Exhibit 10.13
INTERNATIONAL DISTRIBUTORSHIP AGREEMENT
THIS INTERNATIONAL DISTRIBUTORSHIP AGREEMENT ("Agreement") is made
as of the October 21, 2005 (the "Effective Date"), by and between Electronic
Sensor Technology, Inc., a Nevada Corporation, with its principal office at 0000
Xxxxxxxx Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx, X.X.X. 00000 ("Company"), and
TechMondial, Ltd., a company organized and existing under the laws and
regulations of England with its principal office at Xxxxxx Xxx Xxxxxxxxx Xxxxx,
Xxxxxx, XX0X 0XX, Xxxxxxx ("Distributor").
R E C I T A L S
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WHEREAS, Company designs, produces, markets, and sells surface
acoustic wave gas chromatograph detection systems (including, without
limitation, the zNose(R) Vapor Detector and Analyzer System which is further
described in Exhibit A attached hereto, and together with future products based
on this technology, the "Products") and wishes to develop export sales of the
Products to Europe and other countries;
WHEREAS, Distributor wishes to act as the exclusive distributor of
the Products in the Exclusive Territory as hereinafter defined; and
WHEREAS, Company wishes to appoint Distributor as Company's
distributor on an exclusive basis of its Product in the Exclusive Territory.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
"Disqualified Territory" shall mean for a Market Sector any Geographic
Sector as to which Distributor's right to act as exclusive distributor of the
Products in that Market Sector has been terminated by Company in accordance with
Section 2.3 hereof.
"Exclusive Territory" for a Market Sector shall mean the countries
comprising The European Community as of the Effective Date, Romania, Bulgaria,
Turkey, Croatia and Switzerland unless any such country or countries has become
a Disqualified Territory.
"Geographic Sector" shall mean each of the countries included within the
Exclusive Territory.
"Market Sector" shall mean each of the following: defense/security,
environmental, chemical/petrochemical, food/beverage and life science.
"Non-Exclusive Territory" for a Market Sector shall mean the countries
of the World other than the Exclusive Territory for that Market Sector and those
countries or subdivisions thereof covered by an exclusive distributorship
agreement between Company and a third party for that Market Sector.
"Performance Metrics" shall mean each of the performance criteria set
forth in Exhibit E hereto.
ARTICLE 2
DISTRIBUTORSHIP
2.1 APPOINTMENT
Subject to the terms and conditions of this Agreement (including,
without limitation, Distributor's continued compliance with the Performance
Metrics), Company hereby appoints Distributor as Company's exclusive distributor
to sell, distribute, market and maintain the Products in the Markets Sectors in
the Exclusive Territory and Distributor hereby accepts such appointment,
effective as of the Effective Date; provided, however, that such appointment
shall not become effective as to Italy until the date that is thirty (30) days
after the date Company delivers written notice to its present exclusive
distributor for Italy ("Italian Distributor") terminating the exclusive
distributorship relationship between Company and Italian Distributor
("Termination Notice"). Company shall deliver the Termination Notice to Italian
Distributor as soon as practicable following Company's receipt of a written
request from Distributor to send the Termination Notice. Subject to the terms
and conditions of this Agreement, Company hereby appoints Distributor as
Company's non-exclusive distributor to sell, distribute, market, and maintain
the Products in the Market Sectors in the Non-Exclusive Territory and
Distributor hereby accepts such appointment, effective as of the Effective Date.
2.2 TERM
Subject to the terms and conditions of this Agreement (including,
without limitation, Distributor's continued compliance with the Performance
Metrics), Distributor's appointment as the exclusive distributor for the
Products in the Market Sectors in the Exclusive Territory shall remain in effect
from the Effective Date until the twelve (12) month anniversary of the date on
which Company delivers written notice to Distributor pursuant to this Section
2.2 stating that Company is terminating Distributor's exclusive distributorship
of Product in the Exclusive Territory (the "Term"); provided, however, in no
event shall Company be permitted to deliver such a notice to Distributor prior
to the sixth anniversary of the Effective Date. Subject to the terms and
conditions of this Agreement, Distributor's appointment as the non-exclusive
distributor for the Products in the Market Sectors in the Non-Exclusive
Territory shall remain in effect for the Term. In the event that Company desires
to grant an exclusive distributorship to any person or entity in a Market Sector
or Market Sectors for
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any country or subdivision thereof countries or subdivisions thereof included
within the Non-Exclusive Territory ("Subject Territory"), Company shall give
Distributor written notice thereof and Distributor's non-exclusive right to
sell, distribute, market and maintain the Products in such Market Sector or
Market Sectors in the Subject Territory shall immediately terminate; provided,
however, that Distributor shall (i) within five business days of termination,
provide Company with a written list of all Active Customers (as defined below)
and prospective customers with which Distributor has had communication during
the ninety (90) day period prior to termination regarding a purchase or
prospective purchase of Product ("Subject Product") in the Subject Territory
(each, a "Prospective Purchase"); (ii) be permitted for a ninety (90) day period
immediately following termination to complete each Prospective Purchase at
Distributor's price in effect immediately prior to termination; and (iii) for
all Product (other than Subject Product) sold to an Active Customer (as defined
below) within the twelve (12) month period immediately following termination, be
entitled to receive a distributor's discount of fifteen percent (15%) of
Company's published list prices in effect at the time the purchase order for
such Product is placed with Company. As used in this Section 2.2, an "Active
Customer" means each person or entity that purchases at least US $5,000.00 of
Product in the Subject Territory from Distributor during the twelve (12) month
period preceding the Termination Date.
