Distribution Agreement – 1B Without Fees

DISTRIBUTION AGREEMENT

The Distributor identified in the applicable registration or registration form to which this agreement is referenced (the “Distributor”) wishes to sell Produce on behalf of Produce Pay Inc. (“Company”) on the terms set forth in this Distribution Agreement (this “Agreement”) and the Company’s Distribution Agreement General Terms and Conditions found at [https://producepay.com/distribution-agreement/], as the same may be updated from time to time (“Terms and Conditions”).  Capitalized terms used in this Agreement that are not defined in this Agreement have the meanings given to them in the Terms and Conditions.  This Agreement consists of two parts:  (a) the transaction terms that immediately follow (the “Transaction Terms”), and (b) the Contract Terms attached as Exhibit A (the “Contract Terms”).  The following are the Transaction Terms::

By electronically accepting or signing this Agreement, the Distributor agrees that this Agreement and the Terms and Conditions, which are incorporated by reference into this Agreement, shall be legally binding on the Distributor.

Exhibit A

CONTRACT TERMS

1. DEFINITIONS

As used herein, the following terms shall have the respective meanings indicated below:

“Affiliate” of a party means any corporation, limited liability company, partnership or other legal entity that controls, is controlled by, or is under common control with such party. For the purposes of this definition, an entity shall be deemed to control another entity if it owns or controls directly or indirectly more than fifty percent (50%) of the voting equity or assets of the other entity (or other comparable ownership interest for an entity other than a corporation).  

“Company Expenses” means, with respect to each Produce Shipment, bank fees (including wire fees and charges for insufficient funds), credit check costs, diligence costs, supplies, and costs of collection and enforcement of the Company’s rights, including legal fees.

“Company Proceeds” means, with respect to a particular Produce Shipment, the amount that the Company is entitled to receive under the In-season Produce Purchase Agreement with respect to such Produce Shipment, including without limitation the In-season Payments, Distribution Fees and Company Expenses.

“Deficit” has the meaning set forth in Section 3.2 of these Contract Terms.

“Distributor’s Commission” means the commission payable to a Distributor under a Producer Agreement with respect to the sale and distribution of a Produce Shipment.

“Distributor Deductions” means any and all (a) deductions from proceeds of the sale and distribution of a Produce Shipment the Distributor deems appropriate in its business judgment and in accordance with the applicable Producer Agreement or other governing agreement and (b) taxes, fees, commissions and other amounts assessed by parties other than the Distributor or Company on account of the sale and distribution of a Produce Shipment to the extent that such amounts have been actually paid by (or will contemporaneously be paid by) a Distributor out of proceeds from such sale.

“Excess Deficit” has the meaning set forth in Section 3.2(b) of these Contract Terms.

 “Gross Sale Proceeds” means the proceeds invoiced by the Distributor on behalf of Company for the sale of a Produce Shipment, without deduction of any kind.

“Net Sale Proceeds” means the Gross Sale Proceeds for a particular Produce Shipment less (a) the Distributor’s Commission for that Produce Shipment, and (b) the Distributor Deductions for that Produce Shipment, as (a) and (b) are limited by the application of Section 3.2 of these Contract Terms.

“Party” refers to Company or the Distributor, and “Parties” shall collectively refer to both Company and the Distributor.

“Platform” means, the software platform and software as a service solution provided by Company to the Distributor and other parties that enables (a) Produce Shipments to be purchased by Company via the Platform, and (b) all funds owed by Distributor to Company to be remitted electronically via the Platform.

 “Produce Shipment” refers to a shipment or a series of  shipments of Produce that are purchased by the Company under an In-season Produce Purchase Agreement.

 “Producer” refers to any party from which Company acquires Produce that is sold by Distributor under this Agreement. 

“Producer Agreement” means an agreement between the Distributor and a Producer relating to the sale of a Produce Shipment by Company to Distributor on a fixed or consignment basis for Produce that is shipped directly by Producer to Distributor.

