EXHIBIT 10.7(a)
DISTRIBUTION AGREEMENT
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THIS DISTRIBUTION AGREEMENT (the "Agreement") is entered into as of the
________ day of ____________, 19___, by and between BLUE RHINO CORPORATION, a
Delaware corporation ("Company"), and ________________., a __________________
corporation ("Distributor").
W I T N E S E T H:
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WHEREAS, Company is in the business of offering Cylinders for exchange,
upgrade and sale pursuant to a proprietary system including the use of certain
marks owned by Company (the "Business"); and
WHEREAS, the parties hereto desire to effect an arrangement whereby
Distributor will provide Cylinder exchange service, including sales and upgrades
of Cylinders, to Company's customers using Company's Marks.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. Wherever the following words appear herein their
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meanings shall be as follows:
"Company" shall mean Blue Rhino Corporation, a Delaware corporation,
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or its successors and assigns.
"Company's Accounts" shall mean all customers serviced by Distributor
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other than Distributor's Accounts.
"Company's Marks" shall mean the trademarks, service marks and trade
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names set forth in Exhibit A.
"Cylinders" shall mean 20 lb. cylinders of liquid propane fuel.
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"Distributor" shall mean ______________ a __________corporation.
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"Distributor's Accounts" shall mean those customers listed on Exhibit
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B.
"NFPA" shall mean the National Fire Protection Association.
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"Sleeve" shall mean the shrink-wrap covering to be applied to all
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Cylinders, the form of which shall be prescribed by Company.
"Term" shall mean, subject to Section 15 hereof, the period beginning
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on the date hereof and continuing until the _______ anniversary of the
date hereof. The Term shall thereafter be automatically renewed for
successive one-year periods until either party shall deliver to the
other written notice not less than ninety (90) days prior to the end
of any such one-year period, of such party's intent to terminate this
Agreement as of such year end.
"Territory" shall mean the area described on Exhibit C attached
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hereto.
2. APPOINTMENT. Company hereby appoints Distributor during the Term of
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this Agreement as its exclusive distributor of Cylinders using Company's Marks
in the Territory, upon the terms and conditions hereinafter set forth, and
Distributor hereby accepts said appointment. Distributor acknowledges that it
has paid no consideration to Company in exchange for this appointment. The
Company will not appoint any additional distributors for Cylinders in the
Territory during the Term without Distributor's consent.
In consideration of Distributor's agreement to sell and distribute the
Cylinders using Company's Marks, Company shall pay to Distributor the
consideration described on Exhibit D attached hereto. All payments due from
Company to Distributor for services provided in any month shall be made within
forty-five (45) days of the date of invoice, except as set forth on Exhibit E,
and except for delays in the payment by the customer due to disputes relating to
the servicing of such customer by Distributor. Company shall have the right to
set off any amounts due from Distributor to Company against amounts due to
Distributor pursuant to this Section 2.
3. DISTRIBUTOR'S DUTIES.
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(a) Exchanges, Upgrades, Sales, and Inventory. Distributor shall
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provide Cylinder exchange service, including exchanges, upgrades, and sales of
Cylinders, to Company's customers (as designated by Company) at such prices as
Company from time to time shall designate in writing. Distributor shall
maintain a sufficient supply of Cylinders to fully stock all Cylinder racks
installed at a customer's place of business and shall maintain a sufficient
quantity of Cylinders in inventory (float) to properly service the customers in
accordance with this Agreement.
(b) Setup Process. Distributor shall be solely responsible for
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implementing the Cylinder exchange program at Company's customer's place of
business and shall elicit such customer's input and cooperation. Distributor's
duties shall include, but not be limited to, those duties which are described on
Exhibit F attached hereto.
(c) Customer Delivery. Distributor shall plan and execute such
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deliveries of filled Cylinders to each of Company's customers in the Territory
so as to avoid stock-out situations. Distributor acknowledges that it is
Company's policy that no customer be out of filled
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Cylinders for more than forty-eight(48) hours. Distributor agrees that no more
than 5% of its deliveries shall consist of deliveries to out-of-stock customers.
Distributor shall be responsible for monitoring the sales history and demand
information of each location and compiling sales reports for the customer and
Company so as to avoid stock-outs. To assist Distributor, Company shall provide
Distributor with sales data and customer history on a monthly basis.
(d) Refurbishment and Refilling. Distributor shall transport the
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exchanged Cylinders to its plant for refurbishment and refilling. Distributor
shall refurbish and refill the Cylinders in accordance with the procedures and
standards as outlined in Exhibit G and other procedures and standards that are
communicated from time to time by Company to Distributor.
