Exhibit 10.24
Note: Confidential portions of this Agreement have been omitted and are filed
separately with the Commission.
SUPPLY AGREEMENT
This Supply Agreement (this "Agreement") is made and entered into as of April 2,
2003 ("Effective Date"), by and between Midas International Corporation, a
Delaware corporation ("MIC"), Parts Warehouse, Inc., a Delaware corporation
("PWI") (MIC and PWI are sometimes referred to herein collectively as "Midas"),
having their principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and AutoZone, Inc., a Nevada corporation, ("AutoZone") having its
principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, AutoZone desires to purchase from Midas, and Midas desires to sell to
AutoZone, all of the Lifted Inventory (as hereinafter defined), on the terms and
subject to the conditions set forth herein; and
WHEREAS, AutoZone and Midas desire to have AutoZone serve as (i) the exclusive
supplier of Midas-brand Products (as hereinafter defined) to any and all current
and future Midas shops, whether franchised or owned by Midas or its affiliates,
located in the United States (collectively, "Midas Shops"), (ii) a supplier of
non-Midas Stocking Products (as hereinafter defined) to Midas Shops, and (iii) a
supplier of Non-Stocking Products (as hereinafter defined) to Participating
Midas Shops (as hereinafter defined), all on the terms and subject to the
conditions set forth herein; and
WHEREAS, in order to serve as the exclusive supplier of Midas-brand Products to
Midas Shops, AutoZone and Midas desire to enter into a supply arrangement
whereby AutoZone shall purchase from Midas, and Midas shall sell to AutoZone,
Midas Manufactured Products (as hereinafter defined) at such times and in such
quantities as required by AutoZone to service the Midas Manufactured Product
needs of the Midas Shops, on the terms and subject to the conditions set forth
herein.
WHEREAS, AutoZone (or an affiliate) and Midas shall enter into a license
agreement that will permit AutoZone (or an affiliate) to procure and sell to
Midas Shop Midas-brand Products in addition to Midas Manufactured Products, on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements of
the parties set forth herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. SALE AND PURCHASE OF LIFTED INVENTORY
-------------------------------------
(a) Lifted Inventory. On the terms and subject to the conditions
contained herein, Midas agrees to sell to AutoZone, and AutoZone agrees to
purchase from Midas in accordance with the timeline specified in Section 1(b)
and at the price specified in Section 1(e) of this Agreement, free and clear of
any security interest, mortgage, lien, charge, restriction, encumbrance,
conditional sale agreement, claim, pledge or right of any party (collectively,
"Liens"), the types and quantities (subject to reduction for availability and
the quality standards outlined below) of Midas-brand and non-Midas brand
Products identified on Schedule 1 hereto (collectively, the "Lifted Inventory").
For purposes of this Agreement, "Products" shall mean Midas-brand and non-Midas
brand automotive parts, accessories and supplies, collectively. The parties
agree that the Lifted Inventory shall only consist of (and, accordingly,
AutoZone shall only purchase from Midas pursuant to this Section 1) Products
that are in good and merchantable condition, in appropriate packaging in good
condition, and of a quality usable and sellable in the ordinary course of Midas'
business and should otherwise be acceptable for purchase by Midas Shops and
their customers. AutoZone acknowledges that the Lifted Inventory may consist of
Products that are manufactured or acquired by Midas after the date hereof. Midas
shall not order or manufacture Products of the types contained in the Lifted
Inventory in amounts in excess of those reasonably believed by Midas to be
necessary to continue its ordinary course of business, consistent with past
practices, between the date of this Agreement and the final Closing (as defined
in Section 1(b) below). However, AutoZone shall not be required to purchase
Lifted Inventory in excess of the types and quantities of Products specified on
Schedule 1 hereto (although it may do so, if AutoZone so desires).
(b) Schedule of Closings. The parties acknowledge that the sale and
purchase of the Lifted Inventory described in Section 1(a) above must be
consummated in a manner that does not disrupt Product deliveries to Midas Shops.
Accordingly, the parties agree that such sale and purchase transaction shall
occur pursuant to separate "phased" closings (each, a "Closing" and,
collectively, the "Closings"). The timeline for the Closings shall be developed
by mutual agreement of the parties, with the last Closing occurring no later
than November 30, 2003. Each Closing corresponds to the shutdown by Midas of one
or more of its existing distribution centers (each, a "Midas DC"), and the Parts
Warehouse, Inc. ("PWI") locations serviced by such shutdown Midas DC, and, in
turn, the transition of the shutdown Midas DC's (and the corresponding shutdown
PWI locations') distribution business to one or more AutoZone distribution
centers (each, an "AutoZone DC").
(c) Ordering Procedure.
(i) Initial Lifted Inventory Orders. In partial fulfillment of
AutoZone's obligations to purchase the Lifted Inventory as listed in
Schedule 1 (subject to the limitations set forth in Section 1(a)), prior to
each Closing, AutoZone shall issue to Midas, via electronic data interchange
(EDI), one or more orders covering, in the aggregate, the types and
quantities of Products mutually determined by the parties as necessary to
fulfill the ongoing Product inventory needs of the Midas Shops serviced by
the Midas DC to be shutdown (and its corresponding PWI locations to be
shutdown), as well as those of AutoZone's existing customers, for delivery
to the applicable AutoZone DC(s).
(ii) Remaining Lifted Inventory. The balance of the Lifted Inventory
specified on Schedule 1 not purchased pursuant to Section 1(c)(i) (but
subject to the limitations set forth in Section 1(a)) shall be purchased by
AutoZone pursuant to one or more separate Product orders issued to Midas no
later than November 30, 2003.
(d) Delivery. Midas shall use commercially reasonable efforts to pick,
pack and ship each Product order placed by AutoZone pursuant to Section 1(c)
above promptly after its receipt of such order. Regarding Product orders that do
not relate to a specific Closing, the parties agree to work together in good
faith to develop an orderly delivery schedule and process which is mutually
acceptable to the parties. Midas shall be responsible for the freight charges
relating to all shipments of Lifted Inventory from Midas to AutoZone (FOB the
applicable AutoZone DC or AutoZone supplier). All right, title and interest in
and to the Lifted Inventory shall transfer to AutoZone upon delivery. Midas'
failure, for any reason, to ship all or any portion of a Product order issued by
AutoZone pursuant to Section 1(c) above shall not constitute an Event of Default
(as hereinafter defined) by Midas. Rather, as provided in Section 1(e) below,
such failure shall simply be taken into account for purposes of calculating the
Purchase Price (as hereinafter defined) to be paid by AutoZone hereunder.
(e) Purchase Price.
(i) Calculation. The total purchase price to be paid by AutoZone to
Midas for the Lifted Inventory (the "Purchase Price") shall be the product
of (i) the actual number of units of each Product purchased by AutoZone from
Midas under this Section 1, multiplied by (ii) the applicable price for such
Product as set forth on Schedule 1 hereto.
(ii) Payments. Individual shipments of Lifted Inventory from Midas to
an AutoZone DC or an AutoZone supplier shall be billed to AutoZone at the
applicable price for such Products as set forth on Schedule 1 hereto.
Shipments shall be billed on an individual Product order basis, where
practical. Subject to Subsection 1(e)(iii) below, payment terms are net
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
calendar days. All Purchase Price installments must be paid by either
FEDWIRE, ACH or EFT (unless factored as stated in Subsection 1(e)(iii)
below).
(iii) Factoring Arrangement. As a material inducement to Midas'
agreement to grant [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION] terms to AutoZone, as provided in Subsection 1(e)(ii) above,
AutoZone shall introduce Midas to a program
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whereby Midas may factor its account receivable from AutoZone under this
Section 1 to such bank as AutoZone may specify, at a cost of LIBOR +
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
basis points and with the funding to occur within ten (10) calendar days of
negotiation of the draft to the bank. If AutoZone fails to introduce Midas
to a bank that will make such a factoring arrangement available to Midas (on
the terms set forth in the preceding sentence), then the payment terms under
Subsection 1(e)(ii) shall, instead, be net 30.
