When a 15-Year Distribution Deal Ended, Clean Terms Saved the Company

The situation

Reza had trained and worked for several years as a physiotherapist before joining the family business his parent had built: a Toronto company that distributed rehabilitation and mobility equipment — exam tables, therapy machines, walkers, and related supplies — to clinics, retirement homes, and hospitals across Ontario. His clinical background made him unusually good at the sales side, since he understood exactly how each piece of equipment was used and could speak to clinic owners as a peer. His sister Hodan, a construction project manager by training, had come on board a few years later to lead a warehouse expansion and later stayed on as co-owner, running logistics and supplier relationships.

The company had grown to roughly $12 million in annual revenue, built on relationships with about a dozen manufacturers. The largest of those relationships was with a mobility equipment manufacturer whose products made up close to a fifth of the company's revenue — about $2.1 million a year. The two companies had worked together for 15 years under a distribution agreement signed by Reza and Hodan's parent, before either of them had joined the business. Neither of them had ever read it closely; it had simply always been there, renewing itself year after year without incident.

That changed on a Tuesday afternoon, when Ifrah, a regional vice president at the manufacturer, called Reza directly. The manufacturer had decided to bring distribution in Ontario in-house within 30 days. The call was followed by a short letter confirming the termination date and offering to repurchase the company's remaining inventory of the manufacturer's products at 65 cents on the dollar, citing restocking and depreciation costs. The company's warehouse held roughly $640,000 of that inventory at cost. At the offered rate, the buyback would return about $420,000 — a shortfall of roughly $220,000 — with only a month to either sell the rest or absorb the loss.

What the review found

Reza and Hodan brought the termination letter and the original distribution agreement to our team the same week they received it, worried they had no leverage and little time. Our first step was reading the agreement itself, not the letter — and the agreement told a different story than the one the manufacturer's letter assumed.

Two things stood out. First, the termination clause did not specify a set notice period for ending the relationship without cause; it was silent on the point. Under Ontario common law, when a long-running distribution or dealership agreement is silent on notice, courts have generally found that a distributor is still entitled to reasonable notice before the relationship ends — with what counts as reasonable scaled to the length of the relationship, how dependent the distributor was on that supplier, and how much time it would realistically take to replace the lost revenue or wind the line down. Thirty days after 15 years, with a product line worth close to a fifth of the company's revenue, was well short of anything a court would likely treat as reasonable.

Second, the buyback provision was not silent at all. It stated that on termination, the manufacturer would repurchase the distributor's then-current, undamaged, resalable inventory of its products at the distributor's original purchase cost. There was no restocking fee or depreciation discount written into the clause. The 65-cents-on-the-dollar figure in the manufacturer's letter had no basis in the agreement the two companies had actually signed — it appeared to be the manufacturer's standard internal policy for terminations, applied here without checking what this particular contract said.

That gap between what the letter offered and what the contract actually required became the basis for the response.

What we did

1. Reviewed the full agreement before responding to the manufacturer. Rather than negotiating off the termination letter, we confirmed exactly what the signed contract obligated each side to do — the true notice standard and the true buyback price — before any conversation with the other side began.
2. Sent a written response addressing both issues separately. The reply did not simply ask for "more time and more money." It set out, with reference to the specific clauses, why 30 days did not meet the implied reasonable notice standard for a relationship of this length and dependence, and why the buyback was contractually owed at full cost, not a discounted rate.
3. Proposed a structured wind-down rather than an abrupt cutoff. We suggested the company continue selling the manufacturer's products to its existing clinic customers for a defined transition period, with the manufacturer repurchasing only what remained unsold at the end of that window — reducing the size of the buyback for both sides and giving the company time to shift its sales focus to other product lines it already carried.
4. Negotiated directly with the manufacturer's legal and commercial contacts. Ifrah remained the day-to-day contact throughout, but the manufacturer's internal legal team engaged once it was clear the termination letter had understated its own obligations. Negotiations settled the notice period and the buyback price together, since the two were connected — a longer sell-through window meant a smaller final buyback.
5. Documented the settlement in a signed termination and buyback agreement. The final terms were put in writing, including the buyback price per unit, the transition timeline, and confirmation that neither company owed the other anything further once the buyback was complete — closing off the risk of a later dispute over leftover stock or unpaid invoices.

The outcome

The manufacturer agreed to extend the transition period to 150 days rather than 30, giving the company nearly five months to sell through its existing inventory to clinics at its normal margins instead of at a forced discount. By the end of that window, the company had sold most of its remaining stock through ordinary sales, leaving a much smaller quantity — worth roughly $190,000 at cost — for the manufacturer to repurchase.

Critically, that final buyback was priced at full original cost, exactly as the agreement required, rather than the 65 percent the initial letter had offered. Combined with the sales made during the extended window, the company recovered the full value of its inventory rather than absorbing the roughly $220,000 shortfall the original letter would have imposed. Reza and Hodan used the extra months to bring in two smaller manufacturers to fill the gap in their catalogue, softening the revenue loss from the terminated line and keeping most of their clinic relationships intact through the transition.

The company lost a long-standing supplier relationship, and that loss was real — replacing $2.1 million in annual product revenue is not something a five-month transition fully solves, and the following year's revenue came in modestly below the prior year's as the new supplier lines ramped up. But the company avoided the compounding damage a rushed, underpriced exit would have caused: a warehouse of stranded inventory, a cash shortfall at a bad moment, and clinic customers left without stock on short notice. What could have been a scramble became an orderly transition, and the company was still standing on solid footing a year later.

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