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EXHIBIT 10.1
EXCLUSIVE DISTRIBUTION AGREEMENT
This agreement made as of the 10th day of January, 1999 between Mr.
Tube Steak Canada Inc., a corporation incorporated under the laws of
Canada (hereinafter referred to as "MTS") and Pacific Cart Services
Ltd. a corporation incorporated under the laws of the State of Nevada
and having offices at 000 Xxxxxxxx Xxxxxx, Xxxx, Xxxxxx (hereinafter
referred to as "PCS") collectively known as the "parties."
WHEREAS MTS has designed and manufactured a mobile vending cart and
certain other equipment relating to hotdog vending. And whereas MTS
owns certain rights, names, recipes and trademarks.
WHEREAS PCS has expressed its intend to distribute the Products in
the California and Washington State.
NOW THEREFORE in consideration of the mutual premises and covenants
set forth herein, the parties agree as follows:
1. DEFINITIONS AND APPENDICES
1.1 DEFINITIONS
1.1.1 "Affiliate" shall mean, with respect to a party,
an entity which, directly or indirectly, majority
owns, or is majority owned by, or is under common
majority ownership with, that party;
1.1.2 "Distribution" shall mean advertising, promoting,
warehousing, providing samples of and selling
Products;
1.1.3 "Effective Date" means February 1, 1999;
1.1.4 "Initial Period" means with respect to the United
States 2004 the period five (5) years from the
Effective Date of this Agreement and with respect
to all other countries five (5) years from the
effective date of this Agreement or such date as
may be agreed to by the parties with respect to
any additional country;
1.1.5 "Net Sales" shall mean gross sales of Products
invoiced by PCS to its customers (a) retroactive
price reductions, (b) trade, quantity discounts,
and (c) any taxes or other governmental charges
levied or measured or both by sale and indicated
in the billing price. Net Sales shall include
all sales of Products by PCS in the ordinary
course of business but shall exclude sale for the
purpose of evaluation, demonstration or
promotion;
1.1.6 "Non-Exclusive Basis" shall mean a situation in
which PCS is not the sole distributor of these or
any future Products which MTS may choose to
market;
1.1.7 "Price" is defined in Section 4.1;
1.1.8 "Products" are the Mobile Vending cart and other
products listed in Appendix "A," and any other
product created and manufactured by MTS during
the period of this Agreement which PCS may elect
to distribute and sell;
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1.1.9 "Recalls" shall mean any withdrawal of Products,
market withdrawal or product corrective action
caused by any problems or defects associated with
the Products to be delivered to PCS or to PCS's
customers hereunder, including but not limited to
actions required by governmental or regulatory
authorities having jurisdiction in the relevant
countries;
1.1.10 "Significant Customer Complaint of Adverse Event"
is defined in Section 5.9;
1.1.11 "Territory" shall mean the United States and any
other countries subsequently coming under the
terms of this Agreement during the initial
period;
1.1.12 "List Price" is defined in Appendix A.
1.2 The following appendices are attached to and form part of
this Agreement.
(a) Appendix A: List Price
1.3 All references in this Agreement to activities, rights,
obligations, agreements or covenants by PCS are defined to
refer to PCS carrying on business in that country.
2. DISTRIBUTION OF PRODUCTS
2.1 Subject to the terms and conditions of this Agreement, MTS
hereby appoints PCS as its exclusive Distributor for the
Products in the Territory, and PCS agrees to undertake
appropriate activities related to the distribution of the
Products.
2.2 It is hereby acknowledged that this Exclusive Distribution
Agreement is Phase 1 of what may become a broader
relationship between the parties. The parties may later
consider a Phase 2, which may entail a distribution
agreement with PCS having certain manufacturing rights. At
such time as the parties agree to proceed with Phase 2, if
the manufacturing of the Products meets all applicable
regulatory requirements, PCS at its sole discretion may
elect to take over manufacturing of some or all of such of
the Products as are distributed by PCS. At the time, PCS
will take appropriate steps to satisfy all regulatory
requirements commensurate with the rights granted to PCS
under such new agreement.
2.3 It is hereby acknowledged that in the event that the
parties enter into Phase 2, PCS may wish to become the
Manufacturer and continue as the exclusive distributor of
the Products. Reasonable royalty rates will be negotiated
by the parties in good faith as part of any Phase 2
agreement. If PCS elects to manufacture the products, MTS
shall provide all documentation including, but not limited
to, manufacturing procedures, packaging specifications,
quality control procedures, and recipes.
