DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made as of the 11th day of September,
1996,("Commencement Date") between XXXXXXX RADIO CORP., a corporation having its
principal place of business at 0 Xxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000
("Company"), XXXXXXX RADIO CANADA LTD., a corporation having its principal place
of business at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0,
("Xxxxxxx Canada") (hereinafter, collectively "the Company") and AVS
TECHNOLOGIES INC., a corporation having its principal place of business at 0000
Xxxxx Xxxxxx Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("Distributor").
The Company is in the business of designing, procuring, marketing, and
selling consumer electronics products.
Distributor has expressed an interest in becoming the exclusive
Distributor of the Company for consumer electronic products of the types
identified on Exhibit A (the "Products") bearing the trademark identified on
Exhibit B (the "Xxxx") in the territory identified on Exhibit C (the
"Territory").
Distributor has represented to the Company that it and its principals are
experienced in the marketing and selling of consumer electronic products and has
an adequate staff and facilities to fulfill its obligations as the Distributor
in the Territory with respect to the Products.
Distributor believes that the sales projections for the Products within the
Territory which it has presented to the Company are reasonable.
NOW THEREFORE, IT IS AGREED:
1. APPOINTMENT.
1.1 Company hereby appoints Distributor, subject to the terms of this
Agreement, as the Company's exclusive Distributor of Products in the Territory
to the customer classifications set forth on Exhibit D but specifically
excluding the customers set forth on Exhibit E. Distributor accepts such
appointment and agrees to act as the Distributor of the Company's products in
the Territory as provided in this Agreement.
1.2 (a) The Company agrees that it shall not sell Products to any
customers knowing that such customers intend to ship such Products into the
Territory to the customer classifications set forth on Exhibit D and that
Company will take all reasonable steps to ensure that its other distributors do
not breach this covenant, in each such case so long as the actions of the
Company are in compliance with applicable laws, treaties and international
agreements relating to free trade and commerce among nations.
2. PRODUCTS.
The Company's products to be sold to the Distributor under this Agreement
are those Products contained in Exhibit A and any "New Products" added to
Exhibit A on the terms set forth therein and in Section 6 hereof. The Company
shall also have the right from time to time to change, modify, discontinue
marketing or otherwise alter any or all of the Products without incurring
liability to Distributor. The Company agrees to advise Distributor in writing
thirty (30) days prior to discontinuing any Product from its current line of
Products.
3. DUTIES OF DISTRIBUTOR.
3.1 Distributor agrees to use its best efforts to promote to the
fullest extent possible, in conformity with sound business practices, the sale
of the Products in the Territory. Costs of all advertising, coop advertising and
other promotional efforts shall be borne by Distributor. Simultaneously
herewith, the Company is furnishing Distributor with a listing of all
outstanding customer advertising accruals as of September 11, l996. Distributor
shall use its best efforts to maintain account chargebacks at the level set
forth on such listing. In this event, the Company agrees to reimburse
Distributor for all accrual amounts held by the Company for accruals for which
Distributor provides proof to the Company that the accruals were applied. Such
reimbursement shall be paid by the Company to Distributor thirty (30) days after
Distributor presents satisfactory proof to the Company that the accruals were
applied.
3.2 Distributor shall purchase exclusively from the Company, or a
subsidiary of the Company as designated by the Company, any and all Products to
be sold by Distributor within the Territory.
3.3 Distributor agrees that it
(a) shall refrain from seeking customers, from establishing any branch,
and from maintaining any distribution depot outside the Territory, in each case
in respect of the Products;
(b) shall refrain from actively promoting the sale of the Products and/or
from seeking orders in respect of those accounts in the Territory where
controlling location, defined as buying office, is outside the Territory; and
(c) shall immediately notify the Company of any sale which Distributor
made and Distributor becomes aware that such Product sold was shipped outside
the Territory and/or to any customer within the category referred to in the
previous paragraph.
3.4 In order to perform its duties hereunder, the Distributor shall
utilize its existing sales, warehousing and delivery facilities (which
Distributor represents and warrants are adequate to perform its obligations
under this Agreement), employ adequate numbers of sales and service personnel,
maintain adequate inventories, and provide after sale consumer and end-user
service as set forth in this Agreement.
