EXHIBIT 10.26
EXECUTION COPY
GNC/RITE AID RETAIL AGREEMENT
THIS AGREEMENT, is made and entered into as of this 8th day of December,
1998 ("Effective Date), between GENERAL NUTRITION SALES CORPORATION, an Arizona
corporation ("GNC"), and RITE AID CORPORATION, a Delaware corporation ("Rite
Aid"), and sets out the terms and conditions under which Rite Aid may open and
operate GNC-General Nutrition Center(R)(s) within certain designated retail drug
stores now or hereinafter owned or operated by Rite Aid (each referred to in
this Agreement as a "Store" and collectively as the "Stores", and the GNC -
General Nutrition Center(R)(s) within such Stores are referred to as a
"Business" and collectively as the "Businesses").
SELECTED TERM SUMMARY
LOCATION: The initial list of Stores within which Rite Aid may operate
the Businesses is set forth on Exhibit A attached hereto (hereafter the latitude
and longitude coordinates of a Store listed on Exhibit A is referred to as a
"Location" or the "Locations"). Rite Aid may by written notice to GNC, providing
the latitude and longitude coordinates (using the then current commercially
available Global Positioning System) or the street address thereof (which GNC
shall convert to latitude and longitude coordinates), designate additional
locations as sites where it desires to operate a Business. Subject to I.C. 2
through 4 hereof, any location so designated shall be added as a Location to
Exhibit A unless GNC informs Rite Aid within 14 days (28 days for proposed sites
within Major Metropolitan City Centers or if Rite Aid designates more than 100
proposed locations within a one week period), that the proposed site does not
meet the Site Designation Criteria (as hereinafter provided). GNC will provide
to Rite
Aid a copy of the computer printout (i) showing the Protected Territory of each
Location listed on and added to Exhibit A and (ii) with respect to each proposed
location which the Computer Software determined does not meet the Site
Designation Criteria, a statement of the reasons why it does not and a copy of
the computer printout reflecting the conflict. Rite Aid may, in its discretion,
from time to time, delete Locations from Exhibit A upon the permanent cessation
of the operation of a Store which conducted the Business.
PROTECTED TERRITORY: The Protected Territory with respect to each
Location listed on Exhibit A from time to time is as follows:
(a) For Locations within one of the "Major Metropolitan City Centers",
as discussed below, the Protected Territory shall be the area within the
perimeter of a circle that has the front entrance of the Location in the center
and a radius of 1,056 feet (except that for the New York City Major Metropolitan
City Center the radius shall be 528 feet); provided, however, that in all events
the Protected Territory shall encompass the entire physical structure of any
building within which the Location is located.
(b) For all other Locations, the Protected Territory shall be the area
within the perimeter of a circle that has the Location in the center and a
radius of two miles; provided, however, that if the residential population
within the perimeter of a circle that has the Location in the center and a
radius of two miles is 25,000 or more, the Protected Territory shall be the area
within the perimeter of a circle that has the Location in the center and a
radius of one mile and
(c) Any shopping center in which any Location is situated; provided,
however, that the Protected Territory of a Location: (i) within a Major
Metropolitan City Center shall in no event be deemed to encroach on any place
outside that Major
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Metropolitan City Center or (ii) outside a Major Metropolitan City Center shall
in no event be deemed to encroach on any place within that Major Metropolitan
City Center.
"Major Metropolitan City Centers" are those listed on Exhibit B attached
hereto that contains the name of the city, as well as a street map designating
the agreed geographic area included as the "Major Metropolitan City Center".
TERM OF LICENSE: This Agreement and the license granted herein begin on
the Effective Date and shall expire ten (10) years after the date the first
Business opens within any Store, unless extended or terminated sooner in
accordance with the terms and conditions of this Agreement.
INITIAL FEE: Ten Thousand ($10,000) Dollars per Store in which a
Business has opened, payable to GNC by Rite Aid in three consecutive equal
annual installments, the first of which shall be paid on the date each Store
opens with a Business and the second and third installments on the one year and
two year anniversaries of the date the applicable Store opened with a Business.
A new initial fee shall be paid for each relocation of an existing Location.
GNC BRAND PRODUCTS: Products containing on their labels one or more of
the Proprietary Marks.
GNC CONSIGNMENT PRODUCTS: Certain GNC Brand Products placed on
consignment with Rite Aid by GNC pursuant to a separate Consignment Agreement.
GNC will place on consignment sale with Rite Aid as GNC Consignment Products GNC
Brand Product having a minimum retail value of ten percent (10%) of the retail
value of Rite Aid's inventory of GNC Brand Products in the GNC Plan-O-Gram.
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GNC PLAN-O-GRAM: The store layout for the Business specifying a bird's
eye view, product facings, product code numbers and merchandising requirements
that are part of the System. The products in the GNC Plan-O-Gram include GNC
Brand Products and Third Party Products. The GNC Plan-O-Gram will be customized
for three Rite Aid base square footage stores, however, Rite Aid agrees that not
more than one-third of the Stores in which the Business is operated will utilize
the smallest square footage GNC Plan-O-Gram. The initial GNC Plan-O-Grams are
attached hereto as Exhibit C and shall be updated at least annually at GNC's
annual line review, and modified as agreed by GNC and Rite Aid. The opening
order quantity for each product in each GNC Plan-O-Gram for each new Business is
specified in Exhibit C-1. Rite Aid agrees that it shall set the minimum quantity
in its Store Automatic Replenishment System for GNC Brand Product at least two
(2), except that for GNC Consignment Products the minimum quantities will be set
by GNC pursuant to the Consignment Agreement.
THIRD PARTY PRODUCTS: Products manufactured by third parties, included
in the GNC Plan-O-Gram and available for GNC to sell to Rite Aid, but not
including those products listed on Exhibit D attached hereto.
RECITALS:
WHEREAS, General Nutrition Investment Company, GNC's affiliate, as the
result of the expenditure of time, skill, effort and money, has developed and
owns a unique and comprehensive system (hereinafter the "Comprehensive System")
relating to the opening and operation of retail nutrition, health and/or fitness
stores ("GNC-General Nutrition Centers") which sell, among other things,
vitamins, health foods, natural
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cosmetics, diet products, physical fitness products and health management
products and services; and
WHEREAS, the distinguishing characteristics of the Comprehensive System
include, without limitation, the establishment, development and operation of
stores which feature vitamins, emphasizing a special selection of vitamins,
minerals and herbs manufactured or distributed by GNC or its affiliates under
labels bearing the xxxx "GNC" and related marks and which may feature health
foods, natural cosmetics, diet products, physical fitness products or
health-management products and services; distinctive building designs, interior
and exterior layout and trade dress; standards and specifications for
construction methods and materials, equipment, furnishings, fixtures, supplies,
signs and product lists; technical assistance and training; sales and management
assistance and training; operating procedures for the storage, display and sale
of vitamins, natural cosmetics, diet products, physical fitness products and
health-management products and services; and specialized methods and techniques
for inventory and cost controls, record keeping and reporting, personnel
management, purchasing, customer service, sales promotion and advertising; and
unique merchandising systems including the GNC Plan-O-Gram, all of which may be
changed, improved and further developed by GNC or its affiliates from time to
time; and
WHEREAS, General Nutrition Investment Company has developed a modified
Comprehensive System consisting of the features set forth on Exhibit E hereto
(hereinafter referred to as the "System") for use applicable to operating the
Business within large retail drug store chains and Rite Aid seeks to use the
System including the GNC Plan-O-Gram, and to identify the System by means of
certain trademarks, trade
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names, service marks, logos, emblems and other indicia of origin, including but
not limited to the "GNC" and "GENERAL NUTRITION CENTER" marks, and such other
trade names, service marks and trademarks as are listed on Exhibit F (as the
same may hereafter be modified or designated by GNC in writing by amending
Exhibit F provided such change is generally applicable to GNC's operations) for
use in connection with the System (hereinafter such marks are referred to as the
"Proprietary Marks"), all of which such Proprietary Marks are owned by GNC or
its affiliates; and
WHEREAS, General Nutrition Investment Company has licensed to GNC the
right to use or further license the System so long as GNC agrees to abide by the
high standards of quality, cleanliness, appearance and service and to operate in
conformity with General Nutrition Investment Company's use of the System or if
GNC further licenses the System, such further licensee, being, in this case,
Rite Aid, must agree and does hereby agree to operate in conformity with the
System and this Agreement;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, intending to be
legally bound hereby, mutually agree as follows:
1. GRANT OF LICENSE
A. GNC hereby grants to Rite Aid upon the terms and conditions herein
contained, the right and license to operate, within the United States of America
the Business within its Stores only, at and from each of the Locations specified
on Exhibit A from time to time, and to use solely in connection therewith the
Proprietary Marks and the System, as they may be changed, improved, and further
developed from time to time. In any Location in which Rite Aid operates the
Business, it shall operate the Business in accordance with the System and the
license granted in this Agreement. Exhibit C to this
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Agreement specifies the initial GNC Plan-O-Gram, and categories of goods which
Rite Aid shall offer from the Locations at which it operates the Business to
properly store, market and sell these goods in conformity with the System.
