Part I. Financial Information

EX-10.51 6 a94967exv10w51.txt EXHIBIT 10.51 EXHIBIT 10.51 DISTRIBUTION SERVICE AGREEMENT THIS DISTRIBUTION SERVICE AGREEMENT ("Agreement") is entered into and made effective as of the 7th day of November 2003, between McCabe's QUALITY FOODS ("McCabe's") and LA SALSA, INC. ("Buyer"). RECITALS WHEREAS, McCabe's operates certain distribution centers in California and Oregon from which it distributes food, packaging, and related supplies to food service operations which are located within the service area of such distribution centers (the "Service Area"): and WHEREAS, Buyer presently operates certain restaurants listed on Exhibit A in which it or an affiliate owns a controlling interest (hereinafter the "Company Units") and licenses others to operate certain restaurants listed on Exhibit A-I (hereinafter the "Franchised Units") under the service marks "La Salsa Fresh Mexican Grill", "La Salsa", and "La Salsa Cantina", The Company Units and the Franchised Units shall include additional locations opened during the term of this Agreement within the Service Area. The Company Units and the Franchised Units, including any such additional locations, are sometimes hereinafter collectively referred to as the "Restaurants". NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the value and sufficiency of which are hereby acknowledged, the parties agree as follows: I BASIC AGREEMENT McCabe's will purchase, warehouse, and distribute for sale to Restaurants, and Restaurants will purchase from McCabe's all Buyer approved products including, but not limited to, the following categories: dairy, frozen and refrigerated items, poultry, beef, pork, seafood, canned and dry goods, beverages, soft drink syrup products, paper and disposables, janitorial supplies including cleaning chemicals and other non-food products requiring frequent replacement (collectively the "Products"), II PRODUCT DESIGNATION Buyer shall designate the brands and/or suppliers of Products it requires and may negotiate with designated suppliers the price and terms at which McCabe's shall procure Products from such suppliers for resale to the Restaurants, which shall be based upon volume requirements that are supported by the historical usage over the previous twelve (12) month period. III INVENTORY MANAGEMENT A. Inventory Management -- During the term of this Agreement, McCabe's shall maintain an inventory of the Products in quantities necessary to provide the Restaurants with an adequate supply of such Products. McCabe's shall use reasonable, good faith efforts to minimize the risk of inventory obsolescence. McCabe's shall not buy or stock more than four weeks supply unless authorized by Buyer. McCabe's will provide Buyer with monthly status reports of slow moving items. Buyer will communicate with McCabe's regarding menu changes and Product mix changes. IV SERVICES A. Delivery Frequency - McCabe's will determine Order and delivery schedules. McCabe's will make two deliveries per week to each Restaurant unless otherwise mutually agreed in writing between Buyer and McCabe's. Under certain circumstances, individual Restaurants may only require one weekly delivery due to less than average volume. Delivery schedule and route changes shall have Buyer's approval four weeks before implementation. Major route changes shall be limited to three times a year. B. Service Area - Subject to and in accordance with the terms of this Agreement, McCabe's shall deliver Products to all current and future Restaurants located in the Service Area, defined as "within a 350 mile radius of the Distribution Center". C. Scheduling Access - McCabe's may make such deliveries on any day of the week, at any time of day, except between 11:00 a.m. -- 1:30 p.m. Buyer agrees to provide keys and security codes for its Restaurants to facilitate night deliveries where necessary. It is understood that either Buyer or McCabe's may have particular scheduling needs for specific Restaurants where unusual circumstances may exist, and each party agree to address such needs in good faith. 