with program operating
guidelines and contacts for local issue resolution.
2.4 U.S. Foodservice Representation
As the scope and complexity of serving your business dictates, U.S. Foodservice
will assign appropriate direct representation to your account. Customer and U.S.
Foodservice will mutually determine the U.S. Foodservice individual(s) selected
to manage the operating relationship.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 2
2.5 Program Administration
U.S. Foodservice's Customer Operations Department offers centralized account
services that span all U.S. Foodservice distribution centers serving your
account. Customer Operations administers contract pricing, deviated cost
programs, reporting, new product set-ups, incentive/allowance tracking and other
services. The Customer Operations Department provides uniform administrative
controls with the ability to execute deviated cost program pricing consistently,
at the same time, for all U.S. Foodservice distribution centers serving your
account.
3. CONDITIONS OF SALE
The average order size per customer unit will be $2,500.00 per delivery. We
recognize that there may be some exceptions which are addressed herein and under
the Section 4. Pricing of this agreement. Both average order size and product
mix (product brand, case value, weight and cube) are key elements in determining
the ▇▇▇▇-ups of this agreement. Therefore, upon thirty (30) days advance notice
to you and your failure to correct the deficiency within such time period, U.S.
Foodservice reserves the right to adjust the terms of this agreement, including
▇▇▇▇-ups, upon prior notice, it there is a significant change in product mix or
a failure to regularly meet the average order size described above. Product mix
changes include, but are not limited to, changes in purchase amounts (as related
to total purchases) of the individual product categories listed under Section
4.2 Product Categories and Schedules, or changes in product brand, average case
value, weight or cube. The above average order parameters are based upon
information which you have provided us.
Products will include U.S. Foodservice exclusive brand, national brand and other
products as specified by customer and stocked by U.S. Foodservice. Unless
otherwise specified, U.S. Foodservice exclusive brand products will be utilized
to insure consistency of quality and to minimize costs.
4. PRICING
4.1 Primary Vendor Relationship
The premise of this agreement assumes that a prime vendor relationship is being
established between U.S. Foodservice and customer to provide and maximize
efficiencies. U.S. Foodservice will provide specific ▇▇▇▇-ups for various
product categories while the customer provides support of the program by
purchasing 85% of their total purchases in each specified product category from
U.S. Foodservice.
4.2 Product Categories and Schedules
Listed below are the product categories and the applicable pricing for products
purchased under this agreement. Bi-weekly and/or monthly pricing cycles are
limited to price stable products. Items with volatile and/or frequent price
changes ("market" products as determined by U.S.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 3
Foodservice) will be priced on a weekly cycle. U.S. Foodservice assigns each
product to an appropriate category.
PRODUCT CATEGORY APPLICABLE SCHEDULE
---------------- -------------------
Frozen Foods 10.0%
Fresh Meat, Seafood, Poultry Market price bid weekly
Refrigerated 9.0%
Dairy 9.0%
Beverage 12.0%
Dry Grocery 9.0%
Paper and Disposables 10.0%
Chemical and Janitorial 12.0%
Stocked Equipment and Supplies 12.0%
Produce TMC, priced weekly
Coke Contract National Contract
TMC - True Market Cost
Sushi grade product will be excluded from this agreement.
4.3 Produce Pricing
Due to the volatile market conditions and increased service and delivery
requirements, produce pricing is not covered by this agreement. Produce may be
offered to you on a market by market basis by the U.S. Foodservice distribution
center(s) serving your account. Where U.S. Foodservice elects to offer produce,
prices to you will be established via price list or oral quotes.
4.4 Performance Surcharge and Incentives
The Conditions of Sale previously stated an average delivery per unit of
$2,500.00. Individual orders under $500.00 will be charged an additional $35.00
to offset delivery inefficiencies. The minimum individual order size will be at
least $500.00; order requests of less than the minimum order size will only be
shipped at the sole discretion of U.S. Foodservice and may (at U.S.
Foodservice's option) include an additional delivery fee.
