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EXHIBIT 10.3
December 21, 1998
Mr. Xxxxxx Xxxxxxxx
Vice President, Proprietary Products
Wal-Mart Stores, Inc.
000 XX 0xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx
00000 - 0139
Dear Xxx:
SUBJECT: SUPPLY CONTRACT
This is our agreement (the "Agreement") concerning the supply of Products by
Cott to Wal-Mart.
1. TERM - THE TERM OF THIS AGREEMENT SHALL BE * [CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED] OR UNTIL TERMINATED BY MUTUAL AGREEMENT OF THE PARTIES OR
OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT ("TERM").
2. SCOPE -
(A) Cott will, throughout the Term, be the supplier of Products to Wal-Mart, but
Wal-Mart shall, subject to the terms and conditions of this Agreement, have the
right to source Products from other suppliers (provided that Wal-Mart shall not
produce any of the Products for itself). Subject to what is otherwise agreed by
the parties from time to time regarding forecasting and purchase order lead
times, Cott will supply Products as and when ordered by Wal-Mart. Some of the
Soft Drinks are produced from Wal-Mart Controlled Concentrates, and the balance
of the Soft Drinks are produced from concentrates supplied by Cott. However, if
Wal-Mart issues a termination notice pursuant to clause 6(d) below its new
supplier shall (to the extent that Wal-Mart is entitled to transfer portions of
its requirements for production of Products during the Notice Period, as
hereinafter defined) not be entitled to utilize Cott supplied concentrates.
(B) Except to the extent that any stores when acquired by Wal-Mart are
contractually obligated to purchase Soft Drinks from other suppliers, if
Wal-Mart wishes to introduce a new Soft Drink flavor or to change a Soft Drink
flavor being produced by Cott, Wal-Mart may do so and have such Soft Drink
produced by another manufacturer for the Program, so long as Wal-Mart shall have
first given Cott 30 days from receipt of written notice from Wal-Mart to
formulate a flavor, together with service, pricing and product quality,
acceptable to Wal-Mart, acting reasonably and in good faith (it being
acknowledged and agreed by Wal-Mart that service, pricing and product quality
which is consistent with that of the other equivalent Products then being
supplied by Cott under this Agreement shall be deemed to be acceptable to
Wal-Mart). If Cott is able to do so, Cott shall provide such Soft Drinks to
Wal-Mart in accordance with this Agreement. If Cott is unable to do so, Wal-Mart
shall be free to engage a third party to provide such Soft Drinks for the
Program.
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(c) Cott may supply Soft Drinks or other products to competitors of Wal-Mart,
including under other retailer brands. * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] Cott will not supply any colas or clear sparkling flavored waters
with the same specifications and flavors as the Products to any other customers
in the USA ("Cott's Exclusivity Obligation"). All intellectual property rights
in all concentrates and formulations used by Cott in the production of the
Products are and shall remain the sole property of Cott.
(d) Cott will provide Wal-Mart with a letter from * [CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED] by which * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
will agree to provide * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
3. PRICING; TERMS; FORMATS -
(a) Pricing throughout the Term will be as agreed by Cott and Wal-Mart from time
to time.
(b) Prices are exclusive of Levies and Wal-Mart shall continue to be responsible
for, and shall pay, those Levies for which it is currently responsible as well
as any future Levies which are imposed on it by any applicable authority or
which are ultimately recoverable from consumers.
4. * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] Manufacturing Option -
(a) If Wal-Mart does not accept (i) a * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] proposed by Cott at any time during the Term, or (ii) * [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED] at any time during the Term, Wal-Mart will notify
Cott that it wishes [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]. Wal-Mart shall
be deemed to have accepted any * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] to
which it does not object in writing within 30 days of being notified of the *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] and, in the absence of a *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] being proposed by Cott, Wal-Mart may
not notify Cott pursuant to clause 4(a)(ii) above more frequently than once in
any 12 month period.
(b) If Wal-Mart notifies Cott in accordance with either of clauses 4(a)(i) or
4(a)(ii), * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] will be asked to provide
Wal-Mart with * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] to cover the *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] and * [CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED] (other than * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]), plus
the * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]. If (i) the overall *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] proposed by the * [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED] selected by Wal-Mart to * [CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED], after taking into account all relevant terms (and excluding
the * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]), is * [CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED], and (ii) the * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
is able to * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED], then Cott will (unless
it * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] 90 days after
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Wal-Mart notifies Cott of * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]) use
such * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] as its * [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED] on terms and conditions for forecasting, ordering,
supply and payment which are reasonably acceptable to all parties.
(c) If pursuant to clause 4(b) Cott engages a * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] as its * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED], Cott will
continue to use its * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] for the *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] of the * [CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED], and will adjust its * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] accordingly to reflect the * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] of * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] and * [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED] and * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
charged by * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]. The price payable to
Cott for * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] will be $* [CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED] / 12 oz. equivalent case (subject to changes in -
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] from time to time).
