THIS
DISTRIBUTION AGREEMENT (“Agreement”) is effective as of
the 15 th
day of July, 2009, by and between
Skinny Nutritional Corporation, a Nevada corporation
(“Supplier”), and Canada Dry Bottling Company of New
York, a New York limited partnership
(“Distributor”).
WHEREAS , Supplier is the owner or exclusive U.S.
licensee, with authority to sublicense, of the trademarks listed on
Exhibit A hereto, and all service marks, designs, logos, trade
names, advertising, commercial symbols and slogans used in
connection with Products (as defined below) (collectively or
separately, the “Trademarks”) for non-alcoholic
beverages; and
WHEREAS , Supplier is engaged in the business of, among
other things, manufacturing, selling and distributing beverages
bearing one or more of the Trademarks (“Products”) in
various product forms as set forth on Exhibit B
hereto and such other forms as the parties may agree in
writing from time to time; and
WHEREAS , Distributor is engaged in the business of
manufacturing, selling and distributing beverages; and
WHEREAS , Supplier and Distributor hereby propose that
Supplier license the Trademarks to Distributor and sell the
Products to Distributor for sale and distribution in the territory
specified below; and
NOW, THEREFORE , in consideration of these premises and the
mutual covenants contained herein, Supplier and Distributor agree
as follows:
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Subject to the
express provisions of this Agreement, Supplier hereby grants to
Distributor the exclusive right to sell and distribute Products
within the Territory, as defined below.
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Supplier shall
offer to Distributor the exclusive right to sell and distribute in
the Territory pursuant to the terms and conditions of this
Agreement, all new or additional beverages manufactured,
distributed, owned or licensed by Supplier that Supplier wishes to
introduce in the Territory. If Distributor accepts such offer, then
such new or additional products shall be added as Products under
this Agreement and shall be subject to the terms hereof. In the
event Distributor declines such offer or fails to respond to such
offer within [***] days thereof, then:
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if the new or
additional product is in a [***] different from
the [***] of any Product previously distributed by
Distributor and with a [***] that is distinct from and not
confusingly similar to the [***]of any Product
previously distributed by Distributor, Supplier shall have the
right to sell or distribute such new or additional products in the
Territory directly or through third parties; and
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[*CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND
REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
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if the new or
additional product is a new or additional [***] of an existing
category of Product previously distributed by Distributor, then
Supplier shall [***] such new or additional products in the
Territory directly or through third parties.
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For purposes of
this Agreement, the term “[***]” shall mean a product
or line of products [***], such as, without limitation, the initial
[***] (including within such [***] and other [***] including but
not limited to [***].
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Supplier hereby
licenses the Trademarks and other Intellectual Property (as defined
in Paragraph 2.f.ii) to Distributor for use on and in connection
with the advertising, promotion, sale and distribution of the
Products. Supplier shall have the right to use
Distributor's name and logo on Supplier’s website for the
purpose of identifying Distributor as a distributor.
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Supplier shall
fill promptly all orders from Distributor for Products and for
other items to be provided by Supplier hereunder. Supplier’s
prices and terms of sale to Distributor for the Products shall be
[***]. Supplier’s prices to Distributor (net of all
discounts, allowances, rebates and promotional support payments
provided to Distributor by Supplier) shall reflect [***] to any
permitted [***] in the Territory (net of all discounts, allowances,
rebates and promotional support payments provided to such customer
by Supplier), to reflect the [***] Distributor. Supplier shall not
[***] for any item on less than [***] days’
advance written notice. The initial price for the
Products shall be [***] per 12 pack case.
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Supplier shall
set aside an exclusive area described in the schedule attached
hereto as Exhibit “C” (the “Territory”) in
which no person other than Distributor will distribute, sell or
promote Products. Supplier shall not suffer or permit in the
Territory any other distributor or licensee of the Trademarks with
respect to Products and shall not itself sell, nor suffer or permit
any others to sell, Products for resale or use in the Territory,
nor shall Supplier sell any Products to any person that Supplier
knows or has reason to know is likely directly or indirectly to
resell the Products in the Territory. Supplier is developing a
transshipment policy in consultation with Distributor for the
purpose of discouraging transshipment into the Territory and
redressing the economic impact of transshipping on the affected
distributors. The parties will negotiate in good faith to finalize
such a policy within ninety (90) days of execution of this
Agreement.