4.5 Incentive Programs
PROMPT PAY INCENTIVES: Your payment terms are net twenty-one, (21) days. Payment
is to be made electronically. If you select to pay prior to the net due date,
then U.S. Foodservice will pay you an incentive amount based upon the following
schedule:
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 4
NET PAYMENT DAYS INCENTIVE
---------------- ---------
0 - 7 days 0.75%
8 - l4 days 0.50%
15 - 21 days 0.25%
The incentive, which will be paid within thirty, (30) days following the close
of the respective quarterly period, will be calculated by multiplying the
incentive amount by the net invoiced purchases amount during the period. No
invoice deductions will be permitted. The incentive will be paid by credit memo.
This prompt payment incentive excludes all products where sell prices to
customer from U.S. Foodservice have been negotiated by customer with the vendor.
DROP SIZE INCENTIVE: To incent customer to improve our operational efficiency,
customer will be entitled to receive an incentive based upon the following
performance schedule:
DELIVERY SIZE INCENTIVE
------------- ---------
$1,500 - $2,500 0.25%
$2,501 - $3,500 0.35%
$3,501 - $4,500 0.45%
$4,501 - $7,000 0.50%
$7,001 and over 0.75%
The incentive, which will be paid within thirty, (30) days following the close
of the respective quarterly period, will be calculated by multiplying the
incentive amount by the net invoiced purchases amount during the period. The
average delivery size maintained during the respective period will be the basis
for incentive qualifications. Any deviation from customer payment terms will
void and nullify this drop size incentive. The incentive will be paid by credit
memo. This delivery size incentive is limited to those products utilizing a
▇▇▇▇-up schedule stated as a percentage. Excluded from the incentive are
products marked up by a fee per pound or fee per case (or unit of sale), and
products where sell prices to customer from U.S. Foodservice have been
calculated for payment included when establishing delivery size performance.
EXCLUSIVE BRAND INCENTIVE: To incent customer to improve our operational
efficiency you will be entitled to receive a U.S./Alliant Foodservice Exclusive
Brand product penetration incentive on purchases made under this agreement
during the quarterly incentive period per the schedule below.
TOTAL EB PURCHASES INCENTIVE
------------------ ---------
45.0% to 50.0% 0.75%
50.1% and above 1.00%
The incentive, which will be paid within thirty, (30) days following the close
of the respective quarterly period, will be calculated by multiplying the
incentive amount by the net invoiced
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 5
purchases amount during the period. Any deviation from customer payment terms
will void and nullify this labeled products penetration incentive. U.S./Alliant
Exclusive Brand labeled products covered by other special pricing programs
offered to customer by U.S. Foodservice will be excluded from payment under this
incentive. These purchases will, however, be included in the calculation to
determine customer U.S. Foodservice Exclusive Brand purchases as a percentage of
customer total purchases.
4.6 Vendor Terms/Performance Exclusions
When the cost of products has been negotiated directly between you and vendors,
such vendors may attempt to place specific performance parameters upon U.S.
Foodservice. These may include, but are not limited to, payment terms, purchase
quantity minimums, pick-up minimums and reporting requirements. As U.S.
Foodservice must manage its own negotiations with vendors to manage inventories,
warehouse and receiving efficiencies, U.S. Foodservice will not accept such
conditions established by customer specified vendors.
4.7 Operating Cost Adjustments
Certain economic situations may be substantial enough to cause U.S. Foodservice
to adjust the terms of this agreement. These situations include, but are not
limited to, national or regional economic changes such as fuel cost increases,
utilities cost increases or shortages and other significant increases in U.S.
Foodservice's operating expenses. In such event, U.S. Foodservice may raise the
product category schedule(s) in Section 4.2 Product Categories and Schedules,
add a surcharge amount to each delivery invoice or add a surcharge per case of
product. U.S. Foodservice will advise you ten days prior to effecting any such
changes and will review the circumstances with you.
4.8 Product Cost Increases
Regardless of the normal pricing cycle assigned to a product, U.S. Foodservice
reserves the right to immediately adjust selling price of products when
replacement cost increases by two (2%) percent or more. Selling price will be
re-established by applying the applicable ▇▇▇▇-up amount as stated in Section
4.1 Pricing to the increased cost.
4.9 Advanced Distribution Network
To increase product handling efficiencies, U.S. Foodservice has developed the
Advanced Distribution Network ("Network"), a forward warehousing and
distribution system which supports participating U.S. Foodservice distribution
centers. The Network enhances product variety, availability, and freshness while
streamlining purchasing and administration. U.S. Foodservice may, at its option,
place certain products (customer proprietary and other products) into the
Network and may, at its option, add a fee for the services provided.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 6
4.10 Special Order Charge
To compensate for the expense incurred by U.S. Foodservice in fulfilling special
order requests, an additional 10% ▇▇▇▇-up will be added to the applicable
category ▇▇▇▇-up on such items. For purposes of this agreement, special orders
are "in and out" purchases made by U.S. Foodservice for your account of product
not stocked on a continuing basis.