5. INTELLECTUAL PROPERTY - Wal-Mart will indemnify, defend and hold harmless
Cott from and against all claims, damages and costs (including reasonable
attorneys' fees), to the extent they result from any action alleging that
Wal-Mart's trademarks or trade dress used in connection with the Program
infringe such party's rights.
6. DEFAULT; TERMINATION -
(A) If either party commits a Material Breach of this Agreement which is not
rectified within 30 days after receipt of notice of the Material Breach, or if
the Material Breach is not capable of being rectified within such 30 day period,
if steps to rectify the Material Breach are not commenced within the 30 day
period and thereafter pursued to completion within an additional 30 day period:
(i) the other party may terminate this Agreement (without prejudice to its other
rights and remedies that may be available under this Agreement and under
applicable law), or (ii) in the case of a Material Breach by Cott, Wal-Mart may
by notice to Cott trigger the Third Party Manufacturing Option.
(b) Notwithstanding anything to the contrary contained in this Agreement, Cott
is not obligated to provide any * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] to
Wal-Mart (or to any * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] for the *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] of * [CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED]), other than pursuant to the * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] Manufacturing Option, and Wal-Mart shall not use any concentrates
supplied by Cott (nor allow them to be used) for * [CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED] exept pursuant to the * [CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED] Manufacturing Option.
(C) If this Agreement is terminated by Cott pursuant to clause 6(a), Wal-Mart
shall reimburse Cott, for the Termination Costs.
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(d) In addition to its rights under Section 6(a) above, Wal-Mart may terminate
this Agreement at any time so long as it gives Cott * [CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED] years prior written notice (the "Notice Period") of its
intention to terminate. * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] At the end
of the Notice Period Wal-Mart shall reimburse Cott for the Termination Costs. It
is understood and agreed that Cott's obligations with respect to the *
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] Manufacturing Option shall be of no
further force or effect upon the issuance by Wal-Mart of the termination notice
pursuant to this clause 6(d). Finally, Wal-Mart agrees that if it exercises its
termination right pursuant to this clause 6(d) Cott will (i) not be required to
produce any Products for Wal-Mart during the Notice Period using concentrates
other than those used by Cott prior to the issuance by Wal-Mart of the
termination notice and (ii) be relieved of Cott's Exclusivity Obligation 1.5
years after the issuance by Wal-Mart of the termination notice pursuant to this
clause 6(d).
7. FORCE MAJEURE -
(A) The performance by each party of its obligations shall be excused for so
long as and to the extent that such performance is prevented, hindered or
delayed by Force Majeure.
(B) If Cott is unable to supply Products either directly or through others due
to Force Majeure, Wal-Mart may trigger the Third Party Manufacturing Option for
the period of the Force Majeure (and Cott agrees to reimburse Wal-Mart for any
reasonable additional costs incurred by Wal-Mart to obtain such supplies of
Products during such period of Force Majeure).
8. GENERAL -
(A) This Agreement inures to the benefit of and is binding upon the parties
hereto and their respective successors and assigns. Wal-Mart acknowledges and
agrees that Cott may have any of the Soft Drinks produced by third party
co-packers.
(B) This Agreement, together with the Wal-Mart Vendor Agreement in effect from
time to time as agreed by the parties (which covers payment terms, insurance and
indemnification provisions), constitutes the entire agreement between the
parties with respect to the subject matter hereof. In the event of any conflict
or inconsistency between the terms of this Agreement and the Wal-Mart Vendor
Agreement or any Wal-Mart purchase order, the terms of this Agreement shall take
precedence. This Agreement may only be amended by a writing signed by both
parties.
(C) This Agreement is governed by and construed in accordance with the laws of
the State of Arkansas, without regard to the internal law of the State of
Arkansas regarding conflicts of laws. The parties mutually (i) consent and
submit to the jurisdiction of the federal and state courts for Xxxxxx County,
Arkansas, and agree that any action, suit or proceeding concerning this
Agreement shall be brought only in federal or state courts for Xxxxxx County,
Arkansas and (ii) acknowledge and agree that they will not raise, in connection
with any such suits, actions or proceedings brought in any federal or state
court for Xxxxxx County, Arkansas, any defense or objection based upon lack of
personal jurisdiction, improper venue, inconvenience of forum. Each party shall
bear its own costs in connection with any litigation, including without
limitation, its attorneys fees, without regard to the party that is the
prevailing party. The parties acknowledge that they have read and understand the
provisions of this paragraph and agree willingly with its terms.