(e) Reporting. Distributor shall use its best efforts to comply with
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Company's reporting requirements as described on Exhibit H attached hereto.
(f) Billing and Collection. Company will be responsible for all
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invoicing and collection matters. Notwithstanding the foregoing, if so
requested by Company, Distributor shall invoice customers for Cylinders and
collect the receipts or shall make deliveries on a COD basis.
(g) Insurance. Distributor shall carry, at its sole cost and expense,
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(i) public and products liability insurance in an amount not less than
$5,000,000 for personal injury, death, or property damage, which shall include
coverage "X" of "XCU" coverage; (ii) comprehensive automobile liability
insurance providing third party liability insurance with $1,000,000 inclusive
limits, covering all licensed vehicles owned or operated by or on behalf of
Distributor; (iii) xxxxxxx'x compensation insurance, in such amounts as required
by law; and (iv) products liability insurance as Company shall specify from time
to time. All policies of insurance procured by Distributor shall (i) be issued
in form acceptable to Company by insurance companies with a financial rating of
not less than A-8 as rated in the most current available "Best's" insurance
reports, and licensed to do business in the Territory; (ii) be written as
primary policies and not contributing with, nor in excess of, coverage that
Company may carry; (iii) include Company as a additional insured; and (iv)
contain endorsements that such policies may not be materially changed, amended,
or canceled with respect to Company except after thirty (30) days' prior notice
from the insurance company to Company. Certificates of such insurance and
copies of current Insurance Policies shall be furnished to Company by
Distributor upon Company's request.
(h) Disposal of Cylinders. Distributor shall dispose of Cylinders
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when such Cylinders are no longer fit for use in the business. Prior to
disposal, Distributor shall remove from the Cylinders all Marks and any other
identifying labels or other markings associated with Company.
4. ELECTRONIC ACCOUNTING SYSTEM. Distributors will use the Blue Rhino
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Electronic Accounting System (BREAS) to conduct all customer transactions and
report these transactions to Company. The BREAS consists of: (A) P. C. as
provided by Blue Rhino Corporation, (B) Handheld Terminal(s) (HHT), HHT
printer(s), (C) National Data Datacomputer Interface components, and (D) BREAS
software provided by Company. HHT's will be used to print delivery tickets for
all store deliveries. Delivery data entered into the handhelds will be
transferred to Company via electronic communication. Distributor will obtain
sufficient BREAS hardware to meet the above requirements pursuant to lease
agreements with Company supplier. Company will provide, free of charge, the
BREAS software required for system use and electronic communications.
5. SUPPLIES. Distributor acknowledges that Company has an interest in
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controlling all materials identifying Company to be used in connection with the
Cylinders including, but not limited to, the Sleeve, the Company's Marks,
marketing materials, and labels to be applied to the Cylinders. Therefore,
Distributor agrees to purchase all such items directly from Company or a
supplier approved by Company.
6. OWNERSHIP OF ACCOUNTS. Distributor agrees that all sales of
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Cylinders pursuant to this Agreement shall be for the benefit of Company and
Distributor shall have no interest in such accounts or the underlying customer
including, but not limited to, those customers who are initially contacted by
Distributor, except as expressly set forth herein.
7. MARKETING. Company will supply to Distributor point of purchasing
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advertising material and a reasonable number of vehicle decals at Company's
expense. Distributor shall display such advertising material as directed by
Company. All other materials desired by Distributor will be at Distributor's
sole cost and expense.
8. INDEMNITIES. Distributor agrees to protect, defend, indemnify, and
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hold Company harmless against any and all loss, cost or expense whatsoever,
including without limitation attorney's fees and disbursements, resulting from
any breach of a representation or warranty, or arising out of any claims,
proceedings, demands or causes of action of every kind and character made,
instituted, or asserted against Company alleging personal injuries, death or
damage to property, occurring, arising out of, incident to, or resulting
directly or indirectly from the operation of the Cylinder exchange business
including as such may pertain to the handling, filling, and sale of Cylinders.
Company agrees to protect, defend, indemnify, and hold Distributor
harmless against any and all loss, cost or expense whatsoever, including without
limitation attorney's fees and disbursements, resulting from any breach of a
representation or warranty, or arising out of any claims, proceedings, demands
or causes of action of every kind and character made, instituted, or asserted
against Distributor alleging personal injuries, death, or damage to property,
occurring, arising out of, incident to, or resulting directly or indirectly from
the operation of Company's business.