1 D. Order Balancing - It is understood that Restaurants receiving two deliveries per week will use reasonable, good faith efforts to balance the orders such that each delivery consists of approximately the same number of cases. E. In-store Delivers at Restaurants - McCabe's delivery drivers will bring all Products into those Restaurants where it is possible to safely roll a two-wheel cart. McCabe's delivery drivers will separate and deliver the order to the Restaurants freezer, cooler and dry storeroom. McCabe's delivery driver will not put Products on the shelves. McCabe's delivery drivers shall use caution and care in using access driveways, hallways, and pathways. McCabe's shall repair damages (other than reasonable wear and tear) caused by McCabe's delivery drivers within a reasonable time. F. On-time Delivery - Deliveries within sixty (60) minutes of a. scheduled delivery are considered to be "on time," McCabe's will maintain a monthly average of no less than eighty-percent (85%") on-time delivery. G. Service Level - Service level is defined as the calculation of the total number of items actually received at the time of delivery divided by the total number of cases ordered. McCabe's will maintain a Service level of no less than ninety-nine and one-half percent (99.5%). H. Order Entry - Restaurant shall fax order to McCabe's by 4:00 PM two days prior to scheduled delivery. Restaurant may place orders electronically to McCabe's when available systems are in place at both Restaurant and McCabe's. I. Shortages - McCabe's shall promptly notify Restaurants of shorted items prior to delivery. McCabe's shall arrange delivery of shorted items within twenty-four (24) hours from the time of delivery. McCabe's shall reimburse the Restaurants for related expenses incurred for retail purchases to cover shorted items. V TERM OF AGREEMENT AND IMPLEMENTATION The term of this Agreement will be three (3) years and shall commence as of October 1,2003 and terminate on September 31, 2006 unless sooner terminated as hereinafter provided. Such term shall be extended for consecutive periods of one (1) year from the expiration thereof and from the expiration of each subsequent extension period, as the case may be, unless McCabe's or Buyer shall have given, either to the other, not less than one hundred twenty (120) days prior written notice of its desire to terminate this Agreement as of such expiration. VI PRICING A. Sell Price - The Sell Price to Restaurant for all Products sold under this Agreement will be the manufacturer FOB cost (excluding any "prompt payment" discount), less any promotional allowances reflected or, invoices to the distribution centers, plus applicable Freight Charges (collectively referred to hereafter as "Cost"), plus a distribution fee. Freight rates shall not exceed those negotiated and guaranteed by the Product supplier. B. McCabe's Fee Per Case - The Sell Price of each Product sold under this Agreement will equal the cost ("Cost") of each Product delivered to all McCabe's distribution centers on a period basis, or a weekly basis for commodity items, plus a distribution fee that will equal a prescribed dollar amount per case of Product. (the "Fee Per Case") as stated in the following table.

1. For example, a Product with a Cost of $20.00 and a Fee Per Case of $1.90 will have a sell price calculated as follows: $20.00+$1.90=$21.90 2. Fee Per Case shall be adjusted after the end of the second (2nd) year of the term (September 31, 2005) of this Agreement by multiplying the most recent Fee Per Case by the "Percentage Change" (hereinafter defined) in the "Price Index" (hereinafter defined). 2 a) "Price Index" as used herein shall mean the Consumer Price Index for All Urban Consumers (CR1-U), West Coast City Average, All Items (Base Year 1982-84=100) ("CPI"). b) "Percentage Change" as used herein shall mean the percentage increase in the Price Index represented by a fraction, the numerator of which shall be the latest Price Index available and the denominator of which shall he the Price Index reported for the month which was twenty-four (24) months before the month used in the numerator. c) There shall he no Fee Per Case increase until the CPI Percentage Change has increased by 3.5%. Furthermore, the CPI mark-up increase shall be capped at 3.5% per year. C. Cola Supplier Products. Soft drink syrup products and bottled water products will be priced according to the national account-pricing program provided to McCabe's by cola supplier less applicable discounts. There will be a 1% discount, less national pricing (i.e., sell price $40.99 per case for 2003). D. Minimum Drop Size -- In the event the combined average shipment of Product (cases per delivery), measured annually, falls below 75 cases of Product per shipment, McCabe's is entitled to a $0.10 per case increase. Buyer shall have the option to go with once a week delivery for low volume units in order to maintain the existing markup structure. E. Fuel Price Adjustment -- The Fee Per Case shall be adjusted every six months (6) to reflect the increases or decreases in fuel costs per gallon, on a one month lagged basis, in the following fashion: The October 1,2003 