5. LANDED COST DEFINITION
5.1 U.S. Foodservice Exclusive Products
U.S. Foodservice exclusive products include products marketed under trademarks
owned by U.S. Foodservice or its affiliates, including but not limited to
products for which U.S. Foodservice or its affiliates have exclusive marketing
and/or sales authority, property rights in a proprietary product formula, or
have supplied raw materials or packaging for the finished product. Landed Cost
for such products may be based on various national or regional published price
lists, plus inbound freight (where applicable). In the alternative, at U.S.
Foodservice's option, the Landed Cost for U.S. Foodservice exclusive products
may be calculated as set forth in Section 5.2 below "All Other Products".
5.2 All Other Products
Landed Cost for such products shall be invoice cost plus freight (where
applicable) or local market replacement cost, at U.S. Foodservice's option, plus
freight (where applicable). Landed Cost may include a fee for U.S. Foodservice
procurement activities which provide procurement leverage, order consolidation
and administration, product marketing and quality assurance. U.S. Foodservice
may, at its option, select the invoice cost to be used for determining Landed
Cost from among all invoices for product currently available for sale, or from
confirmed purchase orders to be received through the third day of the pricing
cycle for weekly priced items and through the seventh day of the pricing cycle
for monthly priced items. Landed Cost for forward purchases (including forward
warehouse purchases, Network purchases, and consigned products) may include
applicable storage, finance and/or other charges or shall be based on local
market replacement cost at U.S. Foodservice's option. Local market replacement
cost means the cost the individual U.S. Foodservice distribution center would
have been required to pay for the purchase of its normal quantity requirements
of such products. The invoice used to establish Landed Cost will be the invoice
issued by the vendor, U.S. Foodservice's Central Logistical Services department
or by The ▇▇▇▇▇▇▇▇ Corporation, Dot Foods or other pre-distributors.
5.3 Freight
Unless in-bound freight is included in vendor's delivered pricing, freight
charges will be based on market conditions and will not exceed the freight rate
normally payable by the U.S. Foodservice distribution center for inbound
shipments of regular quantity requirements of such products. Freight charges may
include common or contrast carrier charges by the product vendor or a carrier,
and/or charges billed by U.S. Foodservice for its freight management service.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 7
6. PROMOTIONAL ALLOWANCES
Only promotional allowances exclusively negotiated by you or on your behalf will
be passed through to customer. U.S. Foodservice shall be entitled to cash
discounts and other supplier incentives. Because of the competitive nature of
our pricing and other terms of sale, U.S. Foodservice has no additional
marketing monies to fund special customer requests (for example,
customer-sponsored events, donations to customer-directed causes, etc.).
7. DELIVERY PARAMETERS
While our goal is to accommodate customer needs and preferences regarding
delivery days and hours, the pricing of this agreement and/or certain market
transportation conditions may dictate our need to route deliveries for utmost
efficiency. As such, while U.S. Foodservice will review your customer delivery
preference, U.S. Foodservice reserves the option to assign specific delivery
days and/or maintain open delivery windows to your locations. All such delivery
designations shall be reviewed with you prior to the initiation of the program.
8. METHODS
The following methods and practices will be employed in serving your business.
8.1 ▇▇▇▇-ups
All ▇▇▇▇-ups stated as a percentage reflect a percentage on cost. To accommodate
minimum handling expenses, U.S. Foodservice reserves the right to impose a
minimum fee of $1.25 per unit of sale transaction. The minimum fee shall be
increased by $0.05 per unit of sale transaction on each annual anniversary of
this agreement.
8.2 Rounding
To simplify pricing, receiving and inventory valuation, U.S. Foodservice rounds
all prices with calculated ▇▇▇▇▇ fractions to the next highest ▇▇▇▇▇ per unit of
sale.