(f) Commitment Letter. To the extent requested by Midas and/or Midas'
lenders, AutoZone shall issue a purchasing commitment letter to Midas for the
types and quantities of Products listed on Schedule 1 hereto. The commitment
letter shall set forth the terms of the purchasing commitment (subject to
reduction as stated in Section 1(a)) made by AutoZone hereunder and shall
otherwise be in form and substance reasonably requested by Midas and/or Midas'
new lenders, and reasonably acceptable to AutoZone. Prior to each Closing, and
as a condition of the Closing, Midas shall cause its lenders to provide AutoZone
with reasonable evidence acceptable to AutoZone of the lenders' release of their
respective security interests in and to that portion of the Lifted Inventory
which corresponds to such Closing, as well as reasonable evidence of
satisfaction of any other Liens, if any.
(g) Assistance with Disposal of Other Inventory. AutoZone shall also
provide reasonable assistance to Midas in its efforts to sell, liquidate or
otherwise return to the original vendor or AutoZone's comparable vendor all of
Midas' inventory of automotive parts, accessories and supplies remaining in the
Midas DCs and the PWI locations (i.e., those inventory items not otherwise
constituting Lifted Inventory). The foregoing assistance from AutoZone shall
include providing to Midas the benefit of AutoZone's expertise and assistance
with vendors.
2. AUTOZONE SUPPLY PROGRAMS.
-------------------------
Upon the terms and subject to the conditions set forth herein, Midas hereby
appoints AutoZone to serve as (i) the exclusive supplier of Midas-brand Products
to Midas Shops, (ii) a supplier of non-Midas Stocking Products to Midas Shops,
and (iii) a supplier of Non-Stocking Products to Participating Midas Shops
during the Supply Term (as defined in Section 8 of this Agreement). AutoZone may
make deliveries to the Midas Shops under the Stocking Program from any facility
that AutoZone deems appropriate, without notice to Midas or the Midas Shops.
Midas Shops are listed in Schedule 2 to this Agreement which is attached hereto
and incorporated herein by reference. Midas shall use commercially reasonable
efforts to give AutoZone at least thirty (30) calendar days' advance notice of
the opening or relocation of any Midas Shop, and notice as soon as practicable
for any closed Midas Shop. Such notice shall be deemed to amend Schedule 2
hereto. AutoZone hereby accepts such appointment and, in furtherance thereof,
agrees to maintain and provide to the Midas Shops the following programs:
(a) Stocking Program.
-----------------
(i) Stocking Product Inventory. Under the "Stocking Program", Midas
Shops shall be entitled to place, in the manner described in
subsection (a)(ii) below, and AutoZone shall receive and fill,
orders for such types and quantities of Stocking Products as the
Midas Shop may require from time to time during the Supply Term to
be delivered, in the manner described in Subsection 2(a) (iii)
below, on a weekly basis (or otherwise as mutually agreed). For
purposes of this Agreement, "Stocking Products" shall mean the
Products identified on Schedule 3 attached hereto plus any other
non-Midas products stocked from time to time by the servicing
AutoZone DC. Schedule 3 hereto sets forth the Stocking Products
previously made available by Midas to the Midas Shops and represents
the minimum Stocking Product stock keeping units ("SKUs") that
AutoZone must initially make available to the Midas Shops during the
Supply Term ("Minimum Stocking Products"), subject to availability
from the vendor of such Products. Midas and AutoZone shall review
the list of Minimum Stocking Products from time to time, no less
often than quarterly, and shall add or delete SKUs from the list of
Minimum Stocking Products as Midas and AutoZone shall mutually
agree.
(ii) Orders. Each Midas Shop shall have the right to place Stocking
Program orders with AutoZone on a weekly basis (or on a scheduled
semi-weekly or bi-weekly basis if mutually agreed to by AutoZone and
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the applicable Midas Shop). Each Midas Shop shall be informed of its
scheduled delivery time and date, and the date and time after which
any orders received from the Midas Shop will not be shipped with the
next shipment (the "Cut-Off Time"). The scheduled delivery time and
date and the Cut-Off Time may be adjusted by AutoZone from time to
time in its sole discretion upon prior written notice to the
affected Midas Shop.
(iii) Delivery. AutoZone shall make deliveries under the Stocking Program
on a scheduled weekly basis (or on a scheduled semi-weekly or
bi-weekly basis if mutually agreed to by AutoZone and the applicable
Midas Shop). Delivery shall be made to the location of the Midas
Shop placing the order (or such other location(s) as may be mutually
agreed to between AutoZone and Midas or the Midas franchisee). The
frequency of Stocking Program deliveries for a particular Midas Shop
(or other specified location) shall be weekly, unless mutually
agreed otherwise between AutoZone and Midas or the applicable Midas
franchisee. Subject to Section 14(a) of this Agreement, AutoZone
shall deliver (either directly through the use of AutoZone's own
fleet or through third party carriers) all orders under the Stocking
Program within forty-eight (48) business hours after the Cut-Off
Time for the applicable Midas Shop (continental U.S. only), such
delivery to occur during the applicable Midas Shop's (or other
specified location's) normal hours of operation. For purposes of
this Agreement, "forty-eight (48) business hours" shall mean all
hours elapsed, other than the hours between midnight Friday night
and midnight Sunday night. Midas Shops may also have the option of
receiving Stocking Program orders on a night drop delivery basis, if
agreed to by AutoZone. AutoZone shall use commercially reasonable
efforts to establish a Stocking Program delivery schedule that is
compatible with, and takes into account, the business needs of
Midas, the applicable Midas franchisee and AutoZone. AutoZone shall
ensure that all Stocking Products are delivered on trailers supplied
with lift gates and such other equipment as is necessary to safely
and legally unload the Stocking Product order from the trailer into
the Midas Shop's bays. In turn, unless otherwise agreed to by
AutoZone, a Midas Shop (or other specified location) must be able to
safely and legally accept deliveries from at least 45-foot trailers
with lift gate equipment in order to participate in the Stocking
Program.
(iv) Freight Terms. AutoZone shall be responsible for the freight charges
relating to all shipments made to Midas Shops under the Stocking
Program, but only to the extent that the Stocking Program order is
greater than or equal to [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] and specifies delivery to a single
Midas Shop location (or other mutually agreed location). For
purposes of this Subsection 2(a)(iv), individual orders from a
single Midas Shop that are combined into a single delivery shall be
aggregated and counted as a single order. The Midas Shop shall be
charged the freight on each Stocking Program order that does not
meet the foregoing [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] minimum requirement. In addition, on
a semi-annual basis (i.e., at the end of the first two quarters and
the last two quarters of Midas' fiscal year) during the Supply Term,
each Midas Shop shall be required to pay to AutoZone an additional
one-time delivery fee in an amount equal to: (A) [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION] in the
event that the average of the Stocking Program orders placed by such
Midas Shop during the two quarters in question was between
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION], (B) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION]n the event that the average of the Stocking
Program orders placed by such Midas Shop during the two quarters in
question was between [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION], and (C) [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] in the event that
the average of the Stocking Program orders placed by such Midas Shop
during the two quarters in question was between [CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]. A Midas
Shop shall not be required to pay AutoZone an additional one time
delivery fee in the event that the average of the Stocking Program
orders placed by such Midas Shop during the two quarters in question
was greater than or equal to [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION].
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(v) Pricing. AutoZone shall provide the Midas Shops with competitive
pricing on Stocking Products. Prices for application specific
Stocking Products will be at a discount to Hot Shot order prices
(described in Section 2(b)(iv) below). AutoZone and Midas will work
in good faith to resolve pricing concerns on Midas-brand Products
sold by AutoZone to Midas.
(vi) Invoices and Payment Terms. Unless otherwise agreed between AutoZone
and Midas or the applicable Midas franchisee, AutoZone shall invoice
each Midas Shop separately for its purchases under the Stocking
Program. AutoZone shall establish payment terms for each Midas Shop
based upon AutoZone's credit analysis. If AutoZone's credit analysis
or the Midas Shop's payment history reasonably indicates that a
Midas Shop should receive longer or shorter payment terms than those
initially given, then AutoZone may change the payment terms as
AutoZone deems appropriate. AutoZone shall use commercially
reasonable efforts to provide Midas with written notice of any such
changes to payment terms. Notwithstanding any other provision to the
contrary contained herein, AutoZone may refuse to extend credit upon
at least thirty (30) days prior written notice to any Midas Shop
that, in AutoZone's sole discretion, would not qualify for extension
of credit under AutoZone's credit criteria applicable to AutoZone
customers not subject to this Agreement that operate comparable
businesses to the Midas Shop seeking such credit.