2.  APPOINTMENT; GENERAL TERMS

  1. The Platform.  During the Term, Company shall operate the Platform and provide a user account to the Distributor for it to engage in the Distribution of Produce Shipments on the terms set forth herein.  Company grants the Distributor the non-exclusive right and license to use the Platform during the Term on the terms set forth herein.
  2. Nonexclusive Appointment.  Subject to the terms and conditions of this Agreement, Company hereby appoints the Distributor as its nonexclusive distributor to sell the Produce in a final form for fresh market shipment and purchase by the applicable purchaser.  It is specifically understood and agreed that this appointment is nonexclusive in nature and that nothing herein contained shall be construed to grant the Distributor any exclusive rights.
  3. Notice and Acceptance of Produce Shipments. Producers may from time to time make available Produce Shipments for sale on the Platform. When a Producer ships a Produce Shipment to Distributor, the Distributor shall log into the Platform to notify Company of such shipment and shall supply the Company with the Producer Agreement for that Producer via the Platform. The Distributor shall notify Company of its acceptance or rejection of shipment of such Produce Shipment as satisfactory for sale by the Distributor under the terms of this Agreement. The Distributor will accept the shipment in the Platform. All rejected Produce shall not be included in a Produce Shipment and shall be removed from the Platform. At its sole discretion, Company can then, upon such notification by the Distributor of acceptance of a Produce Shipment through said Platform, remit a payment to the Producer and take title to the Produce Shipment if it does not already have title. Upon Company taking title to the Produce Shipment through the Platform, the Distributor will thereby be required to remit to the Company the Net Sale Proceeds for such Produce Shipment.
  4. Title to Produce.  Title to the Produce will remain with Company until such Produce has been sold by the Company to the Distributor on a fixed price basis or to a third party by the Distributor on behalf of the Company, on a consignment basis, and the Produce has been accepted by the applicable purchaser.
  5. Term. The term of this Agreement (“Term”) shall be the period commencing on the Effective Date and ending on the date that is one year from the Effective Date, and shall be automatically extended for consecutive one (1) year periods on each anniversary of the Effective Date, unless either party shall have provided written notice of termination to the other party not less than thirty (30) days prior to the expiration of the current term Effective Date or the Agreement is otherwise terminated in accordance with the Terms and Conditions. Sections 4.5 and 5 of these Contract Terms will survive termination of this Agreement, together will all payment obligations to the Company for services provided hereunder or that otherwise accrued during the Term.

3. TERMS AND CONDITIONS OF SALES

  1. Payment to Company. Upon acceptance of a Produce Shipment on the Platform by the Distributor, the Company is entitled to receive, and Distributor will promptly remit to Company, an amount equal to the Net Sale Proceeds as per the terms accepted by the Distributor on the Platform. Upon shipment and invoicing of such Produce Shipment, Distributor shall calculate and notify Company via the Platform of the Gross Sale Proceeds from its customer for such Produce Shipment, the Distributors Commission and the Distributor Deductions thereon, and shall provide invoice and liquidation details for such Produce Shipment upon request by Company.
  2. Deficit. If for Produce Shipments (A) the amount that the Company is entitled to receive under the In-season Produce Purchase Agreement, if any, exceeds (B) the amount of the Gross Sale Proceeds less the Distributor’s Commission and Distributor Deductions (the amount of such excess, the “Deficit”), then the amount of Distributor’s Commission and Distributor Deductions that the Distributor may withhold from the Gross Sale Proceeds before transferring the proceeds from such Produce Shipment to the Company shall be limited as follows:
    • (a) If the Deficit is less than the sum of the Distributor’s Commission and Distributor Deductions for such Produce Shipment, then the amount of Distributor’s Commissions and Distributor Deductions that the Distributor may withhold from the Gross Sale Proceeds shall be reduced by the amount of the Deficit.
    • (b) If the Deficit is greater than or equal to the sum of the Distributor’s Commission and Distributor Deductions for such Produce Shipment, then (i) the Distributor may not withhold any Distributor’s Commissions or Distributor Deductions from the Gross Sale Proceeds and shall pay the entire Gross Sale Proceeds to the Company (in which case, the Net Sale Proceeds shall equal the Gross Sale Proceeds for all purposes hereof), (ii) to the extent that the Company Proceeds exceed the Gross Sale Proceeds (the “Excess Deficit”), then the Company shall be entitled to receive from the Distributor, on a first-priority basis, the entire Gross Sale Proceeds for any other Produce Shipments purchased by Company from the Producer, until such time as the Excess Deficit, together with any and all outstanding fees and charges owed to the Company by the Producer and/or the Distributor, are satisfied in full, and (iii) the Company may at any time demand payment from the Distributor of an amount equal to the Excess Deficit. The foregoing collection demand may be made by the Company first to the Distributor without attempting to collect any amount from the Producer.
    • (c) Notification and Payment. upon shipment and invoicing of such Produce Shipment, Distributor shall calculate and notify Company via the Platform of the Gross Sale Proceeds from the retailer or wholesaler for such Produce Shipment, the Distributors Commission and the Distributor Deductions thereon, and shall attach the invoice for such sale. With respect to each Produce Shipment, upon receipt of notification from the Distributor of the shipment and invoicing of such Produce Shipment through the Platform, Company shall calculate and notify the Distributor of the Company Proceeds and the Net Sale Proceeds, as well as any Deficit and Excess Deficit. Distributor will then pay Company the Net Sale Proceeds for such Produce Shipment and the Excess Deficit, if any, for any other Produce Shipment.
  3. Taxes.  The Gross Sale Proceeds does not include any foreign, federal, state or local taxes that may be applicable to the Produce, including sales, excise, value-added, withholding, and other taxes, which shall be the responsibility of the Distributor.  Each party shall be solely responsible for any taxes imposed on it based upon its net income
  4. Receivables Risk.  The Distributor shall bear all default risk of any purchaser of the Produce Shipment accepted on the Platform. As such, Distributor shall compensate Company based on the first invoiced Gross Sale Proceeds even if a grocer, retailer or other purchaser or end user defaults on payment after having taken possession of the Produce.
  5. Bona Fide Purchaser. The Distributor acknowledges and agrees that Company is a bona fide purchaser acting in good faith with respect to all of its interactions with the Distributor, including, without limitation, all transactions contemplated by this Agreement. The Distributor further acknowledges and agrees that all amounts due and owing to Company in connection with this Agreement, including, without limitation, the Company Expenses, and any other fees and amounts received by Company in connection with a Produce Shipment are duly earned and obtained for fair and reasonable value provided by the Company.