8.3 Substitutions
All substitutions will be priced in accordance with the applicable category
▇▇▇▇-up.
8.4 Spilt Case Surcharge
To help defray additional handling expenses and increased damage loss
experience, U.S. Foodservice, in its sole discretion, may choose to make
available products sold in units less than manufacturer's standard containers,
and will upcharge an additional $1.75 per unit.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 8
8.5 Restocking Fee
U.S. Foodservice may, at its option, agree to accept product returns from
customers for reasons other than an U.S. Foodservice delivery error. Such
product must be unopened, full case non-perishable product, in good condition
with adequate shelf life remaining to allow for resale. To defray our additional
handling expenses for the return of such products, U.S. Foodservice reserves the
right to charge a restocking fee of fifteen (15%) percent of the selling price.
Customer returns of certain products, including but not limited to, seasonal,
special order, discontinued or promotional products will not be accepted unless
the customer or the vendor of such products agrees to reimburse U.S. Foodservice
for selling price and all other expenses involved.
8.6 Joint Buying Decisions
Forward purchases made with your concurrence will be priced to you as follows:
During the first calendar month the product is in U.S. Foodservice's warehouse,
the price will be Landed Cost plus normal ▇▇▇▇-up. During each additional
calendar month that the product remains in U.S. Foodservice's warehouse, the
price will be increased by an amount not to exceed two (2%) percent of product
cost basis to cover the cost of financing and storage.
8.7 Annual Adjustments
The parties agree that on each anniversary of this agreement for so long as this
agreement remains in effect, each product category ▇▇▇▇-up listed in the product
category pricing schedule above shall be increased by an additional one quarter
of one percent.
8.8 ▇▇▇▇-up/Pricing Limitations
Pricing of products not falling into U.S. Foodservice pre-designated categories
listed in Section 4.2 Product Categories and Schedules is not covered under this
agreement and will be handled under separately established pricing.
8.9 Order Entry Fee
The financial evaluation of this agreement included the efficiencies that your
use of our electronic ordering system, such as U.S. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇(TM),
will provide to U.S. Foodservice.
While a necessary economic component of the agreement, U.S. Foodservice
recognizes that a transition period to begin ordering via U.S.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ may be necessary. Therefore, during the first 90 days of
customer purchasing under this agreement, customer may place orders using the
Customer Service department of the U.S. Foodservice distribution center(s)
assigned to service your account, without any additional charge. After the
initial 90 day purchasing period has elapsed, all orders placed to U.S.
Foodservice by customer outside of the U.S. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ system will be
assessed a charge of $7.50 per invoice.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 9
U.S. Foodservice reserves the right to adjust ▇▇▇▇-ups upon thirty (30) days
notice to you if customer fails to substantially use U.S. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ as
its ordering system.
9. INVENTORY
9.1 Proprietary Products
For the purposes of this agreement, "proprietary products" are products that
U.S. Foodservice has in inventory, in transit or for which non-cancelable orders
have been placed, that have been purchased, transferred or consigned for your
account, including, without limitation, special order products, test products,
menu special products, seasonal products, customer label and non-customer label
products and other products brought into stock especially to service your
account, including requests from customer units.
To effectively service our customers, U.S. Foodservice agrees to stock certain
proprietary products as described above. However, to support the ▇▇▇▇-up
structure and other terms of this agreement, U.S. Foodservice must maximize
warehouse capacity and limit inventory proliferation. Accordingly, we reserve
the right not to stock any special or proprietary inventory which does not meet
our minimum velocity requirement of ten (10) cases per week and twenty-six (26)
turns annually per participating U.S. Foodservice distribution center. We also
request that our customers afford us the opportunity to present alternatives to
customer-requested special and/or proprietary products.
U.S. Foodservice recognizes a customer's need to differentiate, among other
things, in theme, menu and products. While it is U.S. Foodservice's desire to
support all your needs in the product area, the combination of warehouse
capacity restraints, freight scheduling, receiving dock congestion and other
issues, require us to charge the following for proprietary products carried for
your account.