(vii) Returns. For each calendar quarter of the Supply Term, each Midas
Shop shall be entitled to return to AutoZone for full credit an
amount of undamaged Stocking Products in original undamaged
packaging in a dollar amount up to [CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] if that Midas Shop's total net
Stocking Product purchases under the Stocking Program during the
previous four (4) calendar quarters. For the first year of the
Supply Term, the previous four (4) calendar quarters' Stocking
Product purchases shall include purchases made by the Midas Shop for
stocking inventory from a Midas DC during the appropriate calendar
quarter(s). All returns under the Stocking Program shall be picked
up by the nearest local AutoZone Store (as hereinafter defined) or
otherwise at AutoZone's discretion, at no charge to the Midas Shop.
For any Midas Shop that is not serviced by a local AutoZone Store,
AutoZone shall provide a process whereby returns can be made by the
Midas Shop to its servicing AutoZone DC without charge to Midas or
the applicable Midas franchisee.
(viii) Performance Guarantees. For each Stocking Program order placed
during the Supply Term before the Cut-Off Time, subject to Section
14(a) of this Agreement, AutoZone shall guarantee an order fill rate
of at least [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION]% (measured by pieces) for such Midas Shop,
calculated monthly based on a blended average of all Stocking
Program deliveries to such Midas Shop over the prior 3 months.
The foregoing performance guarantee shall only apply with respect to
Stocking Products generally stocked by the applicable servicing
AutoZone DC and shall be subject to Midas' timely delivery of (A)
the Lifted Inventory to AutoZone in accordance with the agreed to
Closing timeline and (B) Midas Manufactured Products, as applicable.
In the event that AutoZone does not meet the performance guarantee
stated above, AutoZone will be required to pay to Midas or the
applicable Midas franchisee a penalty in an amount equal to:
w) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]% of the total dollar amount of the last month's
Stocking Program orders if the aggregate fill rate during the
applicable three month period is between [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION];
x) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]% of the total dollar amount of the last month's
Stocking Program orders if the aggregate fill rate during the
applicable three month period is between [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION];
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y) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]% of the total dollar amount of the last month's
Stocking Program orders if the aggregate fill rate during the
applicable three month period is between [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION]; and
z) [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]% of the total dollar amount of the last month's
Stocking Program orders if the aggregate fill rate during the
applicable three month period is less than [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION].
For the first two months of the Supply Term for Stocking Products
for an applicable Midas Shop, the aggregate fill rate shall be
calculated with respect to each of the first two months individually
and not aggregated with any other month. Midas agrees to reimburse
AutoZone for [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION] of any penalty required to be paid by AutoZone to a
Midas Shop pursuant to the foregoing provision in connection with
the first two (2) months of the Supply Term.
Subject to Section 14(a) below, if an order is delivered more than
72 hours after the Cut-Off Time (continental U.S. only), at the
request of the Midas Shop, the Midas Shop will be paid by AutoZone
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION]% of the dollar amount of the Stocking Program order (and
the actual fill rate of the order shall be included in the
performance guarantee calculation above). The foregoing shall be the
sole remedy of any Midas Shop for the failure of AutoZone to meet
the performance guarantee. Any penalty imposed upon AutoZone
pursuant to this Section 2(a)(viii) shall be paid at the end of the
applicable calendar month by AutoZone to Midas or the applicable
Midas franchisee in the form of a credit against future purchases
under the Stocking Program or in cash if so requested by Midas or
the applicable Midas franchisee. Notwithstanding the foregoing, the
performance guarantee calculation stated above shall not include
(AA) any order by any Midas Shop that exceeds such Midas Shop's
average Stocking Program order over the trailing two calendar
quarters by more than 100% in dollar value, or (BB) any order for
Products necessary for the fulfillment of any promotion or event
(other than local promotions and events) promoted by Midas or any of
its franchisees for which AutoZone does not have adequate in-stock
quantities of such Products, but only to the extent that Midas has
not provided AutoZone with at least ninety (90) calendar days' prior
written notice of such promotion or event and to the extent that the
forecast of demand created by the promotion or event (as determined
in the manner provided below) is not exceeded by 10%. Midas shall
provide to AutoZone the prior twelve (12) months' promotion event
calendar and the demand driven by such events. Midas and AutoZone
shall mutually agree on a forecast for such promotion or event.
(b) Hot Shot Program.
-----------------
(i) Orders. Under the "Hot Shot Program," Participating Midas Shops
shall be entitled to place with AutoZone, and AutoZone shall receive
and fill, orders for such types and quantities of Non-Stocking
Products as Midas and Midas franchisees may require from time to
time during the Supply Term, for delivery on a same-day basis. For
purposes of this Agreement, "Non-Stocking Products" shall mean
automotive products, accessories and supplies sold from time to time
by the AutoZone retail location that services a particular Midas
Shop (each, an "AutoZone Store"), subject to availability, and
additional products that can be obtained by the AutoZone Store for
same-day delivery. All orders placed by Midas Shops with AutoZone
other than in accordance with the Stocking Program order provisions
described in Section 2(a)(ii) above shall constitute orders under
the Hot Shot Program.
For purposes of this Agreement, "Participating Midas Shops" shall
mean those Midas Shops that AutoZone is now or hereafter
commercially able to make same day deliveries, as required under the
Hot Shot Program. Schedule 4 attached hereto lists the currently
existing Midas Shops that constitute Participating Midas Shops as of
the date hereof. After receipt of any notice amending Schedule 2,
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AutoZone shall inform Midas as to whether it will be able to service
such Midas Shop as a Participating Midas Shop, and upon such
determination, Schedule 4 shall be deemed amended as appropriate. In
addition, AutoZone shall give Midas and the appropriate Midas Shop
at least 30 calendar days advance written notice of the opening or
relocation of any AutoZone store, and written notice as soon as
practicable for any closed AutoZone store, that would affect the
performance of the Hot Shot Program. By such notice, AutoZone may
add or remove Midas Shops from Schedule 4 as Participating Midas
Shops as appropriate.
(ii) Delivery. As noted above, AutoZone shall make deliveries under the
Hot Shot Program on a same day basis. Subject to Section 14(a) of
this Agreement, AutoZone shall deliver (from one of its AutoZone
Stores) all orders under the Hot Shot Program consistent with the
time frames shown on the delivery schedule zones attached hereto as
Schedule 5. In any event, AutoZone shall use commercially reasonable
efforts to establish a Hot Shot Program delivery schedule that is
compatible with, and takes into account, the business needs of each
individual Participating Midas Shop.
(iii) No Delivery Charge. AutoZone shall be responsible for any delivery
charges relating to shipments made to Participating Midas Shops
under the Hot Shot Program, other than special orders that are
required to be shipped from a different point of origin.
(iv) Pricing. During the Supply Term, AutoZone agrees to sell
Non-Stocking Products to Participating Midas Shops at the servicing
AutoZone Store's then current commercial account pricing for such
Non-Stocking Products less a [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION] off-invoice allowance. If any Midas
Shop believes that any price charged for a Non-Stocking Product is
not competitive with its local market pricing for products of like
grade and quality, the Midas Shop shall notify the servicing
AutoZone Store which then shall apply its then-existing price
matching program for its commercial customers, if any.
(v) Invoicing and Payment Terms. Unless otherwise agreed between
AutoZone and Midas or the applicable Midas franchisee, AutoZone
shall invoice each Midas Shop separately for its purchases under the
Hot Shot Program. AutoZone shall establish payment terms for each
Midas Shop based upon AutoZone's credit analysis. If AutoZone's
credit analysis or the Midas Shop's payment history reasonably
indicates that a Midas Shop should receive longer or shorter payment
terms than those initially given, then AutoZone may change the
payment terms as AutoZone deems appropriate. AutoZone shall use
commercially reasonable efforts to provide Midas with written notice
of any such changes to payment terms. Notwithstanding any other
provision to the contrary contained herein, AutoZone may refuse to
extend credit upon at least thirty (30) days prior written notice to
any Midas Shop that, in AutoZone's sole discretion, would not
qualify for extension of credit under AutoZone's credit criteria
applicable to AutoZone customers not subject to this Agreement that
operate comparable businesses to the Midas Shop seeking such credit.
