Exhibit 10.1

 

[g67751kiimage002.jpg]

 

OPERATING AGREEMENT

 

Prestige Brands, Inc and
Warehousing Specialists, Inc.
7140 N. Broadway
Saint Louis, MO 63147

 

STORAGE AND HANDLING AGREEMENT

 

--------------------------------------------------------------------------------

 

THIS AGREEMENT is made and entered into by and between Warehousing
Specialists, Inc. (WSI), a Missouri Corporation, and Prestige Brands Inc.
(Prestige) a New York corporation

 

WHEREAS, WSI represents that it operates a warehouse facility in the State of
Missouri located at 7140 N Broadway Saint Louis, MO 63147 and further represents
that it has duly complied with all federal and state regulations relating
thereto; and

 

WHEREAS, Prestige Brands Inc desires that space within the WSI Premises be made
available for storage of goods owned by or in possession of Prestige Brands as
well as other warehousing services including daily handling of product;

 

NOW, THEREFORE, in consideration of these services and premises, the parties
hereto covenant and agree as follows:

 

1.                                       Confirming Documents:  When WSI
receives goods for storage which are owned by Prestige Brands, WSI shall issue
weekly billing. WSI also agrees to supply Prestige Brands designated personnel
access to the LogiView system to track all required information and reports.

i.      WSI will provide for Prestige Brands up to 30 LogiView and Logistics
sign-in accounts with a one year rolling history

 

2.                                       Storage and Handling:  WSI agrees to
unload and receive in storage unit loads of goods, directed to WSI by Prestige
Brands. All receiving, storage, selection and loading as well as capture origin,
item, lot, expiration date if applicable, quantities, item status, and any OS
and D’s. All products will be maintained by Lot control. The combination of
these services will be provided for the case cost outlined below.

•                  Household Products @ $0.20 cents per case based upon full
pallet shipments allowing for 10% of the product to be case selected, assuming
approximately 6 million cases annually and 16,000 pallets stored plus or minus a
20% deviation

•                  HB Product @ $0.455 cents per case assuming the majority is
case selected and approximately 2,500 pallets on stored plus or minus a 20%
deviation, inclusive of individual case labeling and banding for product ship
through a parcel service

•                  VAS pallets will be charged at $10.00 per pallet storage and
handling

•                  An up charge of 10% will be assessed for any purchases made
by WSI on behalf of PBI

 

A.           Customer returns can either come back as full case or pieces. No
customer return is to be accepted without a return authorization number supplied
by Prestige Brands. Full case items are to be received and processed like any
other contract manufacturer inbound and therefore will be calculated and paid
under the full case structure outlined above. Piece returns are to be scanned
individually with a software systems and hardware set-up supplied by Prestige
Brands which generates a piece return tally sheet. This process will be paid by
the accessorial guide below, documenting the actual hours spend on the task by
person.

B.             Daily CMF receiving activity must be provided to Prestige Brands
via a copy of each inbound tally and its corresponding back-up (packing slip,
bill of lading ET.)

 

2

--------------------------------------------------------------------------------

 

Each tally is required to be sent overnight delivery after it is keyed. As an
example Monday inbounds paperwork would be delivered to its NY office by
Wednesday morning.

C.             Daily customer returns are submitted to the Jackson, WY office

D.            Inbound invoicing must take place weekly, listing all receipts
individually and by break out category code, brand code and SKU. Invoicing must
have pallet display units (PDU) converted into open stock case equivalents.

E.              Product received today is expected to be available for shipment
the next business day. There are however some same day receipt shipping but only
on an exception basis.

The rates quoted above are inclusive of supply and preparation of all paperwork,
tallies, bills of lading, packing slips, pick tickets, status change requests
et.

 

3.                                       Additional Charges:  If WSI is required
to perform services in addition to those outlined above, such additional service
charges shall be subject to accessorial charges at the rate of $20.00 per hour
inclusive of normal industrial equipment or fixed charge agreed to at the time
of the request, which ever is the lesser amount. Pallets will be tracked for
both Chep and White wood. If White wood is required to be supplied by WSI a
charge of $5.50 per #2 and $7.00 per #1 respectively will be assessed and billed
to Prestige Brands accordingly. WSI will use and/or update the Chep Web system
or EDI daily.

 

4.                                       Duty of Care:  Prestige Brands agrees
that each palletized unit shall be properly packaged and contained so as to
allow normal unloading, stocking and reloading from and to truck or rail
carriers. WSI shall exercise such care in regard to Prestige Brands goods stored
at WSI premises, as a reasonably careful man would exercise under like
circumstances. WSI will obtain and maintain warehouseman’s liability insurance.
No further warranties and liabilities are hereby granted or expressly implied.