3. ORDERS AND SHIPMENTS
3.1 PCS shall provide MTS on or before the 20th day of each
calendar month a twelve (12) month rolling forecast
indicating non binding delivery requirements. PCS will
place purchase orders with MTS and MTS will ship Products
within sixty (60) days of receipt of the purchase orders by
MTS.
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3.2 MTS shall ship the Products ordered to the PCS designated
warehouse, FOB the MTS-designated factory, subject to PCS
Purchase Orders. PCS will specify to MTS the carrier to
deliver the products. MTS shall agree to deliver the
Products to PCS within a period of sixty (60) days from
issuance of the purchase order by PCS. From time to time
it may be necessary to MTS to supply Product within the
sixty (60) day lead time at PCS' request, and MTS will make
every reasonable attempt to meet the delivery.
3.3 MTS it to supply PCS with Products in lots and packaging
pre-existing in Canada where applicable. Shipper size to
be finalized and agreed to prior to the first shipment of
products.
3.4 MTS is to supply PCS with Exporters' Certificates of Origin
under the Canada/U.S. F.T.A. and/or the N.A.F.T.A., as
applicable, where PCS is supplying Products for sale,
sample or otherwise, outside of the country of manufacture.
PCS will co-operate in responding to any information
requests form any Customs authority relating to the
validity of the information contained on the
certificate(s).
4. CONSIDERATION, PRICES OF PRODUCTS AND DISCOUNTS.
4.1 For all Products manufactured by MTS and ordered by PCS and
delivered to PCS by MTS, MTS shall deliver invoices to PCS
during each calendar month based on each individual
delivery of Product, PCS shall pay MTS based on invoices
calculated pursuant to Appendix A, based on the prices set
forth therein. The total Product price ("Price") paid to
MTS by PCS will consist of the following:
4.1.1 MTS's list price for products (Appendix A) to be
paid in Canadian Dollars on a sixty (60) days net
basis form the date of receipt of invoice and
Products by PCS. MTS' current direct factory
manufacturing costs for Products shall remain
fixed for a period of one (1) year for the date
of this Agreement, with the exclusion of: (a)
fluctuation in the Canadian currency in relation
to the U.S. dollar, subject to Section 4.2, (b)
industry shortages, or (c) changes in government
regulations which would require changes to the
manufacturing site at the request of PCS and
agreed to by MTS. Direct manufacturing costs
will be adjusted hereafter once every twelve (12)
months to reflect MTS' actual cost changes.
These adjustments must be agreed to by both
parties sixty (60) days before they become
effective.
4.1.2 MTS' list price, to be paid in Canadian Dollars
on a sixty (60) day net basis from the date of
receipt of invoice and Product by MTS. MTS'
current list price will remain fixed for a period
of one (1) year from the date of this agreement,
with the exclusion of:
(a) fluctuation in the Canadian currency with
respect to the U.S. dollar.
(b) changes in Government regulations which
would require changes to the manufacturing
process or Product status.
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4.2 No penalty for late payment will apply until sixty (60)
days after receipt of invoices by PCS. Balances which are
unpaid after sixty (60) days are to bear interest at the
rate equal to the prime rate quoted by the Royal Bank of
Canada in effect at the date the balance became overdue
plus two percent (2.00%) per annum charged on a monthly
basis.
4.3 The parties agree that the costs subject to subsection
4.1.1 hereof shall be made in Canadian dollars at the
current rate of exchange for the U.S. dollar. At the time
of execution of this Agreement said rate is .65 Canadian/
1.00 U.S. If the exchange rate should vary by more than
=/- 5.00% during the term of this Agreement, the parties
will share any gain or loss in equal shares of one-half of
such gain or loss greater than +/- 5.00%
5. PCS RIGHTS AND RESPONSIBILITIES
5.1 PCS shall have sole control over the responsibility for
advertising, marketing, pricing and distributing the
Products which it will sell, including all expenses arising
therefrom.
5.2 In connection with the promotion and sale of Products, PCS
shall have the right to use such trademarks, and is
obligated to use such trademarks, service marks or trade
names as are owned and used by MTS in connection with the
Products. Notwithstanding the foregoing, PCS shall be free
to market the Products under such names and logos which
shall be free to market the Products under such names and
logos which PCS deems appropriate ("MTS Trademarks"). PCS
will acknowledge all MTS trademarks and copyrights on
promotional materials and product literature and MTS hereby
grants PCS a non-exclusive paid up license to such
trademarks, service marks and trade names in accordance
with the requirements and intent of this Agreement. In the
event that this Agreement expires or is terminated for any
reason, such license will also terminate and all rights in
such trademarks, service marks or trade names which re
owned and used by MTS will revert to MTS. Products which
are in commercial distribution prior to the expiration or
termination of this Agreement will continue to be subject
to the license issued to PCS. In no event will PCS acquire
any rights to the MTS Trademarks without the specific
written permission of MTS.