B. Rite Aid may solicit and sell to any customers at the Store
Locations; provided, however, that Rite Aid acknowledges that the license
conferred by this Agreement is for a GNC-General Nutrition Center(R) retail
store to be located within a Store at a Location included on Exhibit A and
customers must receive products which contain the Proprietary Marks at the
designated Store Location, and except as provided in the Internet Site
Development Agreement dated the date hereof between Rite Aid and GNC, as the
same may be amended, that Rite Aid shall not operate a mail order, direct mail,
catalog, telemarketing, Internet, World Wide Web, websites, electronic pages,
electronic communications, interactive electronic media, shopping networks,
direct marketing or similar business which permits customers to purchase and
receive products containing the Proprietary Marks without being present at the
designated Store Location. Rite Aid acknowledges that GNC and its affiliates and
franchisees of GNC's affiliates also may solicit and sell to any customers
wherever the customers are located. Rite Aid shall have no rights to such sales
by GNC, its affiliate or franchisees.
C. After the date hereof, Rite Aid shall have the right to add Locations
to Exhibit A from time to time subject to the following:
1. Rite Aid shall be deemed to have failed to meet the Site Designation
Criteria with respect to any location and shall have no right under the license
granted to it in this Agreement to designate as a Location any location:
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(a) within the protected territory of any franchisee or of any
other licensee of GNC or its affiliates;
(b) within the area of a United States government military
facility;
(c) within the perimeter of any area within which GNC or one of
its affiliates is bound pursuant to a legally enforceable lease (other than from
the location which is the subject of the lease) or GNC or one of its affiliates
is prohibited from granting a license to operate, or is itself prohibited from
operating a business selling GNC Brand Products;
(d) in any shopping center in which GNC or one of its affiliates,
operates for its own account a store, kiosk or other outlet from which it
conducts a retail business selling GNC Brand Products;
(e) not within a Major Metropolitan City Center, but within the
area within the perimeter of a circle with a radius of two miles and that has in
its center any location from which GNC or one of its affiliates or their
franchisees or licensees operates a store, kiosk or other outlet that sells ONC
Brand Products; provided, however, that if the residential population within the
perimeter of the circle referred to above in this clause is 25,000 or more then,
within the perimeter of a circle with a radius of one mile and that has as its
center such store, kiosk or other outlet that sells GNC Brand Products;
(f) that is within a Major Metropolitan City Center and is within
the perimeter of a circle that has the front entrance of any store, kiosk or
other outlet that sells GNC Brand Products in the center and a radius of 1,056
feet (except that for the New York City Major Metropolitan City Center the
radius shall be 528 feet); provided,
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however, that in all events not within the entire physical structure of any
building in which the store, kiosk or other outlet that sells GNC Brand Products
is located, or
(g) with respect to which GNC or its affiliates has committed or
is in negotiation for a lease or with a prospective franchisee or licensee for a
location which if secured by GNC or its affiliates or a franchisee or licensee,
would under clauses (a)-(f) hereof preclude Rite Aid from having Rite Aid's
proposed location added as a Location on Exhibit A; provided, however, that GNC
or its affiliates must complete the negotiations to secure the lease or
franchise or license within sixty (60) days from the date that Rite Aid
designated a site as a proposed Location or GNC or its affiliates or franchisee
or licensee must open the location within two (2) years after the lease or
franchise or license commitment. GNC represents that as of the date of execution
of this Agreement no Location listed on Exhibit A is located within the area
described in (a) through (f) above and that no store, kiosk or other outlet that
sells GNC Brand Products encroaches on the Protected Territory of any Location
listed on Exhibit A on the date of this Agreement. Copies of the computer
printouts as to each Location listed on Exhibit A on the date of this Agreement
have been provided to Rite Aid. Notwithstanding the foregoing, no proposed
Location: (i) within a Major Metropolitan City Center shall fail to meet the
Site Designation Criterial by reason of subpart (e) above, (ii) not within a
Major Metropolitan City Center shall fail to meet the Site Designation Criteria
by reason of subpart (d) above and (iii) shall fail to meet the Site Designation
Criteria by reason of its proximity to a United States government military
facility.
2. With respect to locations at which Rite Aid is operating a Store on
the date this Agreement is executed, Rite Aid shall be entitled to add that
number of Locations
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(the "Permitted Number of Additional Open Store Locations") determined by
subtracting the number of Locations listed on Exhibit A on the date this
Agreement is executed from 1500; provided, however, that any locations, at which
Rite Aid is operating a Store on the date this Agreement is executed, added to
Exhibit A in excess of the number of Permitted Number of Additional Open Store
Locations shall be deemed Committed Locations (as defined below).
3. Any Locations listed on Exhibit A shall be deleted from Exhibit A:
(i) 36 months after the date this Agreement is executed, unless Rite Aid opens a
Business at this Location within such 36 months; (ii) 18 months after being
added to Exhibit A if (x) at the time such Location is added to Exhibit A Rite
Aid owns or leases a Store at the Location and Rite Aid has added the Permitted
Number of Additional Store Locations, or (y) if Rite Aid does not own the
Location at the time the Location is added to Exhibit A, but at the time it is
added Rite Aid (or its nominee or designee) has entered into a legally binding
Agreement to purchase or lease the Location (individually a "Committed
Location"), unless Rite Aid opens the Business at the Committed Location within
such 18 months; and (iii) after 12 months in the case of all other Locations
("other Locations"). Anything in this Agreement to the contrary, at no time
shall Exhibit A contain more than 150 Committed Locations and more than 100
Other Designated Locations.
4. In the event that Rite Aid acquires a retail drug store chain having
300 or more stores, Rite Aid may, in addition to the Locations added to Exhibit
A pursuant to 2 and 3 above, add each such acquired location to Exhibit A,
provided that no such location may be added if it could not be added after
application of the Site Designation Criteria set forth in 1 (a) through (d) and
(g) above or if it is within the perimeter of a circle with a
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radius of 2.5 miles and that has in its center any location from which GNC or
one of its affiliates or their franchisees or licensees operates a store, kiosk
or other outlet that sells GNC Brand Products; provided, however, that if the
residential population within the perimeter of the circle referred to above in
this clause is 25,000 or more, within the perimeter of a circle with a radius of
one mile and that has as its center such store, kiosk or other outlet that sells
GNC Brand Products.
