Exhibit 10.31
CONFIDENTIAL
TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this “
Agreement ”) dated as of March 27, 2009, (the
“ Effective Date ”) by and among Green Mountain
Coffee Roasters, Inc., a Delaware corporation, with its head office
located at 33 Coffee Lane, Waterbury, Vermont 05676-1529 (“
GMCR ”) and TC Global, Inc., f/k/a Tully’s
Coffee Corporation, a Washington corporation with its head offices
located at 3100 Airport Way South, Seattle, Washington 98134 (
“ Tully’s ”). Capitalized terms used in
this Agreement without separate definition are defined or otherwise
referenced in Section XII(l).
WHEREAS, GMCR and Tully’s have
previously entered into an Asset Purchase Agreement, dated as of
September 15, 2008 as amended by Amendment No. 1 thereto
dated November 12, 2008 and Amendment No. 2 thereto dated
February 6, 2009 (the “ Transaction Agreement
”), whereby GMCR is purchasing the assets associated with the
wholesale business of Tully’s, including the
“Tully’s” world-wide brand (excluding Japan) and
other trade names, trademarks and service marks;
WHEREAS, simultaneously with the
execution hereof, GMCR and Tully’s have entered into a
License Agreement, dated as of September 15, 2008 (the “
License Agreement ”), whereby GMCR has agreed to grant
Tully’s a license to use the “Tully’s”
brand and other trade names, trademarks and service marks in
connection with (i) certain retail operations worldwide
(excluding Japan), and (ii) certain wholesale operations
outside of North America;
WHEREAS, conditional upon the
successful completion of the transactions contemplated in the
Transaction Agreement and License Agreement, GMCR has agreed to
enter into exclusive supply arrangements on the terms and in such
manner as is set forth below;
WHEREAS, agreement of Tully’s
and GMCR, respectively, to enter into this Supply Agreement is a
condition precedent to each party’s obligations to close the
transactions contemplated by the Transaction Agreement;
WHEREAS, upon the closing of the
transactions contemplated by the Transaction Agreement, GMCR as the
new owner of the “Tully’s” brand wants to ensure
the quality of the product sold as Tully’s coffee at
“Tully’s” branded retail, franchised and licensed
locations;
NOW THEREFORE in consideration of
the mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto covenant and agree as
follows:
I. PRODUCTS AND OTHER COFFEE
PRODUCTS
(a) “ Products ”
shall mean certain 5-lb bulk, Retail Coffee Bags and fractional
pack coffee for use at Licensed Retail Stores (as defined in the
License Agreement) listed in Schedule A
CONFIDENTIAL TREATMENT
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been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
attached hereto . Schedule A may
be amended from time to time by a written agreement signed by the
authorized representatives of both parties, at their sole
discretion; provided, however , GMCR may delete any item
from Schedule A without the prior consent of Tully’s,
upon ninety (90) days prior written notice to Tully’s,
if Tully’s does not purchase at least [***] pounds of
such item per month. To the extent GMCR develops or Tully’s
requests amendments to Schedule A involving new products not
offered as of the Effective Date but of the same general kind or
nature as those listed on Schedule A , the parties agree
that any amendment of Schedule A to add such new
products shall be contingent upon the mutual agreement of the
parties to price, quantity, delivery, and other terms which may
vary from the terms stated herein based on the nature of the new
product and associated circumstances. Notwithstanding the
foregoing, GMCR agrees not to remove any Retail Coffee Bag from
Schedule A (“ Schedule A Retail Coffee Bag
”) during the term of this Agreement without the prior
written approval of Tully’s.
(b) “ Other Coffee
Products ” shall mean grocery bagged coffees, K-Cup
portion packs and other coffee products as listed in Schedule
B attached hereto . Schedule B may be amended
from time to time by a written agreement signed by the authorized
representatives of both parties, at their sole discretion;
provided, however , GMCR may delete any item from
Schedule B without the prior consent of Tully’s, upon
ninety (90) days prior written notice to Tully’s, if
Tully’s does not purchase at least [***] pounds of
such item per month. To the extent GMCR develops or Tully’s
requests amendments to Schedule B involving new products not
offered as of the Effective Date but of the same general kind or
nature as those listed on Schedule B , the parties agree
that any amendment of Schedule B to add such new products
shall be contingent upon the mutual agreement of the parties to
price, quantity, delivery, and other terms which may vary from the
terms stated herein based on the nature of the new product and
associated circumstances.
