Exhibit 10.2
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is made between Ovation
Products Corporation, a Delaware corporation ("Ovation"), and X. X. Electro
Systems, Inc., a Minnesota corporation ("SJE" ).
RECITALS
A. Ovation is engaged in the design and development of distillation
technology for use in wastewater treatment, water purification and related
processes.
B. SJE is engaged in the design, development, manufacture, marketing, sale
and distribution of liquid level control devices for the water, sump and
wastewater markets.
C. The parties desire to work together to develop, market, sell and
distribute septic appliances which incorporate Ovation's distiller technology.
D. The parties are entering into contemporaneously with and conditional
upon this Agreement that certain Strategic Alliance Agreement as well as a
Series A Preferred Stock Purchase Agreement, First Refusal and Co-Sale
Agreement, Investor Rights Agreement, Promissory Note, Pledge Agreement,
Confidentiality Agreement and Intellectual Property Agreement.
AGREEMENT
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree
as follows:
1. APPOINTMENT
1.1 APPOINTMENT. Ovation appoints SJE as its authorized distributor of
Ovation distiller products used in Septic Appliances (as such term is defined in
the Strategic Alliance Agreement) ("Products") within Canada, Mexico and the
United States of America ("Territory") upon the terms and conditions of this
Agreement.
This appointment is exclusive within the Territory during the Exclusive
Term. Exclusive means that Ovation will not directly or indirectly sell the
Products in the Territory or authorize anyone other than SJE to distribute the
Products in the Territory.
This appointment is non-exclusive for a period of five years following the
termination of the Exclusive Term (the "Non-Exclusive Term").
At all times while SJE is an authorized distributor in the Territory, it
shall also have the non-exclusive right to distribute and sell the Products in
any geographical area outside the Territory for which Ovation has not yet
granted exclusive distribution rights to a third party with respect to such
area.
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1.2 INDEPENDENT RELATIONSHIP; NO AGENCY. SJE's status under this Agreement
is that of an independent contractor. Nothing in this Agreement shall constitute
either party as the agent or legal representative of the other party for any
purpose, and no officer, representative or employee of either party shall be
considered as having employee status with Ovation. Neither party is granted the
right or authority to assume or to create any obligation or responsibility,
express or implied, in the name of or on behalf of the other party except as may
be specifically authorized in writing. Each party shall have the sole
responsibility for the satisfaction of any and all claims made by third parties
on account of its conduct or that of its employees or agents in the performance
of this Agreement.
1.3 STRATEGIC ALLIANCE AGREEMENT. This Agreement and that certain
Strategic Alliance Agreement have been entered into concurrently by the parties.
Capitalized terms not otherwise defined in this Agreement shall be provided the
meanings afforded to them in the Strategic Alliance Agreement.
2. TERM
2.1 EXCLUSIVE TERM. Except as otherwise provided herein, the Exclusive
Term, as used in this Agreement, begins on the date that both parties agree in
writing that sales in commercial quantities of Products are first made (the
"Commencement Date," which shall be mutually agreed and recording in writing as
close to the date agreed upon as practicable) and ends on the later of: (a) the
seventh (7th) anniversary of the Commencement Date or (b) the date on which SJE
has received $50,000,000 in Profit Sharing Payments, provided that in no event
shall the Exclusive Term extend beyond the tenth (10th) anniversary of the
Commencement Date.
2.2 AGREEMENT TERM. The term of this Agreement shall begin on the date
both parties has signed this Agreement ("Effective Date") and terminate on the
earlier of the end of the Non-Exclusive Term or upon termination of the
Strategic Alliance Agreement. This Agreement will be renewed only upon the
written mutual agreement of the parties.
3. PRICES, PAYMENTS AND TERMS AND CONDITIONS OF SALE
3.1 ORDERS. SJE shall submit purchase orders to Ovation for such Products
as SJE may require. Each purchase order will include: (a) Products ordered; (b)
quantity requested; (c) shipment dates requested; and (d) shipping instructions.