D. Rite Aid hereby commits to open the Business in a minimum of 1,500
Locations within the first three (3) years of this Agreement at the minimum rate
of 350 in year one, 575 in year two and 575 in year three of this Agreement. In
the event Rite Aid fails to open the Businesses at 1,500 Locations within the
first three years of this Agreement, its sole liability on account thereof shall
be to pay GNC the Initial Fee in full multiplied by the difference between 1,500
and the number of stores that have opened the Business at the end of the third
year of this Agreement; provided GNC has complied with its obligations under
this Section 1.D. In order to assist Rite Aid in reaching the 1,500 minimum on
time, to the extent there are fewer than 1,500 Locations on Exhibit A at the
expiration of twelve months from the Effective Date, Rite Aid shall designate as
proposed Locations a number equal to at least the shortfall and GNC shall within
60 days thereafter add to Exhibit A fifty percent of such shortfall. To the
extent that there are fewer than 1,500 locations on Exhibit A on the expiration
of twenty four months from the Effective Date, Rite Aid shall designate as
proposed Locations a number equal to at least twice the then shortfall and GNC
shall within 60 days thereafter add to Exhibit A a sufficient number of
locations to cover such shortfall.
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E. During the Term neither GNC nor any of its affiliates shall operate a
GNC or General Nutrition Center under the System or the Comprehensive System or
any part thereof or otherwise operate or grant any other person or entity any
franchise, right or license to operate a store kiosk or outlet within a
Protected Territory that distributes or sells GNC Brand Products. In addition,
GNC will not expand the protected territory of an existing GNC franchisee or
licensee or grant a larger protected territory to any GNC franchisee or licensee
than that provided to Rite Aid in this Agreement.
F. Except as expressly set forth above, GNC and its affiliates, without
any liability whatsoever to Rite Aid and without granting Rite Aid any rights
therein, retain the right:
(i) to operate, or grant a license for the operation of, a GNC or
General Nutrition Center store, a kiosk or other outlet, using GNC Brand at any
location outside a Protected Territory notwithstanding its proximity to the
Protected Territory,
(ii) to give, sell, promote, advertise and/or distribute,
directly or indirectly (or to license others to give, sell, promote,
advertise/or distribute, directly or indirectly) any goods or services
(including, but not limited to, GNC Brand Products), by any means (including,
but not limited to, direct or indirect sales, electronic communications,
Internet, World Wide Web, websites, electronic pages, interactive electronic
media, shopping networks, direct mail, mail order, catalog sales and any other
method of sale or distribution which now exists or which may in the future
exist), to any business, distributor, wholesalers, retailer, establishment,
organization, club, outlet, individual consumer, or customer at any location:
(a) provided the business, distributor, wholesaler, retailer organization or
club, is located outside of the Protected Territory; (b)
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whether or not the goods or services bear, and/or are sold in connection with,
any or all of the Proprietary Marks; and/or (c) regardless of whether or not the
goods or services are the same as, similar to or different from those sold or
distributed by the Business.
G. GNC acknowledges that, except as otherwise may be provided in this
Agreement, Rite Aid will market and sell products which compete with the GNC
Brand Products in Stores at which Rite Aid does and at Stores at which Rite Aid
does not operate the Business. GNC acknowledges and agrees that Rite Aid's so
doing is not a violation of any provisions of this Agreement and that Rite Aid
shall have no obligation to make any payment or to account to GNC for any sales
resulting from those activities, other than as specified in this Agreement.
H. Rite Aid acknowledges that GNC and its affiliates will market and
sell GNC Brand Products and other products in the mass market channels of trade,
among other places. RiteAid acknowledges and agrees that, except as otherwise
provided in this Agreement, GNC and its affiliates so doing is not a violation
of any provisions of this Agreement and that GNC and its affiliates shall have
no obligation to make any payment or to account to Rite Aid for any sales
resulting from those activities.
II. TERM AND RENEWAL
A. This Agreement and the license granted herein begin on the Effective
Date and shall expire ten (10) years after the date the first Business opens
within any Store, unless extended or terminated sooner in accordance with the
terms and conditions of this Agreement. This Agreement shall be subject to early
termination, at the expiration of 36 months and 60 months as described below:
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At 36 months from the date the first Business opens within a
Store, a calculation will be made of the average net sales of products in the
GNC Plan-O-Gram during the prior twelve (12) months for all Stores in which the
Business has been open for more than one (1) year as of the end of such 36 month
period. If the resulting per Store average equals or exceeds $80,000 , then the
Agreement will continue in effect for the remainder of the Term, and neither
party shall have early termination rights under this Section II; however.
(1) If the resulting per Store average is less than $80,000, then
Rite Aid shall have the option to terminate this Agreement and, if it does not
exercise the option to terminate, then all Locations then listed on Exhibit A at
which Rite Aid is not operating the Business shall be deleted from Exhibit A and
may thereafter be added to Exhibit A only if at the time thereafter designated
by Rite Aid they do not fail to meet the Site Designation Criteria, and
(2) At 60 months from the date the first Business opens in a
Store, a calculation will be made of the average net sales of GNC Plan-O-Gram
Products during the prior twelve (12) months for all Stores in which the
Business has been open for more than one (1) year as of the end of such 36 month
period. If the resulting per Store average does not equal or exceed $100,000,
then GNC has the option to either (a) continue the Agreement in effect for the
remainder of the Term or (b) terminate the Agreement.
B. Rite Aid may, after the expiration of the Rite Aid's initial ten (10)
year term and again at the expiration of each additional five (5) year term
thereafter, renew this Agreement and the license granted hereunder for five
additional consecutive terms of
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five (5) years, each renewal subject to the following conditions which must be
met prior to each renewal term:
(1) Rite Aid shall give GNC written notice of Rite Aid's election
to renew not less than twelve (12) months nor more than eighteen (18) months
prior to the end of the initial term or the then current renewal term, as
applicable.
(2) Rite Aid shall not be in default of any provision of this
Agreement, any amendment hereof or successor hereto.
III. DUTIES OF GNC
A. GNC shall make available an initial training program as set forth in
Section V of this Agreement. GNC shall provide to Rite Aid certain electronic
training materials designed for Rite Aid to train Rite Aid's employees.
B. GNC at no cost to Rite Aid, shall provide the same initial
advertising materials and promotional package materials as provided to
franchisees for Rite Aid's use in conjunction with the opening of the Business
at each Store. GNC shall also make available to Rite Aid, advertising and
monthly promotional material for the Business, at no cost to Rite Aid.
C. GNC shall seek to maintain high standards of quality, appearance and
service of the Comprehensive System, and to that end shall provide such initial
and continuing advisory assistance as GNC deems advisable in the opening and
operation of the Business, including, from time to time, advice and material on:
(i) new sales and marketing developments and operational techniques; and (ii)
periodic newsletters and bulletins, as provided to all its franchisees.
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D. GNC shall supply the GNC Plan-O-Gram to Rite Aid for use in three
categories of Store square footage and will supply to Rite Aid if requested, any
GNC fixtures at actual cost, including shipping and tax for delivery to the
Business Locations designated by Rite Aid.
IV. FEES, PRODUCT PURCHASES, AND ADVERTISING CONTRIBUTIONS
A. Initial Fees. Rite Aid shall pay to GNC the Initial Fees specified in
the Selected Term Summary.
B. Product Purchases. During the Term of this Agreement and any renewal
period, Rite Aid agrees that it shall order and purchase from GNC and GNC shall
supply Rite Aid's requirements for GNC Brand Product, as well as its
requirements for Third Party Product as specified in the GNC Plan-O-Gram,
carried by GNC in its distribution centers and available for sale to Rite Aid.