West Coast fuel price published on the 1st day of October or first date of publication following the 1st day of October (which is compiled by Energy Information Administration, Retail On-Highway Diesel Prices, National Average as shown on their Website:http:www.cia.doe.gov/pub/oil_gas/ petroleum/data_publications/weekly_on_highway_diesel_prices/current/html/ html/diesel.html) will be subtracted From the West Coast fuel price for subsequent bi-annual adjustment. For every $0.10 per gallon increase or decrease in fuel prices the markup per case will increase or decrease by $0.01. Fuel cost adjustments shall be added to or subtracted from the Fee Per Case at the beginning of the accounting period following the first of the month fuel cost posting. F. Cost Verification -- Within thirty (30) days of the first, second, and third anniversaries of the agreement and upon written notice, a representative of the Buyer has the right to verify the Cost of Products sold under this Agreement. McCabe's will furnish documentation verifying Costs, subject to the following limitations: 1. Date and time of verification must be mutually agreed. 2. All verifications must be done at McCabe's premises. 3. The period for which pricing is verified shall be the twelve (12) months prior to the date of Cost Verification. VII PROMPT PAYMENT A. McCabe's shall periodically invoice the Company (which may be affected by electronic transmission of the invoice to the Company) at the address of its corporate headquarters, Attention: Director of Cash Management following delivery to the Company Restaurants for all Products supplied by McCabe's and accepted by the Company Restaurants hereunder. The prices on invoices for all Products supplied by McCabe's and accepted by the Company Restaurants shall be in accordance with Section X hereof. The terms of payment of each invoice shall be zero days as outlined in Section VI.B. (the "Payment Terms"). All payments made by the Company to McCabe's pursuant to that Agreement shall be made by wire transfer of immediately available funds to a bank account designated by McCabe's not fewer than two days prior to such payment, or the last bank account used for any such transfer, as the case may be, B. McCabe's shall periodically invoice the operator of each Franchised Restaurant it accordance with its usual practices, provided, however, that each Franchised Restaurant shall be offered the Payment Terms if such Franchised Restaurants meets McCabe's credit standards as they may from time to time be amended in good faith. VIII TERMINATION A. Notwithstanding Section V of this Agreement, if any party fails or refuses to comply with one or more of its material obligations hereunder resulting in a material default which is incapable of being cured or which is capable of being cured and is not cured within a reasonable period of time following its receipt of oral or written notice of such default (a "Breach"), the nonbreaching party shall provide the breaching party written notice thereof describing the Breach 3 and specifying a date, not less than sixty (60) days following the breaching party's receipt of such notice, on which this Agreement shall be terminable at the option of the nonbreaching party unless the Breach has by that date been substantially cured. This procedure and remedy of termination is in addition to any and all other remedies available to a party by contract, law or otherwise, including without limitation McCabe's right to immediately modify payment terms or stop shipment under Section VTI of this Agreement for non-payment. B. Any party's failure to terminate this Agreement, or to take any other action, upon the occurrence of one or more breaches shall not constitute a waiver or otherwise affect the right of such party to terminate the Agreement for any subsequent Breach. C. The obligations of McCabe's pursuant to this Agreement shall be terminable, at McCabe's option, if any of the following events shall occur and be continuing: (i) if a proceeding is instituted (and not dismissed within sixty (60) days) by or against Buyer under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law to he adjudicated as bankrupt or insolvent: (ii) the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or similar official of all or a substantial part of the assets of buyer; (iii) any assignment for the benefit of creditors of Buyer; or (iv) if Buyer shall admit in writing its inability to pay its debts as they became due. D Upon termination of this Agreement by the Buyer, Buyer shall he responsible for purchasing all Products approved by and purchased by McCabe's solely for Buyer