EXHIBIT 10.3
DISTRIBUTION
AGREEMENT
THIS AGREEMENT is made and entered into as of this __15th__ day
of March, 2007 (the "Effective Date"), by and between Havoc
Distribution, Inc. ("Havoc"), and Black Dog Distributors, L.L.C.
("Distributor").
In consideration of the mutual premises set forth herein, and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. CERTAIN DEFINITIONS.
1.1 "Product" or "Products" means any and all Havoc(r)
energy drink products, whether directly distributed under the
Havoc(r) brand or under a private label brand which is distributed
by, through or under the Havoc(r) brand, including but not limited
to those initial Products which are specifically identified and
listed in Exhibit A. Products shall expressly include any and all
Havoc(r) Items which are presently existing as well as any and all
new non-alcoholic beverages which are associated with the
Trademarks that Havoc wishes to develop and/or introduce into the
Territory in the future, whether or not same are presently
contemplated or under development.
1.2 " Trademarks" means the words Havoc(tm) and any and all
variations and derivations thereof, any materials, logos, slogans,
designs and distinctive bottles patented, copyrighted or designed
by or on behalf of Havoc, and other related trademarks, together
with any rights existing as a result of the use of the foregoing in
connection with Products.
1.3 "Accounts" means individual retail and wholesale
outlets, categories of outlets and channels of distribution, which
shall include National Accounts and warehouse purchasers (which
means a warehouse, or a wholesale business, owned or controlled by
the retailer(s) to which it sells or otherwise supplies products),
which are located within the Territory.
1.4 "Item" or "Items" means stock keeping units of Products,
by flavor and package or container type, design and size.
1.4 "Territory" means the geographical boundaries of the
State of Florida; provided, however, that with respect to any
particular Product(s) or Item(s), the Territory may be further
geographically limited or restricted in order to comply with any
specific geographical restrictions or limitations which may be
imposed on a Product or Item by virtue of any licensing or
distribution agreements by, under or through which Havoc has
derived the right or entitlement to market or distribute such
Product or Item.
2. APPOINTMENT AND GRANT OF LICENSE AND
RIGHTS.
2.1 Appointment and License. Havoc hereby grants
Distributor the exclusive right to distribute and sell Products to
Accounts in the Territory, and the limited non-exclusive license to
use the Trademarks solely in connection therewith, in each case
subject to the remaining provisions of this Agreement.
2.2 National Accounts. "National Account" means a
group of affiliated, centrally managed Accounts, which are
designated by Havoc for National Account treatment. Havoc retains
the right to manage and establish pricing policies for National
Accounts. So long as Distributor complies with any National Account
pricing policies, or otherwise sells to National Account outlets at
prices (taking account of any Havoc support and allowances) and on
terms mutually agreeable to all concerned parties, it will retain
the exclusive right to sell Products to National Account outlets in
the Territory. Havoc agrees that Havoc shall at all times maintain
pricing policies with respect to any National Account which shall
afford Distributor a sales margin of no less than twenty percent
(20%), and shall correspondingly and accordingly lower its pricing
to Distributor in order to enable Distributor to maintain said
minimum sales margin on all such National Accounts. Distributor
agrees, however, that if it is unwilling to sell to a National
Account on acceptable terms, or for any other reason cannot or does
not sell to a National Account, Havoc may arrange for alternate
sources of supply to that National Account's outlets in the
Territory. In that circumstance, where Havoc arranges for alternate
sources of supply to that National Account's outlets in the
Territory, Havoc shall pay Distributor an invasion fee, calculated
in accordance with procedure set forth in Exhibit B, for the
Item(s) and Product(s) sold to such National Account for
distribution at an outlet or outlets in the Territory.
2.3 Distributor Representations. Distributor
represents and warrants that (i) it will comply with all food,
labeling, health, packaging and other relevant Federal, state and
local rules, orders, regulations and laws (including returnable
container or deposit laws) applicable to its performance hereunder,
including those applicable to its use of the Trademarks, and (ii)
it has the infrastructure, equipment and capability to diligently
and aggressively cover and service the Territory in its
entirety.
3. TERM . The period during which this Agreement
remains in effect is referred to as the "Term". The Term will
commence on the Effective Date and will continue for six (6) years.