This requirement to purchase all of Rite Aid's requirements of Third Party
Product shall not apply on a case by case basis if Rite Aid is able to obtain
such Product from another source at more favorable terms than from GNC. If Rite
Aid does purchase those products from a source other than GNC, then Rite Aid
will provide proof to GNC of the terms of such purchase within five (5) business
days of the purchase date. Rite Aid shall purchase units of the GNC Plan-O-Gram
Product in quantities, at times and in assortments as may be called for from
time to time in Rite Aid's purchase orders, subject to GNC's normal lead times
as GNC may establish from time to time. During the first three years of this
Agreement Rite Aid shall provide GNC with a forecast of product orders six (6)
weeks in advance; followed by firm orders two (2) weeks in advance of the
shipment date. Rite Aid shall place only one order per week per Rite Aid
distribution center. After the first three (3) years, Rite Aid need not provide
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GNC with six (6) week forecasts of orders. GNC will use its best efforts to
supply Rite Aid under this Agreement and provide a service level not worse than
that provided to franchisees, but there will be no penalties to GNC. Product
sold to or carried by Rite Aid shall fall into the following three categories
and price formulas.
(1) For GNC Brand Products in the GNC Plan-O-Gram not on
consignment to Rite Aid the price to be paid by Rite Aid will be the GNP
Standard Cost in effect on the date the order is shipped multiplied by [*] with
payment due forty-five (45) days after receipt by Rite Aid.
(2) For Third Party Product in the GNC Plan-O-Gram to be sold to
Rite Aid the price will be the GNC Standard Cost multiplied by [*] with payment
due forty five (45) days after receipt by Rite Aid. "GNC Standard Cost" shall be
the Standard Cost reflected in GNC's then current purchasing and inventory
system. Within forty five days of the close of each fiscal year of GNC during
the term of this Agreement, on a vendor by vendor basis, GNC will pay Rite Aid
its pro rata share, based on Rite Aid's purchases as a percentage of GNC's total
purchases of Third Party Product from each vendor with respect to free goods,
volume rebates, discounts, special buys or off invoice credits.
(3) For product in the GNC Plan-O-Gram on consignment from GNC to
Rite Aid, the amount set forth in the Consignment Agreement, dated the date
hereof, between GNC and Rite Aid.
For purposes of this Agreement
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
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(a) "GNP Standard Cost" shall mean the aggregate cost of Labor Cost,
Overhead Cost, Raw Material Costs and non-affiliated licensing fees incurred by
General Nutrition Products, Inc., a South Carolina corporation ("GNP"), which is
an affiliate of GNC, in the production of each GNC Brand Product.
(b) "Raw Material Cost" shall mean cost of materials and ingredients
used by GNP in the manufacture and packaging for each GNC Brand Product and the
associated in-bound freight to GNP.
(c) "Labor Cost" shall mean all monies paid by GNP to hourly personnel
for working directly on the production of each GNC Brand Product.
(d) "Overhead Cost" shall mean all costs incurred by GNP in
manufacturing the GNC Brand Products purchased by Rite Aid pursuant to this
Agreement excluding Labor Cost and Raw Materials Costs. Costs incurred from
administration, product development, outbound freight, and sales and marketing
are excluded from GNP Standard Cost. GNC in conjunction with GNP agrees to
establish standard costs reasonably, reflecting anticipated costs using
generally accepted cost accounting methodologies and Rite Aid has the right to
audit such methodologies. All prices to Rite Aid are landed costs at Rite Aid's
designated distribution center.
C. Cooperative Advertising.
1. Recognizing the value of advertising, and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Comprehensive System, Rite Aid agrees to pay to GNC, on a
quarterly basis
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forty five (45) days following the close of each [calendar] quarter, [*]% of
gross sales of GNC Plan-O-Gram Products from each Store in which it operates the
Business that is in an area that has established a GNC Area Advertising
Cooperative, by paying the same to the GNC Area Advertising Cooperative, if any,
for the region in which the Store is situated; provided, however, if any
franchisee's or licensee's contribution is at a rate of less than [*]%, Rite
Aid's payment to GNC with respect to that region shall be at the lowest rate
payable by any franchisee in good standing in that region. GNC agrees that all
GNC Company owned stores will make contributions contribute to the GNC Area
Advertising Cooperatives now or hereafter established and that it will require
all franchisees and licensees to participate in the GNC Area Advertising
Cooperatives established by franchisees as provided in their Franchise
Agreements.
2. As used in Section C.(1), "gross sales" means all gross receipts from
the sale by Rite Aid of GNC Brand Products and Third Party Products contained in
the GNC Plan-O-Gram, whether for cash or credit; provided, however, that "gross
sales" shall not include any sales taxes or other taxes collected by Rite Aid
for transmittal to the appropriate taxing authority. Rite Aid may deduct from
"gross sales" all customer refunds and adjustments occasioned during the normal
course of business, provided, however, that the Rite Aid shall substantiate all
such deductions.
D. All products delivered by GNC pursuant to this Agreement shall be
delivered on a carrier designated by Rite Aid from time to time as "preferred
carriers" unless delivered on GNC trucks. Rite Aid's preferred carrier on the
date hereof are "Overnight" and "ABF."
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
19
V. TRAINING
A. GNC or its affiliate shall provide electronic training materials on
sales and product information. In addition, GNC shall once per year offer in
house training on sales and product information as directed by Rite Aid. Rite
Aid shall bear the costs and expense of their employees attending such training.
B. Rite Aid shall be responsible ensuring that all of Rite Aid's
applicable employees, use the electronic training materials provided by GNC.
Rite Aid shall maintain a competent, conscientious, trained staff dedicated to
the Business at least twenty (20) hours per week in each Business Location, each
of whom renders competent, prompt, courteous and knowledgeable service to the
Businesses' customers.
VI. DUTIES OF RITE AID
A. In each Store at which Rite Aid operates the Business, Rite Aid shall
prominently display and maintain in first class appearance and condition, at
Rite Aid's expense, signs of such nature, form, color, number, illumination and
size, and containing such name(s), design(s), legend(s) and symbol(s) as GNC
shall prescribe in the attached operating standards, all of which shall be
supplied by GNC to Rite Aid at cost to Rite Aid. Subject to applicable zoning
and lease restrictions, Rite Aid shall display or cause to be displayed a GNC
Store front sign on the front facia of each Store which operates a Business and
shall be presented in the same size and prominence as Rite Aid's other secondary
Store front signage for that Store (e.g., "Photofinishing", "Food Mart" etc.)
provided, however, that if by reason of space or applicable zoning or lease
restriction there are fewer than two secondary store front signs, Rite Aid shall
not be required to display a GNC sign as a secondary store front sign but shall
endeavor to provide
20
substitute prominent signage. Rite Aid acknowledges that the GNC Gold Card
program is a voluntary marketing system that may be participated in by Rite Aid
if it follows the guidelines set forth in the Gold Card Program. If Rite Aid
elects to participate in the Gold Card Program, no other card based affinity
program or marketing system may be applied to GNC Brand Products in the GNC
Plan-O-Gram without GNC's approval.
B. GNC reserves the right to modify the GNC Plan-O-Gram annually, and to
make modifications as agreed with Rite Aid. The then current GNC Plan-O-Gram
will remain in effect until the revised GNC Plan-O-Gram has been agreed upon.
Rite Aid shall implement at its cost the GNC Plan-O-Gram changes and shall
purchase and implement the annual reset signs and merchandising kits.