3. SUPPLY OF MIDAS-BRAND PRODUCTS.
-------------------------------
(a) Midas Manufactured Products. In order to serve as the exclusive
supplier of Midas-brand Products to Midas Shops during the Supply Term, AutoZone
and Midas shall enter into an AutoZone Vendor Agreement, the form of which is
attached hereto as Exhibit A, for the supply from Midas to AutoZone (or its
wholly owned subsidiary) of Midas-brand Products which are now or hereafter
manufactured by Midas or one of its wholly-owned subsidiaries (collectively,
"Midas Manufactured Products"). AutoZone (or its wholly owned subsidiary) shall
have the exclusive right to purchase from Midas (or its wholly-owned
subsidiary), and Midas (or its wholly-owned subsidiary) shall sell to AutoZone
(or its wholly-owned subsidiary), such types and quantities of Midas
Manufactured Products as AutoZone may require during the Supply Term solely for
resale to Midas Shops under the Stocking Program. Midas shall provide AutoZone
with competitive pricing on Midas Manufactured Products. AutoZone and Midas will
work in good faith to resolve pricing concerns on Midas Manufactured Products
sold by Midas to AutoZone.
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During the Supply Term, Midas and its wholly-owned subsidiaries may sell
and distribute Midas Manufactured Products sold under the Midas name in the
United Stated only to AutoZone (or its wholly-owned subsidiary).
Solely for purposes of clarification, the parties agree that nothing
contained in this Agreement shall be deemed to prohibit Midas from selling
products or product lines manufactured by Midas under its "IPC", "▇▇▇▇" or
"Ravin" trademarks to third parties other than AutoZone.
(b) Other Midas-Brand Products. All Midas-brand Products other than Midas
Manufactured Products (collectively, "Other Midas-Brand Products") are
manufactured by third party vendors (each, a "Third Party Vendor"). AutoZone
agrees to attempt to enter into an AutoZone Vendor Agreement with Third Party
Vendors that are currently supplying Midas on terms reasonably acceptable to
AutoZone. If AutoZone is not successful in these efforts, AutoZone may purchase
the products manufactured by the Third Party Vendor from other Third Party
Vendors as described below.
Midas and AutoZone shall enter into a license agreement, the form of which
is attached hereto as Exhibit B (the "License Agreement"), whereby Midas shall
grant to AutoZone the authority to contract with Third Party Vendors to
manufacture Other Midas-Brand Products solely for resale to Midas Shops. The
License Agreement shall immediately terminate upon the expiration or any
termination of this Agreement.
As more specifically stated in the License Agreement, all Other Midas-Brand
Products must meet such product quality standards and specifications as
determined by Midas from time to time in its discretion (the "Standards"), and
AutoZone shall assure that the Other Midas-Brand Products meet the Standards in
accordance with a the terms of the License Agreement.
If Midas decides, in its discretion, to modify the Standards for any Other
Midas-Brand Product at any time during the Supply Term, Midas agrees that
AutoZone shall be given a commercially reasonable period of time within which to
(i) sell (or otherwise dispose of, at AutoZone's option) its existing inventory
of the affected, non-compliant Other Midas-Brand Product and (ii) properly stock
up on new Other Midas-Brand Products which meet the new Standards.
Under no circumstance may the Standards require the use of asbestos or any
asbestos-containing material in any Product.
In the event that Midas (or its wholly-owned subsidiary) is unable to
provide Midas Manufactured Products to AutoZone in sufficient quantities to
supply the Midas Shops, AutoZone may procure such products from Third Party
Vendors under the Standards, but only until such time as Midas (or its
wholly-owned subsidiary) is able to provide such Midas Manufactured Products to
AutoZone in the quantities required.
(c) Changes to Midas-brand Products. From time to time during the Supply
Term, Midas and AutoZone shall perform product line reviews with respect to
Midas-brand Products. Midas shall have the unilateral right, in its discretion,
to make deletions to SKUs and/or product lines for Midas-brand Products;
provided, however, that the timing would be subject to AutoZone's approval, such
approval not to be unreasonably withheld, allowing AutoZone a commercially
reasonable amount of time to sell (or otherwise dispose of, at AutoZone's
option) its existing inventory of the deleted SKU or Product lines. Midas may
unilaterally add up to fifty (50) Midas-brand Product SKUs, consisting only of
friction, exhaust, struts and shocks, in any twelve (12) month period, provided
that the timing would be subject to AutoZone's approval, such approval not to be
unreasonably withheld.
(d) Warranties. Under the Stocking Program, AutoZone shall warrant all
Midas-brand Products sold to Midas Shops during the Supply Term to be free from
defects in materials and workmanship for a period of ninety (90) calendar days
from the date that the Product is sold by the Midas Shop to the retail customer.
Upon the return of a defective Midas-brand Product to a Midas Shop by the Midas
Shop's customer within the 90-day warranty period, AutoZone shall, at its own
cost and at no charge to the Midas Shop, provide the applicable Midas Shop with
a new
8
replacement Midas-brand Product in exchange for the returned, defective Product.
AutoZone shall also reimburse the Midas Shop for a percentage of the Midas
Shop's published labor rate incurred in connection with such warranty
replacement, such percentage to be in accordance with AutoZone's then current
standard warranty reimbursement policies. The foregoing shall be the sole remedy
for a defective Midas-brand Product and is in lieu of all other warranties from
AutoZone, express or implied. Midas shall be solely responsible for the warranty
costs incurred by Midas Shops for valid warranty claims relating to Midas-brand
Products which are properly presented by the customer after the 90-day warranty
period described above, all in accordance with the terms of the applicable Midas
warranty.
In addition, AutoZone shall warrant all application specific non-Midas
Stocking Products and Non-Stocking Products sold to Midas Shops under the
Stocking Program and the Hot Shot Program to be free from defects in materials
and workmanship for the period of the then current standard warranty offered by
the Midas Shops to its customers for such Products. The current standard
warranty term applicable to non-Midas Stocking Products and Non-Stocking
Products is listed on Schedule 6 attached hereto and incorporated herein by
reference. Midas must provide AutoZone with at least sixty (60) calendar days'
prior written notice of any changes to the warranty terms, conditions, policies
or procedures for any non-Midas Stocking Products and Non-Stocking Products.
AutoZone may approve the warranty term changes by written acceptance to Midas of
the warranty terms. For any Product that is not listed on Schedule 6, or if
AutoZone has not otherwise accepted the terms of a warranty change in writing,
the Products shall have a warranty of 90 days from the date that the Product is
sold by the Midas Shop to the retail customer. Notwithstanding the foregoing,
AutoZone shall assure that Midas receives the benefit of any warranty provided
by AutoZone's vendor that AutoZone may pass through to the Midas Shops.
The warranty stated in this section above represents the total liability of
AutoZone and its subsidiaries, for any Product. All warranties implied by law
applicable to a Product shall be limited to the applicable warranty period.
AutoZone shall not be liable to Midas or its franchisees for any indirect,
special, incidental or consequential damages.
4. ALLOWANCES AND REBATES.
-----------------------
(a) Midas. In consideration of the agreements of Midas contained herein,
for the period commencing on the date hereof and ending on termination or
expiration of this Agreement, AutoZone shall pay to MIC, on a monthly basis,
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]
allowance on all purchases (calculated net of returns, allowances, penalties and
rebates) of Stocking Products and Non-Stocking Products made by Midas Shops
(including company-owned Midas Shops), whether under the Stocking Program or the
Hot Shot Program, during the month in question (the "Monthly Allowance"). Each
Monthly Allowance shall be due and payable within thirty (30) calendar days
after the end of the month to which such payment relates. The Monthly Allowance
shall be reviewed by the parties at least semi-annually and may be adjusted by
mutual agreement of the parties.
(b) Midas Shops. AutoZone shall pay to the respective Midas Shop, on a
monthly basis for each month during the Supply Term, a [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] rebate on all Non-Stocking
Product purchases (net of returns, penalties and the allowance provided in
Section 2(b)(iv)) made by such Midas Shop under the Hot Shot Program during the
month in question. This rebate is in addition to the [CONFIDENTIAL PORTION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION] off-invoice allowance
described in Section 2(b)(iv) above.