II. COVENANTS TO SUPPLY AND
PURCHASE
(a) Subject to the terms and
conditions of this Agreement, GMCR covenants and agrees to use
commercially reasonable efforts to supply, or cause to supply, to
Tully’s all of Tully’s requirements of Products and
Other Coffee Products during the Term of this Agreement.
Notwithstanding the foregoing, GMCR covenants and agrees that it
will supply, or cause to supply, to Tully’s all of
Tully’s Non-Free Standing Licensed Store Requirements for
Schedule A Retail Coffee Bags.
(b) Subject to the terms and
conditions of this Agreement, Tully’s covenants and agrees to
purchase, or cause to be purchased, all of its requirements of
Products and Other Coffee Products from GMCR during the Term of
this Agreement, solely for use consistent with the parties’
License Agreement.
(c) GMCR shall not be obligated to
supply, or cause to supply, to Tully’s and Tully’s
shall not be obligated to purchase, or cause to be purchased, from
GMCR any products other than the Products and Other Coffee
Products.
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CONFIDENTIAL TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
(d) Notwithstanding anything to the
contrary hereinabove, but subject to the limitation set forth in
Section II(e) below, during the term of this Agreement,
Tully’s shall have the option to purchase Products and Other
Coffee Products, except K-Cup portion packs, from a Secondary
Vendor in the following situations, but in all cases subject to the
requirements and limitations applicable to a Secondary Vendor set
forth in the License Agreement:
(i) if any product listed on
Schedule A is moved to Schedule B without Tully’s prior
written approval, Tully’s may purchase such product from a
Secondary Vendor;
(ii) if GMCR is unable to fill all
or any part of a purchase order for any Product or Other Coffee
Product within 30 days after the delivery date set forth in such
order, Tully’s may purchase that portion of the order for
such product from a Secondary Vendor;
(iii) if GMCR elects to discontinue
producing any Product or Other Coffee Product (each a
“Discontinued Product”), Tully’s may purchase
such Discontinued Product from a Secondary Vendor;
(iv) if GMCR elects not to produce
any new Product or Other Coffee Product desired by Tully’s,
Tully’s may purchase such new Product or Other Coffee Product
from a Secondary Vendor;
(v) if after reaching the first
[***] aggregate pounds of Products supplied by GMCR each
Contract Year, GMCR elects not to continue with Schedule A pricing
for one or more Products that were subject to Schedule A pricing,
Tully’s may purchase from a Secondary Vendor those Products
for which GMCR has made such election;
(vi) if at the end of the initial or
any follow-on term of this Agreement, GMCR elects not to continue
with the Schedule A and Schedule B pricing for Products and Other
Coffee Products, Tully’s may purchase some or all of its
requirements for Products and Other Coffee Products from a
Secondary Vendor subject to Section II(e) below; and
(vii) if GMCR elects not to supply
Special Coffee Products, Tully’s may purchase such products
from a Secondary Vendor; provided, however, before doing so
(a) Tully’s shall provide ninety (90) days written
notice to GMCR prior to the date upon which Tully’s desires
to offer Special Coffee Products for sale (“ Special
Coffee Product Notice ”) (b) the Special Coffee
Products per such notice shall be limited in number and shall only
be sold for a limited seasonal, promotional or special-event
related period and (c) GMCR elects not to supply such products
after having fifteen (15) days to consider the Special Coffee
Product Notice. Tully’s shall only sell Special Coffee
Products in its stand-alone Licensed Retail Stores. Tully’s
may make up to three (3) Special Coffee Product Notices each
Contract Year. GMCR’s election not to supply products per a
Special Coffee Product Notice shall not waive GMCR’s right
under this Agreement to be the exclusive supplier, subject to this
subsection, of Special Coffee Products in the future.
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CONFIDENTIAL TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
(e) Tully’s shall not have any
right to use a Secondary Vendor to supply Schedule A Retail Coffee
Bags to Non-Freestanding Licensed Retail Stores, unless GMCR has
consistently failed to supply to Tully’s the volume of Retail
Coffee Bags required to supply all of Tully’s
Non-Freestanding Licensed Retail Store Requirements.
