Exclusive Territory Distribution Agreement with Drink King Distributing Company, Inc

A.          Supplier hereby appoints Distributor as its exclusive distributor for the Distribution of the Products via the Channel in the Territory, and Distributor agrees to use commercially reasonable efforts to resell the Products via the Channel in the Territory on the terms and conditions set forth herein.  The parties acknowledge that Schedule A may be amended from time to time upon the mutual written consent of the parties to add or modify the Products to be Distributed hereunder.  Distributor shall not solicit orders for the Products from outside the Territory.  If Distributor receives orders from outside the Territory, Distributor shall promptly refer all such orders directly to Supplier without processing such orders or accepting any payment for such orders.  Any (a) marketing or sales of Products by Distributor outside the Territory or (b) sales of Products to entities that Distributor knows or has reason to believe are reselling Products outside the Territory, shall be considered a material breach of this Agreement.

A.   Supplier will supply to the Distributor such quantities of the Products as shall be required by the Distributor to perform the conditions of this Agreement and the same shall be shipped on order from the Distributor subject to and consistent with the production schedules of Supplier. During any time in which demand exceeds supply of the Products, Supplier may restrict the availability of the Products to Distributor in accordance with a commercially reasonable equitable allocation program specified by Supplier.

B.            Distributor shall submit written purchase orders for all Products to be purchased hereunder.  Any provisions in a purchase order which conflict with the provisions of this Agreement will be null and void, unless otherwise agreed to in writing by Supplier and unless such provision expressly states that it is intended to supersede a provision of this Agreement and specifically identifies the provision(s) being superseded.  Purchase orders for the Products shall state the following terms, which shall be in full conformity with the terms and conditions of this Agreement:

A.           Supplier shall submit invoices to Distributor for Products purchased hereunder.  Distributor's payment for the Products purchased shall be 2% 10, net ninety (90) days calculated from the date that the Products have been received by Distributor and specified in an invoice for first three (3) months of purchases.  Distributor's payment for the Products purchased shall be 2% 10, net sixty (60) days calculated from the date that the Products have been received by Distributor and specified in an invoice after first three (3) months of purchases until first twelve (12) months of purchases.  Thereafter Distributor's payment for the Products purchased shall be 2% 10, net forty five (45) days calculated from the date that the Products have been received by Distributor and specified in an invoice.

C.   Distributor shall (i) store, handle and distribute its inventory of Products in clean and sanitary conditions as required to maintain Product quality and in accordance with Supplier's and any applicable manufacturers’ reasonable specifications; (ii) not alter the Products in any manner; and (iii) comply with all applicable international, federal, state and local food, health and other applicable laws, rules, regulations, standards and orders (collectively, “Applicable Laws”) in connection with the storage and Distribution of the Products; provided, however, that Supplier shall be solely responsible for complying with all Applicable Laws with regard to the composition, makeup, development, manufacture, supply, advertising and marketing of the Products (including, without limitation, any labels affixed to the Products and the content of any advertising or marketing materials relating to the Products which are provided to Distributor by Supplier) and Supplier's license, distribution and sale of the Products to Persons other than Distributor.

D.   If Supplier or a governmental authority notifies Distributor of a Recall/Withdrawal Event, Distributor agrees that it shall fully cooperate with Supplier and take all necessary actions reasonably requested by Supplier in connection with a market withdrawal or recall of any Recalled Products or Withdrawn Products, including but not limited to, a notification to accounts and retrieval of Recalled Products or Withdrawn Products from accounts, at Supplier's sole expense.  In the event of a Recall/Withdrawal Event, Supplier shall repurchase from Distributor, at a purchase price equal to (i) the full purchase price initially paid by Distributor to Supplier for such Recalled Products or Withdrawn Products; plus (ii) if Distributor refunds any money to its accounts in buying back unsold Recalled Product or Withdrawn Product, the difference between: (A) the amount of the refund and (B) Distributor's original purchase price paid for the unsold Recalled Product or Withdrawn Product based on the original purchase order; plus (iii) Distributor's documented freight, delivery and insurance expenses to return Recalled Product and Withdrawn Product to Supplier's designated location.

