Exhibit 10.3
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CONFIDENTIAL TREATMENT REQUEST
[ * ] INDICATES INFORMATION THAT HAS BEEN
OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST AND THIS INFORMATION HAS BEEN FILED
UNDER SEPARATE COVER WITH THE COMMISSION.
AGREEMENT BETWEEN
MIDNIGHT AUTO FRANCHISE CORPORATION
AND
ASSOCIATION OF AUTOMOTIVE AFTERMARKET DISTRIBUTORS
This agreement made and entered into as of the 5th day of August, 2004, by and
between Midnight Auto Franchise Corporation (hereinafter referred to as "MAFC"),
a Michigan corporation with principal offices at 0000 Xxxxxxxxx Xxxx, Xxxx,
Xxxxxxxx 00000 and ASSOCIATION OF AUTOMOTIVE AFTERMARKET DISTRIBUTORS
(hereinafter referred to as "AAAD"), an Illinois corporation with principal
offices at 0000 XXXXXX XXXXXX, XXXXX 0000, Xxxxxxx, Xxxxxxxxx.
WITNESSETH:
WHEREAS, "MAFC" is engaged in providing automotive parts and services to
the motoring public at numerous All Night Auto Service Centers (hereinafter
referred to as ANAs) located throughout the United States, and
WHEREAS, "MAFC" desires to obtain a unified principal source of supply for
its ANAs, and
WHEREAS, AAAD is an association of automotive parts warehouse distributors
(hereinafter referred to as "AAAD Members") who are capable and desirous of
supplying to "MAFC" the automotive replacement and repair parts required by the
ANAs.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions contained herein, "MAFC" and AAAD agree as follows:
1. SCOPE AND COVERAGE.
A. AAAD and "MFAC" agree that the participating AAAD Members (as
hereinafter defined) shall be the principal suppliers to the designated ANAS of
at least [*]% of their automotive inventory replacement and repair parts, as
defined below, on the terms and conditions set forth herein or as may hereafter
be agreed to by and between AAAD or the AAAD Members and "MAFC". This Agreement
will apply to all ANAs in the United States except as specified herein or
otherwise mutually agreed. A participating AAAD Member is defined as a current
member of AAAD in good standing. AAAD will act in behalf of those participating
AAAD members as their billing and information disseminating agent and will act
to provide general management and coordination of the supply program. Monies
paid to AAAD by "MAFC" and the accounts receivable for unpaid merchandise are
the property of and are owed to the individual AAAD Members who sold the goods.
B. The automotive inventory replacement and repair parts to be supplied
hereunder include, but are not limited to, ignition parts, brake parts,
front-end and other chassis parts, spark plugs, light bulbs and other electrical
parts, filters, fan belts, hoses and hose clamps, thermostats, water pumps,
windshield wiper parts, tire repair parts, wheel weights, and cooling system and
fuel line chemicals. Products to be supplied hereunder shall be obtained from
sources whose quality is acceptable to "MAFC".
* Portions of this exhibit have been omitted and filed separately pursuant to
an application for confidential treatment filed with the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended.
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C. AAAD agrees to obtain the separate written agreement of each
participating AAAD Member, which agreement shall specify the ANAs designated to
be supplied by that AAAD Member, shall acknowledge the participating AAAD
Member's responsibility to AAAD and "MAFC" for its faithful performance of and
compliance with this Agreement with respect to those ANAs, and shall commit the
participating AAAD Member to continue its faithful performance and compliance
with the AAAD Agreement with "MAFC" (except for central billing and
coordination) with respect to those ANAs in the event AAAD ceases to exist as a
business entity or is legally or financially unable to operate as a business.
Thereafter, "MAFC" may change its designation of ANAs to be supplied by a
participating AAAD Member with one (1) month's written notice prior to any
change.