2.3 PERFORMANCE METRICS
Distributor acknowledges and agrees that Company may terminate its
appointment as exclusive distributor as to a Market Sector or Market Sectors in
a Geographic Sector or Geographic Sectors in the event that Distributor fails to
satisfy the Performance Metrics. In the event of any such non-performance by
Distributor, Company shall give Distributor fourteen (14) days prior written
notice thereof.
2.4 RELATIONSHIP
The relationship hereby established between Company and Distributor
shall be solely that of seller and buyer. Neither party shall have the right to
hold itself out to third parties as a representative of the other party or to
enter into contracts on behalf of the other party. No agency or fiduciary duty
is to be created by this Agreement.
ARTICLE 3
SALES PROMOTION
3.1 OBLIGATIONS OF DISTRIBUTOR
Distributor hereby agrees to perform the following covenants during
the term of this Agreement, each of which constitutes a material condition
precedent to Company's obligations to perform its covenants under this
Agreement.
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(a) Upon execution of this Agreement, Distributor shall order
and purchase from Company seventy (70) units of the model 4200 (without lap top
computer) zNose(R) Vapor Detector and Analyzer System (each, a "Unit") at the
price shown in Exhibit C and a Model 3300 Remote Sampler Kit ("Kits") for each
of the 70 Units at the price shown in Exhibit C (such order, the "Order", such
prices, the "Initial Prices"). Company highly recommends that Distributor
include with the Order a spare detector for each of the 70 Units. The price of
the Units ordered pursuant to this Section 3.1(a) do not include the laptop
computer. Company will provide Distributor with the minimum specifications for
the computer. Such Units and Kits shall be shipped by the Company and accepted
for delivery by Distributor over the period from the Effective Date to November
30, 2007 (the "Initial Period"). Delivery time of the Units will be specified by
Distributor in the Order; provided, however, that Distributor must purchase and
take delivery of (i) (A) not less than forty eight (48) Units and related Kits
for the period from the Effective Date to November 30, 2006 and (B) not less
than seventy (70) Units and related Kits for the Initial Period and (ii) two (2)
Units and related Kits no later than October 31, 2005 (the "Initial Units and
Kits"), which Initial Units and Kits shall be counted toward the forty eight
(48) Units and related Kits contemplated by clause (i)(A) above and the seventy
(70) Units and related Kits contemplated by clause (i)(B) above. Prior to
shipping any Units and Kits (other than the Initial Units and Kits), Distributor
will wire transfer the purchase price of such Units and Kits to Company's bank
in the U.S. or, in lieu thereof shall deliver to Company an irrevocable letter
of credit (LOC) from a commercial bank acceptable to Company with a stated
amount equal to or greater than the purchase price of the Units and Kits to be
shipped. The Initial Units and Kits will be shipped with a net invoice due
within sixty (60) days of shipment. Once placed, Distributor shall not cancel,
terminate or modify the Order without the prior written consent of Company.
(b) The Initial Prices shall not be modified during the Initial
Period. If Distributor sells at least 100 units in the Initial Period, Company
will rebate Distributor US $370 for each of instruments 71 through 100 and $740
for each of instruments 101 through 150. In the event that Distributor sells
more than 150 units in the Initial Period, Company and Distributor shall
negotiate a mutually agreeable rebate which shall be not less than 2% of
Company's then current published list price for the Product purchased. The
failure of Distributor to pay for any Unit shall constitute a breach of this
Section 3.1. The failure of any letter of credit bank selected by Distributor to
honor payment of a drawing made in accordance with the terms of the letter of
credit issued by such letter of credit bank shall constitute a breach of this
Section 3.1.
(c) Company will assist Distributor at Distributor's cost in
setting up a maintenance, training and customer support center in the UK (the
"Center"). Company shall assist Distributor at Distributor's cost to establish
the
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level of inventory and spares necessary to support Distributor's customers in
the Exclusive Territory. Company and Distributor agree that the Center should be
fully operational no later than May 31, 2007.
(d) Distributor shall: (i) conduct business in a manner that
reflects favorably at all times on Company and the good name, good will and
reputation of Company; (ii) avoid deceptive, misleading or unethical practices
that are or might be detrimental to Company, the Product or the public; (iii)
make no false or misleading representations with regard to Company or the
Product; (iv) not publish or employ, or cooperate in the publication or
employment of, any misleading or deceptive advertising material with regard to
Company or the Product; (v) make no representations, warranties or guarantees to
customers or to the trade with respect to the specifications features or
capabilities of the Product that are inconsistent with the literature
distributed by Company; (vi) not enter into any contract or engage in any
practice detrimental to the interests of Company in the Product; and (vii) sell
and deliver the Product only in (A) the Exclusive Territory and the
Non-Exclusive Territory. Distributor shall not, directly or indirectly (through
an affiliate or otherwise), become a distributor of products from a competitor
of Company that compete with the Product in the Market Sectors. Distributor
shall actively promote the Product in the Market Sectors in the Exclusive
Territory.
3.2 OBLIGATIONS OF COMPANY
(a) In addition to Company's obligations set forth in Article 8,
upon Distributor's request, Company shall provide Distributor, free of charge,
with a reasonable quantity of samples of data, catalogs, brochures or other
promotional materials in the English language, which may be necessary to promote
the sale of the Product in the Exclusive Territory.