D.          From and after the one (1) year anniversary of the Effective Date, Supplier may terminate this Agreement without cause at any time by providing Distributor with sixty (60) days prior written notice and paying the “Termination Fee” (as defined below) on the effective date of termination (such termination shall not be effective until the Termination Fee has been paid).  The “Termination Fee” shall mean an amount equal to the “Gross Profit” (as defined below) earned by Distributor for the sale of Products during the twelve (12) full calendar months immediately preceding the effective date of termination (the “Determination Period”).  For purposes of this Agreement, “Gross Profits” means Distributor's revenues from the sale of the Products during the Determination Period less the net invoice price paid by Distributor to Supplier.  “Net invoice” means Supplier's total invoice price for all Products sold to Distributor less any allowances or bill backs paid or owed to Distributor (e.g. discounts, off invoice allowances, rebates and price reductions, and Supplier promotional activities in which Distributor has agreed to participate).  The parties recognize and agree that it would be extremely difficult to ascertain the actual economic effects, if any, that a termination by Supplier under this Paragraph 9D could have on Distributor, as such effects would encompass Distributor's loss of future profits and the fair market value of Distributor's business of the Distribution of the Products.  Supplier acknowledges and agrees that the amount of the Termination Fee is fair and represents a good faith estimate of possible damages to Distributor for Supplier's termination of this Agreement without cause, and the payment of the Termination Fee is not intended as a forfeiture or penalty within the meaning of California Civil Code sections 3275 or 3369 but is intended to constitute liquidated damages to Distributor to approximately compensate Distributor for the early termination of this Agreement.

E.           This Agreement may be terminated immediately by either party upon written notice to the other party upon (a) the discontinuance, dissolution, liquidation and/or winding up of the other party’s business or (b) the making, by the other party, of any general assignment or arrangement for the benefit of creditors; the filing by or against the other party of a petition to have it adjudged bankrupt under bankruptcy or insolvency laws, unless such petition shall be dismissed or discharged within sixty (60) days; the appointment of a trustee or receiver to take possession of all or substantially all of such party’s assets, where possession is not restored to the appropriate party within thirty (30) days; or the attachment, execution or judicial seizure of all or substantially all of the other party’s assets where attachment, execution or judicial seizure is not discharged within thirty (30) days.

(a)           At Distributor's election, (i) cause Supplier to repurchase from Distributor within fifteen (15) days of the effective date of the termination of this Agreement, at Distributor's actual landed cost (calculated on a FIFO basis) plus a reasonable handling fee, all saleable Products and promotional items held by Distributor as of the effective date of termination or (ii) "sell-off' all Products and promotional items held by Distributor as of the effective date of termination via the Channel in the Territory for a three (3) month period following the termination of this Agreement, at the end of which Supplier shall be required to repurchase from Distributor, at Distributor's actual landed cost (calculated on a FIFO basis) plus a reasonable handling fee, all saleable Products and promotional items then held by Distributor.  Such Products(s) shall be delivered to Supplier at a location designated by Supplier (which location must be within Fifty (50) miles of Distributor’s warehouse) or, at Supplier's option upon written notice to Distributor prior to the effective date of termination, Supplier may elect to pick up all such Products at Distributor's warehouse not later than fourteen (14) days following the effective date of termination or the expiration of the "sell-off" period, as the case may be.

(c)           Distributor shall (i) return to Supplier or destroy, at Supplier's cost and expense (with a certificate of destruction to Supplier, if Supplier so requests), any and all Confidential Information of Supplier in its possession or control, (ii) remove any Product branding or other references to the Products or intellectual property relating thereto from any Branded Vehicles (as defined in the Addendum No. 1 hereto) which Distributor then owns or leases, and (iii) return to Supplier, at Supplier's cost and expense, any Display Equipment in its possession or control, or use its commercially reasonable efforts to cause any Display Equipment in the possession or control of Distributor's accounts to be returned to Supplier.