Thereafter, provided neither party is in default, this Agreement
will automatically renew for successive one-year annual renewal
periods, unless either party elects in writing not to renew at
least ninety (90) days before the end of the initial or renewed
Term or unless the Agreement has been earlier terminated pursuant
to its other provisions. Any liability of each party to the other
because of the termination of this Agreement shall be exclusively
governed by Section 13.2 herein.
4. ANNUAL PLANS. 30 days before the annual
anniversary date of this agreement, Havoc and Distributor will
jointly and collectively develop a sales and marketing plan for the
ensuing year intended to maximize distribution and sales of
Products in the Territory (an "Annual Plan"). The first Annual Plan
for the remainder of the initial year of the Term will be developed
within 30 days of the Effective Date. Each Annual Plan will set
forth mutually agreeable targets and minimum performance standards
for sales and market penetration, and will include plans for
increased sales and market penetration (including planned
promotions, campaigns, allowances and other Havoc support and
funding), proposed pricing, as mutually agreed to by Havoc and
Distributor, and such other information, as the parties deem
appropriate. Each Annual Plan will also outline anticipated
advertising, promotional and contribution requirements. Distributor
will diligently pursue and implement each Annual Plan.
5. PERFORMANCE.
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(a)
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Distributor will begin commercial sales of
Products within thirty (30) days of the Effective Date. Distributor
agrees to use commercially reasonable efforts to actively market
and promote all of the Products in the Territory, to call upon all
Accounts regularly and diligently, and to maintain an inventory of
Products sufficient to supply reasonably anticipated demand. Havoc
may monitor Distributor's performance in this regard.
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(b)
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Distributor shall earn the right to acquire
the publicly traded common stock of Havoc on preferential terms
through the achievement of certain performance thresholds related
to Distributor's sales volume and revenue generation on the sale
and distribution of Products in the Territory, in accordance with
the terms and conditions set forth in Exhibit C .
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6. MARKETING, DISTRIBUTION AND SALES.
6.1 Highest Quality Positioning. An essential element
of the consideration Havoc has bargained for is Distributor's
agreement to position and price, and aggressively market, promote,
merchandise and distribute, the Products as premium products of the
highest quality.
6.2 C ooperative Advertising and Promotions.
Distributor acknowledges the importance of advertising, promoting
and merchandising the Products to increase and maintain demand in
the Territory. Accordingly, Distributor agrees to participate in,
and contribute funds to, such cooperative advertising,
merchandising and promotional plans (including acquiring and using
marketing equipment) as may be included in any Annual Plan, or as
may be mutually agreed, in an amount not to exceed one-half of one
percent (0.50%) of Distributor's gross revenue from the sale of
Products in the Territory for Distributor's preceding fiscal year.
In consideration, Havoc agrees that Distributor shall be entitled
to the exclusive control and use of any and all promotional tools
(e.g., sports and venue tickets, suites, etc.) which inure to or
are derived by Havoc under, out of or in connection with any
licensing or distribution agreement for any Item or Product which
is exclusively marketed or distributed by Havoc within the
Territory.
6.3 No Transshipping. Distributor agrees that it will
not distribute or sell Products outside the Territory or Accounts.
Distributor will refrain from selling Products to any party if it
has reason to believe, or if Distributor is advised that Havoc
believes, that such party may be a source of Products sold outside
the Territory. Distributor agrees to comply with reasonable Havoc
transshipping policies provided to Distributor from time to time;
provided, however, that there shall be no restrictions or
limitations placed by Havoc upon Distributor with respect to the
transshipping of Products outside the Territory in cases where such
transshipping is destined for markets outside the continental
United States (unless such transshipping is otherwise limited or
restricted by virtue of any licensing or distribution agreements
by, under or through which Havoc has derived the right or
entitlement to market or distribute such Product or Item).
6.4 Data and Reports . Distributor will
maintain accurate and complete books and records concerning its
performance and its implementation of Annual Plans, which may be
inspected by Havoc during Distributor's regular business hours upon
no less than seven (7) days advance notice of inspection provided
by Havoc to Distributor. Distributor shall deliver to Havoc no
later than twenty (20) days after the end of each calendar quarter
(March, June, September and December) during the term of this
Agreement a written report showing the following for the preceding
quarter.