(b) Company shall be responsible for packaging the Product in a
manner appropriate for export to ensure protection from damage caused in
transport to the Exclusive Territory or the Non-Exclusive Territory, as the case
may be.
(c) Company will refer all inquiries regarding the purchase and
sale of Product in the Market Sectors from prospective customers and prospective
distributors in the Exclusive Territory to Distributor and shall inform any such
prospective customer and/or prospective distributor that Distributor is
Company's exclusive distributor in the applicable Geographic Sector.
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ARTICLE 4
TERMS AND CONDITIONS OF SALE
4.1 PURCHASE ORDERS
(a) Purchase orders (including the Order) submitted by the
Distributor shall be binding upon the parties unless Company otherwise notifies
Distributor in writing within two (2) business days after Company's receipt of a
purchase order. All purchase orders shall state the following terms, which shall
be in full conformity with the terms and conditions of this Agreement:
(i) The purchase order number and date;
(ii) The type and quantity of Product ordered;
(iii) The total price of the Product ordered;
(iv) The delivery date or dates; and
(v) All relevant shipping information, including the
destination to which the units of Product are to be shipped.
(b) In the event of any discrepancy between the provisions of
this Agreement and any purchase order, the provisions of this Agreement shall
prevail.
(c) Each purchase order submitted pursuant to this section shall
be firm and not subject to cancellation, termination, revocation or modification
by Distributor or Company after Company's acceptance of that purchase order.
4.2 PRICE
(a) For the period following the date of this Agreement through
November 30, 2007, the prices for the Product shall be the Initial Prices.
Thereafter, the prices for Product shall be Company's published international
list prices in effect at the time a purchase order is placed less the Applicable
Discount (as defined below). Quantity discounts, if any, will be negotiated at
the time of placing the order. Company reserves the right to refer to
Distributor's discount in Company's books and records as "Distributor's
commission" and Distributor agrees not to object thereto. "Applicable Discount"
shall mean: (i) for the first Marketing Period, (A) if the aggregate amount of
sales by Distributor in Second Period equal or exceed 100% of $2,700,000, 50%;
(B) if the aggregate amount of sales by Distributor in Second Period equal or
exceed 65% of $$2,700,000 but are less than 100% of $$2,700,000, 35%; (C) if the
aggregate amount of sales by Distributor in Second Period equal or exceed 35% of
$$2,700,000 but are less than 65% of $$2,700,000, 25%; or (D) if the aggregate
amount of sales by Distributor in Second Period are less than 35% of
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$$2,700,000, 15%; and (ii) for each Marketing Period (other than the first
Marketing Period), (A) if the aggregate amount of sales by Distributor in the
preceding Marketing Period equal or exceed 100% of the Marketing Period Minimum
Requirement for the preceding Marketing Period, 50%; (B) if the aggregate amount
of sales by Distributor in preceding Marketing Period equal or exceed 65% of the
Marketing Period Minimum Requirement for the preceding Marketing Period but are
less than 100% of the Marketing Period Minimum Requirement for the preceding
Marketing Period, 35%; (C) if the aggregate amount of sales by Distributor in
preceding Marketing Period equal or exceed 35% of the Marketing Period Minimum
Requirement for the preceding Marketing Period but are less than 65% of the
Marketing Period Minimum Requirement for the preceding Marketing Period, 25%; or
(D) if the aggregate amount of sales by Distributor in preceding Marketing
Period are less than 35% of the Marketing Period Minimum Requirement for the
preceding Marketing Period, 15%. As used in the above defined term, the terms
"Marketing Period", "Marketing Period Minimum Requirement" and "Second Period"
each have the meaning set forth in Exhibit E.
(b) Company's prices do not include any national or local sales,
use, value added or other taxes, customs duties, or similar tariffs and fees
which Company may be required to pay or collect upon the delivery by Company of
the Product or upon collection of the prices and license fees or otherwise.
Should any such tax, levy, duty, tariff or fee be payable, Distributor agrees to
pay the same in full and to indemnify Company for any claim with respect
thereto. Distributor will pay any withholding taxes required by applicable law
and will supply Company with evidence of such payment of withholding tax in a
form acceptable to Company. Distributor will also pay all shipping, insurance
and handling costs. The shipping destination and method of shipping will be
specified by Distributor at the time a purchase order is placed.
4.3 PAYMENT
(a) All payments shall be made in United States Dollars by bank
wire transfer or by irrevocable and confirmed letter of credit at sight issued
by an internationally reputable bank acceptable to the Company.
(b) Under no circumstances shall Distributor be permitted to set
off or deduct from payments owed to Company hereunder any amounts which
Distributor claims that Company owes to Distributor. Notwithstanding anything to
the contrary, the preceding sentence does not apply to Distributor commission as
appropriate and approved by Company.
4.4 DELIVERY AND SHIPMENT
All units of the Product shall be shipped F.O.B. Company's factory
using a carrier selected by Company, unless Distributor requests in writing the
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use of a particular carrier. Risk of loss of Product ordered by Distributor
shall pass to Distributor upon delivery to a common carrier for shipment and
thereafter Company shall have no liability in connection with shipment of the
Product. Title to Product ordered by Distributor shall pass to Distributor upon
payment in full of the purchase price for such Product.
4.5 SOFTWARE
To the extent the Product is accompanied by software, Distributor
may distribute such software with the Product and by doing so Distributor and/or
its customers shall acquire the right to use such software. For the avoidance of
doubt, Distributor acknowledges and agrees that the purchase of Products does
not transfer any right, title or interest in or to any software that accompanies
the Products.