5.3 PCS will use its reasonable best efforts to continuously
and diligently develop demand for the Products and to
solicit purchases therefor. At all times hereunder, PCS
shall maintain adequate working capital, facilities and
personnel to accomplish this purpose.
5.4 PCS shall have the right to distribute, under this
Agreement, any improvements to the Products.
5.5 In the event of a notice of a Significant Customer
Complaint of Adverse Event and of PCS having knowledge of
such Event, PCS agrees to notify MTS within two (2) working
days. A Significant Customer Complaint of Adverse Event
includes but is not limited to:
5.5.1 Medical complaints: side effects.
5.5.2 Technical complaints: quality defects, stability
problems, erroneous product identification, mix-
ups, errors in manufacturing or packaging,
mislabeling, etc.
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5.5.3 Reports and other information as specified in the
prevailing regulations.
5.5.4 Dangerous Adverse Product Information: product
hazards which re associated with a considerable
risk to life or health or damage thereto or a
suspicion thereof.
5.5.5 Significant Adverse Product Information: Product
hazards without a considerable risk to health,
but which may considerably impair the efficacy or
utility of the product with possible consequent
injury.
5.5.6 Other Adverse Product Information: Deviation from
product standards, which do not significantly
impact on the utility, safety or efficacy of the
product.
5.6 PCS has the right, but no the obligation, to confirm that
the Products manufactured by or for MTS meet all MTS
performance claims, implied and explicit warranties and
conditions of merchantability or fitness for a particular
purpose.
5.7 All Products delivered to PCS under this Agreement will
have a remaining shelf life of not less than forty-five
(45) days where applicable as of the date such Products are
received by PCS.
6. MTS RIGHTS AND RESPONSIBILITIES
6.1 MTS shall indemnify, defend and hold harmless PCS and its
officers, directors, employees and representative against,
and in respect of, any and all claims, losses, expenses,
costs, including reasonable attorneys' fees, obligations,
liabilities and damages of every kind arising out or
attributed to any defect or failure of any Products
manufactured by or for MTS, and any Recall of Product
except those arising out of the negligence or fault of PCS.
6.2 Provided that MTS is responsible for manufacturing and/or
supplying the Products to PCS, MTS shall provide PCS with a
certificate of insurance evidencing product liability
insurance in the amount of Two Million Canadian Dollars
(CAN$2,000,000) that has been obtained and maintained by
MTS for the Products from Insurers acceptable to PCS, MTS
shall maintain such insurance for the Initial Term of this
Agreement and subsequent renewals. MTS agrees that it
shall provide PCS with at least sixty (60) days prior
written notice of any transfer of such policy to another
insurer which shall also be acceptable to PCS or change of
limits or terms of such policy. The certificate and policy
shall contain an endorsement that such insurance may not be
cancelled or modified except upon sixty (60) days written
notice to PCS. No additional amount will be charged to PCS
for this insurance coverage.
6.3 MTS represents and warrants that it is the sole and
exclusive owner of all rights, titles and interest in and
to the trademarks, service marks and trade names associated
with the Products, and registrations thereof in the
Territory; and the goodwill attached thereto. MTS further
represents and warrants that to the best of its knowledge,
no other person, firm, corporation or association has any
right to xxx said trademarks, service marks and trade names
in commerce in the Territory and the Products do no
infringe any patent, industrial design or other
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intellectual property rights of any person in Canada or the
United States or will not infringe, such rights in any
other jurisdiction in which PCS may sell Products pursuant
to this Agreement. MTS shall indemnify, defend and hold
harmless PCS pursuant to section 6.4 with respect to any
such claims, challenges or actions based on allegations of
infringement of intellectual property rights.