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6.4.1
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Depletions of Product by case for each
item
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6.4.2
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Year-to-date sales of Product in cases for
each item
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6.4.3
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Number of active accounts purchasing the
Product
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6.4.4
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Sales to National Accounts within the
Territory by cases for each item, upon request
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6.4.5
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Top 50 accounts with cases for each item
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6.4.6
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Ending inventory
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7. PURCHASE OF PRODUCT.
7.1 Purchase and Sale of Products. Distributor will
purchase Products only from or as directed by Havoc. Havoc will
sell to Distributor such quantities of Products as Distributor
shall require in fulfilling its obligations hereunder, F.O.B.
destination, on the condition that Havoc will only be obligated or
required hereunder to fulfill firm orders for Products placed by
Distributor which constitute "full truckloads", as that term is
reasonably and mutually agreed upon by Distributor and Havoc from
time to time throughout the Term of this Agreement. Payment terms
are net thirty (30) days.
7.2 Order Requirements. Provided and on the condition
that Distributor places a firm order with Havoc for a "full
truckload" of Products, Havoc shall diligently and timely fulfill
and ship to Distributor each such "full truckload" of Products as
and when same are ordered from Havoc by Distributor.
7.3 Inspection of Products; Limitations on Liability.
Distributor will inspect all deliveries of Products within ten (10)
days of delivery to identify incorrect order fulfillment and patent
defects, including overage Products, external damage to labels and
packages, and other defects that can be determined without
breaching packages or pallets. Havoc may inspect the damage and
make a determination at its sole discretion. Havoc will replace all
defective Products justifiably rejected, at no cost to Distributor,
or issue a credit for the invoiced cost thereof. Subject to Section
17.1, this Section sets forth Distributor's sole remedy with
respect to any such defects. Havoc is not liable for any damage
caused by improper or inadequate handling, use or storage of
Products by Distributor or its agents from and after delivery, or
the use of Products after the recommended shelf life thereof.
7.4 Prices for Products. The initial delivered prices
for Products (including freight and shipping charges) are set forth
in Exhibit D. Havoc reserves the right to change prices on no less
than ninety (90)-day notice to Distributor. Distributor's orders
will be honored at the price in effect at the time they are placed
by Distributor with Havoc.
7.5 Shortages; Allocations. If Havoc is unable to
fulfill Distributor's order requirements, it will equitably
allocate available supplies in good faith among Distributor and
others dealing in the Products, taking into account historical and
forecasted sales, planned promotions and marketing campaigns, and
other relevant factors.
7.6 Havoc Representations. Havoc represents and
warrants that all Products, on the date of shipment, will be
merchantable, of good quality and fit for the purpose intended, and
will not be impure, contaminated or adulterated, misbranded or
mislabeled within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, and the Food Additives Amendment of 1968,
or an article which may not be introduced into interstate
commerce.
8. HANDLING OF PRODUCTS.
8.1 Quality Control; Maintenance of Quality; Inspection of
Facilities Distributor will be responsible for maintaining
the quality of all Products in its possession or under its control.
Distributor agrees to use the warehousing practices, inventory
control, product rotation (including at Accounts), handling and
other quality control procedures, which Havoc reasonably may
specify, or, if not so specified, which are consistent with
national brand industry standards in effect in the Territory.
Distributor promptly will notify Havoc of any quality problems that
come to its attention, and of the steps being taken to correct each
such problem. Distributor agrees to keep complete and accurate
records of the disposition and location of all Products distributed
by it to facilitate tracing.
8.2 Distributor to Manage Claims. Distributor will
give Havoc prompt written notice of any complaints involving
Products it has distributed. Distributor will manage promptly, in
cooperation with Havoc, all such complaints.
9. THE TRADEMARKS.
9.1 Trademark License. Distributor is hereby granted
the limited, non-exclusive, non-assignable and non-transferable
right to use the Trademarks, strictly in accordance with the terms
hereof, in connection with the promotion, merchandising,
distribution and sale of Products within the Territory. 9.2 Havoc
Representations. Havoc represents and warrants that it owns and
possesses adequate authority and rights to grant Distributor the
right to use the Trademarks as contemplated hereby, and that the
use of the Trademarks by Distributor in accordance with the terms
of this Agreement will not infringe the trademark or other
intellectual property rights of any third party.
9.3 Distributor Ackn