ARTICLE 5
INSPECTION, WARRANTY, AND LIMITS ON LIABILITY
5.1 ACCEPTANCE
Upon receipt of units of the Product by Distributor, Distributor
shall inspect them to determine their conformity to the requirements of this
Agreement. If the Product fails to so conform, Distributor shall deliver notice
thereof to Company within thirty (30) days of receipt, which notice shall
contain an explanation of the nature and details of the nonconformity. In the
absence of such timely and proper notice, Distributor shall be deemed to have
accepted all units of the Product included in such shipment.
5.2 WARRANTY
(a) Subject to Section 5.2(c), Company warrants that each unit
shall be free and clear of defects in materials and workmanship for a period of
one (1) year from the date such Unit is delivered by Company. During the
warranty period, Company shall, at its option, upon examination and testing
performed in accordance with Section 5.2(d) below, either repair or replace
units of the Product that are defective.
(b) Company warrants that the software accompanying the Product
will execute its programming instructions when properly installed on the
computer for which it is intended for a one (1) year period from the date of
delivery of such Product by Company, and that the media upon which the software
is recorded will be free from defects in materials and workmanship.
Distributor's sole remedy for defective software will be to return the diskettes
to Company for replacement.
(c) Company's warranty for the Product does not apply to
expendable components of the Product, or to nonconformities which result in
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whole or in part from actions of any party other than Company, from improper or
unauthorized use of the Product or use in a manner contrary to Company's
instructions or for which it was not designed. In particular, no warranties
apply to defects or damage to the Product resulting from improper or inadequate
maintenance by the customer, customer-supplied software or interfacing,
unauthorized modification or misuse, operation outside of the environmental
specifications for the Product, duty cycle abuse, and improper site preparation
or maintenance. Further, Company's warranty does not cover the replacement of
consumable parts. Exhibit F sets forth a complete list of consumable parts as of
the Effective Date.
(d) Except as otherwise provided in Section 6.1, if any Product
fails to conform to the warranties set forth in Sections 5.2(a) and 5.2(b),
during the applicable warranty period, Distributor shall, no later than thirty
(30) days after Distributor learns or should have learned of such nonconformity
and no later than thirty (30) days after the end of that warranty period, notify
Company of such nonconformity and all details with respect thereto, and shall
promptly return the Product, transportation and insurance prepaid by
Distributor, to Company's designated facility for examination and testing. Any
services and/or repairs will be performed either at Company's headquarters or at
a repair facility designated by Company. Upon verification of nonconformity,
Company will, at Company's option, either repair or replace the Product, and
promptly return the Product to Distributor during the applicable warranty
period. Company shall pay the costs of shipping (including insurance) the
Product back to Distributor or Distributor's customer or sub-distributor.
(e) Company makes no warranty concerning the infringement by the
Product of any intellectual property rights arising under the laws of any
jurisdiction.
(f) COMPANY MAKES NO WARRANTY REGARDING CLAIMS OR DAMAGE ARISING
OUT OF ANY FAILURE OF THE PRODUCT TO DETECT THE PRESENCE OF ANY HARMFUL
CHEMICALS, COMPOUNDS OR CONTAMINANTS.
(g) THE WARRANTIES SET FORTH IN THIS SECTION 5.2 ARE COMPANY'S
SOLE AND EXCLUSIVE WARRANTIES WITH RESPECT TO THE PRODUCT OR ITS PERFORMANCE.
COMPANY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS OF THE PRODUCT FOR ANY PARTICULAR
PURPOSE. THE REMEDY FOR BREACH OF WARRANTY PROVIDED IN THIS SECTION 5.2
REPRESENTS DISTRIBUTOR'S EXCLUSIVE REMEDY THEREFOR.
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5.3 LIMITATION OF LIABILITY
(a) COMPANY'S LIABILITY TO DISTRIBUTOR WITH RESPECT TO ANY UNIT
OF PRODUCT SHALL IN NO EVENT EXCEED THE PURCHASE PRICE OF THAT UNIT. COMPANY'S
TOTAL AGGREGATE LIABILITY TO DISTRIBUTOR ARISING OUT OF OR RELATED TO THIS
AGREEMENT SHALL IN NO EVENT EXCEED THE AMOUNT PAID BY DISTRIBUTOR FOR ALL THE
PRODUCTS PURCHASED BY DISTRIBUTOR FROM COMPANY HEREUNDER. IN NO EVENT SHALL
COMPANY BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS AND SERVICES,
LOSS OF USE OR PROFITS, LOSS OF SAVINGS, OR ANY OTHER SPECIAL, INCIDENTAL,
INDIRECT, OR CONSEQUENTIAL EXEMPLARY OR PUNITIVE DAMAGES, ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE USE OR PERFORMANCE OF THE PRODUCT, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN AN ACTION FOR CONTRACT OR TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, AND WHETHER OR NOT COMPANY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
(b) Each limitation on liability or limited or exclusive remedy
set forth in this Agreement is independent of any other limitation or remedy,
and if any such limitation or remedy fails of its essential purpose or is
otherwise held to be unenforceable, that shall not affect the validity of any
other such limitation or remedy.
ARTICLE 6
TERMINATION
6.1 EVENTS OF TERMINATION
(a) This Agreement shall automatically terminate without notice
or other action at the close of Company's business on the last day of the Term.
