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Exhibit 10.12
SUPPLY AND FULFILLMENT AGREEMENT
This SUPPLY AND FULFILLMENT AGREEMENT (this "Agreement") dated as of
July 1, 1999 by and between XXXXXXXXXXXXX.XXX, INC., a Delaware corporation
("XxxxxxxXxxxxx.xxx"), and VITAMIN SHOPPE INDUSTRIES INC., a New York
corporation ("VSI"),
W I T N E S S E T H:
WHEREAS, XxxxxxxXxxxxx.xxx desires to purchase its requirements for
vitamins, supplements and minerals and other products from VSI, and VSI desires
to sell such products to XxxxxxxXxxxxx.xxx, on the terms and subject to the
conditions set forth herein; and
WHEREAS, XxxxxxxXxxxxx.xxx desires to engage VSI to provide warehousing
and fulfillment services for XxxxxxxXxxxxx.xxx's customer orders, and VSI
desires to provide such services to XxxxxxxXxxxxx.xxx, on the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE OF PRODUCTS. (a) VSI shall provide XxxxxxxXxxxxx.xxx with a
list of all The Vitamin Shoppe(R) brand products offered for sale from time to
time by VSI through VSI's retail stores and catalog operations (the "VSI Brand
Products") and shall keep such list current. VSI shall sell to
XxxxxxxXxxxxx.xxx, and XxxxxxxXxxxxx.xxx shall purchase from VSI, all of
XxxxxxxXxxxxx.xxx's requirements for VSI Brand Products. Such sale and purchase
shall take place F.O.B. VSI's distribution center in North Bergen, New Jersey or
at such other location as to which the parties agree in writing. At any time,
XxxxxxxXxxxxx.xxx may elect to cease to purchase VSI Brand Products hereunder
upon 180 days prior written notice to VSI.
(b) VSI shall provide XxxxxxxXxxxxx.xxx with a list of all products
offered for sale from time to time by VSI through VSI's retail stores and
catalog operations that are not VSI Brand Products (the "Other Branded
Products") and shall keep such list current. VSI shall sell to
XxxxxxxXxxxxx.xxx, and XxxxxxxXxxxxx.xxx shall purchase from VSI, all of
XxxxxxxXxxxxx.xxx's requirements for Other Branded Products. Such sale and
purchase shall take place F.O.B. VSI's distribution center in North Bergen, New
Jersey or at such other location as to which the parties agree in writing. At
any time, XxxxxxxXxxxxx.xxx may elect to cease to purchase Other Branded
Products hereunder upon 180 days prior written notice to VSI. Subject to
paragraph 2(g), prior to an election not to purchase Other Branded Products that
complies with this paragraph 1(b), XxxxxxxXxxxxx.xxx shall not enter into any
contractual relationship with any person or entity other than VSI to purchase
Other Branded Products or otherwise to purchase vitamins, nutritional
supplements or minerals without the written consent of VSI, which may be
withheld in VSI's discretion.
(c) VSI shall provide to XxxxxxxXxxxxx.xxx purchasing, merchandising,
executive management and product development services with respect to VSI Brand
Products and, so long as VSI supplies Other Branded Products to
XxxxxxxXxxxxx.xxx under paragraph 1(b), with respect to Other Branded Products.
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(d) From time to time XxxxxxxXxxxxx.xxx may market and sell products
that are not VSI Brand Products or Other Branded Products (the "Requested
Products"); provided that VSI shall have the right to supply Requested Products
to XxxxxxxXxxxxx.xxx in accordance with this Agreement. Prior to marketing or
selling any Requested Product, XxxxxxxXxxxxx.xxx shall notify VSI in writing of
the quantity of such Requested Product that it requests VSI to supply. Within
ten business days after receipt of XxxxxxxXxxxxx.xxx's notice, VSI shall notify
XxxxxxxXxxxxx.xxx in writing of any election by VSI to supply such Requested
Product, which notice shall state the date on which VSI expects such Requested
Product to be available for sale. If VSI does not so elect to supply any
Requested Product, then XxxxxxxXxxxxx.xxx may enter into such contractual
relationships as it deems necessary or appropriate to purchase such Requested
Product from persons or entities other than VSI. VSI may elect to cease to
supply any Requested Product hereunder at any time upon 90 days prior written
notice to XxxxxxxXxxxxx.xxx.