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9. NOTICES - Any notices pursuant to this Agreement shall be given in writing
and sent by recognized national overnight courier for next business day delivery
or by pre-paid registered or certified mail, return receipt requested to the
addresses specified below (or to such other address of which notice is given).
Notices shall be deemed to have been received on the third business day after
the date of mailing or the next business day if sent by courier:
If to Wal-Mart, at: If to Cott, at:
------------------- ---------------
Wal-Mart Stores, Inc. Cott Beverages USA, Inc.
000 XX 0xx Xxxxxx 0000 XX X Xxxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxx 00000-0000 Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: VP, Private Brands (Food) Attention: VP/GM, Wal-Mart Team
With a copy to:
Cott - Legal Department
800 - 000 Xxxxx'x Xxxx Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
If the foregoing is in accordance with your understanding, please sign and date
the enclosed copy of this letter and return it to the undersigned within 2
weeks, whereupon this letter agreement shall constitute a binding agreement
between us in accordance with its terms.
Sincerely,
COTT BEVERAGES USA, INC.
BY: /s/ Xxxxx X. Xxxxx III
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NAME: Xxxxx X. Xxxxx, III
TITLE: Chief Executive Officer
Authorized Signing Officer
Acknowledged and agreed to by:
WAL-MART STORES, INC.
BY: /s/ Xxxxxx X. Xxxxxxxx Date: 12/22/98
----------------------- --------
NAME: XXXXXX X. XXXXXXXX
TITLE:VP Private Brands
Authorized Signing Officer
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GLOSSARY
"Cott" means Cott Beverages USA, Inc.
"Force Majeure" means any cause(s) beyond a party's reasonable control, which
cannot be overcome by reasonable diligence, including without limitation, war,
labor disputes, civil disorders, governmental acts, epidemics, quarantines,
embargoes, fires, earthquakes, storms, or acts of God. Force Majeure shall not
operate so as to enable Wal-Mart to delay making any payments which it is
otherwise obligated to make under this Agreement.
"Levies" means any and all present and future taxes, deposits and environmental
and recycling levies and charges (including without limitation the California
CRV and PRCC) which are imposed or charged in connection with the production,
sale and/or recycling of soft drinks or soft drink packaging.
"Material Breach" means (a) Cott's failure to procure the concentrates for the
Products in accordance with the agreed Product specifications; (b) Cott's
failure to maintain in stock service levels of at least 95% on average over any
three (3) calendar month period (i.e. February through April; May through July;
August through October; or November through January) of any year; (c) valid
damage claims caused by Cott which average more than 1% of total gross sales
over any three (3) calendar month period (i.e. February through April; May
through July; August through October; or November through January) of any year;
(d) valid product quality issues of a material nature caused by Cott in
contents, containers, packaging or otherwise, average more than 1% of shipments
over any three (3) calendar month period (i.e. February through April; May
through July; August through October; or November through January) of any year,
as identified by Wal-Mart quality assurance labs acting reasonably and in good
faith; and/or (e) a failure of either party to perform a material provision of
this Agreement, other than those provisions which are addressed in paragraphs
(a) through (d) of this definition.
"Products" means Soft Drinks which are intended for the Program.
"Program" means any retailer brand soft drink program operated by Wal-Mart in
its present and future USA stores, other than Sam's Clubs stores.
"Soft Drinks" means all non-alcoholic carbonated beverages and includes, without
limitation, clear sparkling flavored water beverages.
"Termination Costs" means the costs incurred by Cott for any unused raw and
packaging materials and full goods inventories intended to be used by or for
Wal-Mart, whether in the possession of Cott, its suppliers, co-packers or
otherwise, existing at the effective date of termination, up to a maximum of
three (3) months worth, in the case of raw and packaging materials, and three
(3) months worth, in the case of finished goods. The three (3) month ceiling
will be calculated on the basis of the average monthly case sales by Cott to
Wal-Mart over the immediately preceding twelve (12) month period for each of the
Products.
"* [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] Manufacturing Option" means
the procedure described in clause 4 of the Agreement.
"Wal-Mart" means Wal-Mart Stores, Inc.
"Wal-Mart Controlled Concentrates" means concentrates used to produce those
Products which are identified with an asterisk on Exhibit "A".
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EXHIBIT "A"
Product * [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] supplied by Cott to
Wal-Mart
Carbonated Soft Drinks New Age Beverages
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Cola * Black Cherry *
Diet Cola * White Grape *
CF Diet Cola * Kiwi Strawberry *
Dr Thunder * Peach *
Diet Dr Thunder * Raspberry *
Twist Up * Strawberry *
Diet Twist Up * Tropical *
Root Beer * Cranberry *
Mountain Lightning * Key Lime *
Grape * Strawberry Banana *
Raspberry * Mango Peach *
Grapefruit * Blackberry Apple *
Orange *
*Indicates Wal-Mart Controlled Concentrates
* [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED]