III. FORECASTS, ORDERS AND
DELIVERY
(a) On or before the Effective Date,
and thereafter on or before the last day of each calendar quarter
during the Term, Tully’s shall provide to GMCR a written
forecast (“ Forecast ”) of Tully’s
anticipated demand for all Products and Other Coffee Products to be
supplied by GMCR to Tully’s under this Agreement during the
four calendar quarters next following the calendar quarter in which
the Forecast is scheduled to be delivered hereunder. For each of
the Products, the Forecasts shall be binding on Tully’s
(i) to purchase during the first calendar quarter included in
each Forecast at least [***] % of the quantity of such
Product listed therein as the anticipated quantity demand for such
Product during such calendar quarter or (ii) to pay to GMCR a
surcharge equal to [***] % of the aggregate invoice price
for the quantity of such Product purchased during such calendar
quarter which is between the actual amount of Product purchased and
[***] % of the quantity forecasted in such calendar quarter,
notwithstanding the pricing limitations set forth in Section
III(a). In addition, if during the first calendar quarter included
in each Forecast Tully’s purchases in excess of [***]
% of the quantity of such Product listed therein as the anticipated
quantity demand for such Product during such calendar quarter,
Tully’s shall be required to pay to GMCR a surcharge equal to
[***] % of the aggregate invoice price for the quantity of
such Product purchased during such calendar quarter in excess of
such [***] % quantity, notwithstanding the pricing
limitations set forth in Section III(a).
(b) Tully’s shall submit
purchase orders for the Products and Other Coffee Products either
by email, facsimile or first class mail, which, at a minimum, set
forth the product numbers, quantities and requested delivery dates.
The purchase orders shall only become binding on the parties upon
GMCR’s acceptance of such purchase orders, either by email,
facsimile or first mail.
(c) GMCR shall make commercially
reasonable efforts to supply all Products and Other Coffee Products
ordered in conformity with this Agreement, but GMCR does not
guarantee the availability of any Products or Other Coffee
Products. If shortages of any Products or Other Coffee Products
ordered arise, whether due to manufacturing, transportation,
regulatory, economic, supply chain, or other conditions, GMCR may
allocate any of its products among its customers, including
Tully’s on any commercially reasonable basis. In the event
that GMCR is unable to fill all or any part of a purchase order for
any Product or Other Coffee Product within 30 days after the
delivery date set forth in such order, then Tully’s shall be
entitled to use a Secondary Vendor as provided for in
Section II(d) above to supply the Product or Other Coffee
Product, except K-Cup portion packs, until such time as GMCR is
able to supply the quantity of the ordered Product or Other Coffee
Product to Tully’s, at which time Tully’s shall once
again be obligated to purchase its requirements of the Product or
Other Coffee Product from GMCR.
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CONFIDENTIAL TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
(d) GMCR agrees to deliver, and
shall only be obligated to deliver, all Products and Other Coffee
Products supplied under this Agreement to a single facility in the
United States selected by Tully’s (the “ Central
Facility ”). Tully’s shall provide GMCR with
written notice of the specific delivery address of the Central
Facility before the Effective Date. At its sole discretion,
Tully’s may change the location of the Central Facility at
any time during the Term of the Agreement, so long as such changes
are made upon thirty (30) days prior written notice to GMCR.
GMCR shall deliver the Products and Other Coffee Products no more
than two (2) days after the agreed delivery date as set forth
in the respective purchase order.
(e) In GMCR’s sole discretion,
GMCR shall replace, at its own expense, all Products and Other
Coffee Products that do not conform in all material respects to
GMCR’s warranties, as set forth in Section VI, upon delivery
of such products to Tully’s (“ Non-Conforming
Products ”), including transportation costs of getting
replacement Products or Other Coffee Products to Tully’s, or
shall credit to Tully’s account for the delivered price of
such Products or Other Coffee Products plus transportation
expenses; provided, however, Tully’s shall notify GMCR
without undue delay after Tully’s becomes aware of such
Non-Conforming Products.
IV. PRICE AND
PAYMENT
(a) [***] The initial prices
for all Products are set forth in Schedule A and Schedule
B , and all such prices during the Term will be FOB
GMCR’s designated shipping point, with freight costs to the
Central Facility borne equally by GMCR and Tully’s. GMCR
shall update the weighted average cost and the corresponding price
applicable to the Products each calendar quarter during the Term
and deliver each such update to Tully’s, in each case no
sooner than twenty (20) days prior to the end of each calendar
quarter and no later than fifteen (15) days prior to the end
of each calendar quarter. In each case, the weighted average cost
of a Product shall be calculated and equal the weighted average
cost of green coffee, including differentials, plus the weighted
average cost of packaging materials, freight in, labor and
allocated overhead incurred by GMCR with respect to such Product
over the ninety (90) day period immediately preceding the
date, which is fifteen (15) days prior to the date on which
such weighted average cost calculation is delivered by GMCR to
Tully’s.