(e) Notwithstanding paragraph 1(d), XxxxxxxXxxxxx.xxx shall not
commence or continue to market or sell any Requested Product that, in the
reasonable judgment of VSI, is of lower quality than VSI Brand Products
generally or does not comply with applicable government regulations (an
"Objectionable Product"). VSI shall promptly notify XxxxxxxXxxxxx.xxx in writing
of any Requested Product that is or becomes an Objectionable Product in VSI's
reasonable judgment, and XxxxxxxXxxxxx.xxx shall cease to market or sell such
Objectionable Product promptly upon receipt of such notice.
(f) XxxxxxxXxxxxx.xxx shall distribute all VSI Brand Products, Other
Branded Products and Requested Products that are not Objectionable Products
(collectively, the "Products") only through channels of distribution within the
Scope (as such term is defined in the Trademark License Agreement dated of even
date herewith by and between XxxxxxxXxxxxx.xxx and VSI, the terms of which
agreement are incorporated herein by reference). VSI shall not sell Products to
any person or entity other than XxxxxxxXxxxxx.xxx for distribution through
channels within the Scope, as so defined.
(g) XxxxxxxXxxxxx.xxx shall notify VSI in writing (i) 10 business days
prior to commencement of Product promotions involving 60 SKUs or less which are
to continue for 31 days or less and (ii) 60 days prior to commencement of
Product promotions involving more than 60 SKUs or which will continue for more
than 31 days.
(h) VSI hereby assigns to XxxxxxxXxxxxx.xxx all vendor warranties with
respect to Products to the full extent permitted by such warranties. If any such
vendor warranty may not be assigned by its terms, then VSI shall use
commercially reasonable efforts to cause XxxxxxxXxxxxx.xxx to obtain the
benefits of such warranty.
(i) VSI shall name XxxxxxxXxxxxx.xxx as a named insured on all policies
of insurance covering products liability for three years after the latest date
on which VSI supplies any Products to XxxxxxxXxxxxx.xxx pursuant to this
paragraph 1.
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2. FULFILLMENT SERVICES. (a) VSI shall provide to XxxxxxxXxxxxx.xxx
warehousing and fulfillment services, including without limitation receiving,
quality control, storage, picking, packaging and shipping, for VSI Brand
Products.
(b) VSI shall provide to XxxxxxxXxxxxx.xxx warehousing and fulfillment
services, including without limitation receiving, quality control, storage,
picking, packaging and shipping, for Other Branded Products.
(c) At the written request of XxxxxxxXxxxxx.xxx, VSI shall provide to
XxxxxxxXxxxxx.xxx warehousing and fulfillment services, including without
limitation receiving, quality control, storage, picking, packaging and shipping,
for any Requested Product that is supplied to XxxxxxxXxxxxx.xxx by VSI or others
in accordance with paragraph 1(d), so long as (i) the aggregate number of SKUs
that comprise all Requested Products that VSI is requested to fulfill under this
paragraph does not then exceed 10% of the aggregate number of SKUs that on the
date of determination comprise VSI Brand Products and Other Branded Products and
(ii) such Requested Product may be packaged and shipped in a box no larger than
a No. 52 corrugated box.
(d) VSI shall use commercially reasonable efforts to provide
same-day-shipping on all Product orders transmitted by XxxxxxxXxxxxx.xxx and
received by VSI before 5:00 p.m. Eastern time on any weekday on which the United
States Postal Service and United Parcel Service are open for business.
(e) VSI shall use its best efforts to cause the quality of services
provided to XxxxxxxXxxxxx.xxx in this paragraph 2 to be at least as high as VSI
provides when fulfilling orders for VSI's catalog operations.