3.5 (a) The Company shall be fully responsible for all Product
returns that are actually received, at the Company's designated warehouse, by
the Company, Distributor or Venator Sales & Services, Ltd. ("Venator") prior to
February 15, l997, including returns of Product sold after the Commencement Date
and prior to February 15, l997, and agrees to accept and pay for warranty claims
received by the Company, Distributor or Venator prior to February 15, 1997. [All
returns that are the responsibility of the Company must have been preauthorized
by the Company in writing, which authorization shall not be unreasonably
withheld.] Commencing February 15, 1997, Distributor shall be solely responsible
for all Product returns, including Product sold any time prior to February 15,
l997, excluding those of discontinued video Product) and agrees to accept and
pay for all warranty claims received by the Company, Distributor or Venator.
(b) Commencing February 15, 1997, Distributor shall be fully responsible
for after sales support for all Products, including Product sold any time prior
to February 15, l997, (excluding discontinued video Products as set forth in
this Agreement) and shall provide, at its own cost and at no cost to the
Company, after sales service, warranty repairs or other coverage for all
Products for at least the period of time required by applicable local law
throughout the various regions of the Territory. Additionally, should a
warranty period exceed that statutorily set minimum, Distributor shall be
responsible for such expenses.
(c) The Company guarantees that the lifetime defective return rate by
Product category shall not exceed the percentages set forth on Exhibit F.
Should Distributor claim that the lifetime defective return rate exceeds the
percentages set forth on Exhibit F, Distributor must provide the Company with
detailed records showing: 1.) lifetime sales of each Product in the Product
category; 2.) lifetime A-Stock and non-A-Stock returns for each Product in the
Product category; and 3.) lifetime warranty claims paid for each Product in the
Product category with detail on the types of defects responsible for the claims.
In the event that during the term of this Agreement any lifetime defective
return rate for a Product category exceeds such percentages, the Company shall
remit to Distributor the actual costs deemed to be reasonable for such excess.
For purposes of this Agreement, "lifetime defective return rate" is defined as
[lifetime unit returns (excluding A Stock Returns) plus in warranty claims]
divided by lifetime unit sales. For purposes of this provision, "actual costs"
is defined as the actual direct costs incurred by Distributor to third parties,
acting at arm's length with the Distributor, or the Company for providing such
services to Distributor as agreed to by the parties, for administering and
disposing of sales returns and for administering and paying warranty claims but
shall not include any allocation of overheads or any indirect, consequential,
special or incidental damages.
(d) The provisions for returns and warranty expenses set forth in this
Agreement shall exclude, and not be applicable to, A Stock Returns.
(e) Repair and maintenance service provided by Distributor for the
Products shall be in accordance with the best commercial practices in the
Territory, and to this end, Distributor shall employ or contract for a
sufficient number of competent, technically trained personnel. Distributor shall
maintain, or ensure that a third party retained to perform such repair and
maintenance service, or the Company providing such services to Distributor as
agreed to by the parties, maintains, a sufficient inventory of spare parts. No
adjustment shall be made or payment due to Distributor for providing such
services.
3.6 Distributor shall promptly contact any existing or prospective
customers referred to Distributor by the Company and promptly report to the
Company the result of such meeting.
3.7 Distributor shall promptly, upon request, provide the Company
with evidence of sale of the Products in the Territory.
3.8 Distributor shall keep at its principal place of business full,
proper and up-to-date accounts and records showing clearly in respect of the
Territory (and each distinct part thereof) all transactions for each of the
Products and all written records of inquiries, transactions and other material
relating to its dealings in and marketing of the Products.
3.9 Distributor represents that it has been provided with a copy of
the Company's policy statement entitled "Xxxxxxx Radio Corp. Antiboycott Policy
Statement and Compliance Guide" and agrees on its own behalf, and on behalf of
its affiliates, to comply with the terms of such policy statement. However, it
is agreed that nothing in such Policy creates a relationship between the Company
and Distributor other than as independent contractors as set forth in this
Agreement.