(b) Either party may, in addition to any other available
remedies, terminate this Agreement at any time by delivery of a written notice
to the other party stating such decision to terminate, if:
(i) The other party fails to perform any duty or other
obligation required by this Agreement when due and, if
that failure is curable, fails to cure it within thirty
(30) calendar days of receipt of notice from the
non-breaching party, provided however, that if the
obligation is one for payment of money, it must be cured
within five (5) calendar days following receipt of
notice.
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(ii) The other party files or has filed against it a
voluntary or involuntary bankruptcy proceeding, a
receiver or similar official is appointed for any of the
other party's property, the other party become insolvent
or is unable to pay its debts as they become due or the
other party makes an assignment for the benefit of
creditors.
(iii) A Change in Control (as defined below) occurs with
respect to the other party. "Change in Control" means
the happening of any of the following: (a) The
consummation of a merger or consolidation of a party
with or into another entity or any other corporate
reorganization, if 50% or more of the combined voting
power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation
or other reorganization is owned by persons who were not
shareholders of the party immediately prior to such
merger, consolidation or other reorganization. (b) The
sale, transfer or other disposition of all or
substantially all of a party's assets or the complete
liquidation or dissolution of a party. (c) A change in
the composition of the board of directors of a party
occurring within a two-year period, as a result of which
fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors
who either (i) are directors of such party as of the
date of this Agreement, or (ii) are elected, or
nominated for election, to the board of directors of
such party with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an
individual not otherwise an Incumbent Director whose
election or nomination is in connection with an actual
or threatened proxy contest relating to the election of
directors to such party). (d) Any transaction as a
result of which any person or group is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
indirectly, of securities of a party representing at
least 35% of the total voting power of such party's then
outstanding voting
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securities. For purposes of this paragraph, the term
"person" shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of a
party; or (ii) so long as a person does not thereafter
increase such person's beneficial ownership of the total
voting power represented by a party's then outstanding
voting securities, a person whose beneficial ownership
of the total voting power represented by such party's
then outstanding voting securities increases to 35% or
more as a result of the acquisition of voting securities
of such party by such party which reduces the number of
such voting securities then outstanding. A transaction
shall not constitute a Change in Control if its sole
purpose is to change the state of a party's
incorporation or to create a holding company that will
be owned in substantially the same proportions by the
persons who held such party's securities immediately
before such transaction.
6.2 DUTIES UPON TERMINATION
(a) If a party has the right to terminate this Agreement
pursuant to Section 6.1(b) or has demanded cure of a default pursuant to Section
6.1(b), that party may also suspend its own performance under this Agreement and
any individual sales contracts concluded pursuant hereto and cause all amounts
owed to it by the other party which are not yet due to become immediately due
and payable.
(b) Except as otherwise stated herein, the termination or
expiration of this Agreement shall not affect any rights of the parties which
accrued hereunder prior to such termination or expiration.
(c) NEITHER COMPANY NOR DISTRIBUTOR SHALL BE LIABLE TO THE OTHER
FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON
ACCOUNT OF THE TERMINATION OR EXPIRATION OF THIS AGREEMENT IN ACCORDANCE WITH
SECTION 6.1 OR THE TERMINATION OF DISTRIBUTOR'S EXCLUSIVITY AS TO ANY MARKET
SECTOR OR GEOGRAPHIC SECTOR IN ACCORDANCE WITH SECTION 2.3. DISTRIBUTOR WAIVES
ANY RIGHT IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION
OR EXPIRATION OF THIS AGREEMENT OR THE TERMINATION OF DISTRIBUTOR'S EXCLUSIVITY
AS TO ANY MARKET SECTOR OR GEOGRAPHIC SECTOR, OTHER THAN AS EXPRESSLY
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PROVIDED IN THIS AGREEMENT. Neither Company nor Distributor shall be liable to
the other on account of termination or expiration of this Agreement or the
termination of distributor's exclusivity as to any Market Sector or Geographic
Sector in accordance with Section 2.3 for reimbursement or damages for the loss
of goodwill, prospective profits or anticipated income, or on account of any
expenditures, investments, leases or commitments made by either Company or
Distributor or for any other reason whatsoever based upon or growing out of such
termination or expiration. Distributor acknowledges that (i) Distributor has no
expectation and has received no assurances that any investment by Distributor in
the promotion of the Product shall be recovered or recouped or that Distributor
shall obtain any anticipated amount of profits by virtue of this Agreement, and
(ii) Distributor shall not have or acquire by virtue of this Agreement or
otherwise any vested, proprietary or other right in the promotion of Company,
the Product or in "goodwill" created by its efforts hereunder. THE PARTIES
ACKNOWLEDGE THAT THIS SECTION HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR
COMPANY TO ENTER INTO THIS AGREEMENT AND THAT COMPANY WOULD NOT HAVE ENTERED
INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY SET FORTH HEREIN.
ARTICLE 7
COMPLIANCE WITH EXPORT REGULATIONS
Distributor shall comply with all applicable provisions of the
United States Export Administration Regulations with respect to all units of the
Product delivered hereunder and shall provide Company with all requested
documentation and data necessary or desirable for Company to be able to verify
such compliance. Distributor may, one week prior to the shipping date, have an
inspector from Intertec or SGS review Products for compliance with U.S. Customs
laws.