(f) Without the written consent of VSI, which may be withheld in VSI's
discretion, XxxxxxxXxxxxx.xxx shall not enter into any contractual relationship
with any person or entity other than VSI for the fulfillment of VSI Brand
Products, Other Branded Products or Requested Products that VSI has elected to
supply pursuant to paragraph 1(d). Notwithstanding the foregoing, if at any time
XxxxxxxXxxxxx.xxx determines in its reasonable discretion that the quality of
fulfillment services then provided by VSI hereunder fails to meet the standards
that it requires in order to remain competitive in its business,
XxxxxxxXxxxxx.xxx shall have the right to solicit a proposal from a third-party
provider of fulfillment services. XxxxxxxXxxxxx.xxx shall notify VSI in writing
of the receipt of such a proposal and the terms and conditions thereof, and VSI
shall thereafter have the right to elect to provide fulfillment services to
XxxxxxxXxxxxx.xxx on substantially the terms and conditions contained in such
proposal. If VSI does not so elect in writing within 30 days after
XxxxxxxXxxxxx.xxx's notice, then XxxxxxxXxxxxx.xxx may enter into a contractual
relationship for fulfillment services with such third party on substantially the
terms and conditions contained in the proposal; provided that XxxxxxxXxxxxx.xxx
either (i) shall give VSI 180 days prior written notice of the date on which it
requests that VSI cease to provide fulfillment services hereunder or (ii)(A)
shall give VSI 90 days prior written notice of such date and (B) prior to such
date shall purchase hereunder on a one-for-one basis the exact quantity of VSI
Products and Other Branded Products that it purchased hereunder during the
60-day period immediately preceding XxxxxxxXxxxxx.xxx's notice.
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(g) If XxxxxxxXxxxxx.xxx enters into a contractual relationship for
fulfillment services with a person or entity other than VSI in accordance with
paragraph 2(f), then on the date on which VSI ceases to provide fulfillment
services for XxxxxxxXxxxxx.xxx hereunder, VSI shall deliver to XxxxxxxXxxxxx.xxx
all Requested Products then held by VSI for the fulfillment of XxxxxxxXxxxxx.xxx
orders and the obligations of the parties under paragraphs 1(b), 1(d) and 3
shall terminate. In addition, VSI's obligation under paragraph 1(c) shall cease
with respect to Other Branded Products. Notwithstanding the foregoing, VSI shall
continue to provide VSI Brand Products to XxxxxxxXxxxxx.xxx pursuant to
paragraph 1(a).
3. CUSTOMER RETURNS. VSI shall accept customer returns of Products that
it fulfills for XxxxxxxXxxxxx.xxx pursuant to paragraph 2. XxxxxxxXxxxxx.xxx
shall receive a credit on the next statement presented pursuant to paragraph
4(c) for 95% of VSI's product cost, computed in accordance with paragraph 4(a),
on customer returns of VSI Brand Products and Other Branded Products that are
unopened, unexpired and not obsolete. No credit shall be given for (i) VSI Brand
Products or Other Branded Products that are opened, expired or obsolete or (ii)
Requested Products fulfilled by VSI.
4. COMPENSATION. (a) XxxxxxxXxxxxx.xxx shall pay VSI an amount equal to
105% of VSI's product cost for each Product supplied by VSI pursuant to
paragraph 1. For these purposes, VSI's product costs shall include any costs
customarily included by VSI as costs of inventory on the date of this Agreement.
Unless the parties agree otherwise, the calculation of VSI's product cost shall
be based on the weighted average of all products sold by VSI to
XxxxxxxXxxxxx.xxx or others rather than on the basis of individual items.