6.4 MTS is responsible to meet and maintain all Regulatory and
Quality Assurance requirements necessary to market MTS
products in the United States and if PCS so elects, any
other countries. PCS shall be responsible for compliance
with regulatory requirements associated with its role as a
distributor of MTS' products throughout the Territory. PCS
will made a reasonable effect to notify MTS if it becomes
aware of any changes in regulatory requirements which
affect MTS' obligations as a manufacturer, however, MTS is
responsible for ensuring compliance with all Regulatory and
Quality Assurance requirements which are applicable to it
as a manufacturer and PCS assumes no responsibility for
such compliance. Any failure by PCS to keep MTS updated as
to such requirements shall not constitute a breach or
default of the Agreement by PCS.
6.5 MTS shall comply with Canadian and United States Government
regulations and be solely responsible for meeting all
Products manufacturing standards and quality control
specifications.
6.6 MTS must notify PCS immediately in the event of any
unforeseen manufacturing or packaging changes.
6.7 In the event of a notice of a significant Customer
complaint of an Adverse Event as described in Section 5.5,
MTS will notify PCS by telephone or facsimile within
twenty-four (24) hours and provide PCS with written
confirmation of the particulars of such complaint within
ten (10) working days.
6.8 MTS warrants that the Products are owned by MTS and will be
free of any liens or encumbrances to the title to the
Products at the time that title tot he Products passes from
MTS to PCS or from MTS to the applicable MTS/PCS customer,
as the case may be.
6.9 MTS agrees that it will co-operate with and consult
thoroughly with PCS regarding any and all Product Recalls.
7. TERM AND TERMINATION
7.1 The term of this Agreement shall commence on the Effective
Date and continue in full force and effect for five (5)
years unless earlier terminated on consent of both parties.
This Agreement shall automatically renew for successive two
(2) year periods commencing on the fifth anniversary of the
Effective Date unless PCS provides not less than one
hundred and eighty (180) days prior written notice to MTS
of its intent not to renew. MTS shall have the right to
cancel this Agreement on the fifth anniversary of the
Effective Date and second anniversary of any subsequent
renewals upon not less than one hundred and eighty (180)
days prior written notice to PCS of such intent.
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7.2 The non-defaulting party may terminate this Agreement:
7.2.1 by written notice to the other party if that
party is in material breach of any of the terms
and conditions of this Agreement and does not
cure such breach or breaches within ninety (90)
days after receiving written notice of such
breach from the other party, or
7.2.2 without notice or opportunity to rectify if the
other party ceases to carry on business, makes a
general assignment for the benefit of its
creditors or files a proposal or arrangement
under the bankruptcy and Insolvency Act Canada,
or similar legislation in the United States or
other relevant jurisdiction or a petition is
filed against that party under such legislation
or if that party shall be declared or adjudicated
bankrupt or if a liquidator, trustee in
bankruptcy, custodian, receiver-manager or any
other officer with similar power shall be
appointed of or for either party or its business
or assets (unless such petition or appointment of
an officer is rescinded within thirty (30) days
after being filed or appointed) or if either
party shall commit an act of bankruptcy or shall
propose a compromise or arrangement or institute
proceedings to be adjudged bankrupt or insolvent
or consents to the institution for such
appointment or proceedings or admits in writing
its inability to pay debts generally as they
become due.
7.3 In addition to the termination of rights set out in Section
7.2, MTS may terminate this Agreement by thirty (30) days
written notice to PCS if PCS is in default on payments
outlined in Article 4 of this Agreement. PCS shall not be
in default for the purposes of this Section 7.4 until
payments due under this Agreement are overdue for one
hundred and twenty (120) days.
7.4 If MTS terminates this Agreement after the Initial Period
or any subsequent term for whatever reason other than a
default or a breach by PCS then MTS shall reimburse PCS for
the fair and reasonable value of the business based upon
the goodwill crated by PCS, such value to be negotiated at
the time of termination.
7.4.1 If the total annual gross sales of the Products
by PCS in the Territory during the twelve months
preceding the termination by MTS is less than one
million dollars ($1,000,000) then the negotiated
value will be not less than fifty percent (50.0%)
but not more than one hundred percent (100%) of
PCS annual gross sales of the Products in the
Territory.
7.4.2 If the total annual gross sales of the Products
by PCS in the Territory during the twelve months
precedent the termination by MTS is more than one
million dollars ($1,000,000) then the negotiated
value will be not less than one hundred percent
(100%) but not more than two hundred percent
(200%) of PCS annual gross sales of the Products
in the Territory.
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7.5 Neither PCS, nor MTS, shall be deemed to be in default of
the Agreement if such default is due to force majeure.
Changes in the general economic or business conditions in
the Territory shall not constitute force majeure.