 

5.                                       Title and Ownership of Products.

 

5.1                                 Title and Ownership.  All Products stored at
the WSI Premises and handled pursuant to this Agreement or which are otherwise
in the care, custody or control of WSI shall at all times be and remain the
property of Prestige Brands. The Products shall not be subject to attachment or
execution nor shall any person or entity have or acquire any right, lien or
claim whatsoever with respect to the Products.

 

5.2                                 Waiver of Liens.  WSI hereby expressly,
knowingly and irrevocably waives the right to claim the benefit of any type of
lien whatever which may be applicable to the work being performed and the
services rendered by WSI.  WSI hereby agrees to promptly procure, execute and
deliver such documents evidencing the above-described Waiver of Liens as and
when Prestige Brands shall request. WSI shall immediately notify Prestige Brands
of any claims made or actions taken by any person or juristic entity with
respect to the Products.  In the event a claim for lien or a lien is filed
against the Products due to or arising out of the activities of WSI, WSI shall
promptly discharge all such items and shall post appropriate security in
connection therewith satisfactory to Prestige Brands.

 

5.3                                 Survival.  Expiration, termination or
cancellation of this Agreement, regardless of cause or procedure, shall not in
any way affect or impair the rights, obligations, duties and liabilities of WSI
or Prestige Brands, pursuant to this Section 5.

 

3

--------------------------------------------------------------------------------

 

6.                                       Risk or Loss:  WSI assumes all risk of
damage or loss to its premises due to fire or accident incurred as a result of
the handling and storage of Prestige Brands goods at manufacturers cost or up a
total of $2 million dollars which ever is less.

 

7.                                       Inspections:  Prestige Brands shall
have the privilege of inspecting, at any reasonable time during normal business
hours, the goods and premises on which they are stored.

 

8.                                       Independent Contractor:  Prestige
Brands and WSI agree that WSI is an independent contractor and that the WSI
shall not be considered an agent or employee of Prestige Brands for any purpose
whatsoever.

 

9.                                       Indemnification:  WSI shall protect,
indemnify and hold harmless Prestige Brands from any loss, damage, liability and
expense, including reasonable counsel fees, for all injuries, including death to
persons or damage to property directly or indirectly arising from or growing out
of WSI’s negligent acts or omissions in the performance of this Agreement,
except such loss or damage that is the direct result of Prestige Brands
negligence.

 

10.                                 Insurance:  During the term of this
Agreement, WSI shall carry and maintain such liability insurance as will protect
WSI and Prestige Brands from claims under any Worker’s Compensation or other
similar acts and from any other damages from personal injury, including death,
which may be sustained by Warehouseman’s workers, contractors or any of their
servants, agents or employees and the general public, and from claims for
property damage, which may be sustained by any of them, due to the performance
of this Agreement.

 

11.                                 Inventory: WSI shall conduct physical
inventories at Prestige Brands request; such inventory shall be conducted by WSI
employees for which all costs associated with such inventories shall be at
Prestige Brands expense. WSI shall conduct cycle counts of Prestige Brands goods
stored on WSI premises.  Such cycle counts shall be conducted no less than
thirty (30) day increments commencing upon the receipt of Prestige Brands goods
at WSI’s facility so that the entire square footage of product stored is
completed as least once every quarter.

 

12.                                 Physical Inventory:  At Prestige Brands
request, a year-end physical inventory may be conducted at a date mutually
agreeable and at Prestige Brands expense. Immediately following each physical
inventory or cycle count, Prestige Brands and WSI shall adjust their book
inventories to reflect the results of the physical count. Losses and gains
resulting from cycle counts and the annual physical inventory will be
accumulated during the year and netted to one number upon completion of the
annual physical inventory.  Within 30 days of completion of the annual physical
inventory, Prestige Brands shall invoice WSI for any shortages at Prestige
Brands manufactured cost based upon damage and loss variance allowance of .05%
of the total cases received that year following the final reconciliation.

 

13.                                 Movement and Storage of Product:  WSI shall
unload, stock and reload Prestige Brands product in accordance with Prestige
Brands written direction. WSI will “lot” product by date code and ship product
by batch code.

