Document:

gss_ex10-3.htm

    
      June 01,
2009

       

       

      Tracking The Trends

       

      It was wild ride for the nation's convenience stores in
2008, but despite the stagnant economy and unprecedented fuel prices, industry
profits held strong.

       

      By CSD
Staff

       

      An
otherwise tough year for convenience stores was balanced out by strong retail
fuel margins from the unprecedented drop in wholesale fuels prices during the
fourth quarter of 2008, according to National Association of Convenience Stores’
(NACS) 2009 State of the Industry report. However, credit card fees continue to
take a toll on industry profitability. 

       

      Overall
convenience store industry profits rose 54% in 2008 to reach $5.2 billion,
reversing a two-year decline where profits dropped 42% over that period.
Industry sales jumped 8.1% to reach $624.1 billion, with both motor fuels sales
(up 10.1% to $450.2 billion) and in-store sales (up 3.2% to $173.9 billion)
showing growth. 

      The
growth of in-store sales defied the overall trend in U.S. retail sales, which
fell 0.6% based on U.S. Department of Commerce data. It also came despite a rare
decline in the number of convenience stores, NACS reported. For only the third
time in the past 15 years, the industry store count fell 1% to 144,875, as many
stores closed because of the punishing economic conditions and record-low motor
fuels margins the industry faced during the first three quarters of
2008. 

      The
convenience store industry sells an estimated 80% of the fuels purchased in the
U.S., and motor fuels sales continue to dominate industry revenues, accounting
for 74.5% of all sales dollars, in examining same-firm sales data. However,
overall fuel gallons sold declined 2.4%, according to NACS. Meanwhile because of
low gross margins on fuel (5.7%), only 31.7% of all profit dollars came from
fuels sales. 

      Credit
card fees continue to be the industry’s top pain point, surging another 10.5% in
2008 to reach a record $8.4 billion—-nearly three times the level just five
years ago. 

      In-Store
Performance
Once
again, cigarettes dominated in-store sales, accounting for nearly one in every
three dollars spent in stores, but cigarette gross margins continued to plummet,
falling to 15.3%. These low cigarette margins dropped the category to third in
terms of gross margin contribution. Meanwhile, foodservice, which includes
dispensed beverages and food prepared on site, continues to show strong growth,
accounting for nearly one in four in-store profit dollars.

       

      
        	 
      	 
      	
                As
      of the end of 2008, the number of locations now stands at 144,875 stores,
      a 1% decline from 2007.

                U.s.
      Convenience stores (as of 12/31/08): 

                2008:
      144,875

                2007:
      146,294

                2006:
      145,119

                2005:
      140,655

                2004:
      138,205

                For
      just the third time in the last 15 years the industry’s store count
      decreased. The count also declined in 1994 and 2003.

              	 
      
	 
      	 
      	
                 

                TOP
      STATES FOR

                CONVENIENCE
      STORES

                (as
      of 12/31/08): 

                Texas:
      14,112 stores

                California:
      10,298

                Florida:
      9,303

                New
      York: 7,580

                Georgia:
      6,320

                North
      Carolina: 6,130

                Ohio:
      5,149

                Michigan:
      4,824

                Illinois:
      4,541

                Virginia:
      4,487 

                The
      bottom three states are Alaska (198 stores), Delaware (315) and Wyoming
      (350).

              
	 
      	
                 

                Nearly
      75% of in-store sales were from the top five categories:   •
      Cigarettes, 32.7% of in-store sales • Packaged beverages, 14.1% •
      Foodservice, 13.9% • Beer, 10.2% • Other tobacco products,
      3.9%

              
	
                 

                Nearly
      70% of gross margin dollars were from the top five categories, NACS
      REPORTED:   • Foodservice, 23.9% • Packaged bevs, 16.6% • Cigarettes,
      16% • Beer, 6.9% • Candy, 4.8%gss_ex10-4.htm

    

      ONE
STORE EQUIPMENT TEST AGREEMENT

      

      This
Agreement, when executed by the parties, represents the agreement between Global
Smoothie Supply, Inc. (“GSS”) and 7-Eleven (the “Company”) to test market and
evaluate the GSS Smoothie S3
Equipment (the “Equipment”) in one (1) 7-Eleven store #26885 located at
6833 Northwest Highway, Dallas, Texas (the “Test Store"), (collectively the
“Test Agreement”):

      

      Test
Agreement Terms:

      

      1. License: Company hereby
grants to GSS a license to install and maintain the Equipment at the Test Store
for the period of time beginning August 10, 2009 through November 13, 2009 (the
“Test Period”) unless this Test Agreement is earlier terminated as set forth in
the Test Agreement.

      

      2. Installation/Removal: GSS
will, at its sole cost and expense, deliver and install the Equipment in the
Test Store. The Equipment will be installed and operated in an agreed upon area
in the Test Store, easily accessible to the Company’s customers and employees
and to GSS's installers and maintenance employees and contractors, meeting the
following space and power supply Requirements:

      

      
        	
                 
      

              	
                •
      Counter top location.

              

      

      
        	
                 
      

              	
                •
      Two (2) dedicated 20A circuits and minimum of 3 110V electrical outlets.
      (GSS Smoothie S3 Equipment, Ice-O-Matic ice cuber and one under counter
      back-up water heater)

              

      

      
        	
                 
      

              	
                •
      Hot and cold water supply to
counter

              

      

      
        	
                 
      

              	
                •
      Access to floor drain

              

      

      

      Within
ten (10) days of the termination of the Test Agreement, GSS will, at its sole
expense, remove the Equipment, and restore the Test Store to its condition prior
to installation, ordinary wear and tear excepted.