PROPRIETARY PRODUCT TABLE
# Of Products Amount of Up-Charge
------------- -------------------
1 through 20 2%
21 through 40 4%
41 through 50 6%
Customer requests for handling of more than 50 proprietary products and
applicable charges must be agreed upon between the parties in writing.
Up-charges reflect an increase over applicable category ▇▇▇▇-ups stated a
percentages. The up-charge on fee charged products shall equal two (2%) percent
of the applicable product selling price.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 10
9.2 Product Disposition Upon Agreement Termination
Upon termination of this agreement for any reason, you agree to purchase, or
cause a third party to purchase, at full selling price, including the applicable
category ▇▇▇▇-up and any additional surcharges incurred by U.S. Foodservice, all
products that U.S. Foodservice has in inventory, in transit, or for which
non-cancelable orders have been placed, that have been purchased, transferred or
consigned at customer's request, or otherwise for your account, including but
not limited to customer-labeled or other proprietary products. The pick up of
these products, either by you or a third party (acceptable to U.S. Foodservice)
at your direction, shall be within seven (7) days of termination date for all
frozen and refrigerated products and within ten (10) days of termination date
for all other products.
You assume responsibility for full payment to U.S. Foodservice for all such
products. Such payment will be received by U.S. Foodservice within twenty-one
(21) days of agreement termination. U.S. Foodservice may, at its option, elect
to subtract payment from credits or allowance payments due to customer from U.S.
Foodservice.
In the event that the above defined product is not removed from U.S. Foodservice
within the prescribed time frames, you understand and accept that U.S.
Foodservice will dispose such products and you will be responsible for the full
payment of such product as stated above.
9.3 Obsolete and Slow Moving Products
As your proprietary products become "obsolete products" as defined below, you
agree to either purchase such products directly, cause a third party to purchase
such products or advise us how to dispose of such products. In any event, U.S.
Foodservice will be entitled to the full price, including the applicable
category ▇▇▇▇-up, which we would otherwise be entitled to under this agreement.
"Obsolete products" shall mean those proprietary products that are test
products, products beyond code date (unusable due to shortness of code date),
products no longer used by you at a location (including limited time offers or
seasonal promotions) or which otherwise have sales velocity of less than our
minimum velocity requirement, within an individual U.S. Foodservice distribution
center, set forth in Section 9.1 Proprietary Products.
U.S. Foodservice will advise you when product(s) has been classified as obsolete
or slow moving and will provide you with a thirty, (30), day period to remove
such product from U.S. Foodservice. If customer has not relieved U.S.
Foodservice of such product within thirty (30) days of notice, U.S. Foodservice
may dispose of the product. Certain products such as out of code product or
spoiled product may be disposed of by U.S. Foodservice within three, (3) days of
notice to you.
Payment to U.S. Foodservice for obsolete products shall be made within seven (7)
days of U.S. Foodservice notifying you that a product has been classified as
obsolete and may, at U.S. Foodservice's option, be subtracted from any credits
or allowance payments due to customer.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 11
10. CUSTOMER-SPECIFIED VENDORS
If you specify a particular vendor for your account which is not currently
authorized by U.S. Foodservice, then such vendor will be required to complete
our standard vendor documentation before purchases can be made by U.S.
Foodservice for resale to your unit(s). Vendor documentation includes, but is
not limited to, statement(s) of indemnification, insurance coverage and
applicable pure food guarantees.
11. PRICE SUBSTANTIATION - RIGHT TO AUDIT
Upon reasonable notice and during regular business hours, but no more frequently
than once every six (6) months, you may examine documentation to support pricing
of products sold to customer pursuant to this agreement; provided, however, that
any such audit shall be limited to no more than twenty-five (25) items with one
price point verification per item. If such documentation is not available at the
distribution center office, U.S. Foodservice's computer generated reports will
be made available to you at the distribution center office or the audit may be
conducted at our processing center or national headquarters facility, at U.S.
Foodservice's option. The invoice date to be audited shall be limited to fall
within the thirteen (13) weeks immediately preceding such audit. The price list
for U.S. Foodservice exclusive brands, where applicable, will be made available
to you to verify the contract cost of such products.