within sixty (60) days. IX ASSIGNMENT A. McCabe's may not assign this Agreement without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed; provided, however, that nothing in this Section shall preclude McCabe's from employing common carriers, contract carriers, public warehousemen or other similar parties to temporarily perform its services hereunder. B. Notwithstanding subsection VIII A above, McCabe's may not assign its rights and obligations under this Agreement without Buyer's consent to any subsidiary or affiliate of McCabe's or to any purchaser of all or substantially all of its distribution business or assets. For purposes of this Section, a change of control or majority ownership of McCabe's shall not be deemed to be an assignment of rights under this Agreement for which Buyer's consent is required. C. McCabe's may assign accounts receivable payable by Buyer. D. Any permitted assignment of this Agreement by either party shall, except as otherwise agreed, be deemed an assignment of all of the assignor's rights and liabilities under this Agreement accruing, arising or relating to any period on or after the date of such assignment E. Any assignment made in violation of this Section shall be null and void. X TITLE AND RISK OF LOSS Except in the case of night deliveries or so-called "key drop" deliveries, title to all Products shall pass upon a Restaurant's acceptance, subject to the rejection of certain items by notation on the delivery ticket, of such Products for delivery. With respect to "key drop" deliveries, title to all goods shall pass at the close of business on the immediately succeeding business day, unless rejected by the Restaurant prior thereto. In the event the product is picked-up by McCabe's in original condition and a credit is due the Restaurant, McCabe's shall provide credits for Product(s) within seven (7) days of pickup. Restaurant shall make arrangements through McCabe's order department before close of business the next day for the pickup of any goods not accepted by Restaurant. Pickups are typically made on the next scheduled delivery day. Credits for highly perishable items can be issued without waiting for the next delivery, providing that the Restaurant has the advance agreement of McCabe's. McCabe's shall promptly issue a receipt to Restaurant for any Products determined acceptable by McCabe's for return and ensure that, Buyer receives a proper credit therefor within seven (7) days of pickup. McCabe's shall bear all risk of loss, damage, or destruction until title passes to Buyer. Credits will be automatically processed after ten (10) days if McCabe s fails to make the customer pickup as agreed with the Restaurant. XI REPORT REQUIREMENTS Within five (5) days of the commencement of a McCabe's Accounting Period, McCabe's will provide Buyer with an Accounting Period Order Guide and Price List. For purposes of determining commodity Sell Prices, McCabe's will provide a Weekly Price Change Notice. McCabe's agrees to provide rolling twelve (12) month usage reports, monthly gross margin report, fill rate report by unit and roll up, on-time delivery report by unit and rollup to Buyer. Buyer may reasonably request additional reports that may be useful as a management tool. 4 XII INSURANCE McCabe's agrees to maintain, during the entire term of the Agreement, insurance coverage against such risks as may he reasonably specified by Buyer, in such minimum amounts as may be reasonably satisfactory to Buyer. XIII FORCE MAJEURE Either party is excused from performance hereunder (other than payment obligations, which shall not be excused under this Section XIII) if such non-performance results from any acts of God, war, riots, terrorism, sabotage, subversion, acts of governmental authorities (interruption in supply, strike lockout, labor dispute), or any other cause outside the reasonable control of the non-performing party. Both parties shall use their best efforts to terminate or cause the expiration of any Force Majeure as soon as practical following its occurrence. XIV CONFIDENTIALITY Buyer and McCabe's each agree that they will keep all terms of this Agreement completely confidential, and that neither party will disclose any information concerning this Agreement to any person or entity without the prior express written consent of the other party; provided, however, that neither party will be in breach of this requirement if such party reasonably believes such disclosure is required based on the advise of counsel under applicable law, regulation or court order. In the event that such disclosure is required by applicable law, regulation or court