(b) XxxxxxxXxxxxx.xxx shall pay VSI an amount equal to (i) 105% of
VSI's actual average unit cost per package, multiplied by the number of packages
shipped, for all Product orders fulfilled by VSI pursuant to paragraph 2 plus
(ii) VSI's actual shipping costs related to XxxxxxxXxxxxx.xxx orders that are
not directly paid by XxxxxxxXxxxxx.xxx. For these purposes, VSI's actual unit
cost shall include all fixed and variable warehousing and fulfillment costs,
including without limitation VSI's cost of labor and overhead items such as
rent, depreciation and operating expenses and any other costs included by VSI as
warehousing and fulfillment costs on the date of this Agreement, and shall
exclude shipping costs. VSI shall estimate its average unit cost per package on
a monthly basis, based on its total costs of packages shipped for its own
account and for XxxxxxxXxxxxx.xxx divided by the total number of packages
shipped during the preceding month, and shall adjust such estimates to reflect
actual costs within 90 days after the close of each fiscal year.
(c) VSI shall present XxxxxxxXxxxxx.xxx with a statement that computes
the amount payable hereunder in accordance with paragraphs 4(a) and 4(b), after
deducting any credit available in accordance with paragraph 3. Such statement
shall be provided on a monthly basis until XxxxxxxXxxxxx.xxx's gross revenues
for the preceding calendar month exceed $2 million and thereafter on a weekly
basis. Except with respect to Requested Products that VSI has elected to supply
pursuant to paragraph 1(d), such statement shall reflect all Products shipped by
VSI during the month or week then ended, as the case may be. With respect to
Requested Products that VSI has elected to supply pursuant to paragraph 1(d),
such statement shall reflect the entire
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quantity of such products that was added to inventory by VSI during the month or
week then ended, as the case may be.
(d) Within ten days after the date of each statement presented pursuant
to paragraph 4(c), XxxxxxxXxxxxx.xxx shall pay to VSI the amount set forth in
the statement. Payment by XxxxxxxXxxxxx.xxx of any statement shall not preclude
XxxxxxxXxxxxx.xxx from challenging the accuracy thereof.
(e) VSI shall maintain accurate books and records which reflect (i) its
product cost, (ii) its actual average unit cost per package, (iii) the number of
packages that it ships and (iv) the customers returns that it handles. At its
own expense, XxxxxxxXxxxxx.xxx or its representatives may examine and copy such
books and records as provided in this paragraph 4(e). XxxxxxxXxxxxx.xxx and its
representatives may make examinations only during usual business hours and at
the place at which VSI usually keeps its books and records. XxxxxxxXxxxxx.xxx
shall be required to notify VSI at least ten days before the date of planned
examination. If an examination has not been completed within two months after
commencement, VSI may require XxxxxxxXxxxxx.xxx to terminate the examination on
seven days notice to XxxxxxxXxxxxx.xxx, so long as VSI has cooperated in full
with XxxxxxxXxxxxx.xxx in the examination of such books and records.
(f) In addition to any amounts payable under paragraphs 4(a) and 4(b),
on July 1, 1999 and on the first day of each calendar month thereafter during
the term of this Agreement, XxxxxxxXxxxxx.xxx shall pay VSI $50,000 for services
rendered pursuant to paragraph 1(c). If XxxxxxxXxxxxx.xxx enters into a
contractual relationship for fulfillment services with a person or entity other
than VSI in accordance with paragraph 2(f), then the monthly fee for services
rendered pursuant to paragraph 1(c) shall thereafter be $30,000. Such monthly
fee shall be adjusted annually on mutually agreeable terms. If the parties are
unable to agree on the amount of any such annual adjustment, the monthly fee
shall be adjusted for any change in the Consumer Price Index since the date of
the last adjustment.
5. TERM. (a) This Agreement shall commence on the date hereof and
continue for an indefinite period in full force and effect until it is
terminated in accordance with this paragraph 5.
(b) Either party shall have the right but not the obligation to
terminate this Agreement immediately if at any time:
(i) the other party shall be in material breach of any of its
obligations here under, and such breach shall not be cured within 20
days after receipt of written notice thereof;
(ii) the other party shall be the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation or assignment for the benefit of
creditors;
(iii) the other party shall become the subject of any
involuntary petition in
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bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or assignment for the benefit of creditors,
and such petition or proceeding shall not be dismissed within 60 days
of filing;
(iv) the business of the other party shall be liquidated or
otherwise terminated on any basis; or
(v) the other party shall become insolvent or unable to pay
its debts as they become due.