4. OBLIGATIONS

  1. Inventory.  The Parties acknowledge that the Producer will ship the Produce directly to the Distributor and that Company will not be responsible for maintaining any inventory.
    • (a) The Distributor shall store any Produce inventory in accordance with the highest industry practice in order to preserve and protect the Produce.  Towards this end, the Distributor shall store inventory in designated storage areas in a manner appropriate for maintaining such Produce in good and saleable condition as required by Produce labeling specifications and storage conditions specified by Company and market conventions. 
    • (b) Within ten (10) days’ prior notice, Company or its representative shall have the right to visit or assess all locations where the Distributor maintains or ships inventory of Produce to conduct a quality assurance audit of such facilities and/or an on-site surveillance of its inventory storage tracking.  In the event that an audit reveals matters that Company determines should be corrected by the Distributor, Company shall provide, in writing a list of such matters and any proposed corrective action to be taken by the Distributor.  The Distributor shall respond within fifteen (15) days thereafter of the corrective action to be taken by the Distributor and an estimated completion date. 
  2. Invoices. The Distributor acknowledges and agrees that any misrepresentations or other fraudulent activity of the Distributor with respect to any invoice or other proof of sale submitted by the Distributor to Company shall be prosecuted to the fullest extent of all applicable statues, regulations and other laws. 
  3. Promotion of Produce. The Distributor shall be responsible for all promotional and marketing activities that the Distributor undertakes related to the sales and distribution of the Produce. 
  4. Accuracy of Data in Platform. Distributor is responsible for validating accurate information into the Platform. Information that is the responsibility of the Distributor includes but is not limited to: commodity type, unit of measure, items per unit, units. Any errors or costs resulting from inaccurate information that is validated as accurate by the Distributor will be at the cost to the Distributor
  5. Complaints.  The Distributor shall promptly forward to Company any customer complaints or comments concerning the Produce.  For any customer complaint, the Distributor shall send Company the nature of the complaint.  The foregoing information shall be communicated in written form (e-mail, fax or express mail). 

5. PROBIHITION ON USE OF PROCCEEDS AS COLLATERAL

  1. The Distributor hereby acknowledges that during the duration of this Agreement it cannot use as collateral with any creditors its accounts, accounts receivables or any proceedings from the sale of Produce (including insurance, general intangibles and other accounts proceeds).
  2. The Distributor hereby acknowledges that it will not accept any Produce Shipment in the platform if such Produce Shipment, or its proceeds, will become collateral by a creditor of any type.
  3. The Distributor represents and warrants that (a) the shipment of the Produce by Company to the Distributor under this Agreement does not violate any agreement or covenant of the Distributor with any lender or other third party, and (b) the Produce shall be free from any and all liens, encumbrances, charges and security interests arising by, through or under the Distributor. 
  4. The Distributor agrees to coordinate with its lenders and other creditors to carve-out or otherwise remove the Produce, all proceeds and related assets thereof from any security interests and liens granted by the Distributor to any such lender or other creditor of the Distributor and to provide Company with evidence of any such carve-out.

End of Contract Terms