(c) International Midas Dealers Association. AutoZone shall pay to the
International Midas Dealers Association (the "IMDA"), on an annual basis for
each year during the Supply Term, an annual rebate in an amount equal to
[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE COMMISSION]. In
addition, AutoZone may provide additional training and sponsorship funds to the
IMDA in such amounts and at such times as reasonably deemed appropriate by
AutoZone. The first such payment shall occur on or about March 31, 2004.
9
5. OTHER SUPPORT.
--------------
During the Supply Term, AutoZone shall provide the following additional support
services to the Midas Shops:
(a) ALLDATA. For valuable consideration provided to AutoZone by Midas in
this Agreement, during the Supply Term, for so long as ALLDATA LLC (or its
successor) remains a consolidated subsidiary of AutoZone, AutoZone shall provide
to each Midas Shop one fully-paid license for the ALLDATA System, including
future updates. AutoZone shall provide commercially reasonable efforts to
interface the ALLDATA System with the R.O. Writer software program. AutoZone (or
ALLDATA) shall retain all property and proprietary rights to the ALLDATA
interface.
AutoZone agrees to request that its Canadian dealer make the ALLDATA System
available to Midas shops located in Canada (whether franchised or company-owned)
at a discounted charge.
AutoZone and Midas shall review and discuss, from time to time, the value of
the ALLDATA System to the Midas Shops, as well as the value to AutoZone of
providing the ALLDATA System to the Midas Shops.
(b) Core Returns. During the Supply Term, AutoZone agrees to not charge a
core charge on Non-Stocking Products to Participating Midas Shops so long as the
Participating Midas Shop makes the applicable core available for pick-up by the
servicing AutoZone Store within three (3) calendar days of delivery of the
Non-Stocking Product. In the event that a core is not returned within the three
(3) calendar day period, AutoZone may charge the Midas Shop the then current
core charge.
For any Midas Shop that is not a Participating Midas Shop, AutoZone shall
provide a process whereby core returns can be made by the Midas Shop to its
servicing AutoZone DC without charge to Midas or the applicable Midas
franchisee.
AutoZone reserves the right to modify the above-described core return
program from time to time upon no less than thirty (30) calendar days' prior
written notice to Midas and the Midas franchisees.
(c) Cataloguing and Pricing and Product File Support. As soon as
practicable, but in no event later than December 31, 2003, AutoZone shall
provide to Midas Shops, no less frequently than on a quarterly basis, at its own
cost, electronic catalogues containing pricing and products for all Stocking
Products in an electronic format mutually agreeable to AutoZone and the Midas
Shops' point-of-sale system providers as stated on Schedule 7 hereto. During the
transition, Midas and AutoZone shall work together in good faith to ensure that
no interruptions of cataloguing and pricing and product file support occur with
respect to any Midas Shop. In addition, the parties agree that no Stocking
Product price changes shall become effective until at least forty (40) but no
greater than ninety (90) calendar days after AutoZone notifies the Midas Shops'
point-of-sale providers of such changes.
(d) Communication Equipment. AutoZone agrees to loan to MIC for use during
the Supply Term, free of charge, a satellite communications system (the
"Equipment") with an approximate value of $[CONFIDENTIAL PORTION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION] to be used solely for the purpose of
communicating stocking orders and electronic catalogue information between
AutoZone and Midas. Midas agrees to use commercially reasonable efforts to
maintain the Equipment in good working condition and repair. Upon the expiration
or termination of this Agreement, Midas shall return the Equipment to AutoZone
in the same condition that it was received, reasonable wear and tear excepted.
AutoZone shall work with Midas in good faith to develop and implement, by the
end of 2003, a direct ordering system for Midas Shops that does not require use
of the Equipment and is otherwise acceptable to Midas and AutoZone.
Midas acknowledges and agrees that ownership of the Equipment shall at all
times remain with AutoZone and that nothing contained in this Section 5(d) shall
be deemed to transfer to Midas any right, title or interest in or to the
Equipment, other than as expressly provided herein. Midas agrees to execute such
documents as AutoZone may reasonably request in order to evidence its ownership
of the Equipment.
10
(e) UPC Coding. During the Supply Term, AutoZone shall reasonably assist
Midas in obtaining UPC codes for its Stocking Products and Non-Stocking Products
(including all exhaust Products sold by Midas). Midas shall be solely
responsible for assuring that such Products are properly labeled with UPC codes
at Midas' sole expense.
(f) Performance Review Meetings. During the Supply Term, AutoZone, Midas
and Midas franchisees (or their designated representatives) shall hold
semi-annual meetings ("Performance Review Meetings") for purposes of discussing
any issues of concern. The location of the Performance Review Meetings shall
alternate between Memphis, Tennessee, and Itasca, Illinois. Changes in the
frequency and location of such meetings may be mutually agreed to by Midas and
AutoZone.
6. EXCLUSIVITY.
------------
In addition to being the exclusive supplier of Midas-brand Products to Midas
Shops as provided in Section 2(a) above, during the Supply Term, AutoZone,
through the Stocking Program, shall also be the exclusive supplier of all
non-Midas Stocking Products to Midas with respect to its company-owned Midas
Shops.
Consistent with the foregoing, to the extent permitted by applicable law,
Midas agrees not to order or purchase any Stocking Products for its
company-owned Midas Shops from any other third party supplier, subject, however,
to availability and AutoZone's compliance with the requirements hereunder. In
addition, Midas agrees to give AutoZone the first opportunity to meet the
Non-Stocking Product needs of each company-owned Participating Midas Shop, on an
order-by-order basis. If AutoZone is not able to fill the requested order, the
company-owned Participating Midas Shop shall be free to purchase such
Non-Stocking Products from another third party "hot shot" supplier. Further, the
exclusivity provided by this Section 6 shall be subject to AutoZone's ability to
meet the requirements contained in this Agreement (other than due to an Event of
Default by Midas or its subsidiaries).
The foregoing exclusivity regarding non-Midas Stocking Products shall not
apply to Midas franchisees. Furthermore, nothing contained in this Section 6 is
intended to apply to tires, batteries or non-application products such as bulk
oil, equipment (e.g., lifts, alignment machines, charging and oil change
equipment), Freon and certain other fluids and chemicals.
7. RELATIONSHIP MANAGEMENT TEAM.
-----------------------------
The parties shall establish a Relationship Management Team whose sole
function shall be to facilitate the AutoZone/Midas relationship created
hereunder by, among other things, evaluating the parties' respective performance
under this Agreement. The Relationship Management Team shall hold regularly
scheduled meetings and shall communicate frequently. Each party shall appoint
team members and may change its appointed members upon written notice to the
other party.
In addition, to the extent deemed necessary or desirable by Midas, AutoZone
shall provide an AutoZone representative who will be on site at Midas'
headquarters in Itasca, Illinois, during the first year of this Agreement, and
thereafter as mutually agreed.
8. SUPPLY TERM.
------------
The term of this Agreement (the "Supply Term") shall commence on the date of
this Agreement and shall terminate on the seventh (7/th/) anniversary of the
date of this Agreement. This Agreement, and the Supply Term, shall automatically
renew for successive five (5) year renewal terms unless either party gives the
other party written notice of its intention not to renew this Agreement at least
twelve (12) months prior to the date of expiration of the then current term or
renewal term.
11
AutoZone's appointment as a supplier of Stocking Products to Midas Shops
under the Stocking Program shall become effective as to a Midas Shop after the
Closing of the Midas DC that services such Midas Shop or as the parties may
otherwise mutually agree. For purposes of the Hot Shot Program, the commencement
date for the Supply Term shall be the date of execution of this Agreement with
respect to all Participating Midas Shops.
9. DEFAULT AND REMEDIES.
---------------------
(a) AutoZone Default. The occurrence of any of the following will
constitute an Event of Default by AutoZone:
(i) AutoZone fails to pay any material amount due under this
Agreement and does not cure such failure within ten (10) calendar days after
receiving written notice thereof from Midas; or
(ii) AutoZone materially fails to perform or observe any of its other
material obligations in this Agreement and does not cure such failure within
thirty (30) calendar days after receiving written notice thereof from Midas;
or
(iii) any of the material warranties and representations of AutoZone
contained in this Agreement proves to have been untrue or misleading in any
material respect as of the time when made; or
(iv) termination of this Agreement by AutoZone other than pursuant to
Section 8 or Subsection 9(d)(ii) (except as the parties may mutually agree
otherwise in writing).