order, however, Buyer and McCabe's each agree that, if reasonably practicable, such disclosure will not be made to, any person or entity until after such time as the other party has received written notice with regard to any required disclosure, and tile other party has had a reasonable opportunity to contest the basis for disclosure and review the content of any disclosure proposed to he made to any person or entity. Buyer and McCabe's further agree that disclosure of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement. XV NOTICES All notices required or permitted to be given hereunder shall be in writing and delivered personally or sent by United States registered or certified mail, postage prepaid, return receipt requested, or by express delivery service which provides for return receipts, addressed to the parties as follows: (A) If to McCabe's: McCabe's Quality Foods. 17600 E, San Rafael Portland, OR 91230 Attention: Joe Kemetz - President/CEO With Copy to: Services Group of America, Inc 4025 Delridge Way SW, Suite 500 Seattle WA 98106 Attention: Peter K. Smith. CFO Jeffrey R. Masi, General Counsel 5 (B) If to Buyer: La Salsa. Inc. 3916 State Street Santa Barbara, CA 93105 Attn: Michele Rushing Vice- President Purchasing With Copy to: La Salsa. Inc. 6307 Carpinteria Avenue Carpinteria, CA 93013-2901 Attn: General Counsel XVI GOVERNING LAW AND VENUE This agreement shall be governed by, and construed in accordance with, the laws of the state of California without reference to the choice of law principles thereof. Each party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this agreement or the transactions contained or contemplated by this agreement, whether in tort or contract or at law or in equity, exclusively in the Superior Court of Orange County, California (the "chosen court") and (i) irrevocably submits to the exclusive jurisdiction of the chosen court, (ii) waives any objection to laying venue in any such action or proceeding in the chosen court. (iii) waives any objection that the chosen court is an inconvenient forum or does not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with section xv of this agreement. XVII CAPTIONED HEADINGS The section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. XVIII COMPLIANCE WITH LA\VS McCabe's warrants that all Products distributed by it to the Restaurants shall be received, handled, stored, shipped, delivered and sold by McCabe's in compliance with all applicable federal, state and local laws, ordinances, rules and regulations. XIX NO PARTNERSHIP McCabe's acknowledges that it is an independent contractor and no party is or shall be construed as an agent, partner, joint venturer or employee of another. No party shall have the authority to bind or otherwise obligate any other palm in any manner and no party shall represent to anyone that it has a right to do so, XX WAIVERS No waiver or waivers by any party of any provision of this Agreement, whether by conduct or otherwise, shall be deemed to be a further or continuing waiver of the provision or any other provision of this Agreement. XXI ATTORNEYS' FEES If it is necessary for either party to institute stilt to enforce any of be provisions of this Agreement, then the prevailing party in such suit shall be entitled to collect and receive reasonable outside attorneys' fees and court costs, XXII SEVERABILITY The provisions of this agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. XXIII THIRD-PARTY RIGHTS Notwithstanding any other provision of this Agreement, this Agreement shall not create benefits on behalf of any third party or person other than the parties hereto or their permitted assignees (including without limitation any broker, finder, supplier or customer), and this Agreement shall be effective only as between the parties hereto, their successors and permitted assigns. 6 XXIV ENTIRE. AGREEMENT/AMENDMENT'S The parties expressly acknowledge that this Agreement contains the entire agreement of the parties with respect to the relationship specified in this Agreement and supersedes any prior arrangements or understandings, verbal or written, between the parties with respect to such relationship. This Agreement may only be amended by a written document signed by each of the parties hereto. XXV COUNTERPARTS This Agreement and any amendments hereto may be executed in one or more counterparts, each of which shall be deemed to be an original by the parties executing such counterpart, but all of which shall be considered one and the same instrument. IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the parties hereto as of the date first written above.