(b) In the event Tully’s
requires a higher aggregate volume of Products than [***]
pounds in a given Contract Year and GMCR does not elect to continue
Schedule A pricing for one or more Products after such aggregate
[***] pound volume is exceeded, all Products for which GMCR
has not made such Schedule A pricing continuation election shall be
priced at GMCR’s best list price offered to like customers
based on volume, services, single order and single point of
distribution on the date on which the order therefor is accepted by
GMCR, provided that Tully’s shall have the option to use a
Secondary Vendor to supply such Products as set forth in Section
II(d) above.
(c) Other Coffee Products supplied
by GMCR under this Agreement shall be priced at GMCR’s list
price offered to like customers for such Other Coffee Products on
the date on which the order therefor is accepted by GMCR, and all
such prices are FOB GMCR’s designated shipping point, with
freight costs to the Central Facility borne equally by GMCR and
Tully’s.
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CONFIDENTIAL TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
(d) Payments made by Tully’s
for Products and Other Coffee Products purchased hereunder and for
any other charges due hereunder shall be due and payable in full in
U.S. dollars within thirty (30) days after the date of
shipment by GMCR or the date on which such other charge accrues, as
applicable. Any payment owed to GMCR under this Agreement that is
not paid before the due date for such payment may, in GMCR’s
sole discretion, bear interest, to the extent permitted by
applicable law, at one and one-half percent (1
1
/ 2 %) per
month calculated on the number of days such payment is
delinquent.
V. TERM AND
TERMINATION
(a) This Agreement shall be for a
term of five (5) years starting on the Effective Date and
shall be renewed thereafter for separate additional terms of one
(1) year each unless either party provides written notice of
non-renewal to the other party at least one hundred twenty
(120) days in advance of the end of the initial five
(5) year term or an additional term, as the case may be. For
the purposes of this Agreement, the five (5) year initial term
referred to above shall be the “Initial Term” and the
Initial Term combined with any extensions or renewals thereof shall
be the “Term” or the “Full Term.” Subject
to the term and conditions of this Agreement including without
limitation Section II(d) above, Tully’s stipulates and agrees
that its agreement to source all of its requirements for Products
from GMCR for a period of years, no less than five (5), is a
material inducement and consideration to GMCR to enter into this
Agreement and to the Transaction Agreement and License
Agreement.
(b) Either party may terminate this
Agreement immediately upon written notice to the other party in the
event of any breach by the other party of a material obligation
under this Agreement, which the receiving party fails to cure
within thirty (30) days after receiving such notice, or in the
event the other party (i) discontinues its business
operations; (ii) makes an assignment for the benefit of its
creditors or an admission of its inability to pay its obligations
as they become due; or (iii) files or has filed against it, a
petition in bankruptcy or any similar proceeding or files any
pleading seeking any reorganization, liquidation, or dissolution
under any law, or admits or fails to contest the material
allegations of any such pleading filed against it, or is
adjudicated as bankrupt or insolvent, or a receiver is appointed
for a substantial part of such party’s assets, or the claims
of creditors of such party are abated or subject to a moratorium
under any law.
(c) Upon termination of this
Agreement for any reason, nothing herein shall be construed to
release either party from any obligation that matured prior to the
effective date of such termination, including obligations under
binding orders for purchase and delivery of Products or Other
Coffee Products at the time of such termination shall remain in
effect.
(d) Upon the termination of this
Agreement (except for termination by GMCR pursuant to Section V(b),
Tully’s shall immediately be permitted to source the Products
and Other Coffee Products, except K-Cup portion packs, from a
Secondary Vendor as set forth in Section II(d).
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CONFIDENTIAL TREATMENT
[***] Indicates that text has
been omitted which is the subject of a confidential treatment
request. This text has been separately filed with the
SEC.
(e) The provisions of Sections IX
and XI of the Agreement and all terms, conditions or definitions
contained within