(b) Midas Default. The occurrence of any of the following will constitute
an Event of Default by Midas:
(i) Midas fails to pay any material amount due under this Agreement
and does not cure such failure within ten (10) calendar days after receiving
written notice thereof from AutoZone; or
(ii) Midas materially fails to perform or observe any of its other
material obligations in this Agreement and does not cure such failure within
thirty (30) calendar days after receiving written notice thereof from
AutoZone; or
(iii) any of the material warranties and representations of Midas
contained in this Agreement proves to have been untrue or misleading in any
material respect as of the time when made; or
(iv) termination of this Agreement by Midas other than pursuant to
Section 8 or Subsection 9(c)(ii) (except as the parties may mutually agree
otherwise in writing).
(c) Remedies for Midas. Upon the occurrence of an Event of Default by
AutoZone, and after passage of any notice and cure period, at any time
thereafter unless and until such Event of Default has been waived by Midas or
cured to Midas's satisfaction, Midas may, by written notice to AutoZone, take
any or all of the following actions:
(i) Declare any unpaid amounts due to Midas from AutoZone and any
and all other indebtedness or obligations of any and every kind owing by
AutoZone to Midas hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by AutoZone; or
(ii) Terminate this Agreement; or
(iii) Seek any other remedies as may be provided by law, in equity or
by contract.
12
(d) Remedies for AutoZone. Upon the occurrence of an Event of Default by
Midas, and after passage of any notice and cure period, at any time thereafter
unless and until such Event of Default has been waived by AutoZone or cured to
AutoZone's satisfaction, AutoZone may, by written notice to Midas, take any or
all of the following actions:
(i) Declare any unpaid amounts due to AutoZone from Midas and any
and all other indebtedness or obligations of any and every kind owing by
Midas to AutoZone hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Midas; or
(ii) Terminate this Agreement; or
(iii) Seek any other remedies as may be provided by law, in equity or
by contract.
(e) Payment Default by Midas Shops. AutoZone may cease making deliveries to
a particular Midas Shop if that Midas Shop fails to pay any past due amounts
owed to AutoZone and fails to cure such failure within thirty (30) calendar days
after receipt of written notice thereof from AutoZone. AutoZone agrees to
provide Midas with a copy of its written notice to cease making deliveries to a
particular Midas Shop (whether franchised or company-owned) under the Stocking
Program and/or the Hot Shot Program simultaneously with the delivery of such
notice to the applicable Midas Shop.
10. COMMUNICATIONS.
---------------
Every notice and correspondence under this Agreement shall be given in
writing to the following address:
If to Midas: If to AutoZone:
Midas International Corporation AutoZone, Inc.
Attention: General Counsel Attention: Vice President, AZ Commercial
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇. 9011
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With copy to:
AutoZone, Inc.
Attention: General Counsel
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
11. TERMINATION.
------------
Upon expiration of this Agreement, or any termination of this Agreement by
AutoZone pursuant to Subsection 9(d)(ii) or upon termination of this Agreement
by Midas at any time for any reason (other than pursuant to Subsection
9(c)(ii)), upon written demand by AutoZone Midas shall be required to
immediately purchase from AutoZone up to a two (2) years' supply (as determined
based upon AutoZone's then current trailing 24-month usage) of AutoZone's then
current inventory of undamaged Midas-brand Products in their original undamaged
packaging at AutoZone's then current purchase order cost. AutoZone shall be
entitled to sell to any third party all Midas-brand Products not otherwise
purchased by Midas pursuant to this Section 11. In the event Midas fails to
purchase the two (2) years' supply of Midas-brand Products, and if after sale of
such Midas-brand Products to third parties AutoZone has a deficiency between the
price required to be paid by Midas for such inventory and the sale price to the
third parties, Midas shall pay to AutoZone the aggregate deficiency upon
AutoZone's written demand.
In the event this Agreement is terminated pursuant to Subsection 9(c)(ii),
AutoZone shall make available its then current inventory of Midas-brand Products
to Midas for purchase by Midas at AutoZone's then current purchase order cost.
Midas will inform AutoZone of the types and quantities, if any, of Midas-brand
Products that it desires to purchase within ninety (90) days of the effective
date of termination and shall have a period of twelve (12) months
13
thereafter to pay for such products. After such notification, AutoZone may
dispose of the inventory of Midas-brand Products not purchased in any manner
that AutoZone deems reasonable, including selling such inventory of Midas-brand
Products to any third party.
In addition, Midas acknowledges that AutoZone is committing to substantial
expenses and investment in order to service the Midas Shops under the terms and
conditions of this Agreement, including substantial time commitment of
AutoZone's employees, and substantial investments in systems and technology. The
parties agree that the monetary investment by AutoZone (and the subsequent
recovery by AutoZone of such expenses through the performance of this Agreement)
are difficult if not impossible for the parties to calculate. Therefore, the
parties agree that if this Agreement is terminated by Midas prior to the fifth
(5/th/) anniversary of the date of this Agreement (other than as a result of an
Event of Default by AutoZone), AutoZone shall be subject to significant damages.
Similarly, AutoZone acknowledges that Midas is placing a significant amount of
its brand value into AutoZone's hands pursuant to the terms and conditions of
this Agreement and that, if this Agreement is terminated prior to the fifth
(5/th/) anniversary of the date of this Agreement (other than as a result of an
Event of Default by Midas), Midas shall be subject to significant damages that
are similarly difficult to calculate.
Accordingly, in order to induce the other party to enter into this Agreement and
to perform the services outlined hereunder, each party agrees that, in the event
that this Agreement is terminated prior to the fifth (5/th/) anniversary of the
date of this Agreement then the non-defaulting party shall receive from the
Defaulting Party, as liquidated damages and not as a penalty the amounts stated
in the following table. If this Agreement is terminated by Midas pursuant to
Subsection 9(c)(ii), or if AutoZone terminates this Agreement for reasons other
than those permitted under this Agreement, AutoZone shall be deemed the
"Defaulting Party." If this Agreement is terminated by AutoZone pursuant to
Subsection 9(d)(ii), or if Midas terminates this Agreement for reasons other
than those permitted under this Agreement, Midas shall be deemed the "Defaulting
Party."
If agreement is terminated: Then the Defaulting Party shall pay
to the other party:
Before the 1/st/ anniversary of the $[CONFIDENTIAL PORTION OMITTED AND
Date of this Agreement FILED SEPARATELY WITH THE COMMISSION]
On or after the 1/st/ anniversary of $[CONFIDENTIAL PORTION OMITTED AND
the Date of this Agreement but FILED SEPARATELY WITH THE COMMISSION]
before the 2/nd/ anniversary thereof
On or after the 2/nd/ anniversary of $[CONFIDENTIAL PORTION OMITTED AND
the Date of this Agreement but FILED SEPARATELY WITH THE COMMISSION]
before the 3/rd/ anniversary thereof
On or after the 3/rd/ anniversary of $[CONFIDENTIAL PORTION OMITTED AND
the Date of this Agreement but FILED SEPARATELY WITH THE COMMISSION]
before the 4/th/ anniversary thereof
On or after the 4/th/ anniversary of $[CONFIDENTIAL PORTION OMITTED AND
the Date of this Agreement but FILED SEPARATELY WITH THE COMMISSION]
before the 5/th/ anniversary thereof
On or after the 5/th/ anniversary of $0
the Date of this Agreement
This Section shall survive termination of this Agreement.
14
The foregoing section is intended solely to recover startup costs incurred by
AutoZone (should AutoZone be entitled to recover such as provided above) or to
recover damages to Midas' brand value and good will (should Midas be entitled to
recover such as provided above). Nothing contained herein shall be deemed to
prohibit either party upon termination of this Agreement from seeking additional
damages for any other reason from the other party as may be provided in law or
equity.
Notwithstanding the foregoing, the parties may mutually agree to terminate this
Agreement at any time on any such terms as the parties may determine, without
application of the liquidated damages stated above.