7 Exhibit A La Salsa, Inc. Company Restaurant Listing

9 EXHIBIT B ACCEPTANCE AGREEMENT This Acceptance Agreement is entered into as of the ____ day of ______________________________________,, by and between the undersigned owner (the "Owner") of the establishments described on the attached Exhibit A (the `Subject Locations") and McCabe's on behalf of itself and certain of its operating companies (collectively, "McCabe's") that are approved to provide distribution services to the Owner, as a franchisee of La Salsa, Inc. (the "Master Organization"). RECITALS A. The Owner and the Master Organization dense that McCabe's provide distribution services to the Subject Locations under substantially similar terms and conditions (the "Standard Tents") as set forth in the distribution agreement entered into by and between McCabe's and the Master Organization dated as of _______________________ [date of Master Distribution Services Agreement] (the "Distribution Agreement"). In certain cases, the Distribution Agreement permits variances in the Standard Terms to address the specific delivery requirements, credit terms, and/or other unique circumstances relating to or requirements of the Owner or the Subject Locations. B. McCabe's, as a condition to providing distribution services to the Subject Locations, requires that the Owner execute this Agreement, evidencing the Owner's agreement to the terms and conditions of the Distribution Agreement, as modified and/or supplemented by the Location Specific Terms, as set forth in Exhibit B attached to and hereby incorporated by reference within this Agreement. All capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to them under the Distribution Agreement. Therefore, in consideration of the premises and the mutual covenants, the sufficiency of which is acknowledged by than, the Owner and McCabe's agree as follows: 1. Binding Nature of Distribution Agreement By his/her/its signature below, the Owner specifically acknowledges and agrees: (A) that the distribution services that McCabe's provides to the Subject Locations shall to subject to the terms and conditions of the Distribution Agreement, as the same may be modified upon. Agreement by and between McCabe's and the Master Organization, from time to time, pursuant to its terms, and further subject to the Location Specific Tents: (B) to be bound by any adjustments in the pricing terms permitted under the Distribution Agreement and/or negotiated and agreed to by the Master Organization. The Owner specifically acknowledges and agrees that the "Cost" or `Contracted Cost' that shall be utilized in determining the sell price of Products distributed to the Subject Locations shall be determined in the manner provided in the Distribution Agreement The Owner specifically recognizes and agrees that McCabe's shall be entitled to compensation for its performance of merchandising and other value-added services to or for the benefit of suppliers, as provided in the Distribution Agreement, and that such compensation shall not be deducted from or otherwise offset against the "Cost or Contracted Cost' utilized in determining the sell price of Products. Provided that McCabe's has indicated its acceptance hereof through the signature of its authorized representative below, McCabe's shall provide distribution services to the Subject Locations in accordance with the terms and conditions of the Distribution Agreement, as amended and/or supplemented by the Location Specific Terms. 2. Pricing Delivery and Credit Terms. Delivery frequencies and credit terms and other supplemental and/or modified terms applicable to the Subject Locations are set forth in Exhibit "B" attached to this Agreement, and incorporated herein by reference or if not addressed therein, shall he the same as set forth in the Distribution Agreement. 10 3. Confidentiality. Owner agrees that it will keep all terms of this Agreement and Financial information completely confidential, and that it will not disclose any information concerning this Agreement to any person or entity without the prior express written consent of McCabe's; provided, however, that such information may be provided by Owner to .its auditors, consultants, and advisors who agree to maintain such confidentiality or are otherwise bound to restrictions or disclosures and to any prospective purchasers of all or part of their respective businesses, provided that such prospective purchasers shall have executed and delivered a confidentiality agreement in form and substance approved by McCabe's, which approval shall not unreasonably be withheld or delayed. Owner will not be in breach of this requirement if Owner reasonably believes such disclosure is required based on the advice of counsel under applicable law, regulation, or court order. In. the event that such disclosure is required by applicable law. regulation, or court order, however, Owner agrees that, if reasonably practicable, such disclosure will not be made to any person or entity until after such time as McCabe's has received written notice with regard to any required disclosure (provided that notice of the requited disclosure is not prohibited by lax;'), and McCabe's has had a reasonable opportunity to contest the basis for disclosure and review the content of any disclosure proposed to be made to any person or entity. Owner further agrees that disclosure of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement. 