Exhibit 10.39
THIRD AMENDMENT TO SUPPLY
AGREEMENT
This Third Amendment to Supply Agreement (this
“Amendment”) is dated the 4th day of May, 2005, and is
attached to and made a part of the Supply Agreement dated as of
April 2, 2003, as amended (the “Agreement”), among
Midas International Corporation, a Delaware corporation
(“MIC”), Parts Warehouse, Inc., a Delaware corporation
(“PWI”) (collectively “Midas”), and
AutoZone Parts, Inc., a Nevada corporation, successor by assignment
to AutoZone, Inc. (“AutoZone”). All capitalized terms
not defined herein shall have the meanings ascribed to them in the
Agreement.
For good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree
as follows:
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1.
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The second recital of the
Agreement is hereby deleted in its entirety and replaced with the
following:
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“WHEREAS, AutoZone and Midas
desire to have AutoZone serve as (i) the exclusive supplier of
Midas-brand Products (as hereinafter defined) to any and all
current and future Midas shops, whether franchised or owned and
operated by Midas or its affiliates, located in the United States
(collectively, “Midas Shops”), (ii) the exclusively
endorsed full-line automotive aftermarket parts supplier of
non-Midas Stocking Products (as hereinafter defined) to franchised
Midas Shops, (iii) a preferred supplier of Non-Stocking Products
(as hereinafter defined) to Participating Midas Shops (as
hereinafter defined), (iv) the exclusively endorsed supplier of
Stocking Exhaust Products (as hereinafter defined) (other than
Specialty Exhaust Products, as hereinafter defined) to franchised
Midas Shops for purchase on a stocking basis, and (v) the exclusive
full-line automotive aftermarket parts supplier of non-Midas
Stocking Products and exclusive supplier of Stocking Exhaust
Products (other than Specialty Exhaust Products) to Midas Shops
owned and operated by Midas or its affiliates, all on the terms and
subject to the conditions set forth herein; and”
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2.
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The first sentence of the first
paragraph of Section 2 of the Agreement is hereby deleted in its
entirety and replaced with the following:
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“Upon the terms and subject to
the conditions set forth herein, Midas hereby appoints AutoZone to
serve, during the Supply Term (as defined in Section 8 of this
Agreement), as (i) the exclusive supplier of Midas-brand Products
to Midas Shops, (ii) the exclusively endorsed full-line automotive
aftermarket parts supplier of non-Midas Stocking Products to
franchised Midas Shops, (iii) a preferred supplier of Non-Stocking
Products to Participating Midas Shops, (iv) the exclusively
endorsed supplier of Stocking Exhaust Products (other than
Specialty Exhaust Products) to franchised Midas Shops for purchase
on a stocking basis, and (v) the exclusive full-line automotive
aftermarket parts supplier of non-Midas Stocking Products and
exclusive supplier of
Stocking Exhaust Products (other
than Specialty Exhaust Products) to Midas Shops owned and operated
by Midas or its affiliates. For purposes of this Agreement,
“Specialty Exhaust Products” shall mean all
high-performance and specialty mufflers and exhaust components,
including, without limitation, Flowmaster-brand exhaust products.
The foregoing appointments as the exclusively endorsed full-line
automotive aftermarket parts supplier of non-Midas Stocking
Products to Midas Shops (clause (ii) above) and the exclusive
full-line automotive aftermarket parts supplier of non-Midas
Stocking Products to Midas Shops owned and operated by Midas or its
affiliates (part of clause (v) above) shall be expressly contingent
upon AutoZone’s pricing and service levels for such products
remaining competitive in the market, as determined by Midas in its
reasonable discretion; provided , however , that
AutoZone shall have a period of thirty (30) days immediately after
Midas notifies AutoZone of its election to rescind the two
foregoing exclusive appointments to correct such pricing and/or
service level issues to the reasonable satisfaction of
Midas.”
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3.
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The following sentence shall be
inserted after the second sentence of Subpart (i) of Subsection (a)
of Section 2 of the Agreement:
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“Notwithstanding anything
contained herein or on Schedule 3 to the contrary, “Stocking
Products” shall specifically exclude any Stocking Exhaust
Products. Rather, AutoZone’s role as the exclusively endorsed
supplier of Stocking Exhaust Products (other than Specialty Exhaust
Products) is governed by the Exhaust Program (as defined and
described in Subsection 2(c) below).”
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4.
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The last two sentences of Subpart
(iii) of Subsection (a) of Section 2 of the Agreement are hereby
deleted in their entirety and replaced with the
following:
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“AutoZone shall ensure that
all Stocking Products are delivered on such equipment as is
necessary to safely and legally unload the Stocking Product order
from the equipment into the Midas Shop’s
bays.”
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5.