(d)           Distributor shall submit a final accounting report to Supplier showing all Monthly Payment Amounts (as defined in the Addendum No. 1 hereto), termination payments, or other amounts owed by Supplier to Distributor hereunder as of the effective date of termination, which amounts shall be paid by Supplier to Distributor not later than thirty (30) days following Distributor's delivery of such report, subject to offset for any amounts then owing by Distributor to Supplier for any invoices delivered by Supplier hereunder.

G.           Except as provided in Paragraph 9D of this Agreement with respect to the Termination Fee, neither party shall be liable to the other party as a result of termination of this Agreement; provided that termination in accordance with this Agreement shall be without prejudice to any of the rights or liabilities of either party accrued as of the date of termination.

C.           Any party seeking indemnity under this Paragraph 10 (the “Indemnified Party”) shall notify the other party (the “Indemnifying Party”) of such claim as soon as practicable after the Indemnified Party first obtains knowledge of such claim (provided that failure to give such notice shall not affect the Indemnifying Party's obligations except to the extent it can show actual prejudice).  The Indemnifying Party will defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such action and all related proceedings, which proceedings will be diligently defended or prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages; which admits guilt, liability or culpability on the part of the Indemnified Party; or which could be reasonably expected to have an adverse impact on the Indemnified Party’s business operations or reputation).  The Indemnifying Party will have control of such defense and proceedings, including any compromise or settlement thereof (subject to the preceding sentence), provided, however, that if (i) the Indemnifying Party fails to diligently defend, prosecute or settle any action (subject to the Indemnified Party’s approval as provided above), (ii) the claim for indemnification relates to or arises in connection with any criminal or quasi-criminal proceeding, action, indictment, allegation or investigation involving an Indemnified Party, (iii) the action seeks an injunction or equitable relief against the Indemnified Party or (iv) the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party, then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the action by all appropriate proceedings, which proceedings will be defended or prosecuted by the Indemnified Party in a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party which shall not be unreasonably withheld); provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any action which the Indemnified Party is contesting.  In any action the defense of which the Indemnifying Party shall assume, the Indemnified Party shall have the right to participate in (but not control) the defense and resolution of such action and to retain its own counsel at such Indemnified Party’s own expense, so long as such participation does not interfere with the Indemnifying Party’s control of such litigation.

E.   The insurance companies providing such insurance required under Paragraph 10D must have an A.M. Best rating of A-VII or better and be licensed or authorized to conduct business in all fifty (50) of the United States.  The policies shall contain a waiver of subrogation with respect to the Indemnifying Party and each policy shall contain all appropriate riders and endorsements based on the nature of any Product manufactured or sold hereunder and its intended use.  Each party shall name the other party as an “additional insured” on all required insurance policies and shall provide the other party with originals or copies of certificates of insurance so reflecting.  Such insurance shall also provide that the other party shall be notified in writing by the insurance carrier of any change or modification in the policy (including termination) not less than thirty (30) days prior to the effective date of such change (including termination).

B.           In the event of any dispute or controversy arising out of or in any way related to this Agreement, the matters referred to herein, or the Products to be supplied by Supplier pursuant to this Agreement (each, a “Dispute”), the parties will attempt in good faith to resolve through negotiation such Dispute.  Either party may initiate negotiations of any Dispute by providing written notice to the other party, setting forth the subject of the Dispute.  The recipient of such notice will respond in writing within ten (10) calendar days with a statement of its position on and recommended solution to the Dispute.  If the Dispute is not resolved by this exchange of correspondence, then representatives of each party with full settlement authority will meet at a mutually agreeable time and place within thirty (30) calendar days of the date of the initial notice in order to exchange relevant information and perspectives, and to attempt to resolve the Dispute.

