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EXHIBIT 10.39
Final
LETTER AMENDMENT AGREEMENT
Letter Amendment Agreement entered into as of January 11, 1999 to that
certain Distribution Agreement between Ben & Jerry's Homemade, Inc., a Vermont
corporation headquartered at 30 Community Drive, South Burlington, Vermont 05403
(the "Manufacturer") and Dreyer's Grand Ice Cream, Inc., a California
corporation located at 5929 College Avenue, Oakland, California 94618 and
certain of its subsidiaries (collectively, the "Distributor") dated as of
January 6, 1987 and as amended from time to time prior to the date hereof (such
Agreement as in effect immediately prior to this Letter Amendment Agreement
being sometimes referred to as the "Prior Agreement").
WHEREAS, the parties have agreed on certain amendments to the Prior
Agreement contained below, which shall be applicable to the distribution of the
Manufacturer's Products by Distributor during the period September 1, 1998
through August 31, 1999 (said period sometimes being referred to as the "Interim
Period");
WHEREAS, the parties have agreed that the Prior Agreement as further
amended hereby (the Prior Agreement as so further amended hereby being sometimes
referred to as the "Old Agreement") shall automatically expire, without any
further notice or actions, at the close of business on August 31, 1999 as more
fully set forth herein;
WHEREAS, the parties have simultaneously entered into a new distribution
agreement of even date (the "New Distribution Agreement") providing for the
purchase, commencing September 1, 1999, by Distributor of products of the
Manufacturer for resale and distribution in the territory specified in said New
Distribution Agreement (a copy of which is attached hereto); and
WHEREAS, the parties have simultaneously terminated, by stipulation of
dismissal, with prejudice, the litigation entitled Dreyer's Grand Ice Cream,
Inc. and Edy's Grand Ice Cream vs. Ben & Jerry's Homemade, Inc. pending in the
United States District Court for the northern District of California.
NOW THEREFORE, in consideration of these premises and the mutual
promises of the parties and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties agree as follows:
1. PRIOR NOTICES. No effect shall be given to the termination notice
dated August 31, 1998 from Manufacturer to Distributor and the related notices
of the Distributor to Manufacturer dated September 22, 1998 and of the
Manufacturer to Distributor dated August 26, 1998 and October 12, 1998.
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Definitions used in the Prior Agreement are used herein with such
defined meanings, except as otherwise expressly provided herein.
2. AMENDMENTS TO THE PRIOR AGREEMENT. The parties agree that the
following amendments (or confirmations in some cases) to the Prior Agreement are
effective from and after this date and shall control, notwithstanding any
provisions of the Prior Agreement.
(i) The area within which Distributor shall purchase and resell
Manufacturer's Products under the Old Agreement shall continue
to be the Territory set forth in the Prior Agreement, subject
to the following provisions of this Letter Amendment Agreement.
Distributor's rights in all portions of the Territory (other
than the New York Territory) shall be exclusive to the extent
they were exclusive under the Prior Agreement on August 30,
1998 and shall be non-exclusive to the extent they were
non-exclusive under the Prior Agreement on August 30, 1998.
Subject to the terms of the existing agreements with such
parties, including the Prior Agreement, as applicable, during
the Interim Period, Manufacturer agrees to maintain or cause to
be maintained on essentially the same terms and conditions, the
current distribution relationships with Sunbelt Distributors
Inc. of Houston, Texas, and with Rainbo Distributors of San
Leandro, California, which serves the out-of-home markets in
Northern California.
(ii) Distributor's exclusive rights to purchase and distribute
Manufacturer's Products to the supermarket trade (three cash
registers or more) in the New York Territory (the New York City
metropolitan area, including the five boroughs of New York,
Nassau County, Suffolk County, Westchester County and Northern
New Jersey) are hereby agreed to terminate automatically,
without any further notice or action, on April 15, 1999 and
Distributor agrees that it will not make any sales of
Manufacturer's Products, directly or indirectly, in such
supermarket trade in the New York Territory or to any person
for resale in such supermarket trade in the New York Territory
after April 15, 1999. The parties understand that the remaining
channels of distribution in the New York Territory remain
exclusive until April 15, 1999 and will then continue on a
non-exclusive basis until August 31, 1999. The parties confirm
that, notwithstanding any provision of the Old Agreement, the
Manufacturer has no right to make Distributor's distribution
rights non-exclusive in any channel of distribution in the New
York Territory prior to April 15, 1999.
(iii) The parties confirm that, without limiting Distributor's best
efforts obligations under the Prior Agreement to distribute
Manufacturer's Products, Distributor shall, during the Interim
Period, be required to
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purchase Manufacturer's Products in at least an amount equal to
the volume purchase commitment set forth in Section 8 of the
Prior Agreement (which commitment became applicable as a result
of Manufacturer's notice of August 31, 1998 and Distributor's
election of September 22, 1998 and which is hereby confirmed to
remain a commitment binding Distributor during the Interim
Period; provided, however, that this volume purchase commitment
shall not be applicable with respect to the Territory described
in Schedule 2A to the New Distribution Agreement. The parties
understand that such commitment shall be adjusted to reflect
changes in the Territory herein and the method of selling
hereunder. Distributor recognizes that this commitment forms
part of the Prior Agreement and is subject to the "for cause"
termination provisions thereof.