ARTICLE 8
MANUALS, SUPPORT AND TRAINING
8.1 MANUALS
Company shall deliver one reproducible set of the applicable
installation, operation and maintenance manuals for the Product prior to or with
the first units of Product delivered to Distributor. These documents will be
supplied in the English language. During the term of this Agreement, Company
shall provide to Distributor, at no charge, all changes to such manuals within
thirty (30) days after their release by Company. During the term of this
Agreement, Distributor may reproduce such manuals, to the extent required to
supply such manuals to Distributor's customers for the Product. Distributor
shall reproduce any copyright notices appearing on such manuals delivered by
Company. Individual manuals will not be included with the units of Product
delivered by Company, and Company shall have no further obligations or
liabilities regarding such manuals or the contents thereof except as expressly
stated herein.
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8.2 SUPPORT AND TRAINING
Commencing with the Effective Date, Company shall provide monthly
training at no charge to Distributor for the next consecutive four month period.
Training will be held at Company's headquarters in California and will be
commensurate with Company's standard published training schedule provided to
Company customers and distributors. Distributor will be responsible for the cost
of travel, food and lodging. Subsequent to the initial four month period, and
upon Distributor's request, Company shall make technical support and training
regarding the Product available to Distributor at Company's prevailing rates and
at times and locations acceptable to both parties. Company also agrees to
occasionally support Distributor with assistance in demonstrations and general
promotion of the Product during Distributor's initial ramp-up, and as needed
thereafter. Sales support will generally be dependent upon scheduling
availability and the relative importance and implications of each potential
sale.
ARTICLE 9
NOTICES
Any and all notices required or authorized hereunder shall be in
writing and shall be delivered by any reasonable means, including by personal
delivery, registered or certified mail, internationally recognized courier
service or telecopier, to the following address of the party to which that
notice is to be given:
To Company: Electronic Sensor Technology, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000, XXX
Attn: Xxxxxxx Xxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
To Distributor: TechMondial Ltd.
Xxxxxx Xxx Xxxxxxxxx Xxxxx
Xxxxxx, XX0X 0XX
Xxxxxxx
Attn: Xxxxxx Xxxxxxx
Telephone: x00-0000000000
or to such other address of which a party may subsequently notify the other
party. Notices that are properly addressed shall be deemed effective: (i) upon
delivery, if hand delivered; (ii) on the seventh business day following deposit
in the mail, if mailed by registered or certified mail; (iii) on the third
business day following delivery to an internationally recognized courier
service, if sent by internationally recognized courier service; and (iv) upon
telephonic or written confirmation of receipt, if sent by telecopier.
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ARTICLE 10
FORCE MAJEURE
10.1 FORCE MAJEURE EVENT
Any delay or failure in the performance of any part or the whole of
this Agreement by either party hereto shall be excused, subject to Section 10.2
hereof, if and to the extent caused by the earthquake, typhoon, or other natural
disaster, war, warlike condition, revolution, blockade, embargo or governmental
order, rule or restriction, and the affected part of this Agreement shall be
suspended until the force majeure circumstances have ended.
10.2 NOTICE
Neither delay nor failure of performance by the other party shall be
excused unless the party experiencing the force majeure sends written notice of
such delay or failure and the reason therefore to the other party within seven
(7) days from the time the force majeure situation becomes apparent.
ARTICLE 11
ENTIRE AGREEMENT
This Agreement (including the Exhibits attached hereto) constitutes
the entire agreement between the parties hereto concerning the subject matter
hereof and supersedes all previous negotiations, agreements and commitments
related thereto. Neither this Agreement nor any rights hereunder shall be
released or modified in any manner, except by a written document signed by a
duly authorized officer or representative of each of the parties.
ARTICLE 12
SEVERABILITY
If a court or other governmental entity holds or asserts that any
part of this Agreement is unenforceable or invalid, or requires the modification
of any part of this Agreement, Company may, at its option, either terminate this
Agreement by notice to Distributor, or continue the Agreement with the remaining
part, including any such modification, given full force and effect.
ARTICLE 13
CONFIDENTIALITY
13.1 CONFIDENTIAL INFORMATION
Each party shall keep strictly confidential as against any third
parties (including, to the extent possible, governmental entities) all
confidential
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information obtained from the other party in connection with this Agreement and
the Products, and shall use such information only for the purposes contemplated
hereunder. Confidential information shall be deemed to include, without
limitation, trade secrets, other proprietary information, manufacturing
processes, design specifications, software programs, research developments,
business activities and operations, inventions and engineering concepts. All
such written information and any oral confidential information reduced to
writing shall be clearly marked "Confidential." The confidentiality obligations
set forth herein shall not apply to:
(a) Disclosures of information required by law or governmental
order;
(b) Information known to one party hereto prior to the date
first above-written and not obtained directly from the other party or from a
third-party in violation of any restrictions on disclosure;
(c) Information required by Distributor for the purpose of
marketing the Product in the Market Sectors in the Exclusive Territory, which
may only be used in the sale, distribution, marketing and maintenance of the
Product in the Market Sectors in the Exclusive Territory during the term of this
Agreement and for no other purpose or for any other party's benefit; or
(d) Information, which now or later becomes available to the
public, provided such occurrence is not the result of an improper act or
omission of either party.
13.2 TERM
The obligation to maintain in confidence all confidential
information learned or disclosed hereunder shall survive termination of this
Agreement, and each party covenants to maintain such confidentiality for a
period for five (5) years after such termination. Upon termination of this
Agreement, all confidential information represented in written form or any other
media, including but not limited to papers, documents, designs, manuals,
specifications, prototypes, schematics, computer software, or any other
materials or models, shall be returned to the party which furnished same,
together with any reproductions or copies thereof.