12. WARRANTIES AND REPRESENTATIONS OF MIDAS.
----------------------------------------
(a) Organization. Midas represents and warrants to AutoZone that it (i) is
duly organized, validly existing and is in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) has the corporate or
other necessary power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (iii) is duly qualified as a foreign
entity and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not be reasonably expected to have
a material adverse effect on its business or assets, and (iv) is in compliance
with all laws and regulations, except to the extent that the failure to comply
therewith would not, in the aggregate, be reasonably expected to have a material
adverse effect on its business or assets.
(b) Authority. Midas has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform this Agreement.
Other than as may be required under the HSR Act described in Section 14(m), no
consent or authorization of, filing with, notice to or other similar act by or
in respect of, any governmental authority or any other person or entity is
required to be obtained or made by or on behalf of Midas in connection with this
Agreement or with the execution, delivery, performance, validity or
enforceability of this Agreement. This Agreement has been duly authorized by all
requisite corporate action, and executed and delivered on behalf of Midas. This
Agreement constitutes a legal, valid and binding obligation of Midas enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
(c) No Violation. The execution, delivery and performance of this Agreement
by Midas (i) will not violate any law, regulation, or contractual obligation of
Midas or any of its subsidiaries or affiliates in any respect, (ii) will not
result in, or require, the creation or imposition of any lien on any of the
properties or revenues of Midas or any of its subsidiaries or affiliates
pursuant to any law, regulation or contractual obligation, and (iii) will not
violate or conflict with any provision of Midas's articles of incorporation or
by-laws or any material agreement to which it is a party, including, without
limitation, any franchise agreement.
(d) Products. Midas represents, warrants and covenants to AutoZone that the
Lifted Inventory is, and that the Midas Manufactured Products to be purchased by
AutoZone from Midas (or its wholly-owned subsidiary) hereunder will be, new or
remanufactured, in good and merchantable condition, in appropriate packaging in
good condition, and of a quality usable and sellable in the ordinary course of
Midas' business and should otherwise be acceptable for purchase by Midas Shops
and their customers. Midas further represents, warrants and covenants to
AutoZone that the Lifted Inventory does not, and that the Midas Manufactured
Products to be purchased by AutoZone from Midas (or its wholly-owned subsidiary)
hereunder will not, contain any asbestos products or asbestos-containing
materials. At no time shall AutoZone be deemed to take title to any asbestos
products or asbestos-containing materials pursuant to this Agreement. Midas
shall indemnify and hold AutoZone harmless from and against any damages, costs,
expenses, and reasonable attorneys' fees related to any asbestos products or
asbestos-containing materials in any of the Lifted Inventory or Midas
Manufactured Products purchased by AutoZone from Midas hereunder. Midas agrees
that it will not seek any contribution from or implead AutoZone in any suit in
law or equity seeking contribution or any other remedy related to claims of
asbestos or asbestos
15
containing material without conclusive evidence that any product sold to Midas
by AutoZone did contain such asbestos or asbestos related material.
(e) Standards. Midas represents, warrants and covenants that the Standards
will, and shall in the future, not lead to the manufacture of defective
Midas-brand Products. All Standards shall be in accordance with applicable laws
and regulations.
13. WARRANTIES AND REPRESENTATIONS OF AUTOZONE.
-------------------------------------------
(a) Organization. AutoZone represents and warrants to Midas that it (i) is
duly organized, validly existing and is in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) has the corporate or
other necessary power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (iii) is duly qualified as a foreign
entity and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not be reasonably expected to have
a material adverse effect on its business or assets, and (iv) is in compliance
with all laws and regulations, except to the extent that the failure to comply
therewith would not, in the aggregate, be reasonably expected to have a material
adverse effect on its business or assets.
(b) Authority. AutoZone has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform this Agreement.
Other than as may be required under the HSR Act described in Section 14(m), no
consent or authorization of, filing with, notice to or other similar act by or
in respect of, any governmental authority or any other person or entity is
required to be obtained or made by or on behalf of AutoZone in connection with
this Agreement or with the execution, delivery, performance, validity or
enforceability of this Agreement. This Agreement has been duly authorized by all
requisite corporate action, and executed and delivered on behalf of AutoZone.
This Agreement constitutes a legal, valid and binding obligation of AutoZone
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(c) No Violation. The execution, delivery and performance of this Agreement
by AutoZone (i) will not violate any law, regulation, or contractual obligation
of AutoZone or any of its subsidiaries or affiliates in any respect, (ii) will
not result in, or require, the creation or imposition of any lien on any of the
properties or revenues of AutoZone or any of its subsidiaries or affiliates
pursuant to any law, regulation or contractual obligation, and (iii) will not
violate or conflict with any provision of AutoZone's articles of incorporation
or by-laws, or any material agreement to which it is a party.
(d) Products. AutoZone represents, warrants and covenants to Midas that the
Stocking Products and Non-Stocking Products (other than the Lifted Inventory and
the Midas Manufactured Products) to be purchased by Midas Shops from AutoZone
hereunder will be new or remanufactured, in good and merchantable condition, in
appropriate packaging in good condition, and of a quality usable and sellable in
the ordinary course of AutoZone's business and should otherwise be acceptable
for purchase by AutoZone's customers. AutoZone further represents, warrants and
covenants to Midas that the Products (other than the Lifted Inventory and the
Midas Manufactured Products) to be purchased by Midas Shops from AutoZone
hereunder will not contain any asbestos products or asbestos-containing
materials (except as Midas may specify in the Standards in breach of the fifth
paragraph of Section 3(b)). At no time shall Midas or any Midas franchisee be
deemed to take title to any asbestos products or asbestos-containing materials
pursuant to this Agreement. AutoZone shall indemnify and hold Midas and Midas
franchisees harmless from and against any damages, costs, expenses, and
reasonable attorneys' fees related to any asbestos products or
asbestos-containing materials in any of the Stocking Products or Non-Stocking
Products (other than the Lifted Inventory and the Midas Manufactured Products)
purchased by Midas Shops from AutoZone hereunder. AutoZone agrees that it will
not seek any contribution from or implead Midas in any suit in law or equity
seeking contribution or any other remedy related to claims of asbestos or
asbestos containing material without
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conclusive evidence that any product sold to AutoZone by Midas did contain such
asbestos or asbestos related material.
14. MISCELLANEOUS.
--------------
(a) Force Majeure. Neither party to this Agreement shall be liable for
events beyond its reasonable control, which shall include, but not be limited
to, accident, casualty, strikes, riots, earthquake, inclement weather, floods,
fires, wars, acts of terrorism and acts of God.
(b) Amendments. The parties agree that the terms and conditions contained
in this Agreement are applicable to the relationship between the parties
described herein and may be modified only upon mutual written consent of the
parties. In the event of a conflict between the terms and conditions of a
Product order and those appearing in this Agreement, the terms and conditions of
this Agreement shall prevail.
(c) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Tennessee, without regard to its choice of laws rules.
In any action between the parties to enforce this Agreement, the prevailing
party in such action as determined by the presiding judge or arbitrator, as the
case may be, shall be awarded all expenses, costs, and reasonable attorneys'
fees related to the action. Each party hereto agrees to waive its right to a
jury before any court.
(d) Binding Effect. This Agreement shall inure to the benefit of and be
binding upon each of the parties and their respective successors and assigns.
This Agreement shall be performed by AutoZone and its various subsidiaries and
affiliates. This Agreement shall inure to the benefit of Midas and its
subsidiaries, affiliates and franchisees.
(e) Headings. All section headings and captions used in this Agreement are
purely for convenience and shall not affect the interpretation of this
Agreement.
(f) Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired. Any illegal,
invalid, or unenforceable provision in this Agreement shall be modified to
conform to the law, rule, regulation, or guideline with which it conflicts.
(g) Waivers. The failure of either party at any time to require performance
by the other of any provision of this Agreement shall in no way affect the
party's right to enforce such provision, nor shall the waiver by either party of
any breach of any provision of this Agreement be taken or held to be a waiver of
any further breach of the same provision or any other provision.
(h) Survival. Any rights and remedies Midas and AutoZone may have with
respect to each other arising out of either party's performance of services or
obligations incurred prior to the termination of this Agreement, including, but
not limited to, payment obligations hereunder, shall survive the termination of
this Agreement.