3.2 DETERMINATION OF PRICES TO CUSTOMERS DURING THE EXCLUSIVE TERM. During
the Exclusive Term, SJE shall recommend the prices for Products to be sold by
SJE to its customers. Such recommended prices shall be subject to Ovation's
approval (which shall not be unreasonably withheld).
3.3 PRICES DURING NON-EXCLUSIVE TERM. During the Non-Exclusive Term, the
price to be paid by SJE for the Products shall be according to Ovation's
standard price lists in effect at the time an order is filled provided that such
prices shall not exceed the lower of:
(a) Prices available in the best price package (based on quantities,
payment terms, delivery requirements and other terms) offered by Ovation to any
of its other customers; or
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(b) The best price offered by Ovation to any other party selling
Septic Appliances in each geographical area where SJE has the non-exclusive
right to distribute and sell the Products.
4. WARRANTY
4.1 APPLICABLE WARRANTY. The Products are subject to the Ovation warranty
and limitation of warranty set forth in Exhibit 4.1 attached hereto.
5. TERMINATION PRIOR TO EXPIRATION OF NONEXCLUSIVE TERM
5.1 IMMEDIATE TERMINATION UPON CERTAIN EVENTS OF BANKRUPTCY. Either party
may at its option terminate this Agreement immediately upon written notice to
the other in the event that the other party makes an assignment for the benefit
of creditors; admits in writing its inability to pay its debts as they become
due; files a voluntary petition in bankruptcy; is adjudicated to be bankrupt or
insolvent; files a petition seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar arrangement under
any present or future statute, law or regulation, files an answer or similar
pleading admitting the material allegations of a petition filed against it in
any such proceeding; or consents to or acquiesces in the appointment of, or has
its business placed in the hands of, a trustee, receiver, assignee, or
liquidator of it or any substantial part of its business, assets or properties,
whether by voluntary act or otherwise (a "Bankruptcy Event"). In the event of a
Bankruptcy Event of SJE, Ovation shall have the option to terminate this
Agreement as well as the Strategic Alliance Agreement. In the event of a
Bankruptcy Event of Ovation, SJE shall have the option of terminating this
Agreement and the Strategic Alliance Agreement.
5.2 DUTIES OF PARTIES UPON TERMINATION. Upon termination of this
Agreement, each party shall perform all obligations incurred prior to the
effective date of such termination and all indebtedness of each party to the
other shall become immediately payable, and any rights and obligations regarding
confidentiality, intellectual property and indemnification for events prior to
termination shall survive termination of this Agreement.
5.3 TERMINATION FOR MATERIAL BREACH. Either party may immediately
terminate this Agreement in the event that the other party does not cure a
material breach of this Agreement within 30 days of receiving written notice of
such breach.
5.4 LICENSE AGREEMENT. So long as this Agreement and the Distribution
Agreement have not been terminated: (a) SJE shall have no right under the
License Agreement attached as Exhibit 5.4 to the Distribution Agreement to: (i)
manufacture Products or (ii) utilize intellectual property of Ovation for any
purposes other than those contemplated in the Distribution Agreement and the
Strategic Alliance Agreement; and (b) SJE shall not be obligated to make the
payments under the License Agreement.
6. SETTLEMENT OF DISPUTES
6.1 BASIC DISPUTE RESOLUTION PROCEDURES. Any dispute between the parties
either with respect to the interpretation of any provision of this Agreement or
with respect to the
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performance of either party will be resolved as specified in Article 10 of the
Strategic Alliance Agreement.
7. GENERAL PROVISIONS
7.1 AMENDMENT. Amendment of this Agreement shall only be binding upon the
parties if made in writing and duly signed by both parties.
7.2 WAIVER. Failure by either party to enforce any provision of this
Agreement shall not be construed to be a waiver of such provision or its right
thereafter to enforce such provision or any other provision.
7.3 ENTIRE AGREEMENT. This Agreement as well as the Strategic Alliance
Agreement, the Series A Preferred Stock Purchase Agreement, the First Refusal
and Co-Sale Agreement, the Investor Rights Agreement, the Promissory Note, the
Pledge Agreement, the Confidentiality Agreement and the Intellectual Property
Agreement constitute the entire agreement between the parties and supersede all
previous understandings, representations, proposals, and discussions, whether
oral or written, between the parties.