 

4

--------------------------------------------------------------------------------

 

14.                                 EDI Capabilities and Reports:  WSI agrees to
support and abide by Prestige Brands EDI

expectations; this includes production of 940,943,944,945,856 and UCC-128 labels
and 997,s. These transactions will be completed via FTP connection. Reporting
will include the following:

 

Daily

 

 

 

 

 

• Ship Confirmation

 

• Open order reports

 

• Bill of Ladings

 

• Customer return tallies

 

• Scan reports

 

• Inbound receipts

 

• Inbound appointment log

 

• Exception report

 

• Adjustment report

 

• Chep pallet report (856)

 

 

 

 

 

Weekly

 

 

 

 

 

• VAS production report

 

• Handling Invoice

 

• Freight Invoice

 

Monthly

 

 

 

 

 

• Activity recap by SKU

 

• Receipts by SKU

 

• Shipments by SKU

 

• Turns report

 

• Stock status for finished goods

 

• Stock status for VAS components

 

• Critical inventory/short dated

 

• Score cards

 

 

 

 

All reporting must be broken out by its general ledger hierarchy and all
Invoicing PDU converted into open stock case equivalent.

 

15.                                 Claims and Service Resolution:  Both parties
agree to resolve matters of claims and service complaints in a timely and
reasonable manner.

 

16.                                 Successors:  Covenants, terms and conditions
made and entered into by the Parties hereto are declared to be binding on their
respective heirs, representatives and assigns.

 

17.                                 Term of Agreement:  The term of this
Agreement shall commence after execution by the parties and shall continue in
full force and effect for a period of thirty six (36) months from the time of
first receiving and shall thereafter automatically renew for successive terms of
one year 90 days prior to the expiration unless prior written notice of
intention to terminate has been provided. If at any time either party shall be
in continuing material breach of its obligations hereunder the non-breaching
party may terminate this Agreement on 30 days notice. In the event that either
party shall declare insolvency or bankruptcy the other party shall have the
right but not the obligation to terminate this Agreement on 30 days notice. If
the goals provided in Exhibit 2 to this Agreement are not substantially achieved
within 18 months of the commencement of the term, Prestige Brands shall have the
right, but not the obligation, to terminate this Agreement on 90 days written
notice. It is expressly agreed and understood that the achievement of the goals
specified in Exhibit 2 is a continuing and ongoing obligation.  If after a
period of acceptable performance a decline ensues such that the goals are not
being substantially achieved, Prestige Brands shall have the right, but not the
obligation, to terminate this Agreement on 90 days written notice.

 

18.                                 Payment:  All payments to WSI by Prestige
Brands will be made by check with 30 day terms. A late payment of past due
balance plus 1 ½% per month will be assessed against the outstanding balance of
any past due invoices. Prestige may elect to pay by wire with no discount.

 

19.                                 Waiver:  No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute a waiver of any other
provision, whether or not similar nor shall any waiver constitute a continuing
waiver.  No waiver shall be binding unless executed in writing by the party
making the waiver.

 

5

--------------------------------------------------------------------------------

 

20.                                 Required Signatures:  Execution of this
Agreement is not complete or binding until all required signatures of Prestige
Brands and WSI set forth below have been obtained.

 

21.                                 Waiver of Liens:  A waiver of liens will be
required of WSI and is attached as exhibit 1 and is part of this agreement

 

22.                                 Required KPI’s: A list of required KPI goals
are attached as exhibit 2

 

This agreement and any addendum, schedules or exhibits hereto contain the entire
Agreement between and may be modified only in writing executed by both parties.
This Agreement shall be governed by and construed under the laws of the State of
New York as applied.

 

 

Warehousing Specialists, Inc. (WSI)

 

 

Prestige Brands, Inc.

 

 

 

 

 

By:

 /s/ Eric M. Millar

 

 

 

 

 

 

Title    Senior VP of Operations

 

 

 

 

 

Date:

  4/13/2005

 

 

 

 

 

 

Warehousing Specialists, Inc. (WSI)

 

 

 

 

 

By:

  /s/ Hilton A. Kahn

 

 

 

 

 

 

Title

    Principal

 

 

 

Date:

      3/28/2005

 

 

 

 

 

Exhibit 2 KPI Requirements

 

Receiving Accuracy:  Goal 98%

Inbound tally sent to PBI is accurate for item, lot and quantity against the
packing slip or actual count. Example: If 70 tallies submitted in a week and 2
had errors the score would be 97.14%

 

Tally Timeliness:  Goal 98%

Inbound receipts are made available for shipment by the next business day or
earlier and tallies sent to PBI by the next business day.

 

6

--------------------------------------------------------------------------------

 

Ship/Chep Confirmations:  Goal 100%

945’s for all prior day shipments must be received by PBI no later than 08:00
EST

 

Inventory Accuracy:  Goal 98%

A cycle count program ensuring the entire warehouse is counted on a quarterly
basis must be established. Accuracy is determined by: Item, lot, expiry and
quantity being correct on both stock status and physical location.

 

7

--------------------------------------------------------------------------------