(i) Further Assurances. Each Party hereto agrees that it will provide such
documents and provide such further assurances as may reasonably be requested by
the other party in order to more fully effectuate the transactions contemplated
under this Agreement.
(j) Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto, constitutes the entire Agreement between the parties with
respect to the subject matter hereof. No modification of this Agreement or
waiver of or addition to any of its terms and conditions shall be binding upon
either party unless made in writing and signed by each party's authorized
representative.
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(k) Indemnification. AutoZone agrees to defend, hold harmless and indemnify
Midas and Midas franchisees from and against all suits, claims, judgments,
damages, losses, costs and expenses, including attorneys' fees and costs, even
if such claims are groundless, fraudulent or false (collectively, "Claims"), to
the extent arising out of any actual or alleged injury or death to any person,
damage to any property or any other damage or loss, resulting in whole or in
part from any alleged or actual defect in any of the Stocking Products or
Non-Stocking Products (other than the Lifted Inventory and the Midas
Manufactured Products) purchased by Midas Shops from AutoZone hereunder,
including improper construction or design of said products, provided that (i)
Midas first promptly gives written notice of the Claim to AutoZone; (ii) Midas
gives proper assistance to AutoZone, at AutoZone's sole cost and expense, in
connection with the defense and/or settlement thereof; and (iii) AutoZone
directs, controls, and fully participates in the defense of or any settlement of
such Claim. Midas shall have the right, at its own expense, to participate in
the defense of any such Claim. This indemnification will be invalid if the Claim
arises from anything other than an alleged or actual defect in any of the
Stocking Products or Non-Stocking Products (other than the Lifted Inventory and
the Midas Manufactured Products) purchased by Midas Shops from AutoZone
hereunder.
In addition, AutoZone agrees to defend, hold harmless and indemnify Midas
and Midas franchisees from and against all Claims to the extent arising out of
any infringement of intellectual property or proprietary rights of third parties
with respect to any Stocking Products or Non-Stocking Products (other than the
Lifted Inventory and the Midas Manufactured Products).
Midas agrees to defend, hold harmless and indemnify AutoZone from and
against all Claims to the extent arising out of any actual or alleged injury or
death to any person, damage to any property or any other damage or loss,
resulting in whole or in part from any alleged or actual defect in any of the
Lifted Inventory purchased by AutoZone from Midas (or its wholly-owned
subsidiary) hereunder, including improper construction or design of said
products, provided that (i) AutoZone first promptly gives written notice of the
Claim to Midas; (ii) AutoZone gives proper assistance to Midas, at Midas' sole
cost and expense, in connection with the defense and/or settlement thereof; and
(iii) Midas directs, controls, and fully participates in the defense of or any
settlement of such Claim. AutoZone shall have the right, at its own expense, to
participate in the defense of any such Claim. This indemnification will be
invalid if the Claim arises from anything other than an alleged or actual defect
in any of the Lifted Inventory purchased by AutoZone from Midas (or its
wholly-owned subsidiary) hereunder.
Further, Midas shall indemnify, defend and hold AutoZone harmless from and
against any Liens encumbering the Lifted Inventory at the time of the applicable
Closing, including payment of any related costs, expenses, judgments, and
reasonable attorney's fees. In the event of execution on any Liens on any Lifted
Inventory paid for by AutoZone (to the extent encumbering the Lifted Inventory
at the time of the applicable Closing), Midas shall repay to AutoZone any amount
paid to Midas for the Lifted Inventory subject to the Liens.
In the event that a court of competent jurisdiction, arbitrator, or other
neutral third party acceptable to both AutoZone and Midas finds comparative
fault or negligence on the part of the party entitled to indemnification
hereunder (the "Indemnified Party"), or as the parties may mutually agree, the
Indemnified Party shall reimburse the other party (the "Indemnifying Party") for
its pro-rata share of any Claims that were incurred by the Indemnifying Party as
a result of such comparative fault or negligence, including reasonable
attorneys' fees and expenses of investigation.
If at any time in the defense of a claim or suit, the Indemnified Party
becomes aware of a conflict of interest between Midas and AutoZone, it shall
immediately notify the Indemnifying Party in writing specifically stating the
nature of the conflict, and the facts in support of the finding of a conflict of
interest. At that time, the Indemnified Party shall have the option of hiring
its own counsel to represent its interests.
Should the Indemnified Party hire its own counsel due to a conflict of
interest, and should the Indemnified Party be found by a court of competent
jurisdiction, arbitrator, or other neutral third party acceptable to both Midas
and AutoZone to be without fault related to the matter in question, then
Indemnifying Party shall reimburse the Indemnified Party for any and all costs
and expenses that were incurred by the Indemnified Party as a result of such
conflict of interest, including reasonable attorneys' fees and expenses of
investigation. Should the Indemnifying
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Party hire its own counsel due to a conflict of interest and should Indemnifying
Party be found by a court of competent jurisdiction, arbitrator, or other
neutral third party acceptable to both AutoZone and Midas to be without fault
related to the matter in question, then the Indemnified Party shall reimburse
the Indemnifying Party for any and all costs and expenses that were incurred by
the Indemnifying Party as a result of such conflict of interest, including
reasonable attorneys' fees and expenses of investigation.
Each party specifically reserves the right to hire its own counsel in any
matter at its own cost and expense
This Section 14(k) shall survive the expiration and any termination of this
Agreement.
(l) Confidentiality. The specific dollars and percentages contained in this
Agreement shall be strictly confidential. Midas and AutoZone will each use the
same degree of care to maintain such confidentiality as it uses to hold its own
confidential information confidential, except as ordered by a court or as
required by governmental regulation, including the rules and regulations of the
Securities and Exchange Commission. Subject to the foregoing, the parties shall
be permitted to disclose the general terms and conditions of this Agreement.
Nothing contained in this Section 14(l) shall prevent Midas from disclosing
the terms and conditions of this Agreement to its franchisees..
The parties understand and agree that one or both parties may be required to
disclose this Agreement, including the Exhibits and Schedules hereto, to the
Securities and Exchange Commission and any securities exchange on which the
securities of either party are listed; provided however, the parties shall use
commercially reasonable efforts to secure permission not to disclose the
Confidential Terms of this Agreement and will cooperate with each other in good
faith to prevent such disclosure if legally permitted to do so.
Upon execution of this Agreement, the parties shall mutually agree on the
language to be contained in a press release announcing the execution of this
Agreement and generally describing the services to be provided by AutoZone
hereunder.
(m) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. As used in this Agreement, "HSR Act" shall mean
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law. If
required by the HSR Act, as soon as practicable and in any event within five (5)
business days following the date hereof, AutoZone and Midas shall make all
notifications and filings required under the HSR Act and initiate procedures
with the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice and/or other applicable governmental authorities necessary
or advisable in order to enable the transactions contemplated hereunder to be
consummated as soon as reasonably practicable after the date of this Agreement.
If any party hereto receives a request for additional information or documentary
material from any governmental authority with respect to the transactions
contemplated hereunder, such party shall endeavor in good faith to make, or
cause to be made, as soon as reasonably practicable and after consultation with
the other party, an appropriate response in compliance with such request.
AutoZone and Midas will cooperate in reaching any understandings, undertakings
or agreements involving any of the foregoing or any other governmental authority
in connection with the transactions contemplated hereunder. Midas shall
reimburse AutoZone for one-half (1/2) of the cost of the HSR Act filing fee, if
applicable.
(n) Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. Such arbitration may be
held in either Memphis, Tennessee, Chicago, Illinois, or such other place as the
parties may mutually agree. The arbitration shall have three arbitrators.
IN WITNESS WHEREOF, the parties have signed this Supply Agreement on the
date first above written.
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Midas International Corporation Autozone, Inc.
By: By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
Signature Signature
Name: Name: ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------- ---------------------------------
Title: Title: Chairman, President & CEO
--------------------------------- ---------------------------------
Date: Date: April 2, 2003
---------------------------------
Parts Warehouse, Inc.
By: By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------- ---------------------------------
Signature Signature
Name: Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------- ---------------------------------
Title: Title: Senior Vice President, Secretary
--------------------------------- & General Counsel
Date: Date: April 2, 2003
---------------------------------
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