On August 30, 2005, The Company entered into a Master Distribution
Agreement (the "Agreement)" with Coca-Cola Enterprises Inc.(CCE) for the
distribution by CCE of the Company's flavored milk drink products in the
entirety of the United States, all U.S. possessions, Canada, Belgium,
continental France, Great Britain, Luxembourg, Monaco and the Netherlands, as
well as any other geographic territory to which, during the term of the
Agreement, CCE obtains the license to distribute beverages of The Coca-Cola
Company. The appointment of CCE as the exclusive distributor for the
Company's products is effective August 30, 2005, has an effective
distribution date of October 31, 2005, and an expiration date of August 15,
2015. CCE has the option to renew the Agreement for two subsequent periods of
ten additional years.
Under the terms of the Agreement, CCE is obligated to use all
commercially reasonable efforts to solicit, procure and obtain orders for the
Company's products, and merchandise and actively promote the sale of such
products in the Territory, as defined in the Agreement. The Agreement
establishes a comprehensive process for the phased transition from the
Company's existing system of distributors to CCE, dependent upon distribution
territory, product and sales channels. The parties have agreed that CCE will
implement its distribution on a ramp-up basis, with the initial distribution
commencing in the United States on or about the October 31, 2005 effective
distribution date. CCE's distribution in other Territory areas will be
dependent upon, among other things, third-party licensing considerations and
compliance with the regulatory requirements for the products in foreign
countries.
The Company has agreed to provide strategic direction of its products;
maintain sales force education and support; actively market and advertise its
products and design and develop point of sale materials and advertising. The
Company also is responsible for handling consumer inquiries; product
development; and the manufacture and adequate supply of its products for
distribution by CCE. The terms of the Agreement require the Company to
maintain the intellectual property rights necessary for the Company to
produce, market and/or distribute and for CCE to sell the Company's products
in the Territory. The Company is obligated to spend a fixed dollar amount in
the remainder of 2005 and 2006 on national and local advertising, including
actively marketing the Slammers trademark, based on a plan as mutually agreed
each year. Beginning in 2007, the Company shall allocate an amount per year
for such activities in each country in the defined Territory equal or greater
than an agreed upon percentage of Company's total revenue in such country.
Under the Agreement, CCE has the right of first refusal to distribute
any new products developed by the Company, and the Agreement establishes a
process for the potential expansion of CCE's distribution of the Company's
products to new territories. Either party may be terminate the Agreement for
a material breach, insolvency or bankruptcy and CCE may terminate for change
of control by the Company, material governmental regulatory enforcement action
or threatened governmental action having a material adverse consumer or sales
impact on the Company's products, and upon twelve months notice after August
15, 2006.
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