-16-
ARTICLE 14
GOVERNING LAW
This Agreement and the performance of all obligations hereunder
shall be governed by and construed in accordance with the laws of the State of
California without regard to any principles governing conflicts of laws or the
provisions of the 1980 United Nations Convention on Contracts for the
International Sale of Goods.
ARTICLE 15
LIMITATION OF ACTION
No action for breach of this Agreement may be brought by either
entity more than one (1) year after the cause of action accrues.
ARTICLE 16
MISCELLANEOUS
16.1 VENUE; WAIVER OF JURY TRIAL
Each party hereto hereby expressly submits to the exclusive
jurisdiction of the United States District Court for the Central District of
California and of any California Superior Court sitting in Los Angeles City for
purposes of actions or proceedings arising out of, under and/or pertaining to
this Agreement. Each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Each party hereby consents to process being served in any
such proceeding by the mailing of a copy thereof by registered or certified
mail, postage prepaid, to its address specified in Article 9 or in any other
manner permitted by law. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING.
16.2 COUNTERPARTS
This Agreement may be executed in several counterparts and by
facsimile or electronic signature, each of which shall be regarded as an
original and all of which shall constitute one and the same document.
16.3 NO ASSIGNMENT
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Neither party may assign its obligations under this Agreement without the prior
written consent of the other party.
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16.4 AMENDMENTS; MODIFICATIONS
No amendment or waiver of any provision of this Agreement shall be
effective unless in writing signed by both parties.
16.6 HEADINGS
Article and Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the Effective Date.
"Company" ELECTRONIC SENSOR TECHNOLOGY, INC.
By:
---------------------------
Name: Xxxxxxx X. Xxxxxxx
Its: President and CEO
Date: October 21, 2005
"Distributor" TECHMONDIAL, Ltd.
By:
---------------------------
Name: Xxxxxx Xxxxxxx
Its: President and CEO
Date: October 21, 2005
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EXHIBIT A
PRODUCT DESCRIPTIONS AND
SPECIFICATIONS
(Please See Attached Files as Exhibit A)
o Model 4200 Specifications
o Model 7100 specifications
o Model 3100 Specifications
o Model 3200 Specifications
o Model 3300 Operation Manual
o Accessories and Consumables
EXHIBIT B
o International Price List No. 215, Effective April 1, 2005
(Please See Attached File as Exhibit B).
o Deliveries shall be based on the schedules specified in the
purchase orders placed by the Distributor and accepted and
confirmed by Company.
EXHIBIT C
Instrument Prices for initial Order of 70 units (U.S. Dollars)
Dist.
Sell Price Commission Dist. Price
-------------- ----------- -------------
Model 4200 without Laptop Computer $35,750 $17,350 $18,400
Model 4200 integrated with Laptop and Software $19,600 $36,950 $17,350
Model 7100 without Laptop Computer $28,795 $12,895 $15,900
Model 7100 integrated with Laptop and Software $17,100 $29,995 $12,895
Model 3300 Remote Sampler Kit $ 3,125 $ 625 $ 2,500
Spare Detector $ 1,875 $ 375 $ 1,500
EXHIBIT D
Repair Items Required for Support of Company Instruments
Qty List Price (each)
--- -----------------
Columns (DB-5) 5 $625
Columns (DB-624) 5 $625
Detectors 10 $1,875
Traps 10 $375
Controller Board 2 $2,250
Pre-Concentration Tube (Slick Stick) 10 $312
Vials (Box of 100 - 40ml) 2 $250
Side Luer Needles (Box of 6) 5 $220
Purge Dryer Cartridge Kit 2 $100
Field Service Kit 1 $3,800
Oven Assembly 2 $3,500
Remote Sampler Kits 2 $3,125
EXHIBIT E
PERFORMANCE METRICS
Quantity Metrics: Effective Date to November 30, 2006:
In Section 3.1(a) of the Agreement, Distributor has agreed to
purchase not less than 48 Units during the period from the Effective Date
through November 30, 2006 (the "First Period").
In order to maintain the right to act as Company's exclusive
distributor of the Product in the Market Sectors in the Exclusive Territory
during the First Period, Distributor shall purchase not less than 9 Units during
each 3-month period of the First Period. In the event that Distributor fails to
purchase at least (i) 12 Units by March 31, 2006 or (ii) 24 Units by July 31,
2006 or (iii) 36 Units by November 30, 2006, Company may deliver a written
notice to Distributor as contemplated by Section 2.3 of the Agreement
terminating Distributor's right to act as Company's exclusive distributor of the
Product in the Market Sectors in the Exclusive Territory ("First Period
Termination").
In the event that Distributor purchases less than 48 Units during
the First Period (difference obtained by subtracting the number of Units so
purchased from 48, the "First Period Shortfall Number") and no First Period
Termination occurs, Distributor shall pay Company no later than December 7, 2006
a rebate amount equal to the product of $5,000.00 and the First Period Shortfall
Number.
Quantity Metrics: December 1, 2006 to November 30, 2007:
In Section 3.1(a) of the Agreement, Distributor has agreed to
purchase not less than 22 Units during the period from December 1, 2006 through
November 31, 2007 (the "Second Period").