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Notwithstanding
the foregoing:
[*CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND
REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(i) Supplier
may continue to sell Products directly to outlets in the Territory
of any account that will not accept a DSD System for any beverages;
provided that the Supplier shall use reasonable efforts to persuade
such account to purchase the Products on a DSD basis from
Distributor;
(ii) To
the extent that any account with multiple outlets in the Territory
does not [***]of any beverages to its outlets and purchases
beverages only through a [***] that services only outlets of such
customer (an “Alternately Serviced Account”), and if
such [***] purchases all beverages [***]thereof and not from any
[***] of such beverages, then the Supplier may sell Products for
such customer [***], provided that Supplier ensures that no such
Products sold through [***] are resold to any other customer with
outlets in the Territory; and
(iii) Supplier
may continue to sell Products directly to the [***] for resale at
[***] in the Territory and directly to [***], provided that after
[***], Supplier’s prices to Distributor shall reflect the
[***] provided for in Section 2.b. above.
If Supplier
sells Products pursuant to clauses (i), (ii) and/or (iii) above,
Supplier shall pay Distributor quarterly an “Invasion
Fee” for each case of Product sold by Supplier during the
previous quarterly period for resale in the Territory equal to
[***] for such Product. Each such payment shall be
accompanied by a detailed accounting showing the calculations of
the amount due, including [***].
Supplier shall
not make sales pursuant to clauses (i), (ii) ) and/or (iii) above
without first ensuring that the customer will provide Supplier with
all information necessary to calculate the Invasion Fee, including
the number of cases of each Product SKU purchased by such customer
in each quarter for resale in each outlet of such customer within
the Territory. For sales of Products to [***], to the
extent that Supplier is unable to obtain from [***] the
number of cases of each Product sold to [***] for resale in the
Territory, the number of cases of Products sold by Supplier to
[***] for resale in the Territory during any period shall be
determined by multiplying the total number of cases of the Product
sold by Supplier directly to [***], as the case may be, during the
period concerned, by a fraction, the numerator of which shall be
the [***] in the Territory and the denominator of which shall be
the [***] within the [***] or within the [***], as the case may
be.
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Supplier shall
create and make available to Distributor advertising and promotion
materials for Products of a form, in amounts and upon terms
reasonably established by Supplier.
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[*CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND
REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
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Supplier shall
promptly pay or credit to Distributor’s account, when due,
not less frequently than monthly, all credits, discounts,
allowances, incentive payments, bill backs or other reimbursements
due Distributor pursuant to any program to which the parties may
agree. Supplier and Distributor will meet and agree (i)
on an annual basis on a projected [***] and (ii) on a quarterly
basis on a projected [***], and will [***]
accordingly. In the event that Supplier and Distributor
cannot agree on the projected average [***] for any year, the
amount applicable to the prior year shall be used for such year. .
In the event that Supplier and Distributor cannot agree on the
projected [***] for any quarter, the amount applicable to the then
current year shall be used for such quarter. Each quarter,
authorized representatives of both parties will meet to determine
final reconciliation of the agreed upon [***].
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Supplier
represents and warrants that:
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the Products
(A) shall be pure and wholesome, fit for human consumption,
merchantable and free from all defects, (B) shall, in all
instances, comply with all applicable Federal, state or local laws
and regulations, in all respects, including without limitation,
beverage quality, labeling, identity, quantity, packaging, and
returnable container or deposit requirements; (C) shall not be
adulterated and misbranded within the meaning of those terms under
the Federal Food, Drug and Cosmetic Act, as amended, and shall not
be an article or articles which may not, under the
provisions, of said Act, be introduced into interstate commerce;
(D) shall not be adulterated or misbranded within the meaning of
the Federal Insecticide, Fungicide, and Rodenticide Act, the
Federal Hazardous Substances Act, or any applicable state pure
foods act or any other applicable Federal, state, or local law or
regulation; and (E) when delivered to Distributor, shall have a
remaining shelf life of not less than five (5) months, the
expiration of which shall be clearly marked on the outside of all
cartons and pallets.
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it is the owner
or exclusive U.S. licensee of the Trademarks and all other
intellectual property used in the packaging, labels, marketing and
promotional materials designed or prepared by Supplier for the
Products (collectively, including the Trademarks, the
“Intellectual Property”), that it has the right to
license the Intellectual Property to Distributor throughout the
term of this Agreement, and that Distributor’s use of the
Intellectual Property will not infringe or violate the rights of
any third party; and
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it is free to
enter into this Agreement and is not under any obligation, written
or otherwise, to any other party which would prevent Supplier from
complying with all the terms and conditions of this
Agreement.