9. SALES OF COMPETING PRODUCTS. Distributor will not, directly or
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indirectly, engage in the business of the exchange of 20 lb. cylinders of liquid
propane fuel in the Territory during the term of this Agreement except as set
forth in this Agreement.
10. NON-SOLICITATION OF CUSTOMERS.
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(a) Distributor will not, for a period of two years from the
termination of this Agreement, directly or indirectly solicit Company's Accounts
in connection with the sale, exchange, or upgrade of Cylinders.
(b) Company will not, for a period of two years from the termination
of this Agreement, directly or indirectly solicit Distributor's Accounts in
connection with the sale, exchange, or upgrade of Cylinders.
11. CONFIDENTIALITY. Each party acknowledges that during the term of this
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Agreement, it will have access to and will become familiar with various trade
secrets and confidential information of the other party including but not
limited to materials or records of a proprietary nature; trade secrets,
engineering or technical data; records and policy matters relating to research,
finance, accounting, sales, personnel, management and operations; matters
particularly relating to operations such as customer lists, price lists,
specifications and information regarding customers and their requirements, costs
of providing service and equipment and equipment maintenance costs (the
"Confidential Information"). Each party agrees not to communicate, divulge or
use for the benefit of any other person, partnership or corporation, any such
Confidential Information of the other party during the term of this Agreement
and thereafter, or any similar data which came to such party as a result of its
participation in the distribution arrangement described herein.
12. INJUNCTIVE RELIEF. Distributor acknowledges that compliance with
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Sections 3(b), 9,10 and 11 of this Agreement is necessary to protect the
business, customers and goodwill of Company and that a breach of this Agreement
will irreparably and continually damage Company for which money damages may not
be adequate, and therefore, Company will be entitled to injunctive relief
restraining such breach in addition to any other remedy provided by law.
Company acknowledges that compliance with Section 11 of this Agreement is
necessary to protect the business, customers and goodwill of Distributor and
that a breach of Section 11 of this Agreement will irreparably and continually
damage Distributor for which money damages may not be adequate, and therefore,
Distributor will be entitled to injunctive relief restraining such breach in
addition to any other remedy provided by law.
13. NO AGENCY RELATIONSHIP. It is the intention of the parties that the
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relationship existing between them shall be that of independent contractors;
that nothing herein contained or done pursuant hereto shall constitute
Distributor the agent of Company for any purpose whatever; and that all acts and
things done and to be done by Distributor pursuant to the provisions hereof or
done by Distributor in anticipation of this agreement, unless expressly
otherwise provided herein, shall be at Distributor's own cost and expense.
14. USE OF COMPANY'S MARKS.
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(a) Distributor is hereby granted a nonexclusive right and license to
use Company's Marks only in connection with services performed by Distributor
pursuant to this Agreement, subject to the following conditions:
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(i) Distributor shall use Company's Marks only in connection
with Cylinders that are of a quality which comply with such standards and
requirements as outlined on Exhibit G attached hereto, and for the purpose of
ascertaining the quality of such Cylinders, Company through such representative
as it may designate shall have the right at all reasonable times to inspect all
of Distributor's places of business and to examine the services rendered by
Distributor (including the refurbishment and filling of Cylinders) and records
of Distributor to verify Distributor's compliance with the requirements of this
Agreement.
(ii) Distributor will not use any of Company's Marks as part of
the corporate or business name of Distributor without prior written approval of
Company.
(iii) Any and all displays or uses of Company's Marks by
Distributor shall comply with the provisions and requirements of this Agreement
as or amended from time to time.
(iv) Distributor acknowledges the validity of each of Company's
Marks.
(v) Distributor will not threaten or undertake any legal action
based upon a claim that someone else's use of a xxxx conflicts with or infringes
any of Company's Marks, but Distributor will promptly call to Company's
attention any conflict with or infringement of any of Company's Marks which come
to Distributor's attention.
(b) In the event of termination of this Agreement, any and all
authorization or approval for the use, in whole or in part, of any of Company's
Marks shall automatically terminate. Distributor shall thereupon promptly
delete all Company's Marks, and parts thereof, from all places where used by
Distributor, and shall completely discontinue all use thereof. Thereafter
Distributor shall not use in relation to any business in which Distributor may
engage any word, name, title or expression which so resembles any of Company's
Marks, or part thereof, as to be likely to lead to confusion or uncertainty.