12. PAYMENT
12.1 Payment Terms
Terms are net twenty-one (21) days, measured from invoice delivery date to date
of our receipt of payment. U.S. Foodservice reserves the right at any time to
adjust the payment terms or take any other appropriate action regarding payment
or terms, including discontinuation of service, as it deems appropriate in its
reasonable judgment, following notice to you if such notice is practical under
the circumstances. You agree to reimburse U.S. Foodservice for all costs and
expenses (including reasonable attorney's fees) incurred in enforcing its right
to payment hereunder.
12.2 Financial Statements
We reserve the right to require the annual or more frequent submission of
audited or other financial statements, including a statement of cash flow, in
order to ensure continuing confirmation of the approved payment terms.
12.3 Late Payment Charges
If invoices are not paid within the specified terms of this agreement, a service
charge will be assessed up to 1 1/2 % per month or the maximum amount allowable
by law, whichever is greater. Unpaid balances and finance charges due to U.S.
Foodservice may, at U.S. Foodservice's option, be deducted from any credits or
allowances due to customer.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 12
13. INDEMNIFICATION AGAINST FRANCHISEES
If you are a franchiser and permit distribution under this agreement to your
franchisees, and if you for any reason direct U.S. Foodservice to cease
distribution or sales of product carrying trademarks or trade dress owned by you
to one or more of your franchisees, you will defend, indemnify and hold harmless
U.S. Foodservice from and against any and all losses, damages or claims by any
terminated franchisees that may arise from: (i) U.S. Foodservice ceasing further
sales to such franchisees under this agreement; or (ii) any other action or
inaction taken by U.S. Foodservice at the direction of customer or otherwise
related to the franchise relationship.
14. TERM
This agreement shall be effective as of June 1, 2002 and continue until either
party elects to terminate, which shall require thirty (30) days prior written
notice to the other party. This agreement is non-binding upon U.S. Foodservice
until customer supplies U.S. Foodservice with a completed new account
application, and until requested financial statements and credit terms listed
under Section 12.1 Payment Terms are approved by U.S. Foodservice. Certain
circumstances, such as tardiness in payment, are grounds for immediate
termination. U.S. Foodservice may discontinue service to one or more of the
customer's locations and may terminate this agreement if an overdue payment is
not received immediately upon notification. Either party may request changes to
this agreement by giving thirty (30) days prior written notice of such request
to the other party.
15. DEVIATED COST PROGRAMS
15.1 U.S. Foodservice and Vendor Obligations
U.S. Foodservice agrees to maintain deviated costing programs in its contract
pricing system when deviated cost(s) has been negotiated directly between you
and vendors. U.S. Foodservice will only maintain those deviated cost programs
documented by the vendor and communicated to U.S. Foodservice via notice on
vendor letterhead, via electronic file, or by completion of an U.S. Foodservice
"Deviated Cost Program" form. The communication shall, at a minimum, contain:
- Adequate lead time of ten (10) working days
- Program start/end dates
- Information pertaining to deviated cost type (delivered to distributor,
allowance, f.o.b. origin)
- Information on specific products covered, including manufacturer product
code
- Signature of vendor representative authorized to offer program
- Vendor contact.
U.S. Foodservice may impose a charge upon vendors providing deviated costing in
part to help defray additional administrative, systems, financing and other
costs incurred by U.S. Foodservice in handling products subject to cost
deviations.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 13
15.2 U.S. Foodservice Limitations
U.S. Foodservice will not be responsible for collection, payment or any
reimbursement of monies due to customer as a result of vendors supplying
inadequate information, communication received after program start date,
predated or retroactive programs. As U.S. Foodservice acts as an administrator
regarding negotiated deviated cost programs negotiated by you, U.S. Foodservice
will not be held liable for any vendor omissions or errors in maintaining the
programs and all such related recoveries shall be from the involved vendor. Upon
reaching the stated end date of a deviated costing program, based on the vendor
documentation described above, U.S. Foodservice's pricing to the customer will
revert to the regular pricing as described in Sections 4.2 Product Categories
and Schedules and 5. Landed Cost Definition. The vendor will be responsible for
supplying updates/extensions on existing programs based on the description and
timing as stated above.
15.3 Deviated Cost ▇▇▇▇-up Calculations
U.S. Foodservice reserves the right to calculate ▇▇▇▇-up based upon its Landed
Cost basis prior to any customer-specific rebates or discounts. The ▇▇▇▇-up will
then be applied to the deviated cost to establish selling price.