In order to maintain the right to act as Company's exclusive
distributor of the Product in the Market Sectors in the Exclusive Territory
during the Second Period, Distributor shall purchase after November 31, 2006 not
less than 5 Units during each 3-month period of the Second Period. In the event
that Distributor fails to purchase after November 31, 2006 at least (i) 5 Units
by February 28, 2007 or (ii) 10 Units by May 1, 2007 or (iii) 15 Units by August
31, 2007 or (iv) 20 Units by November 30, 2007, Company may deliver a written
notice to Distributor as contemplated by Section 2.3 of the Agreement
terminating Distributor's right to act as Company's exclusive distributor of the
Product in the Market Sectors in the Exclusive Territory ("Second Period
Termination").
In the event that Distributor purchases less than 22 Units during
the Second Period (difference obtained by subtracting the number of Units so
purchased from 22, the "Second Period Shortfall Number") and no Second
Period Termination occurs, Distributor shall pay Company no later than December
7, 2007 a rebate amount equal to the product of $5,000.00 and the Second Period
Shortfall Number.
Geographic Sector Metrics: Second Period:
No later than August 31, 2006, Distributor shall submit to Company
its projected sales forecast for the Product during the Second Period on a
Geographic Sector basis ("Second Period Forecast"). At a minimum, the Second
Period Forecast shall indicate the Geographic Sectors in which Distributor plans
to sell the 22 Units it is required to purchase during the Second Period
("Second Period Minimum Requirement"). In the event that the Second Period
Forecast indicates no sales in a Geographic Sector during the Second Period,
Distributor shall either (i) voluntarily relinquish exclusivity for that
Geographic Sector or (ii) provide Company with an outline of the efforts made or
to be made to sell and distribute Product in that Geographic Sector.
In the event that Distributor fails to sell in any Geographic Sector
for which Distributor forecast sales at least 75% of the number of units of
Product forecast to be sold in that Geographic Sector in the Second Period
Forecast, Company may deliver a written notice to Distributor as contemplated by
Section 2.3 of the Agreement within 30 days of the end of the Second Period
terminating Distributor's right to act as Company's exclusive distributor of the
Product in that Geographic Sector.
Geographic Sector Metrics and Market Sector Metrics: Marketing
Periods:
As used below, "Marketing Period" shall mean each twelve month
period commencing on November 1 of a calendar year and ending on November 30 of
the following calendar year. The first Marketing Period shall commence on
December 1, 2007.
As used below, "Forecast Due Date" for a Marketing Period shall mean
a date no later than August 1 of the calendar year during which such Marketing
Period commences.
As used below, "Marketing Period Minimum Requirement" shall mean (i)
for the first Marketing Period, U.S. $3,700,000 and (ii) for each Marketing
Period thereafter, 150% the Marketing Period Minimum Requirement for the
preceding Marketing Period.
No later than the Forecast Due Date for a Marketing Period,
Distributor shall submit to Company its projected sales forecast for the Product
for such Marketing Period on a Geographic Sector basis and a Market Sector basis
(the "Marketing Period Forecast"). At a minimum, the Marketing Period Forecast
for a Marketing Period shall indicate the Market Sectors and Geographic Sectors
in which Distributor plans to sell, on an aggregate basis,
Product (based upon Company's then current list sale price) in an amount equal
to the Marketing Period Minimum Requirement for that Marketing Period. In the
event that a Marketing Period Forecast for a Marketing Period indicates no sales
in a Geographic Sector or no sales in a particular Market Sector within a
Geographic Sector during such Marketing Period, Distributor shall either (i)
voluntarily relinquish exclusivity for that Geographic Sector or that Market
Sector within a Geographic Sector or (ii) provide Company with an outline of the
efforts made or to be made to sell and distribute Product in that Geographic
Sector or that Market Sector within a Geographic Sector ("Sales Effort
Outline"). In the event that a Marketing Period Forecast for a Marketing Period
indicates no sales in a Geographic Sector or no sales in a particular Market
Sector within a Geographic Sector during such Marketing Period and Company is
not satisfied with Distributor's Sales Effort Outline for that Geographic Sector
or that Market Sector within a Geographic Sector, Company may deliver a written
notice to Distributor as contemplated by Section 2.3 of the Agreement
terminating Distributor's right to act as Company's exclusive distributor of the
Product in that Geographic Sector or that Market Sector within a Geographic
Sector, as the case may be.
In the event that Distributor fails during a Marketing Period to
sell in any Geographic Sector or in any Market Sector of a Geographic Sector at
least 75% of dollar amount (or dollar equivalent amount) of Product (based upon
Company's then current list sale price) forecast to be sold in that Geographic
Sector or that Market Sector of that Geographic Sector in the Marketing Period
Forecast for such Marketing Period, Company may deliver a written notice to
Distributor as contemplated by Section 2.3 of the Agreement within 30 days of
the end of such Marketing Period terminating Distributor's right to act as
Company's exclusive distributor of the Product in that Geographic Sector or that
Market Sector within a Geographic Sector, as the case may be.
EXHIBIT F
CONSUMABLES
PERFORMANCE
* Alkanes Calibration Kit
Performance Eval. Kit
VOC (C6 - C14)
Performance Eval. Kit
Semi-VOC (C11 - C22)
LABORATORY
Vials: 40ml
Vials: 250ml
500 ml Syringe
* Side Luer Needle
Sparging Needle
10ul Syringe
1ul Syringe
SAMPLING
Purge Dryer Cartridge Kit
Purge Dryer Refill
"Slick Stick"
Charcoal Filter Kit
Charcoal Filter Inlet Adapter
H(e) Cylinders