C. Rite Aid shall permit GNC and its agents to enter upon each Store
premises at any reasonable time, with or without advance notice, for the purpose
of conducting inspections and evaluating Rite Aid's compliance with among any
other things, FDA, CPSC, and FTC requirements as they relate to the Business and
the Proprietary Marks standards uniformly established by GNC, and shall
cooperate with GNC's representatives in such inspections by rendering such
assistance as they may reasonably request.
D. All advertising by Rite Aid in any medium concerning the Business or
the products in the GNC Plan-O-Gram shall be conducted in a dignified manner,
shall be completely truthful, accurate, and not misleading, shall comply with
the highest ethical standards applicable to advertising generally and the
business in particular, shall comply with all federal, state, and local laws and
regulations, including, without limitations, rules and regulations of the FDA,
the FTC, including GNC's FTC Consent Orders specified in
21
this paragraph D) and all applicable consumer protection agencies and bureaus,
and shall conform to such standards and requirements as GNC may specify from
time to time in writing. Prior to including any statement or claim with respect
to the efficacy or health benefit of any GNC Brand Product in any advertising or
promotional material, Rite Aid shall submit the text thereof to GNC for its
approval. GNC shall no later than the close of the next business day advise Rite
Aid whether it approves or disapproves of such text; GNC shall not unreasonably
withhold such approval. Rite Aid acknowledges that it has received and reviewed
a copy of the FTC Consent Orders dated November 1970, February 1989 and Consent
Decree dated May 1994 entered into by GNC or its affiliates with the Federal
Trade Commission (the "Consent Decrees," copies of which are attached hereto as
Exhibit H) and agrees that its advertising and promotional plans and materials
shall not violate those Consent Decrees; provided, that all advertising and
promotional material provided by or approved by GNC shall for purposes of this
paragraph, be deemed to have satisfied the requirements of this paragraph.
Subject to compliance by GNC with the provisions of Section XVI.D, Rite Aid
agrees to indemnify and defend GNC and its affiliates if its advertising,
promotional plans and materials should violate the terms of the Consent Decrees.
Rite Aid shall display the Proprietary Marks and other marks proprietary to GNC
in a manner prescribed by GNC on all signs and other advertising and promotional
materials used in connection with the Business. Rite Aid and GNC shall regularly
review advertising and promotional plans and materials to ensure compliance with
the Consent Decrees.
E. As to each Location operating a Business, at GNC's request, but not
more often than once every seven years from the applicable Store's opening date
or last
22
substantial refurbishing, Rite Aid shall refurbish the Store at Rite Aid's
expense, to conform to the trade dress, color schemes, and presentation of
trademarks and service marks consistent with the then-current public image of
the System.
F. To insure that the highest degree of quality advice is maintained,
Rite Aid shall operate the Store in strict conformity with such methods,
standards, and specifications as prescribed by the System. Rite Aid agrees to
sell or offer for sale only such products and services in the Business as have
been approved by GNC in the GNC Plan-O-Gram; not to deviate from GNC's standards
and specifications by offering or selling unapproved products or services in the
Business without GNC's prior written consent; and promptly to discontinue
selling and offering for sale any products or services in the Businesses which
GNC may, for reasons of labeling, health or safety, recall any product in the
GNC Plan-O-Gram as part of a GNC system wide or geographic (i.e. state wide)
recall. GNC shall refund to Rite Aid the amount paid by Rite Aid for any product
so recalled based upon the most recent invoice.
G. Rite Aid shall take such steps as are necessary to ensure that its
employees preserve good customer relations and, comply with the requirements and
specifications set forth in this Agreement and pursuant to the System. In
addition, Rite Aid shall provide a dedicated staff of trained employees working
a minimum of [*] hours per week in each Business Location dedicated to promoting
the Business, product sales and good customer relations. In addition, at 100
representative Businesses opened in Stores in Year One of this Agreement, Rite
Aid shall provide a minimum of [*] hours per week staffing of trained employees
dedicated to promoting the Business, product sales and
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
23
good customer relations. Rite Aid shall maintain the [*] hours per week minimum
staffing level in all test Stores during the full 100 Store testing period.
These 100 test Stores shall be designated by Rite Aid so that both Rite Aid and
GNC can track the sales performance of those Locations. For those 100 test
Locations, GNC will contribute one half of the incremental wage costs for
dedicated staffing above [*] hours per week, up to $[*]. Such contribution
toward the incremental wage costs at these test Businesses will be payable to
Rite Aid in twelve (12) equal consecutive monthly installments beginning when
the Business opens in the 50th test Store. When the 100th test Store operating a
Business has been operating for a full twelve (12) months at the 50 hour per
week staffing levels the average sales of products in the GNC Plan-O-Gram for
each of the test stores for the preceding 12 months shall be compared with the
average sales of products in the GNC Plan-O-Gram for the preceding 12 months at
the non-test Stores operating Businesses with dedicated staff limited to [*]
hours per week per Store. If such average sales in Stores with [*] hours per
week staffing equal or exceed $[*] more than such average sales in Stores with
[*] hours per week staffing, then Rite Aid shall thereafter staff all Businesses
with trained employees dedicated to promoting the Business, product sales and
good customer relations working a minimum of [*] hours per week.
VII. REGULATORY COMPLIANCE
A. Rite Aid acknowledges and understands that Rite Aid's storage, offer
and sale of certain of the GNC Plan-O-Grams Products may be subject to specific
federal, state and local laws and regulations, including, without limitation,
rules and regulations
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
24
of the Food and Drug Administration ("FDA"), the Consumer Product Safety
Commission ("CPSC") and the Federal Trade Commission ("FTC").
VIII. PROPRIETARY MARKS
A. GNC represents with respect to the Proprietary Marks that GNC has the
right to use and to license others to use the Proprietary Marks and that the
use thereof by Rite Aid in the operation of the Business in accordance with
this Agreement will not violate any agreement to which GNC or any licensor to
Rite Aid is a party or may be bound and will not infringe upon the rights of any
third party.
B. With respect to Rite Aid's use of the Proprietary Marks pursuant to
this Agreement, Rite Aid agrees that:
(1) In the operation of the Business, Rite Aid shall use the Proprietary
Marks only in the manner authorized and permitted by this Agreement and such
other uniform Proprietary Xxxx Standards as required from time to time. Any
unauthorized use thereof shall constitute an infringement of GNC's rights. GNC
acknowledges that in the operation and promotion of its Stores and business
generally Rite Aid will use its proprietary marks and those of the third
parties.
(2) Rite Aid shall execute any documents deemed necessary by GNC or its
counsel to disclaim any interest in the Proprietary Marks other than the license
granted to it in this Agreement.
(3) Rite Aid shall not use the Proprietary Marks in its corporate name
or any fictitious name.
(4) Rite Aid shall not directly or indirectly contest the validity or
other ownership of the Proprietary Marks.
25
(5) In the event that litigation involving the Proprietary Marks is
instituted or threatened against Rite Aid, Rite Aid shall promptly notify GNC of
such litigation.
C. Rite Aid expressly understands and acknowledges that:
(1) As between the parties hereto, GNC has the exclusive right and
interest in and to the Proprietary Marks and the goodwill associated with and
symbolized by them and that Rite Aid has only the license granted to it in this
Agreement.
(2) Rite Aid's use of the Proprietary Marks pursuant to this Agreement
does not give Rite Aid any ownership interest or other interest in or to such
marks and all goodwill arising from Rite Aid's use of the Proprietary Marks in
its operation of the Business shall inure solely and exclusively to GNC's
benefit and, upon expiration or termination of this Agreement and the license
herein granted, no monetary amount shall be assigned as attributable to any
goodwill associated with Rite Aid's use of the System or the Proprietary Marks.
