ASSESSMENT OF DISTRIBUTORSHIP AGREEMENT

RBE & DMPI

The overall and risk assessment of the Distributorship Agreement was made
with due consideration of the claims in issue, to wit:
A. Claims for display allowances, listing fees, merchandising expenses, etc.;
B. Grocery claims;
C. Food Service claims; and,
D. Bad order returns.
The following provisions were found to be equivocal and should have been
supplanted with subsequent implementing guidelines specific to the common and
actual operational occurrences, based on past experiences;
Section 3.7 pertaining to the sales promotion and advertising:
There is the risk of RBEs failure to comply with the requisite written request
for promos and advertising schemes and the attendant failure of DMPI to act
on the request within a specified period of time;
Standards for documentation from approval, execution and accounting were
not provided for.
Section 3.9 pertaining to the software, market and other data:
Installation of DMPI software and other systems was not mandatory and
provides for the risk that distributor RBE might not use the software/other
systems, when so installed, in accordance with the intended purpose/s, either
due to insufficient knowledge/training or some other factors ;
Improper generation/non-generation of relevant reports.
Sections 4.2.1, 4.2.2 and 4.3 on price and payment terms:
Payment to DMPI through the banking facilities without specific standards to
the transmittal of the details of payment poses a risk to the completeness of the
reports on receivables, payables and their settlement;
Failure to provide for controls and standards when payments are effected
through cheque/s, specific to authority, transmittal and receipt;
Standard procedure for discounts for prompt payment, specific to authority
and documentation were not provided for.

Section 4.6.1 on return of damaged goods after distribution:

There is a risk that the failure to provide for specific controls (especially
authority) and procedures for the said transaction will affect the validity of the
corresponding claims, integrity of the records, chain and flow of
documentation;
The lack of systematic procedure/standards for the delivery, receipt of goods,
returns, accounting and offsetting of claims, specifically providing for the
authorized personnel and requisite documentation affects the integrity and
validity of the receivables/charges.
The Distributorship Agreement, while providing for specific provisions
addressing the standards that are to be observed in the dealings between DMPI and
RBE, it is generally loosely worded and fails to include specific terms that are aimed at
providing for controls that shall ensure the validity and integrity of the companies
records and documentation of transactions; This is especially so, given the volume of
goods/transactions and when the parties were, from the onset, expected to be
offsetting debtors and creditors of each other, with the involvement of third party
clients.