TERMINATION BY COMPANY. Company may terminate this Agreement upon the
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occurrence of any of the following events:
(a) Distributor's breach of its obligation described in the second
sentence of section 3(c) for two consecutive quarters;
(b) Distributor's failure to remedy its default of any other material
obligation under this Agreement within ten (10) business days of receipt of
written notice of such default from Company;
(c) Distributor or any controlling owner of Distributor is convicted
or pleads
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no contest to a felony or other crime or offense that is likely to adversely
affect the reputation of Distributor or Company;
(d) Distributor makes any unauthorized use of Company's Marks; or
(e) If a petition in bankruptcy is filed by or against Distributor; or
if any action is taken by or against Distributor under any law the purpose or
effect of which is or may be to relieve Distributor in any manner from any of
its debts, or to extend the time of payment thereof; or if Distributor makes an
assignment for the benefit of creditors or makes any conveyance of any of its
property which in the opinion of Company may be to the detriment of
Distributor's creditors; or if a receiver or trustee is appointed with authority
to take possession of Distributor's property or of any part thereof.
Upon the termination of this Agreement, Company shall purchase
Distributor's inventory of new or refurbished Cylinders in racks at 75% of
Company's then current cost for similar Cylinders.
16. PAYMENTS AFTER TERMINATION. Termination of this Agreement shall not
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release either party from the payment of any sum then or thereafter owing to the
other. Either party may at its option apply any sums due, or to become due,
from it to the other party to the payment of any sums, accounts or obligations
(whether or not contingent and whether or not matured) which are due, or which
may become due, from such other party or any of its subsidiaries, paying any
balance, when finally determined, to such other party.
17. SEVERABILITY. The provisions of this Agreement shall be severable,
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and the invalidity or unenforceability of any provisions hereof shall not affect
the validity or enforceability of the remaining provisions.
18. ASSIGNMENT. This Agreement shall be binding upon, and inure to the
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benefit of, the parties hereto and their heirs, successors and assigns;
provided, however, that Distributor's rights hereunder shall not be assigned or
transferred, in whole or in part, directly or indirectly, whether by Distributor
by operation of law or otherwise, to any person or firm, or corporation, without
the prior written consent of Company.
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THIS AGREEMENT shall take effect as of the ____ day of ____ 19__.
BLUE RHINO CORPORATION
By_______________________________
(Title)__________________________
DISTRIBUTOR CORPORATE REPRESENTATIVE
By_______________________________
(Title)__________________________
_________________________________
_________________________________
_________________________________
(Address of Distributor)
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LIST OF EXHIBITS
TO
DISTRIBUTION AGREEMENT
Exhibit A Company's Marks
Exhibit B Distributor's Accounts
Exhibit C Territory
Exhibit D Commission Schedule
Exhibit E Exceptions to Commission Payment Schedule
Exhibit F Distributor Duties
Exhibit G Appearance & Standards for Cylinders\Displays
Exhibit H Distributor Reporting Needs
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EXHIBIT A
COMPANY'S MARKS
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Blue Rhino
RhinoTUFF
Picture of Blue Rhino with flame horn
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EXHIBIT B
DISTRIBUTOR'S ACCOUNTS
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EXHIBIT C
TERRITORY
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Examples of territory descriptions:
The Territory shall be as follows:
a. Lake County, Illinois, Will County, Illinois, and DuPage County,
Illinois.
b. The area bounded by the following:
(1) Interstate 80 on the South;
(2) the Illinois state line on the East;
(3) the Xxxx River on the North; and
(4) the Xxxxxxxxxx/Prim county line on the West.
c. The metropolitan Chicago Area of Dominant Influence, as determined by
Arbitron.
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EXHIBIT D
COMMISSION SCHEDULE
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A. Company Accounts (per Cylinder):
EXCHANGES: $_________
UPGRADES: $_________
SALES: $_________
B. Distributor Accounts (per Cylinder):
Customer Sales Exchanges Upgrades
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_______ _____ _________ _________
_______ _____ _________ _________
_______ _____ _________ _________
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EXHIBIT E
EXCEPTIONS TO COMMISSION PAYMENT SCHEDULE
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EXHIBIT F
DISTRIBUTOR DUTIES
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In the setup process the distributor will complete the following duties:
_ Preparation of site plan (if required)
_ Obtaining permits
_ Obtaining inspections and approvals
_ Delivery of rack
_ Rack installation in accordance with all codes that are applicable
_ Crash protection if required
_ Placement of signage
_ Employee and store training
_ Movement of display if required by local authorities or by
customer
24 Hour Emergency Service, 7 days a week that provides the Company
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with a maximum telephonic response time of 30 minutes.