(iv) In addition to the purchase prices payable by Distributor for
Manufacturer's Products specified in the Old Agreement, for the
period beginning January 5, 1999 Distributor shall pay a rebate
to Manufacturer, payable every month in arrears 28 days after
the end of each month, equal to (*) of the amount of the
Distributor's monthly sales of all Products to all customers
including (without duplication) sales by subdistributors (but
excluding sales to or by those Non-affiliated subdistributors
making purchases in smaller quantities [i.e., 10 pallets or
less on an occasional basis] up to an aggregate of (*) of
Distributor's total monthly sales). The term "Non-affiliated
subdistributors" shall mean subdistributors in which
Distributor does not own more than 20% of the equity interests.
As used in this Section, Distributor's monthly sales shall mean
gross revenues less returns and allowances for damaged goods.
Distributor's failure to make rebate payments when due shall
constitute a failure to comply by Distributor which will permit
termination of the Old Agreement by Manufacturer under Section
8 of the Old Agreement unless cured within 30 days after notice
of such failure from Manufacturer to Distributor.
(v) The parties have previously agreed under the Prior Agreement
that Distributor will pay Manufacturer (*) of the cost of the
trade promotions on the Manufacturer's Products that have been
mutually agreed for the remaining months of the year 1998. With
respect to the period January 1, 1999 through August 31, 1999
Distributor agrees to pay Manufacturer (*) of the trade
promotion dollars in an amount equal to the cost for the same
months in 1998 (which are hereby deemed to be mutually agreed
in advance through August 31, 1999 and agreed through April 15,
1999 in the case of the supermarket channel in the New York
Territory) provided that Manufacturer pays the remaining (*) of
the cost of such promotions. The parties confirm that payments
shall be made by Distributor in the manner that has been the
current practice under the Prior Agreement in 1998, namely
promptly by way of off-invoice credits and debits.
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*This confidential portion has been omitted and
filed separately with the Commission.
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For these purposes, trade promotions on the Manufacturer's
Products shall not include print, radio, television or other
media advertising placed by the Manufacturer and all consumer
promotions, i.e. scoop trucks, marketing agents and community
agents or slotting, but shall include off-invoice, retailer
ads, retailer display specials, bunker programs, etc. and
other trade promotional techniques which may be used in lieu
of such conventional trade promotions. If Manufacturer wishes
to conduct additional trade promotions for the period January
1, 1999 through August 31, 1999, Distributor shall not be
required to make any (*) payment of the cost of such
additional trade promotions unless Distributor has given its
express consent. If the Distributor does not give its consent,
then Manufacturer may continue such additional trade
promotions and bear (*) of the cost thereof.
(vi) During the Interim Period, Distributor shall pay its portion
of the cost of all slotting on the Manufacturer's Products in
accordance with Section 4(c) of the Prior Agreement.
(vii) With respect to "selling" activities pertaining to the
Products of the Manufacturer during the Interim Period, it is
agreed that Manufacturer shall take over on January 5, 1999,
the "corporate selling", which means selling to all chain
accounts and headquarters selling; provided, however, that
Distributor will continue to provide such services so as to
work with Manufacturer to provide a smooth transition from
Distributor to Manufacturer but in no event shall this
continued support last more than three to four weeks after the
execution of this Letter Amendment. Distributor will continue
to do the selling activities "up and down the street" trade at
the store level through its route salesmen and other
personnel.
(viii) During the Interim Period, Distributor shall not, directly or
indirectly manufacture, test market, market, promote or sell
super premium ice cream or products as previously defined in
the Prior Agreement (and for convenience, set forth below)
except as follows:
Manufacturer agrees that the provisions of the Old
Agreement relating to super premium ice cream or products,
including, without limitation, the provisions of Section
8A thereof, shall not apply to the following activities of
Distributor and that the following activities shall be
permitted and shall not be deemed inconsistent with the
performance by Distributor of its best efforts obligations
under the Old Agreement:
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*This confidential portion has been omitted and
filed separately with the Commission.
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1. The development of formulae, processes, marketing
and sales plans and other plans relating to super
premium ice cream or products;
2. Test-marketing, promoting, selling and
manufacturing (to the extent appropriate to
test-marketing) super premium ice cream or products
within the territory described in Schedule 2A to
the New Distribution Agreement, within the State of
California or, beginning April 15, 1999, within the
State of New York;
3. Distribution of super premium ice cream or products
of another manufacturer.