7.4 GOVERNING LAW; DISPUTES. This Agreement shall be interpreted and
enforced pursuant to the laws of the State of Minnesota. Any disputes arising
under this Agreement shall be resolved by arbitration according to the rules of
the American Arbitration Association following the procedures set forth in
Section 6 above.
7.5 NOTICES. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be considered given on the
day sent when given in one of the following ways with simultaneous transmission
by e-mail to the e-mail address shown:
(a) delivered personally,
(b) sent by facsimile, telegram, telex or cable; or
(c) by registered or certified mail, return receipt requested;
to the parties at the following addresses (or at such other address as a party
may specify by written notice to the other):
If to Ovation: Ovation Products Corporation
Attention: Xx. Xxxxx Xxxxxx 000
Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Email: x_xxxxxx@xxxxxxxxxxxxxxx.xxx
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If to SJE: X.X. Electro Systems, Inc.
Attention: Xx. Xxxxxx Xxxxxxx
00000 Xxxxxx Xxxxxxx 0
X.X. Xxx 0000
Xxxxxxx Xxxxx, XX 00000
Email: xxxxxxx@xxxxxxxxxx.xxx
7.6 ASSIGNMENT. Neither party hereto shall assign, transfer or otherwise
dispose of this Agreement, in whole or in part, to any individual, firm,
corporation, association or other entity without the prior written consent of
the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the day and year first above written.
OVATION PRODUCTS CORPORATION X.X. ELECTRO SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx By:
---------------------------- ----------------------------
Its: CEO Its:
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If to SJE: X.X. Electro Systems, Inc.
Attention: Xx. Xxxxxx Xxxxxxx
00000 Xxxxxx Xxxxxxx 0
X.X. Xxx 0000
Xxxxxxx Xxxxx, XX 00000
Email: xxxxxxx@xxxxxxxxxx.xxx
7.6 ASSIGNMENT. Neither party hereto shall assign, transfer or otherwise
dispose of this Agreement, in whole or in part, to any individual, firm,
corporation, association or other entity without the prior written consent of
the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the day and year first above written.
OVATION PRODUCTS CORPORATION X.X. ELECTRO SYSTEMS, INC.
By: By: /s/ Xxxxxx Xxxxxxxxxxx
---------------------------- ----------------------------
Its: CEO Its: CEO
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EXHIBIT 4.1
OVATION WARRANTY
NO EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR
MERCHANTABILITY, OR EXPRESS OR IMPLIED WARRANTY OF ANY OTHER NATURE IS GRANTED
HEREIN. NO ONE IS AUTHORIZED TO ASSUME FOR OVATION ANY LIABILITY IN CONNECTION
WITH THE SALE OF THIS PRODUCT.
OVATION'S OBLIGATIONS UNDER THIS WARRANTY SHALL BE LIMITED TO THE REPAIR OR
REPLACEMENT OF THE PRODUCT, AT OVATION'S SOLE DISCRETION, DURING THE TWO (2)
YEAR PERIOD FROM THE DATE ON WHICH THIS PRODUCT WAS INSTALLED IN YOUR SYSTEM.
YOUR RIGHTS UNDER THIS WARRANTY ARE YOUR EXCLUSIVE REMEDIES FOR ANY FAILURE TO
OVATION TO COMPLY WITH ANY EXPRESS OR IMPLIED WARRANTY. OVATION SHALL NOT BE
LIABLE IN EITHER TORT OR CONTRACT FOR ANY LOSS OR DAMAGE, WHETHER DIRECT,
CONSEQUENTIAL, OR INCIDENTAL, ARISING UNDER THE USE OR INABILITY TO USE THIS
PRODUCT OR ANY BREACH BY OVATION OF ANY EXPRESS OR IMPLIED WARRANTY. SOME STATES
DO NOT ALLOW FOR LIMITATIONS ON HOW LONG ANY IMPLIED WARRANTY LASTS, SO THE
ABOVE LIMITATION MAY NOT APPLY TO YOU. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS,
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
EXHIBIT 5.4
LICENSE AGREEMENT
(SEE TAB 9)