(3) Except as may be specifically provided elsewhere in this Agreement,
the right and license of the Proprietary Marks granted hereunder to Rite Aid is
non-exclusive and GNC thus has and retains the following rights, among others:
(a) To grant other licenses for the Proprietary Marks; and
(b) To use the Proprietary Marks in connection with selling
products and services at locations outside of the Protected Territory to the
extent permitted in this Agreement.
IX. CONFIDENTIAL INFORMATION
A. Rite Aid shall not, during the term of this Agreement or at any time
thereafter, communicate, divulge or use for the benefit of any other person,
persons,
26
partnership, association or corporation any confidential information, knowledge,
or know-how concerning the methods of operation of the Business which may be
communicated to Rite Aid by GNC. Rite Aid shall divulge such confidential
information only to those of its employees who must have access to such
confidential information in order to operate the Business.
B. Rite Aid acknowledges that any failure to comply with the
requirements of Section IX.A may cause GNC irreparable injury, and Rite Aid
agrees to pay all court costs and reasonable attorneys fees incurred in
obtaining specific performance of, or an injunction against violation of, the
requirements of Section IX.A.
X. ACCOUNTING AND RECORDS
A. Rite Aid shall maintain and preserve for at least five (5) years from
the dates of their preparation, full, complete, and accurate books, records, and
accounts necessary to comply with this Agreement.
B. Rite Aid shall submit to GNC Point of Sale data on each product in
the GNC Plan-O-Gram and other information or reports as set forth on Exhibit G
hereof.
C. GNC or its designated agents shall have the right at all reasonable
times to audit, examine and copy, at GNC's expense, the books and records of
Rite Aid related to operations of the Business and contributions for the
Cooperative Advertising Funds.
XI. NONCOMPETITION
A. Except with respect to those Xxxxxx Xxxxxx locations listed on
Exhibit I hereto, and Nature's Northwest and any other Natural Food Grocery
Chain that may be acquired by GNC or its affiliates, GNC agrees that so long as
this Agreement is in effect and notwithstanding any other provision of this
Agreement, neither it nor any of its
27
affiliates (a) will operate the Business in any retail drug store chain or
supermarket chain, (b) will not grant any license permitting the sale of GNC
Brand Products in any retail drug store chain or supermarket chain or mass
merchandiser, or chain discounter and (c) will not permit any operator of any
retail drug store chain or supermarket chain or mass merchandiser or chain
discounter to operate a Business under the Comprehensive System or any
derivation thereof. For purposes of this Agreement a "chain" shall mean any
person or entity which together with any person or entity controlling, by or
under common control with such person or entity operates 10 or more retail
locations.
B. Rite Aid agrees that so long as this Agreement is in effect and, in
the event Rite Aid elects to terminate this Agreement pursuant to Section II(1)
for a period of one (1) year after such termination, it will not sell vitamins
or dietary supplements from any free standing locations other than its Stores;
or, directly or indirectly (i) become a licensee or franchisee of any entity
whose primary business is the sale of vitamins or dietary supplements except for
GNC; (ii) invest in or loan money to any entity whose primary business is the
sale of vitamins or dietary supplements; (iii) permit by lease, license or
otherwise permit any person or entity to operate a business selling vitamins or
dietary supplements within a Store or (iv) in any manner violate any proprietary
right of GNC in its Proprietary Marks, use confusingly similar trade dress, or
use permanent graphics and departmental fixturing approaches in combination in a
manner which is confusingly similar with the manner they are used by GNC.
C. The parties further agree and acknowledge that the duration and scope
of the covenants not to compete described in this section are fair, reasonable
and necessary in order to protect the goodwill of the parties and their
affiliates and that adequate
28
consideration has been received by the parties for such obligations. If,
however, for any reason any court determines that the restrictions in this
section are not reasonable or that the consideration therefore is inadequate,
such restrictions shall be interpreted, modified or rewritten to include as much
of the duration and scope identified in this section as will render such
restrictions valid and enforceable to the fullest extent possible.
XII. INSURANCE
A. Rite Aid shall procure and maintain full force and effect during the
term of this Agreement, at Rite Aid's expense, an insurance policy or policies
protecting Rite Aid and GNC, and their officers, directors, partners and
employees against any claims or loss, liability, personal injury, death,
property damage or any expense whatsoever arising out of or occurring upon or in
connection with the Business in the following amounts:
1. comprehensive general liability insurance, including product
liability, contractual liability, personal injury, property damage and
independent contractor's coverage and auto hired and non-owned vehicles in the
amount of [*] per occurrence and aggregate or primary policy in the amount of
[*] per occurrence, and aggregate with an excess policy in the amount of [*] per
occurrence, and aggregate, and naming GNC and its affiliates as additional
insureds in each such policy or policies; such policies will also apply to
vehicles purchased in the name of the business and will include fire legal
liability insurance in an amount of no less than [*].
B. Rite Aid's obligation to obtain and maintain the foregoing policy or
policies in the amounts specified shall not be limited in any way by reason of
any insurance which may be maintained by GNC, nor shall Rite Aid's performance
of that
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
29
obligation relieve Rite Aid of liability under any indemnity provisions set
forth in this Agreement. The maintenance by GNC of insurance shall in no way
relieve GNC of its obligation or limit its liability under any indemnity
provision set forth in this Agreement.
XIII. TRANSFER OF INTEREST
A. Transfer by GNC: GNC shall have the right to transfer or assign all
or any part of this Agreement and GNC's rights or obligations herein to any
person or legal entity, in connection with the sale of all or substantially all
of its stock or assets. Notwithstanding the above limitation, GNC may transfer
or assign this Agreement to any affiliated entity which is under common
ownership with GNC.
B. Transfer by Rite Aid:
Rite Aid understands and acknowledges that the rights and duties set
forth in this Agreement are personal to Rite Aid, and that GNC has granted this
license reliance on the business skill and financial capacity of Rite Aid.
Accordingly, Rite Aid shall not transfer or assign this Agreement, except in a
transaction involving the sale of all or substantially all of the stock or
assets of Rite Aid, without the prior written consent of GNC. Any assignment or
transfer made in violation of this Agreement shall be null and void and shall
constitute a material breach of this Agreement, for which GNC may then terminate
without opportunity to cure pursuant to Section XIV.B of this Agreement.
XIV. DEFAULT AND TERMINATION
A. Rite Aid shall be in default under this Agreement and all rights
granted herein shall automatically terminate upon notice to Rite Aid if Rite Aid
shall make a general assignment for the benefit of creditors; if a petition in
bankruptcy is filed by Rite Aid or such a petition is filed against and not
opposed by Rite Aid; or if Rite Aid is
30
adjudicated a bankrupt or insolvent; or if a xxxx in equity or other proceeding
for the appointment of a receiver of Rite Aid or other custodian for Rite Aid's
business or assets is filed and consented to by Rite Aid; or if a receiver or
other custodian (permanent or temporary) of Rite Aid or Rite Aid's assets or
property, or any part thereof, is appointed by any court of competent
jurisdiction; or of a proceeding for a composition with creditors under any
state or federal law is instituted by Rite Aid or such proceeding is instituted
against and not opposed by Rite Aid.
B. Upon the occurrence of any of the following events, Rite Aid shall be
in default hereunder, and GNC may, at its option, issue a Notice of Default and,
subject to Rite Aid's having an opportunity to cure all such defaults within
sixty (60) days after the receipt of the Notice of Default. If Rite Aid fails to
cure within the 60 day period, this Agreement and all rights granted hereunder,
will terminate effective immediately upon receipt of notice of termination from
GNC by Rite Aid.
(1) If Rite Aid fails, refuses, or neglects promptly to pay when due any
monies owing to GNC or its subsidiaries or affiliates, or to submit the
financial information required under this Agreement.