D. Mutually acceptable terms and conditions regarding xxxxxxxx, delivery,
inventory coverage and management, and similar administrative matters will be
set forth in Exhibits to this Agreement which will be modified by written
agreement of the parties to permit changes that may be required by market and
administrative conditions. Exhibits attached hereto, or any amendment thereof in
accordance with the terms of this Agreement, is incorporated herein by reference
and is made a part of this Agreement.
2. TERMINATION AND MODIFICATION.
A. This Agreement shall remain in full force and effect for [*] from the
signature date hereof unless earlier terminated or cancelled by AAAD or "MAFC".
This agreement will automatically renew as written on each anniversary date of
its inception unless either AAAD or "MAFC" decide otherwise.
B. In the event of termination by "MAFC", "MAFC" shall provide AAAD ninety
(90) days prior written notice of intent to terminate and cancel. As of the date
such notice is provided to AAAD, all terms in this contract will remain in
effect until thirty (30) days prior to the actual cancellation of the contract.
"MAFC" will take control of inventory during the thirty (30) days prior to
actual cancellation of the contract.
C. "MAFC" shall have the option of terminating this Agreement as it applies
to an individual AAAD Member with written notice of a probationary period of 30
days, in event of a breach, followed by a termination notice to AAAD and the
AAAD Member if the breach is not cured during the probationary period. The terms
and other provisions of cancellation of the contract will apply to the
individual AAAD Member.
D. In the event of termination by AAAD, AAAD shall provide "MAFC" 90 day
prior written notice of intent to terminate and cancel. "MAFC" may assume
responsibility for inventory control at any time it desires during the 90 day
notice period by giving AAAD written notice of its intention to assume control
of inventories. Effective with the month MNA takes control of inventory, terms
to "MAFC" will be 10th prox.
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E. This Agreement or any of the Exhibits made a part hereof may be amended
or modified only by a written agreement executed by AAAD and "MAFC". The laws of
the State of Illinois hereunder shall govern this Agreement and any dispute
arising. If any provisions hereof shall be found to be unenforceable, the
remaining portions of the Agreement shall remain in full force and effect.
IN WITNESS HEREOF the parties have executed this Agreement.
MIDNIGHT AUTO FRANCHISE CORP.
By /s/ (illegible) Date 8/12/04
------------------- -------
President, Xxxxxxxx Xxxxx
Attest /s/ (illegible) Date 8/12/04
---------------- -------
Title Project Manager
---------------
ASSOCIATION OF AUTOMOTIVE AFTERMARKET DISTRIBUTORS
By /s/ (illegible) Date 8/10/04
------------------ -------
Xxxx Xxxxxxxx, Executive Vice President
Attest /s/ (illegible) Date 8/10/04
----------------- -------
Title Director of Sales
-----------------
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EXHIBIT A
ADMINISTRATION
1. To coordinate and implement the program in an orderly and timely fashion,
AAAD agrees to provide an Account Executive or Coordinator to work with
designated "MAFC" representatives.
2. "MAFC" agrees to assign a full-time employee to serve as a coordinator
between "MAFC" and AAAD and the participating AAAD Members.
3. "MAFC" and AAAD agree to provide and to take appropriate management
control and action to assure the cooperation and support of the personnel
participating from their respective organizations in minimizing local
purchases and compliance with the standards and requirements of this
Agreement.
4. AAAD and "MAFC" shall meet semi-annually at alternate locations to review
all agenda issues pertinent to managing the AAAD Parts Supply Program.
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EXHIBIT B
WARRANTY
1. AAAD will cooperate with "MAFC" in submitting warranty and labor claims
applicable under any manufacturer's warranty on the merchandise supplied
hereunder, including private brand merchandise. AAAD MAKES NO WARRANTIES
EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH SALES OF
MERCHANDISE HEREUNDER, nor shall AAAD be liable for specific, incidental
or consequential damages or for any delay in performance under any
applicable manufacturer's warranty.
2. AAAD will provide "MAFC" with product liability insurance coverage for
the products sold to "MAFC" under terms of this contract. Manufacturers,
AAAD or AAAD Members, may provide such insurance coverage.