(c) If the Trademark License Agreement dated of even date herewith by
and between XxxxxxxXxxxxx.xxx and VSI terminates in accordance with its terms,
this Agreement shall immediately terminate.
(d) A party may exercise its right to terminate pursuant to this
paragraph 5 by written notice to the other party. No exercise by a party of its
rights under this paragraph 5 shall limit its remedies by reason of the other
party's default, the party's rights to exercise any other rights under this
paragraph 5 or any other rights of that party.
6. INDEPENDENT CONTRACTOR. The parties to this Agreement are
independent contractors. Neither party shall have the power to bind the other or
to incur obligations on behalf of the other without the other's prior written
consent. When VSI or its employees act under the terms of this Agreement, they
shall at all times be under the supervision and responsibility of VSI. No
employee of VSI acting under the terms of this Agreement shall be deemed to be
an agent or employee of XxxxxxxXxxxxx.xxx or any customer of XxxxxxxXxxxxx.xxx.
7. MISCELLANEOUS. (a) Neither party may assign this Agreement or its
rights and obligations hereunder in whole or in part without the other party's
prior written consent. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, either party may
assign this Agreement or its rights and obligations hereunder to any entity
controlled by it or to any entity by which it is acquired by merger, purchase of
capital stock, transfer of substantially all assets or otherwise; provided that
such entity shall thereafter succeed to all obligations of such party under this
Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such state, without regard to the principles
of conflicts of law of such state.
(c) Each party hereto irrevocably and unconditionally consents to the
exclusive jurisdiction of the Supreme Court of the State of New York, New York
County, or the United States District Court for the Southern District of New
York for the purposes of any suit, action or proceeding arising out of this
Agreement or any transaction contemplated hereby. Each party agrees to commence
any such action, suit or proceeding either in the United States District Court
for the Southern District of New York, or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the State of New York, New York County. Each party further
agrees that service of any process, summons, notice or
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documents by United States registered mail to such party's address set forth
pursuant to paragraph 7(e) shall be effective service of process for any action,
suit or proceeding in respect to any matters to which such party has submitted
to jurisdiction in this paragraph 7(c). Each party irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or any transaction contemplated
hereby in the Supreme Court of the State of New York, New York County, or the
United States District Court for the Southern District of New York. Each party
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in either such court
has been brought an inconvenient forum.
(d) If any provision of this Agreement or any portion thereof, or the
application of any such provision or portion thereof, to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or the remaining portion thereof or
the application of such provision to any other persons or circumstances.
(e) All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (or one business day in the case of express
mail or overnight courier service), as follows:
If to XxxxxxxXxxxxx.xxx, to:
XxxxxxxXxxxxx.xxx, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: President and Chief Executive Officer
If to VSI, to:
Vitamin Shoppe Industries Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: President and Chief Executive Officer
(f) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
(g) This Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. Neither party shall be liable or bound to any other party in any manner
by any representations, warranties or covenants relating to the subject matter
except as specifically set forth herein. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been executed and delivered by both parties.
(h) This Agreement may be amended only by an instrument in writing
signed on
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behalf of each party. As long as VSI beneficially owns at least 30% of
the voting power of the capital stock of XxxxxxxXxxxxx.xxx, no material term of
this Agreement may be amended or waived without the approval of a majority of
the directors of XxxxxxxXxxxxx.xxx who are not directors, officers or more than
5% stockholders of VSI (or the designee of a more than 5% stockholder).
(i) This Agreement is for the sole benefit of the parties hereto.
Nothing herein expressed or implied shall give or be construed to give to any
other person or entity any legal or equitable rights hereunder.
(j) The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement. When
reference is made in this Agreement to a paragraph, such reference shall be to a
paragraph of this Agreement unless otherwise indicated.
(k) The provisions of paragraphs 7 shall survive any termination of
this Agreement.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXXXXXXXXXXX.XXX, INC.
By: ______________________________
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
VITAMIN SHOPPE INDUSTRIES INC.
By: ______________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief
Executive Officer
