Page 314 - Onboarding May 2017

CENTRALIZED SUPPLY CHAIN SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014

NOTE 2 - DEFERRED COMPENSATION

Effective January 1, 2010, the Company initiated a Long Term Incentive Plan with an unfunded
Contribution Credit on the behalf of certain officers to be considered deferred portions of their
compensation until their retirement. Awards are to be 0% to 100% of Target based on performance
against objectives identified by the Company’s Board of Directors. Awards are made each January for
the previous plan year, and the awards vest 100% on January 1 of the third year after the award was
granted. The awards are not funded until they have vested 100%.

The Contribution Credit awarded in 2015 and 2014 was $434,332 and $447,651, respectively. The
deferred compensation expense and related liability are recorded by the Company evenly over a twenty-
one month vesting period. At December 31, 2015 and 2014, the deferred compensation liability
amounted to $638,418 and $607,049, respectively. At December 31, 2015 and 2014, the deferred
compensation expense amounted to $446,568 and $428,346, respectively. The deferred compensation
expense is included in fringe benefits in the statements of operations. The related liability is recorded in
accrued payroll and related liabilities in the balance sheets. In March 2015, the Company distributed the
fully vested 2012 grant to the plan participants in the amount of $415,199.

At December 31, 2015, all Contribution Credits awarded prior to 2015 have been fully vested. The 2015
Contribution Credit award will be fully vested by December 31, 2016. The 2016 deferred compensation
expense for the 2015 Contribution Credit is expected to be $248,190, assuming no forfeitures.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

During 2013, the Company entered into a service agreement with an unrelated third party to provide a
web-based interface that allows the Company to access vendor data. The service agreement is for six
years. Under the agreement, the Company pays a monthly subscription fee. For each of the years
ended December 31, 2015 and 2014, the Company paid approximately $1,329,000 in subscription fees.

The approximate future minimum payments under the subscription agreement are as follows:

2016 $ 1,329,000
2017 1,329,000
2018 1,329,000
2019 110,750

$ 4,097,750

Effective January 1, 2015, the Company entered into a renewed two-year agreement with an unrelated
third party to provide produce management services. The agreement includes an automatic one-year
renewal if neither party terminates. The Company is required to compensate the provider through annual
fixed fees. In 2014, The Company was required to compensate the provider through fixed and
performance-based fees, which were negotiated and defined on an annual basis. If the agreement
resulted in certain defined savings for the Company, an additional performance-based compensation was
due to the third party. During 2014, the third party satisfied all requirements to receive the maximum
amount of the performance-based award of $290,000. During 2015 and 2014, the total fixed service fee
recognized under this agreement was $875,000 and $650,000, respectively.

8.