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EXHIBIT C
PRICING
1. The prices to be charged for merchandise to be provided by AAAD Members
and to be paid by "MAFC" shall follow the most current [*] issued and
distributed by the approved vendors. The prices to be charged at the
effective date of this Agreement shall be specified on the attached
Schedule A, "MAFC" Base Price Schedule or any agreed upon amendment
thereof. If an AAAD Member initiates participation in sales to "MAFC"
under this Agreement after the date of this Agreement, the aforementioned
pricing will apply to those sales.
2. Price increases shall go into effect in accordance with the effective
date from the vendor. Credits issued to "MAFC" for merchandise returned
to the AAAD Member shall be at prices in effect on the date of receipt of
merchandise at the AAAD Member's warehouse, subject to any agreed limit
on returns or less any agreed handling charges.
3. All Goods purchased by "MAFC" shall be subject to the incentives set
forth below. Such incentives shall be calculated based on [*]. AAAD is to
provide the [*].
a. The aggregated rebate will be issued to Midnight Auto Franchise
Corp. and mailed to Midnight Auto Franchise Corp, Attention Xxxx
Xxxxx, 0000 Xxxxxxxxx Xxxx, Xxxx, XX 00000 (via check on a
quarterly basis by AAAD).
b. The level of rebate earned and provided will be adjusted on
January 1st of each calendar year. The level will be based upon
the prior year's net purchase total. That level, once established,
will apply to all purchases for the current year.
c. [*] will provide a rebate for purchases from our network by XXX
locations. The Headquarter Rebate will be applied to [*]% of
centrally billed net purchases from AAAD members.
d. [*] will provide Midnight Auto Franchise Corp. with a volume
driven rebate according to the following scale:
i. [*]
ii. [*]
iii. [*]
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4. "MAFC" and AAAD shall meet jointly with all suppliers of parts or
products as needed in order to determine market trends, competitive
costs, new parts/product technology and training.
5. Nothing herein shall prevent "MAFC" or an individual XXX from negotiating
prices with an individual AAAD member which differ from those called for
by this agreement, Exhibit "C" and/or Schedule "A".
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EXHIBIT D
DELIVERY/RETURN
1. Delivery of merchandise by AAAD Members to ANAs will be of the same type
and frequency as customarily provided for the AAAD Member's similar
customers in the same area, provided however, that at least [*] will be
available to each store on a freight prepaid basis. The minimum weight
and/or value for freight prepaid shipments and any product exclusions
will be the same for ANAs as the policy for the AAAD Member's similar
customers in the same area.
2. Authorized new returns from ANAs to an AAAD Member warehouse shall be
shipped freight prepaid unless picked up by the AAAD Member's truck. No
return or handling charge will apply to saleable service parts returned
from an XXX to the AAAD Member unless otherwise set forth in this
Agreement.
3. [*] charges will apply for new returns made within 30 days of the
original delivery date. The AAAD member shall pick up this merchandise on
a regular basis during normal delivery cycles. New returns made after the
30 day period will be subject to a [*]% handling charge.
4. [*] charges will apply for qualified core and warranty returns. The AAAD
Member shall pick up this merchandise on a regular basis during normal
delivery cycles.
5. An annual new return allowance of [*]% (also known as a stock adjustment)
of the prior year's net purchases by XXX location will be allowed with
[*] charges. The XXX will place an offsetting order of equal or greater
value with the supplying AAAD Member at the time of this return. Returns
in excess of [*]% of prior year's net purchases will be subject to a [*]%
handling charge. This handling charge will be waived during the first
year of inventory placed in any XXX facility to allow for proper stock
level and inventory movement.
6. Supply and expense items and non-service parts (unless in unopened, full
case quantities), special order items not carried in the AAAD Member's
regular inventory, and parts obtained from sources other than the AAAD
Member are not returnable from operating or closed ANAs.