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The following shall be inserted
as a new second paragraph to Subpart (iv) of Subsection (a) of
Section 2 of the Agreement:
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“Notwithstanding the
foregoing, following the date that the Exhaust Program is
implemented in a particular Midas Shop, the minimum order
requirement (for purposes of free freight) applicable to such Midas
Shop under the Stocking Program shall be [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] and the
applicable delivery fee for orders failing to meet the minimum
order requirement shall be [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION]. In other words, from and after
that date, AutoZone shall be responsible for the freight charges
relating to all shipments made to such Midas Shop under the
Stocking Program, but only to the extent that the Stocking Program
order is greater than or equal to [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] in the aggregate and
specifies delivery to a single Midas Shop location (or other
mutually agreed location).
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Such Midas Shop shall be charged a
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] delivery fee on each Stocking Program order that does
not meet the foregoing [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] minimum requirement. Such freight
charge will be added to the applicable Stocking Program
order’s invoice. There will be no penalty or fee charged by
AutoZone if a Midas Shop participating in the Stocking Program
elects not to place a Stocking Program order on any particular
order date or otherwise in accordance with its applicable order
cycle.”
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6.
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Subpart (vii) of Subsection (a)
of Section 2 of the Agreement is hereby deleted in its entirety and
replaced with the following:
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“(vii) Returns . (a) On
a semiannual basis during the Supply Term, commencing with the
second quarter of 2005, each Midas Shop shall be entitled to return
to AutoZone for full credit an amount of undamaged Midas-brand
Products and Stocking Exhaust Products (including Code 1 Inventory,
as defined in Subsection 2(c)(x)(C) below), in original undamaged
packaging, in a dollar amount up to [CONFIDENTIAL PORTION OMITTED
AND FILED SEPARATELY WITH THE COMMISSION] of that Midas
Shop’s total net Midas-brand Product and Stocking Exhaust
Product purchases under the Stocking Program and the Exhaust
Program during the previous four (4) calendar quarters. All returns
of Midas-brand Products and Stocking Exhaust Products (including
Code 1 Inventory) shall be picked up by the nearest local AutoZone
Store (as hereinafter defined) or otherwise at AutoZone’s
discretion, at no charge to the Midas Shop. For any Midas Shop that
is not serviced by a local AutoZone Store, AutoZone shall provide a
process whereby returns of Midas-brand Products and Stocking
Exhaust Products (including Code 1 Inventory) can be made by the
Midas Shop to its servicing AutoZone DC without charge to Midas or
the applicable Midas franchisee.
(b) In
addition to and exclusive of the foregoing, AutoZone agrees that,
effective as of May 1, 2005, each Midas Shop shall also be entitled
to return to AutoZone, for full credit at the [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] price from
AutoZone and without limitation , all undamaged non-Midas
Stocking Products and all non-exhaust Non-Stocking Products, in
original undamaged packaging, purchased at any time during the
Supply Term, but only to the extent that such products are then
stocked, or normally stocked, by AutoZone in its retail
outlets.
(c) After the
completion of the lift of the Code 2 Inventory (as defined in
Subsection 2(c)(x)(B) of this Agreement) at a particular Midas Shop
as described in Subsection 2(c)(x)(B) below, any and all Code 2
Inventory remaining at such Midas Shop shall no longer be eligible
for return to AutoZone pursuant to this
Agreement.”
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7.
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The following shall be inserted
as a new Subpart (ix) of Subsection (a) of Section 2 of the
Agreement:
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“(ix) On or before September
1, 2005, AutoZone shall develop, implement, perform and complete a
Midas Dealer Ride Control Changeover Program for the Midas System
(the “Ride Control Program”). The Ride Control Program
shall provide for (a) the elimination of Midas-brand and
Evergard-brand shocks and struts (collectively, “Midas Shocks
& Struts”) from the Midas System and (b) the replacement
of the eliminated Midas Shocks & Struts with Gabriel-brand
G-Force shocks and struts (collectively, “Gabriel Shocks
& Struts”). The Gabriel Shocks & Struts shall
initially have the same pricing as the eliminated Midas Shocks
& Struts (although AutoZone shall thereafter have the right to
adjust such pricing from time to time in accordance with Section
2(a)(v) of this Agreement). AutoZone shall provide each Midas Shop
with two options under the Ride Control Program. Under the first
option, a Midas Shop shall be entitled to have AutoZone
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]. Under this option, a Midas Shop shall not be entitled
to return to AutoZone for credit any remaining Midas Shocks &
Struts in its inventory following the completion of the foregoing
lift. Under the second option (i.e., for all Midas Shops not
electing the first option), Midas Shops shall be entitled to a
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] discount from AutoZone on all Gabriel Shocks &
Struts purchased under the Stocking Program prior to December 31,
2005. Any Midas Shop choosing this option shall not be entitled to
return any Midas Shocks & Struts to AutoZone. All other terms
and conditions of the Ride Control Program shall be mutually agreed
to by Midas and AutoZone.”
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8.
