It is a simple one page service contract. The other party Red Blossom wants to get out of the contract in the final year. There is a specific amount ("minimum") written in for one location (Santa Maria). However the other location (Salinas) does not have a minimum written in the contract. Red Blossom does not want to pay anything for canceling contract in Salinas just the minimum in Santa Maria. My main question is do we have a good claim for getting money for the Salinas portion of contract and what will it be based on (Revenue, net income, gross income)? When should the penalty be due (when the contract is cancelled by Red Blossom in December of 2012 or when the original contract is suppose to end in December of 2013) Pasted Below..
Red Blossom Sales, Inc (“Red Blossom”) shall engage the services of Golden State Ag, LLC (“Golden State Ag”) for the production of carton make-up. This letter agreement sets forth the terms on which Golden State Ag will provide services to Red Blossom. The list of services and terms set forth may be amended in writing by mutual agreement of the parties from time to time.
1. General Description - Golden State Ag will provide strawberry carton make-up services for Red Blossom in Santa Maria, CA and Salinas, CA. Services shall include but not limited to: (a) Warehousing of KD, finished cartons, clamshells, and other items necessary for strawberry harvest. (b) Manufacture cartons from KD to finished cartons ready to accept product. (c) Distribution of cartons, clamshells, and other items to farmers. (d) Inventory reporting. (e) Other duties that are deemed essential and agreed upon by both parties.
2. Terms - The Term of this Agreement shall begin on January 1, 2011 and continue until December 31, 2013.
3. Compensation/Billing - Golden State Ag will bill Red Blossom $0.16. per carton distributed in Santa Maria, CA and $0.13 per carton distributed in Salinas, CA. Finished Cartons transferred out at the end of the year to a non Golden State Ag shall be billed to Red Blossom. Golden State Ag will bill weekly every Monday. Terms to be set at Net 10.
4. Materials - Golden State Ag shall provide and maintain: forklifts, trash/material removal, bailer, raw materials for carton make-up, and any other unnamed materials necessary for carton make-up.
5. Equipment/Machines - Golden State Ag and Red Blossom shall be responsible for securing necessary and appropriate carton make equipment as well as the air compressors necessary for efficient operation.
6. Inventory Reporting - Golden State Ag will be responsible for providing daily inventory reports to Red Blossom at each location.
7. Facilities - Golden State Ag will be responsible for securing proper facility in Santa Maria, CA and be responsible for all the costs involved. Golden State Ag will continue carton services at the SEMCO Cooling facility in Salinas, CA. Red Blossom will be responsible for payment of Salinas, CA facility.
8. Termination - This agreement shall continue through the end of the agreed upon term. Parties may initiate renegotiation of terms and extension of services at the end of each calendar year and may be amended in writing at that time.
9. Minimum - Red Blossom commits to a carton volume of 3.5 million per year in Santa Maria, CA for the next three years. Red Blossom agrees to pay Golden State Ag $.04 per carton for any shortfall in volume.
10. This agreement shall be effective when signed below or in counterpart, and photocopy, facsimile, electronic or other copies shall have the same effect for all purposes as an ink-signed original.