      

      3. Title/Access/Risk of Loss:
GSS has, and will at all times retain, title to the Equipment. Company will
permit GSS and its contractors thereto access to the Test Store, at such
reasonable times as GSS may reasonably requests and upon reasonable prior
notice. GSS agrees that it will bear the entire risk of loss and risk of damage
to the Equipment and related equipment during the Test Agreement.

      

      4. Product and Cups. During
the Test Term, the Test Store shall purchase the Product Mix and Sanitizer at
the prices set forth in Exhibit A.

      

      5. Repair & Maintenance
Fee: GSS will, at its sole cost and expense, perform any maintenance
repairs required to fix or replace the Equipment at the Test Store and will
maintain same in good operating condition.

      

      6. Taxes: Except for any taxes
levied on Company for the sale of the GSS products, GSS will collect and pay all
sales, use or similar taxes levied revenue generated from the operation of, or
personal property taxes on, the Equipment the Test Store. Each party will be
responsible for the payment of any income taxes based upon any revenue it may
receive therefrom.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

      7. Insurance/Indemnification:
GSS will defend, indemnify, pay and hold harmless Company, its parent companies,
its affiliates and subsidiary companies, and their respective officers,
directors and employees against any claims, actions, damages, losses, and
expenses (including court costs and reasonable attorney’s fees) arising from or
incident to: (i) any death, personal injury or damage to tangible property to
the extent such death, inquiry or damage results from GSS's negligence or
willful misconduct including that of its subcontractors with respect to the
installation, operation, maintenance and repair of the Equipment at the Test
Store; (ii) any liability of any nature or kind for or on account of any
allegation  or finding of a violation of any patent, trademark,
copyright or contractual or other rights of any third parties arising from the
purchase, use or sale by 7-Eleven or the Stores of the Equipment; and (iii) from
any consumer complaint, claim or legal action whatsoever, alleging damages,
death, illness or injury to the extent that is due, in whole or in part, to
GSS's actions, omissions, negligence, gross negligence or otherwise. GSS will,
at its own cost and expense, obtain and maintain adequate insurance from a
reputable insurance company, insuring against any and all public liability,
including death to persons and damages to tangible property arising from or
incident to the installation and/or operation of the GSS Smoothie S3
Equipment at the Test Store. Company shall be named as an additional
insured on such policies and GSS shall furnish Company with certificates
evidencing such coverage is in effect and not cancelable without thirty (30) day
notice to Company.

      

      8. Contact Information: GSS
and Company have designated the following individuals as contacts for all
information, notices and requests regarding the terms hereof:

      

      Primary
GSS Contact:

      

      David
Tiller, CEO

      Global
Smoothie Supply, Inc.

      4428
University Blvd.

      Dallas,
TX 75205

      214-769-0836

      

      Primary
Company Contact:

      

      Mr. Jay
Wilkins

      7-Eleven,
Inc.

      1722
Routh Street

      Dallas,
TX 75201

      (214)
828-2939

      

      9. Termination/Expiration: In
the event that either party breaches or defaults in its performance of any of
its obligations under this Agreement, the non-breacing/non-defaulting party may
terminate this Agreement on fifteen (15) days written notice unless the
breaching/defaulting party cures the breach or default within the notice period.
Company may at any time terminate this Test Agreement without cause upon thirty
(30) days prior written notice to GSS. Unless this Test Agreement is extended
upon the mutual agreement of the parties, this Test Agreement will expire at the
end of the Test Period.

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      10. Choice of Law: The terms
hereof will be interpreted and construed under the internaI laws of the state of
Texas, without regard to conflict of laws principles.

      

      11. Successors and Assigns:
The terms hereof shall be binding upon and inure to the benefit of the
successors and assigns of the parties.

      

      12. Waiver: No term hereof
will be deemed waived and no breach excused unless such waiver or consent is in
writing and signed by the party claimed to have waived or consented
thereto.

      

      13. Independent Contractor:
The parties acknowledge that each is an independent contractor of the other;
that each party operates as a separate and independent entity from one another;
and, that the terms hereof are not intended to create an employer/employee
principal/agent, partnership or joint venture agreement between
them.

      

      14. Entire Agreement
Modification: The terms hereof and any exhibits hereto constitute the
entire agreement between the parties concerning the subject matter hereof, and
supersede any proposal or prior agreement, oral or written, and any other
communication concerning such subject matter and may only be modified in a
writing signed by both parties stating specifically that it is an amendment
thereto.

      

      IN WITNESS WHEREOF, the
parties have caused this agreement to be executed by their undersigned duly
authorized representatives as of the date first set forth above.

      

      
        	
                Company

              	
                GSS

              
	
                7-Eleven,
      Inc.

              	
                Global
      Smoothie Supply, Inc.

              
	 
      	 
      
	
                By:
      /s/ Paul Pierce

              	
                By:
      /s/ David C. Tiller

              
	
                Paul
      Pierce

              	
                David
      C. Tiller

              
	
                Sr.
      Dir. Mdse

              	
                CEO

              

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      PRODUCT
MIX AND SANITIZER PRICING

      

      
        	
                2.5
      Gal. Bag-In-Box Smoothie Puree

              	
                $54.00

              
	
                1-Gal.
      Ala-Quat Sanitizer

              	
                $23.50

              

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
           

        

        
          4

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