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EXHIBIT G
APPEARANCE AND STANDARDS FOR CYLINDERS/DISPLAYS
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These standards will apply to Cylinders both at the time they are ready for
transport to the retail location and upon placement in the display unit. No
allowance is made for degradation of quality during the movement of Cylinders to
the retail location.
Quality, as it applies to the finished product, implies that the product meets
all standards for appearance and safety. A Cylinder without high standards for
both appearance and safety is not an acceptable Blue Rhino Cylinder.
Cylinders
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- In accordance with DOT regulations, NFPA 58, and applicable state and local
ordinances, all Cylinders will be completely free of leaks from the time
they are loaded on the transport and through the time of sale to the
consumer.
_ The Cylinder will contain 20 pounds of propane (+/-0.5 pounds) unless local
regulations dictate otherwise. The distributor accepts responsibility for
accuracy of Cylinder filling and any penalties which may be assessed due to
non-compliance of distributor's cylinders with regulatory requirements.
_ The foot ring will be completely intact, functional and will have no sharp
edges or loose weld seams.
_ The Collar of the Cylinder will be completely intact, functional and will
have no loose weld seams.
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_ The valve is intact and operational. The handwheel is securely attached
and there is no indication of valve malfunction.
_ All labels will be securely attached to the Cylinder in a manner in which
is not likely to be disturbed by the consumer or damaged in transit.
_ The Cylinder has at least twelve months remaining before qualification
lapses.
_ The Cylinder will be free of all rust.
_ The Cylinder will have no pits, dents or cuts which exceed the standards of
the CGA Bulletin C-6 and the current edition of NFPA Procedure 118 for the
visual inspection of Cylinders.
_ The Cylinder will be painted in accordance with Company standards.
_ All POL type valves will have a tightly secured POL plug inserted during
transport and while in rack.
_ No adapters will be permitted on valves which extend beyond the protection
of the collar.
_ All Cylinders will be free of dirt, fat, barbecue sauce, grease, dust and
other dirt so as to provide a clean appearance.
_ Present a clean and "like new" cosmetic appearance.
_ Be "labeled" in accordance with marketing objectives as defined by Blue
Rhino Corporate Marketing.
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Displays
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_ The display unit will meet all applicable state and local requirements and
will be approved by the local fire authorities or other applicable
authorities.
_ The display unit will be free of dust and dirt and will be kept in good
repair.
_ The display unit will be lockable and will have protection to preclude
unauthorized opening of the valves.
_ The display unit will bear all the required markings and warnings as set
forth by the NFPA 58 and applicable state and local codes.
_ Meet construction and safety regulations as defined by federal, state and
local laws including but not limited to DOT, NFPA 58 and CGA.
_ Shall be located to assist in maximizing unit sales while meeting all
federal, state and local regulations for safety.
_ Shall have signage installed as defined by Blue Rhino Corporate Marketing.
_ Present a clean and professional appearance.
_ The display unit will be painted and maintained in accordance with Company
standards.
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EXHIBIT H
DISTRIBUTOR REPORTING NEEDS
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Accounting
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Distributor will need to ensure that all deliveries are entered into the Blue
Rhino Electronic Accounting system (BREAS),including deliveries made where BREAS
Hand Held Terminals (HHTs) were not used.
Distributor needs to report the following to Company:
_ Profiles for existing customers including display / rack capacity and
product mix (by valve type).
_ Customer profiles for to Distributor's new accounts developed
subsequent to becoming a BRC distributor (these accounts will become Company
accounts unless specifically exempted by this contract)
_ Change of product mix at any customer location.
(The above information will be used to update the BRC customer data base and
track inventory and total sales capacity).
Cash
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_ Cash sales summary - for cash sales, Company enters a debit in the
accounting system and deducts amount from Distributor's month-end payment.
Checks
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_ If check is made payable to Distributor, it is considered same as
cash. "Cash" is indicated on the delivery ticket and Distributor deposits the
check. A deduction will be made for the amount of the check from the distributor
payment made by Company.
_ If check is made out to Company "check" must be indicated on the
delivery ticket and the check should be attached to the delivery ticket and
forwarded to Company.
Credit Accounts
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_ Credit accounts will be serviced, delivery tickets prepared and
transactions reported in accordance with current billing instructions as
provided by Company.
Marketing and Sales
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Incoming Customer Calls (weekly) - totals by account by question or complaint
category (setups, service, quality and xxxxxxxx).
Setup Status (weekly) list of stores by phase (site plan, display, cylinders,
permit) with actual and planned dates.