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EXHIBIT E
INVENTORY MANAGEMENT
1. AAAD and "MAFC" recognize and agree that proper inventory management and
maintenance of satisfactory service levels are important to the success
of the program. It is intended that AAAD Members shall manage the ANA's
service parts inventories and have products available to provide the best
potential for high utilization of the stocked inventory in each XXX
location. ANA's shall provide AAAD Members with the quantities and part
numbers of merchandise purchased from sources (local purchase) other than
AAAD Members.
2. It is recognized and acknowledged by both "MAFC" and AAAD that there are
many factors which affect ANA's service proportions from Members versus
local purchases, some of which are controllable by Members, some by ANAs,
and some, such as strikes, natural disasters, and acts of God which are
not controllable by either.
3. In order to properly manage XXX inventories, periodic XXX visits by AAAD
Member representatives are required, the frequency and duration of which
will vary in relation to ANA's parts usage and inventory control needs;
however, AAAD Member representatives shall make at least one (1) visit
every other week to each XXX they are servicing unless otherwise mutually
agreed.
4. Service parts will be removed from individual ANA's inventories before
said parts become discontinued or obsolete. In the event a vendor
discontinues or obsoletes a part or parts, the AAAD Member must accept
the return of those parts from the ANAs. "MAFC" shall receive full credit
from AAAD for the amount paid. "MAFC" shall then be responsible for
credit to the XXX store that such inventory was removed from.
5. It is agreed that the aggregate of the inventory maintained for each XXX
store shall be approximately $[*]. The maximum inventory levels and
average monthly purchase volume levels will be adjusted annually
beginning January 1, 2005. The adjustment will be mutually agreeable
between the serving AAAD Member and the XXX franchisee.
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EXHIBIT F
BILLING AND TERMS
1. All billing and accounts payable information with respect to this
Agreement must be received by electronic data transmission in a format
acceptable to "MAFC" and AAAD and which can be entered directly into the
records of "MAFC" and AAAD. AAAD shall provide and maintain a complete
item file, or other mutually agreed upon method, to enable MNA to verify
products, prices and codes on parts sold to ANA's hereunder. A billing
month will start with shipments made on the 10th day of the month and end
with shipments made on the 9th day of the next month. "MAFC" agrees to
make prompt payment of invoices as due and to provide to AAAD via
Electronic Data Transmission, or other mutually agreed upon method,
identification and amount of each invoice being paid.
2. Payment from "MAFC" to AAAD on behalf of the purchases made by each XXX
store, from each AAAD member, shall be twelve (12) times per year; due
the 29th day of each month; but in no event later than 21 days past the
end of the billing month as set in Paragraph 1 above. Further, AAAD
recognizes that MAFC desires to make 9 payments per year. AAAD recognizes
and agrees to negotiate in good faith with regard to the payment
structure at the [*] anniversary or renewal of this agreement.
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EXHIBIT G
E-COMMERCE AND IMPLEMENTATION
1. Any All Night Auto locations with internet capability can access the
Parts Plus Webshop solution now. Parts Plus agrees to work with "MAFC" to
provide integrated order inquiry and transaction fulfillment through [*]
system. "MAFC" agrees to take all necessary steps to drive compliance
within their garage network to utilize this E-Commerce tool and reduce
service costs.
2. Parts Plus HQ will contact and arrange an orientation meeting with the
"MAFC" Management, Warehouse Management, and/or All Night Auto Store
Management. An implementation manual outlining the features and benefits
of the program will be provided to each person in attendance. A senior
representative of Parts Plus HQ and the serving Parts Plus Distributor
will be required to attend the meetings to explain the program and
provide specific local details such as:
a. All contact information including corporate and store / warehouse
information. (Names, Titles, phone, fax, email, etc.)
b. Hours of Operation and Delivery Commitments
c. Product Line Card, Ordering Information and Process
d. Return Information and Process
e. Sales Representation and Call Frequency
[*]