C.             If the Dispute is not resolved by these negotiations, such Dispute shall be settled exclusively by final and binding arbitration in Los Angeles, California in accordance with the then current rules of the American Arbitration Association (“AAA”).  The parties agree that any and all Disputes that are submitted to arbitration in accordance with this Agreement shall be decided by one (1) neutral arbitrator who is a retired judge or attorney licensed to practice law in California with at least fifteen (15) years of experience in complex commercial transactions.  If the parties are unable to agree on an arbitrator, AAA shall designate the arbitrator.  The parties will cooperate with AAA and with one another in selecting the arbitrator and in scheduling the arbitration proceedings in accordance with applicable AAA procedures.  All arbitration proceedings shall be confidential.  Neither party shall disclose any information about the evidence produced by the other party in the arbitration proceedings, except in the course of judicial, regulatory, or arbitration proceeding, or as may be demanded by government authority.  Before making any disclosure permitted by the preceding sentence, a party shall give the other party reasonable advance written notice of the intended disclosure and an opportunity to prevent disclosure.  Any award issued as a result of such arbitration shall be final and binding between the parties thereto and shall be enforceable by any court having jurisdiction over the party against whom enforcement is sought.  By entering into this Agreement, the parties are waiving their constitutional right to have any Disputes decided in a court of law or before a jury and waive the right of appeal, and instead of relying on said rights, each party is solely and knowingly accepting the use of arbitration as a means of resolution of any Disputes.  The prevailing party in such arbitration shall be awarded its costs and reasonable attorneys’ fees.  The parties agree that this clause has been included to rapidly and inexpensively resolve any disputes between them with respect to this Agreement, and that this clause shall be grounds for dismissal of any court action commenced by with respect to this Agreement, other than post-arbitration actions seeking to enforce an arbitration award and actions seeking equitable, injunctive or other similar relief in accordance with Paragraph 11D hereof, which shall be resolved exclusively in the state or federal courts sitting in the County of Los Angeles.

D.           Each party agrees that a breach of its obligations under Paragraph 14 will result in irreparable harm to the other party and, in the event of such breach, or threatened breach, the breaching party agrees that the other party will have available the right to preliminary and permanent injunctive relief and other equitable relief issued by any court of competent jurisdiction to prevent or curtail any such breach, or threatened breach, and to specific performance of any covenant contained herein, in each case without the proof of actual damage or any bond or similar security being posted, in order that the breach, or threatened breach, of such provisions may be effectively restrained.  The parties agree that this remedy shall be in addition to all other remedies set forth in the Agreement or as set forth herein. The parties further agrees that they will not assert as a claim or defense in any action or proceeding to enforce any provision hereof that the other party has or had an adequate remedy at law.

To the extent that the performance by Supplier or Distributor of any of its obligations is prevented due to unforeseeable circumstances beyond the control of that party, including but not limited to, any act of God, new law, regulation or ordinance, war or war conditions, or failure of transport or supply then such performance (except for the payment of money) shall be excused and this Agreement shall be deemed suspended during the continuation of such circumstances provided such party continues to attempt to recommence performance or observance to the greatest extent possible without delay.

Distributor and Supplier understand and agree that each is an independent principal and not an agent, employee, partner, joint venturer, or franchiser or franchisee of the other in the performance of this Agreement, and that each party retains the right to conduct its business as it shall determine, including without limitation the manner in which it shall fulfill its obligations under this Agreement.  Neither party, nor its agents, shall in any way act, or undertake to act, on behalf of, or hold itself out as, the agent of the other party without the express prior written consent of such other party.  The parties will each be responsible for the payment of their respective compensation, wages, taxes, dues, employment benefits and other operating expenses in connection with the separate operations of their respective businesses and companies.

B.           Each party agrees (i) to keep all Confidential Information of the other party confidential and not to disclose or reveal any Confidential Information to any other Person except (A) to such of its pre-approved Representatives of such party who have a need to know such Confidential Information in connection with Distributor's Distribution of the Products in accordance with the terms and conditions hereof and have been advised of the confidential nature of such Confidential Information and such party's obligations hereunder in respect thereof, (B) to any governmental, regulatory or administrative agency, authority, board or body having jurisdiction over the recipient where such disclosure is required in accordance with Applicable Laws, or (C) to any other Person pursuant to subpoena or the process, whether legal, administrative or other (and the disclosing party agrees to provide the other party with prompt notice of any such subpoena or other similar notice); and (ii) not to use such Confidential Information for any purpose other than in connection with the Distribution of the Products in accordance with the terms and conditions hereof.