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Subpart (iv) of Subsection (b) of
Section 2 of the Agreement is hereby amended by deleting from the
end of the first sentence thereof the phrase “ less a
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION] off-invoice allowance”.
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9.
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The following shall be inserted
as a new Subsection (c) of Section 2 of the Agreement:
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“
(c) Exhaust
Program . The parties agree that a new exhaust program will
be implemented under which AutoZone shall serve as the exclusively
endorsed supplier of Stocking Exhaust Products (other than
Specialty Exhaust Products) to franchised Midas Shops for purchase
on a stocking basis and the exclusive supplier of Stocking Exhaust
Products (other than Specialty Exhaust Products) to Midas Shops
owned and operated by Midas or its affiliates (the “Exhaust
Program”). The Exhaust Program will be implemented on a
region-by-region basis, with each region being defined, for
purposes of this Section 2(c), as a respective delivery area of an
AutoZone DC (an “Exhaust Region”). Midas and AutoZone
shall work together to complete the conversion of the entire Midas
System to the new Exhaust Program by December 31, 2005.
Accordingly, the Midas exhaust program currently in effect shall
remain in place in each Exhaust Region until the completion of the
conversion to the Exhaust Program in such Exhaust Region. The
parties agree that, subject to the terms and conditions of this
Agreement, Midas shall have and exercise ultimate control and sole
decision-making authority with respect to all aspects of the
implementation of the Exhaust Program and the transition of the
Midas Shops thereto.
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(i)
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Stocking Exhaust Product
Inventory . Under the
Exhaust Program, Midas Shops shall be entitled to place, in the
manner described in Subsection 2(c)(ii) below,
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and AutoZone shall receive and fill,
orders for such types and quantities of Stocking Exhaust Products
as the Midas Shop may require from time to time during the Supply
Term to be delivered, in the manner described in Subsection
2(c)(iii) below, on a weekly basis (or otherwise as mutually
agreed). For purposes of this Agreement, “Stocking Exhaust
Products” shall mean the complete line of exhaust SKUs
manufactured or offered for sale from time to time by ArvinMeritor,
Inc. (“Arvin”) and/or such other exhaust
manufacturer(s) or vendor(s) as AutoZone may hereafter select;
provided , however , that such other exhaust
manufacturer(s) and/or vendor(s) carry substantially the same depth
and breadth of exhaust SKUs as carried by Arvin.
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(ii)
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Orders . Each Midas Shop shall have the right to place
Exhaust Program orders with AutoZone on a weekly basis (or on a
scheduled semi-weekly or bi-weekly basis if mutually agreed to by
AutoZone and the applicable Midas Shop). Each Midas Shop shall be
informed of its scheduled delivery time and date, and the date and
time after which any Exhaust Program orders received from a Midas
Shop will not be shipped with the next shipment (the “Exhaust
Order Cut-Off Time”). The scheduled delivery time and date
and the Exhaust Order Cut-Off Time may be adjusted by AutoZone from
time to time in its sole discretion upon prior written notice to
the affected Midas Shop. Exhaust Program orders shall be placed by
Midas Shops, and processed by AutoZone, separately from Stocking
Program orders.
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(iii)
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Delivery
. AutoZone shall make deliveries
under the Exhaust Program on a scheduled weekly basis (or on a
scheduled semi-weekly or bi-weekly basis if mutually agreed to by
AutoZone and the applicable Midas Shop). Exhaust Program orders
shall be shipped by AutoZone separately from Stocking Program
orders. Delivery shall be made to the location of the Midas Shop
placing the order (or such other location(s) as may be mutually
agreed to between AutoZone and Midas or the Midas franchisee). The
frequency of Exhaust Program deliveries for a particular Midas Shop
(or other specified location) shall be weekly, unless mutually
agreed otherwise between AutoZone and Midas or the applicable Midas
franchisee. Subject to Section 14(a) of this Agreement, AutoZone
shall deliver (either directly through the use of AutoZone’s
own fleet or through third party carriers) all orders under the
Exhaust Program in accordance with Schedule 5.1 attached hereto and
incorporated herein by reference. For those Midas Shops that are
not listed on Schedule 5.1 hereto, AutoZone shall deliver (either
directly through the use of AutoZone’s own fleet or through
third party carriers) all orders under the Exhaust Program in
accordance with the following timetable:
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AutoZone DC servicing Midas Shop
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Delivery Requirement from Exhaust
Order Cut-Off Time
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Lavonia, GA
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2-3*
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Lexington, TN
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2-3*
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Danville, IL
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3-4*
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Zanesville, OH
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2-3*
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Lafayette, LA
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2-4*
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Dallas, TX
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3-4*
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Phoenix, AZ
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4*
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Ontario, CA (excl. Alaska and
Hawaii)
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3-5*
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Ontario, CA (Alaska and Hawaii only)
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8*
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*
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Based on business days. Delivery
must be made by 5:00 p.m. local time on the scheduled delivery
date.
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