(2) If Rite Aid fails to maintain any of the standards or procedures
prescribed by GNC in this Agreement or pursuant to the System.
(3) If Rite Aid refuses to permit GNC to inspect the Store premises in
which the Business is operated, or the books or records of Rite Aid related to
the Businesses, upon demand.
(4) Otherwise fails to comply with any of its obligations under this
Agreement (Rite Aid agrees that for violations of its obligations under Section
VI-D it will begin
31
actions to cure such violations immediately upon receipt of such notice, and
diligently proceed to cure).
C. Upon the occurrence of any of the following events Rite Aid shall be
in default hereunder, and GNC may, at its option, terminate this Agreement and
all rights granted hereunder, without affording Rite Aid any opportunity to cure
the default, effective immediately upon receipt of notice by Rite Aid.
(1) If Rite Aid misuses or makes any unauthorized use of the Proprietary
Marks or other identifying characteristics of the System as to the Business,
materially or intentionally fails to comply with any federal, state or local law
or regulation, including but not limited to FTC requirements, concerning the
sale of products in the GNC Plan-O-Gram and thereby materially impairs the
goodwill associated with the Proprietary Marks or GNC rights therein; or
otherwise materially impairs the goodwill associated therewith or GNC's rights
therein.
(2) If Rite Aid at any time generally ceases to operate or otherwise
substantially abandons the Business;
(3) If Rite Aid purports to transfer or assign this Agreement to any
third party without GNC's prior written consent; contrary to the terms of
Section XIV of this Agreement;
(4) If Rite Aid knowingly maintains false books or records or submits or
makes any false reports or statements to GNC;
D. Excluding GNC company owned or franchise Stores opened on or before
February 7, 1999, in the event that GNC allows a new location to be built,
franchised or
32
licensed that encroaches on the Protected Territory of any Location on Exhibit
A, GNC shall have one of the following obligations:
(1) If the offending site is a GNC company store, GNC will immediately
cease retail sales of GNC Brand Products at the site and will as soon as
possible remove all interior and exterior signs which identify the site in any
manner confusingly similar to the manner in which the Business is operated at
the Stores so that the offending site does not encroach on the Protected
Territory;
(2) If the offending site is not a GNC company store, GNC will take
whatever action is necessary within ninety (90) days, so that within 90 days the
offending site does not encroach on the Protected Territory.
GNC shall incur graduated penalties for violations which occur within
any rolling twelve (12) month period as follows:
1. For the first violation which is not cured as provided in (1) or (2)
above - $[*] plus GNC's profit from the encroaching location until the offending
site no longer encroaches.
2. For the second violation which is not cured as provided in (1) or (2)
above - $[*] plus GNC's profit from the encroaching location until the offending
site no longer encroaches.
3. For the third violation which is not cured as provided in (1) or (2)
above - $[*] plus GNC's profit from the encroaching location until the offending
site no longer encroaches.
----------
* This information has been omitted based on a request for confidential
treatment. The omitted portions have been separately filed with the Securities
and Exchange Commission.
33
4. If violations occur more than three times in any rolling twelve (12)
month period, then Rite Aid may withhold all unpaid Initial Fees due and to
become due until the rate of violation becomes less than three times in any
rolling twelve (12) month period
E. GNC and Rite Aid agree that for purposes of calculating (i) the
Protected Territory with respect to a Location and (ii) whether or not a
proposed location fails to meet the Site Designation Criteria, the calculations
of distances will be made using the software generally being used by GNC in its
site analysis with respect to franchise locations at the time the original
calculation is made (the "Computer Software") and as so calculated will be final
and binding upon Rite Aid and GNC absent manifest error. With respect to any
Location or proposed location within a shopping center not within a Major
Metropolitan City Center, the latitude and longitude of the Location or proposed
location shall, if available, be those designated by the owner of the shopping
center.
XV. OBLIGATIONS UPON TERMINATION
Upon termination or expiration of this Agreement all rights granted
hereunder to Rite Aid shall forthwith terminate and be of no further force and
effect and, except as provided in this Section;
A. Rite Aid shall immediately cease to operate the Business and shall
not thereafter, directly or indirectly, represent to the public or hold itself
out as a present or former licensee of GNC.
B. Rite Aid shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any confidential methods,
procedures and techniques associated with the System, the Proprietary Marks
"GNC" and "GENERAL
34
NUTRITION CENTER"; and all other proprietary marks and distinctive forms,
slogans, signs, symbols or devices associated with the System. In particular,
without limitation, Rite Aid shall cease to use all signs, equipment,
advertising materials and any other articles which display the Proprietary Marks
and other marks proprietary to GNC.
C. Rite Aid shall take such action as may be necessary to cancel any
assumed name or equivalent registration which contains the name "GNC", "GENERAL
NUTRITION CENTER" or any other service xxxx or trademark of GNC; and Rite Aid
shall furnish GNC with evidence satisfactory to GNC of compliance with this
obligation within 30 days after termination or expiration of this Agreement.
D. Rite Aid shall make such modifications or alterations to the Business
premises of each store (including, without limitation, changing the trade dress
and changing the color scheme and/or other distinctive design features)
immediately upon termination or expiration of this Agreement as may be necessary
to distinguish the appearance of said Stores from that of other GNC stores under
the System
E. Rite Aid agrees, in the event it continues to operate or subsequently
begins to operate any other business, not to use any reproduction, counterfeit,
copy, or colorable imitation of the Proprietary Marks either in connection with
such other business or the promotion thereof, which is likely to cause
confusion, mistake, or deception, or which is likely to dilute GNC's exclusive
rights in and to the Proprietary Marks or other marks proprietary to GNC; and
further agrees not to utilize any designation of original or description or
representation which falsely suggests or represents an association or connection
with GNC which constitutes unfair competition.
35
F. Rite Aid shall promptly pay all sums owing to GNC, including interest
on overdue monies.
G. Rite Aid shall pay to GNC all damages, costs and expenses, including
reasonable attorney's fees, incurred by GNC subsequent to the termination or
expiration of this Agreement in obtaining injunctive or other relief for the
enforcement of any provisions of this Section.
H. GNC shall have the option, at any time , to purchase from Rite Aid
all but not less than all of the inventory of GNC Brand Products owned by Rite
Aid, at Rite Aid's cost, based on the most recent invoices received by Rite Aid.
If GNC does not purchase the GNC Product from Rite Aid, then for a period of
twelve (12) months after the termination or expiration of this Agreement Rite
Aid may continue to sell its inventory of Products in the normal course.
I. All covenants, obligations, and agreements of Rite Aid or GNC which
by their terms or by reasonable implication are to be performed, in whole or in
part, after the termination expiration of this Agreement, shall survive such
termination or expiration.
XVI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them; that Rite Aid shall be an
independent contractor, and that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee or servant of the other for any purpose whatsoever.
B. It is understood and agreed that nothing in this Agreement authorizes
either party to make any contract, agreement, warranty or representation on the
other's
36
behalf, or to incur any debt or other obligation in the other's name; and, that
GNC shall in no event assume liability for or be deemed liable as a result of
any such action or by reason of any act or omission of Rite Aid in its conduct
of the Business or any claim or judgment arising therefrom against GNC. Except
for matters arising out of or resulting from the quality, purity or labeling of
any GNC Brand Product or advertising of such GNC Brand Product by GNC or its
affiliates, Rite Aid shall indemnify and hold harmless GNC, its affiliates and
their respective officers, directors and employees against any and all such
claims arising directly or indirectly from, as a result of, any breach or
default by Rite Aid or its affiliates in connection with this Agreement, or in
connection with Rite Aid's operation of the Business. However, Rite Aid shall
not be required to indemnify GNC or its affiliates or any such person for any
claims arising out of a breach of this Agreement, or negligence of or other
civil wrongs of the GNC or any of its affiliates or any such person.