16. REPORTS/ORDER GUIDES
16.1 Standard Reports
Various reports are available through U.S. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇(TM). Upon
request, the following reporting will be provided:
1. Customized Order/Inventory Guides. One copy will be furnished to each
purchasing location.
2. Monthly or Quarterly Standardized Usage Report. One copy will be furnished
to the location of your choice.
16.2 Exclusivity of Reports
As this agreement was structured with consideration only to the reports listed
in this Section, U.S. Foodservice will determine, in its sole discretion,
whether it will provide any additional reporting requested by customer
(considering the expense involved as well as available resources). The cost to
develop additional reporting will be presented for your approval and payment.
Should reporting be supplied (at the sole option of U.S. Foodservice) to a third
party at customer's request, all reporting costs, including format development
and ongoing support, will be borne by the customer or by the third party.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 14
17. SUBSIDIARIES
This agreement expressly excludes products shipped directly from City Meats and
Provisions Company Inc., a subsidiary of U.S. Foodservice Inc. and any other
subsidiaries or affiliates of U.S. Foodservice which are manufacturers,
fabricators or processors (collectively, "manufacturing entities"). In the event
customer wishes to purchase products from manufacturing entities, those
products' costs shall be determined by the manufacturing entities. A
distribution fee, if applicable, may be added to the price established by the
manufacturing entities.
18. FORCE MAJEURE
Either party hereto shall be relieved of its obligations under this agreement
for so long as such party is prevented from fulfilling its obligations by causes
outside its reasonable control, including but not limit to casualty, labor
strikes and serious adverse weather conditions. This provision shall not be
interpreted to relieve either party of its obligations to make any payments due
hereunder.
19. MISCELLANEOUS
You agree that you will not assign this agreement, in whole or in part, or
otherwise extend the benefits of this agreement to any third party, without our
prior written consent. At U.S. Foodservice's option, the provisions of this
agreement shall not apply to any unit(s) following the transfer or sale of such
unit(s). This agreement constitutes and contains the entire agreement of the
parties and cancels and supersedes any and all prior negotiations,
correspondence and agreements (excluding U.S. Foodservice credit applications),
whether oral or written, between you and U.S. Foodservice respecting the subject
matter hereof. This agreement may only be modified in writing signed by the
parties. No waiver of any provision of this agreement shall be effective unless
it is expressly set forth in writing and then only for that occurrence. The
remedies provided in this agreement are cumulative, and shall not affect any
other remedies at law or in equity. The exercise of any right or remedy herein
shall be without prejudice to the right to exercise any other right or remedy
provided herein, by law or in equity. In no event shall U.S. Foodservice be
responsible for consequential damages, lost profits or punitive damages. If any
term or provision of this agreement is held to be invalid, illegal or
unenforceable by a court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect, impair or invalidate any other term or
provision herein, and such remaining terms and provisions shall remain in full
force an effect.
20. NOTICES
Any written notice called for in this agreement may be given by personal
delivery, first class mail, overnight delivery service or facsimile
transmission. Notices given by personal delivery will be effective on delivery;
by overnight services on the next business day, by first class mail three
business days after mailing; and by facsimile when transmission is complete. The
address of each party is set forth below.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director of Operations
Kona Grill
May 13, 2002
Page 15
21. GOVERNING LAW
This agreement shall be governed by, and interpreted in accordance with the laws
of the State of Arizona, except any such law mandating the application of the
law(s) of a different jurisdiction. The federal and/or state courts of Illinois
shall have personal and subject matter jurisdiction over, and the parties each
hereby submit to the venue of such courts with respect to, any disputes arising
out of this agreement and all objections to such jurisdiction and venue are
hereby waived. Each party consents to service of process permitted under
Illinois law or by certified mail, return receipt requested. The provisions of
this Section 21 shall survive the expiration or termination of this agreement.
If this offer is acceptable to you, please sign both copies of this agreement
retain one original for your files and return the other original to us.
Sincerely, Accepted by:
U.S. FOODSERVICE, (formerly Alliant KONA GRILL
Foodservice, Inc.)
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Signature
Arizona Division President
Director of Operations
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Title
5-29-02 5-29-02
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Date Date