For this purpose, the parties confirm that a super
premium ice cream is defined as:
"ice cream, frozen yogurt, sorbets, ices or other
frozen dessert products whether dairy based or not
(although not to include super premium novelties)
primarily sold in pint-size containers for a
current retail price equal to or greater than an
average of $2.19 per pint over a 52 week period
adjusted by the CPI Index (December 1993 to equal
100 for this purpose), and including quart or
half-gallon sizes of such products."
(ix) The Old Agreement, including without limitation the
provisions relating to the New York Territory, shall
automatically, without any further notice or actions, expire
at the close of business on August 31, 1999 unless sooner
terminated in accordance with its provisions. Notwithstanding
this agreed expiration of the Old Agreement, all claims
arising prior to such expiration for any breach of or for any
amount due under the Old Agreement (excluding any such claims
that have been satisfied, waived or released prior to such
expiration) shall survive such expiration in each case.
(x) All sums payable to Manufacturer for Manufacturer's
Products purchased hereunder shall be paid in arrears 21 days
from the date of Manufacturer's invoice (which shall be the
post-marked date of the invoice or any earlier date of
facsimile transmission or other delivery to Distributor) with
a 7-day grace period. As to all sums not paid within such 28
day period, Distributor shall in addition pay a (*) late
payment premium.
(xi) The amount of credit available under paragraph 9 of the Old
Agreement shall be changed to (*) and all other provisions of
the line of credit and its workings will remain as in the Old
Agreement. Said credit line shall be available
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*This confidential portion has been omitted and
filed separately with the Commission.
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unless Distributor is in breach of a material provision of the
Old Agreement or unless Manufacturer determines, pursuant to
the exercise of its regular credit policy, that Distributor's
financial condition warrants a change in the said credit line.
3. THE PARTIES' CURRENT COMPLIANCE; BEST EFFORTS STANDARD. The parties
acknowledge and agree that as of the date of this Letter Amendment Agreement
each party is in full compliance with all of the terms of Prior Agreement,
including, without limitation, each party's best efforts obligations, and each
party hereby waives any non-compliance (to the extent the relevant party knows
or has reason to know of non-compliance) by the other under the Prior Agreement
prior to the date of this Letter Amendment Agreement. Notwithstanding any other
provision of the Old Agreement, Distributor shall not be in breach of any of its
best efforts obligations under the Old Agreement if Distributor is performing
under the Old Agreement in a manner substantially consistent with its
performance during the twelve (12) month period immediately preceding the date
of execution of this Letter Amendment Agreement (the "Comparison Period").
Nothing herein shall be deemed to waive compliance with the "best efforts"
commitment under the Prior Agreement.
4. NEGOTIATION OF AGREEMENT. Each party and its counsel have cooperated
in the drafting and preparation of this Letter Amendment Agreement and the
documents referred to herein, and any and all drafts relating thereto shall be
deemed the work product of the parties and may not be construed against any
party by reason of its preparation. Accordingly, any rule of law or any legal
decision that would require interpretation of any ambiguities in this Letter
Amendment Agreement against the party that drafted it is of no application and
is hereby expressly waived.
5. REPRESENTATION AND COVENANT. Distributor hereby represents that as of
the date hereof it is not in default in any respect under, and will not be in
default in any respect but for the running of any applicable grace period under,
any loan agreement or other agreement for the borrowing of money or capitalized
leases (collectively referred to as the "Financing Agreements").
6. ENTIRE AGREEMENT; AMENDMENTS. The Prior Agreement as amended hereby
and the New Distribution Agreement constitute the entire agreement between the
parties, and there are no representations, warranties or conditions or
agreements (other than invoices, purchase orders and the like necessary to
implement said agreements) not contained herein (or in any document not referred
to herein) that constitutes any part hereof or that are being relied upon by any
party hereunder. If any provision of this Letter Agreement is held by a court of
competent judgment to be invalid, void or unenforceable, the other provisions
shall nevertheless be in full force and effect without being impaired or
invalidated in any way.
Except as expressly amended hereby, the Prior Agreement shall continue
in full force and effect.
No provisions of the Old Agreement may be modified or amended except by
a written instrument signed by each of Manufacturer and Distributor.
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7. GOVERNING LAW. This Letter Amendment Agreement shall be binding on
the parties and successors and assigns, as provided in the Prior Agreement. This
Letter Amendment Agreement and all actions related hereto shall be governed by,
and any dispute relating to this Letter Amendment Agreement or the Prior
Agreement or the entering into of this Letter Amendment Agreement or the
expiration of the Old Agreement shall be resolved in accordance with, the
provisions of the Old Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed and delivered by its duly authorized representative as of
the day and year first above- written.
BEN & JERRY'S HOMEMADE, INC.
By: /s/ PERRY ODAK
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Title: CEO
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DREYER'S GRAND ICE CREAM, INC.
By: /s/ THOMAS DELAPLANE
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Title: V.P. Sales
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EDY'S GRAND ICE CREAM
By: /s/ THOMAS DELAPLANE
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Title: V.P. Sales
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