C. GNC shall indemnify and hold harmless Rite Aid, its affiliates and
their respective officers, directors and employees against any and all claims
arising out of or resulting from any breach or default by GNC or its affiliates
in connection with this Agreement and from the failure to meet the-quality,
purity or labelling of any GNC Brand Product or arising out of or resulting from
advertising by GNC of any GNC Brand Product by GNC or its affiliates.
D. Upon receipt by a person entitled to indemnification under this
Section (an "Indemnified Person") of actual notice of an action against such
Indemnified Person with respect to which indemnity may be sought under this
Agreement, such Indemnified Person shall promptly notify the person from whom
indemnity is sought (the
37
"Indemnifying Person") in writing; provided that failure so to notify the
Indemnifying Person shall not relieve the Indemnifying Person from any liability
which the Indemnifying Person may have on account of this indemnity or
otherwise, except to the extent the Indemnifying Person shall have been
materially prejudiced by such failure. The Indemnifying Person shall have the
option to assume the defense of any such action, including the employment of
counsel reasonably satisfactory to the Indemnified Person. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless: (1) the Indemnifying
Person has failed promptly to assume the defense and employ counsel, or (ii) the
named parties to any such action (including any impleaded parties) include such
Indemnified Person and the Indemnifying Person, and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available to
the Indemnifying Person; provided that the Indemnifying Person shall not in such
event be responsible hereunder for the fees and expenses of more than one firm
of separate counsel in connection with any action in the same jurisdiction, in
addition to any local counsel. The Indemnifying Person shall not be liable for
any settlement of any action effected without its written consent (which shall
not be unreasonably withheld). In addition, the Indemnifying Person will not,
without prior written consent of the Indemnified Person, settle, compromise or
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action in respect of which indemnification or contribution
may be sought hereunder (whether or not any Indemnified Person is a party
thereto) unless such settlement, compromise,
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consent or termination includes an unconditional release of each Indemnified
Person from all liabilities arising out of such action.
XVII. APPROVALS AND WAIVERS
A. Whenever this Agreement requires the prior approval or consent of GNC
or Rite Aid the party seeking consent shall make a timely written request
therefor to the party whose consent is sought, and such approval or consent
shall be obtained in writing.
B. Neither party makes any warranties or guarantees upon which the other
may rely and assumes no liability or obligation to the other by providing any
waiver, approval or consent in connection with this Agreement.
C. No delay, waiver, omission or forbearance on the part of either party
to exercise any right, option, duty or power arising out of any breach or
default, or by any of the terms, provisions or covenants hereof shall constitute
a waiver of any such right, option or power against, or as to subsequent breach
or default.
XVIII. NOTICES
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered (which includes delivery by
facsimile transmission) or mailed by certified or registered mail, return
receipt requested, or via reputable express mail or courier service to the
respective parties at the address (or telephone number in the case of facsimile
transmission) set forth on the signature page of this Agreement unless and until
a different address has been designated by written notice to the other party.
Any notice by certified or registered mail or by express mail or courier service
shall be deemed to have been received when delivered.
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XIX. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the attachments
hereto constitute the entire, full and complete Agreement between the parties
concerning the subject matter hereof, and supersede any and all prior agreements
between the parties. No amendment, change or variance from this Agreement shall
be binding on the parties unless mutually agreed to by the parties and executed
by themselves or their authorized officers or agents in writing. No purported
amendment, change or variance from the printed form of this Agreement shall be
binding unless initialed by all parties hereto.
XX. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each section,
part, term and/or provision of this Agreement, shall be considered severable;
and if for any reason any section, part, term and/or provision herein is
determined to be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency having valid jurisdiction, shall
not impair the operation of, or have any other effect upon such other sections,
parts, terms and/or provisions of this Agreement as may remain otherwise
intelligible; and, the latter shall continue to be given full force and effect
and bind the parties hereto; and said invalid sections, parts, terms and/or
provisions shall be deemed not to be a part of this Agreement.
B. Notwithstanding anything to the contrary herein, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than GNC, Rite Aid and such of their respective successors and
assigns as may be contemplated by Section XIII. hereof, any rights or remedies
under or by reason of this Agreement.
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C. Each of GNC and Rite Aid expressly agrees to be bound by any promise
or covenants imposing the maximum duty permitted by law which is subsumed
written the terms of any provision hereof, as though it were separately
articulated in and made a part of this Agreement, that may result from striking
form any of the provisions hereof any portion or portions which a court may hold
to be unreasonable and unenforceable in a final decision to which GNC or Rite
Aid, as the case may be, is a party, or from reducing the scope of any promise
or covenant to the extent required to comply with such a court order.
D. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
XXI. APPLICABLE LAW AND JURISDICTION
A. This Agreement shall be interpreted and construed under the laws of
the Commonwealth of Pennsylvania, which laws shall prevail in the event of any
conflict of law.
B. Except for actions for trademark, trade dress or trade name
infringement or other infringement or misappropriation of GNC's proprietary
rights to any trademark, trade dress, trade name, patent, copyright, trade
secret or other proprietary information, GNC and Rite Aid hereby waive to the
fullest extent permitted by law, any right to or claim for multiple, punitive or
exemplary damages against the other and agree that in the event of an
arbitration or action at law between them, no party shall seek multiple,
41
punitive or exemplary damages with respect to any claim or cause of action
against the other party, whether in arbitration or litigation, and each party
shall be limited to the recover of any actual damages sustained by it and costs
and expenses, including attorneys fees as otherwise provided herein.
C. No right or remedy conferred upon or reserved to GNC or Rite Aid by
this Agreement is intended to be, nor shall be, deemed exclusive of any other
right or remedy herein or by law or equity provided or permitted, but each shall
be cumulative of every other right or remedy. Notwithstanding any other
provision of this Agreement, nothing herein contained shall bar either party's
right to seek injunctive relief against threatened conduct that will cause such
party loss or damages under the usual equity rules, including the applicable
rules for seeking restraining orders and preliminary injunctions.
XXII. FORCE MAJEURE
No party shall be responsible or liable for any loss, damage, detention
or delay caused by fire, any natural disaster, strike, civil or military
authority, governmental restrictions or controls, insurrection or riot,
railroad, marine, or air embargoes, lockout, or any other cause which is
unavoidable or beyond its reasonable control, provided that performance shall,
as practicable, recommence immediately upon the cessation of such unavoidable
event.
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IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered
this Agreement on the day and year first above written
ATTEST: GENERAL NUTRITION SALES CORPORATION
By: /s/ Xxxxxxx X. Xxxx
--------------------------------- ----------------------------------
Name: Name: XXXXXXX X. XXXX
-------------------------- --------------------------------
Title: Title: C.E.O.
--------------------------- -------------------------------
GNC Address: General Nutrition Sales Corporation
Phoenix Distribution Center
0000 Xxxxx 00xx Xxxxxx xx Xxxxxxx
Xxxxxxx, XX 00000
Facsimile Telephone #: 000-000-0000
Attention: Chief Legal Officer
With a Copy of any Notice to: General Nutrition, Incorporated
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Facsimile Telephone #: 000-000-0000
Attention: Chief Legal Officer
ATTEST: RITE AID CORPORATION
By: /s/ Xxxxxx X. Grass
---------------------------------- ----------------------------------
Name: Name: Xxxxxx X. Grass
--------------------------- --------------------------------
Title: Title: Chairman & CEO
--------------------------- -------------------------------
Rite Aid Address: Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: General Counsel
Facsimile Telephone #: 000-000-0000
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