4. Financial Reports. The continuing credit worthiness of Owner is of central importance to McCabe's. If the Owner's accounts payable balance due McCabe's exceeds $12,000 at anytime, the Owner will provide quarterly and annual financial statements consisting of a balance sheet, income statement and cash flow statement and the financial condition of the Owner must continually support the extension of credit granted in this Agreement. Alternatively, if the Owner is not a natural person, the Owner [may, in lieu of quarterly financial statements, provide personal guaranties of the payment of Owner's obligations under the Agreement from the owners of legal or beneficial interests in the Owner and annual personal financial statements of such guarantors, provided that the financial condition of such guarantors continues to support the credit extended to the Owner. In such event, the Owner shall continue to provide annual financial statements relating tote Owner. 5. Termination/Delivery Stoppage. (a) This Agreement and McCabe's obligation to provide distribution services to the Subject Locations may be terminated: (i) By McCabe's upon site termination of the Distribution Agreement, or by reason of the circumstances permitting termination of the Distribution Agreement, even if not exercised, by McCabe's; (ii) By Owner upon the termination of Owner's franchise agreement with the Master Organization; (iii) By either Party, upon thirty (30) days prior written notice to the other Party, if the other Party breaches the terms and conditions of this Agreement and fails to cure such breach within such thirty (30) day cure period; (iv) By McCabe's open written notice to Owner In the event that McCabe's reasonably determines that Owner has suffered a material adverse change it his/her/or its financial condition; (v) By either Party, if the other Party is adjudicated insolvent by any court or tribunal, or files a voluntary petition in bankruptcy, or enters into an arrangement with its creditors or applies for or consents to the appointment of a receiver or trustee of itself or its property, or makes an assignment for the benefit of creditors or suffers or permits the entry of an order adjudicating it to be bankrupt or insolvent or appointing a receiver or trustee of itself or its property, in which event no notice to the defaulting Party shall he required and this Agreement shall immediately terminate; or 11 (vi) By either Party, if the oilier Party permits or suffers on involuntary petition in bankruptcy filed against it to remain undischarged or stayed for a period of sixty (60) days in which event no notice TO the other Party shall be required and this Agreement shall immediately terminate. Absent such earlier termination, this Agreement shall remain, in full force and effect until the expiration 0f the Distribution Agreement. (b) In the event Owner fails to pay for any Products delivered to any Subject Locations within the approved payment terms established pursuant to this Agreement, McCabe's shall be entitled to, forthwith upon notice to Owner, withhold any future deliveries of Products to the Subject Locations until McCabe's receives payment in full of the Sell Price with respect to such Products and any finance or law charges permitted under the Distribution Agreement. In addition, in the event that Owner fails to timely pay for Products delivered to any 0f the Subject Locations or upon the occurrence of any of the events described in clauses (iii), (iv), and (s') above with respect to Owner, McCabe's shall be entitled to condition future deliveries of Products to the Subject Locations upon more stringent credit and/or payment terms, such as, without limitation, shortened payment periods, cash on delivery, cash in advance, the receipt of satisfactory guaranties that guaranty payment to McCabe's for such Products, and/or the pledging of collateral to secure such payments. 6. Release. Owner agrees that McCabe's ability to perform distribution services for Owner under the terms of the Distribution Agreement as modified herein, is expressly contingent upon the Master Organization's approval for McCabe's to do so. Accordingly, Owner hereby releases McCabe's it's affiliates, and each of their respective officers, employees, and directors from any and all losses, damages, or claims that Owner may have or suffer as a result of McCabe's discontinuance of services to Owner as a result of express instructions from the Master Organization to cease such services. Effective as of the date first above written. OWNER By: -------------------- Name: ------------------ Title: ----------------- 12