7.6 In the event of any termination of this Agreement,
including its expiry pursuant to section 7.1:
(a) each party shall pay to the other all amounts then due
and accrued due pursuant to this Agreement; and
(b) sections 5.10, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9,
7.10, 8.1 and 9.4 shall survive.
8. CONFIDENTIALITY AND PUBLICATION
Each party agrees to keep secret during the term of this
Agreement and for a period of five (5) years thereafter any and
all written information received from the other on a
confidential basis (such written information to be marked as
Confidential), including such information received before or
after the effective date of this Agreement.
9. GENERAL PROVISIONS
9.1 The failure of either party to enforce at any time the
provisions of this Agreement will not be construed to be a
waiver of such provisions or the right of such party to
thereafter enforce each and every such provision.
9.2 Any notice, report or other communication under this
Agreement shall be deemed to have been duly given on the
date of delivery if delivered to the party to whom or to
which notice is to be given, or on the seventh (7th) day
after mailing if mailed by first-class mail, registered or
certified, postage prepaid, on the next business day, if
sent by fax, after being transmitted by fax confirmed at
the time of transmission, if properly addressed to the
party to receive the notice at the following address or at
any other address given to the other party in the manner
provided by this section 9.2
If to PCS:
Pacific Cart Services Ltd.
Xxx 000
000 Xxxxxxxx Xxxxxx
Xxxx, Xxxxxx
XXX
Phone: (000) 000-0000
FAX: (000) 000-0000
If to MTS:
Mister Tube Steak Canada Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx
Xxxxxx
X0X 0X0
Phone: (000) 000-0000
FAX: (000) 000-0000
9.3 This Agreement shall be construed and interpreted according
to the laws of the province of Manitoba. Bother parties
hereby expressly agree that, by entering into this
Agreement neither party intends to violate any public
policy, statutory or common law, and if any prat of this
Agreement is in violation of any laws, such sections of
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this Agreement will be inoperative and divisible here from
and the remainder of this Agreement will remain binding
upon the parties hereto. Headings and captions are used in
the Agreement for convenience and reference only and shall
not affect the interpretation of construction of this
Agreement.
9.4 No party is the agent or representative of any other party
and no party has any authority to enter into contracts,
agreements or commitments on behalf of any other party, or
in any way to bind any other party.
9.5 If MTS intends to sell or any part of the business of MTS
then PCS shall have the first right of refusal to purchase
all or any such part of the business of MTS at fair market
value subject to commercially reasonable terms of sale to
be prepared by MTS. PCS will have sixty (60) days to
respond to a proposal from MTS. If PCS does not respond
during this period of if PCS declines to purchase the
business of MTS or a part of such business pursuant to this
right of first refusal, MTS may offer to sell all or any
part of the business of MTS to a third party subject to the
identical terms and conditions offered to, and declined by,
PCS. If MTS' negations with a third party results in a
lower sales price or more favorable terms and conditions,
than those offered to PCS for all or any part of the
business of MTS, MTS will offer the lower price and more
favorable terms and conditions to PCS before entering into
an agreement with a third party. PCS will have forty (40)
days within which to respond to this second proposal from
MTS. If PCS does not respond during this period or if PCS
declines to purchase all or any part of the business of
MTS, then MTS may proceed with negotiations with a third
party for the sale or all or any part of the MTS business.
9.6 This Agreement is not assignable as security or otherwise
by either party without the prior consent of the other,
such consent not to be unreasonably withheld.
Notwithstanding the above, PCS and MTS may assign its
rights or obligations hereunder to a subsidiary or
affiliate or to a purchaser of its business relating to the
Products without prior written consent of the other.
9.7 It is agreed that any act or payment required by this
Agreement if not done on a business day, the act or payment
may be done on the next following business day.
9.8 This Agreement sets forth the entire Agreement and
undertaking between the parties as to the subject matter
hereof and supersedes all prior discussions and
negotiations.
9.9 As to the meaning, legal nature, and binding effect of this
Agreement, the undersigned MTS has sought and received
advice and explanation from its attorney, who has confirmed
this as signified by the attestation attached hereto as
Exhibit 1.
9.10 The parties require that this contract be drawn up in
English. Les parties exigent que ce contract soit redige
en anglais.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement by
the signature of their duly authorized representatives.
PACIFIC CART SERVICES LTD.
BY: /s/ illegible
Title: Secretary
Date: January 26, 1996
MISTER TUBE STEAK CANADA INC.
BY: /s/ Xxxxx X. Xxxx
Title: President
Date: January 26, 1999