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[*CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND
REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
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Supplier shall
replace all Products that, at the time and place of delivery, do
not meet the requirements of Section 2.f.(i) above, at
Supplier’s expense, including [***] shall be allowed in the
amount of Distributor’s laid-in cost, at Distributor’s
option. Supplier shall also [***] for all of
Distributor’s [***] as a consequence of such Products [***]
above (including but not limited to Products in the hands of
Distributor or of the retail trade that have [***] if such Products
did not conform to the requirements of [***]) or as a consequence
of any other fault of Supplier, and the [***], at Supplier’s
option. The foregoing shall not be construed to entitle Distributor
to recover lost profits or other consequential damages resulting
from the failure of Products to conform to the requirements of
Section 2.f.(i) other than as expressly set forth above.
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Supplier shall
materially comply with all laws, rules, regulations, requirements,
orders and ordinances now in effect or which may hereafter be
enacted or promulgated applicable to its operations or obligations
under this Agreement.
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Distributor’s
Obligations.
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Distributor
shall pay Supplier for Product and any other items sold by Supplier
to Distributor in accordance with the prices and terms of sale set
forth in this Agreement or otherwise agreed to in writing by
Supplier and Distributor. All payments shall be due
within [***] days of delivery of such Products and items to
Distributor.
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Distributor
shall materially comply with all laws, rules, regulations,
requirements, orders and ordinances now in effect or which may
hereafter be enacted or promulgated applicable to its operations or
obligations under this Agreement.
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Distributor
shall use reasonable efforts to promote the sale of Product in the
Territory and to maintain a business organization and equipment
necessary to function properly in the manufacture, sale and
distribution of Product. Distributor may engage such
subdistributors, agents or other third parties to assist it in the
performance of this Agreement as Distributor deems
appropriate.
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Distributor
shall not sell or distribute Product outside the Territory or sell
the Product to any person that Distributor knows or has reason to
believe is likely to resell the Products outside the Territory.
Supplier shall include in all distribution agreements entered into
hereafter, and use diligent efforts to add to all existing
distribution agreements, a provision [***]. in all its bottling and
distribution agreements with all [***].
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Distributor and
Supplier shall jointly prepare and execute a reasonable Annual
Marketing Plan for the Products for each marketing year, including
participation in such marketing programs as the parties shall
agree. For the first year of the term hereof, the Annual
Marketing Plan is as set forth on Exhibit
“D.” If Distributor and Supplier are unable
to agree on an Annual Marketing Plan for any subsequent year,
[***]shall govern until agreement is reached.
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[*CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND
REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
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Supplier shall
cover [***]% of any and all slotting fees, subject to
Supplier’s approval. Supplier agrees to commit not
less than $[***]in slotting fees in the Territory during
[***]. Supplier agrees to [***] to ensure payment of
[***] to [***] by Supplier to a chain customer. Supplier
and Distributor shall agree upon Supplier’s commitment for
slotting fees for each subsequent seven-year renewal
term.
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Distributor
shall maintain and submit to Supplier at reasonable intervals
sales, marketing and similar reports relating to Product in a
mutually agreed form; provided that Distributor shall not be
required to provide [***] information. Distributor shall
maintain and submit to Supplier reports on [***], aggregated by
[***] but without [***] data, on a [***] basis.
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Except as
otherwise provided in this Agreement, Distributor shall not sell,
transfer, convey, assign, or otherwise dispose of all or any part
of its interest in this Agreement without the prior written consent
of Supplier, provided that such consent is not unreasonably
withheld; and provided further that no consent shall be
required for any transfer so long as the majority of the
outstanding voting shares or other form of voting ownership of the
entity holding Distributor’s rights and obligations under
this Agreement is held by: [***] (“Family
Members”); or any trusts for the benefit of any Family
Members of any of them; or any corporation or other business entity
controlled by [***], Family Members or such trusts. It shall be
presumptively unreasonable for Supplier to withhold its consent to
any transfer of Distributor’s rights under this Agreement to
any transferee that has, or the senior management of which has, at
least [***] in the beverage industry and [***] of at least [***]
during the [***]period immediately preceding the month in which
Distributor notifies Supplier of the identity of the proposed
transferee.
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Distributor
warrants and represents to Supplier that it is f
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