3.10 With regard to the Products, Distributor shall be responsible for
all negotiations with, notification and submission of samples to and obtaining
the approval of any government agency or other body as required within any part
of the Territory. It is understood that, in accordance with the provisions of
Section 4.2 of this Agreement, the Company shall obtain the CSA/CUL/CETL
approvals on behalf of Distributor.
4. SUPPLY AND PRICING OF PRODUCTS.
4.1 Subject to the terms of this Agreement, Company agrees to sell
and Distributor agrees to buy and to pay for such quantities of Products as
Distributor may reasonably request. All Product purchased by Distributor from
the Company shall meet CSA/CUL/CETL standards, and all other Canadian regulatory
standards, and shall have bilingual packaging and manuals. Distributor shall
purchase Products exclusively from the Company, or a subsidiary of the Company
as designated by the Company, except as specifically approved in writing by the
Company. To fill short term Product needs and in the Company's sole discretion,
Distributor may purchase a.)Products directly from the Company's US inventory,
if available, which Products shall be converted to meet Canadian Standards or
b.) Product stored in Canada as set forth herein.
4.2 The following prices shall apply to purchases of the Products:
(a) Prices for Product purchased by Distributor from the Company shall be
FOB Factory at the Company's FOB cost plus 2% sourcing load plus 3.5% fee,
except prices for video Products which shall be FOB Factory at the Company's FOB
cost plus 2% sourcing load plus 2% fee. The Company's FOB cost shall include all
variable costs, not covered in Section 4.2(c) below, of producing CSA/CUL/CETL
approved Product with bilingual packaging including any applicable royalty
(payable to a third party acting at arm's length with the Company) for the
Product.
(b) Prices for Product purchased from the Company's US inventory are FOB
the Company's US warehouse and shall be at the Company's landed cost (including,
but not limited to, FOB cost, sourcing load, Ocean Freight, Inland Freight,
Brokerage and Duty) ("ELC"), less any duty drawback to which the Company is
entitled and receives, plus a fee of 6.5% of ELC, plus cost of converting
product to meet Canadian standards (including bilingual packaging and manuals,
if required), except that the fee for video product shall be 3.5%.
(c) Costs incurred by the Company to obtain the necessary CSA/CUL/CETL or
other required approvals, regulatory or otherwise, and costs incurred to
translate and typeset packaging, warranties and owners manuals shall be
reimbursed by Distributor. The Company will invoice these charges at regular
terms as set forth in Section 5.1 with invoices to be issued as of the date of
first shipment from the factory. The Company will initiate the approval,
translation and typesetting process when Distributor places its initial order
for a model. However, it is agreed by the parties that upon receipt of the
initial order for a model, the Company shall provide Distributor with a quote
for CSA/CUL/CETL and translation/typesetting charges for said model. The
Company shall proceed with such CSA/CUL/CETL and translation/typesetting only
upon receiving Distributor's written approval by model, based on the costs
involved. Should Distributor subsequently cancel such order, the Company will
invoice Distributor for all out-of-pocket costs incurred by the Company as a
result of the cancellation.
4.3 Pricing for Distributor's purchases of Product(s) from Xxxxxxx
Canada inventory shall be quoted and invoiced in Canadian Dollars. Pricing for
Distributor's purchases of all other Product(s) from the Company and for all
other costs pursuant to the terms of this Agreement shall be quoted and invoiced
in U.S. Dollars.
5. PAYMENTS.
5.1 Payment for purchase of Product, and any other invoices covered
by this Agreement, shall be net 60 days plus interest on the outstanding amount.
The interest charged shall be calculated equal to the Company's then current
cost of funds. The Company acknowledges that, as of the Commencement Date, its
cost of funds is calculated as New York, US prime plus 1.25%. [It is agreed
that interest shall not accrue on any current amounts outstanding, and not past
due (aged less than 61 days), for the purchase of Current Inventory,
Discontinued Inventory and Close-Out Inventory as defined in this Agreement but
shall apply to such past due amounts and to the assumption by Distributor of the
production commitments, as defined in this Agreement.]
5.2 It is agreed that if at any time Distributor exceeds the credit
limit authorized by the Company, any purchases which exceed such authorized line
of credit shall be paid by cash in advance, wire transfer or letter of credit
payable 60 days from the date of shipment. In the event payment is to be made
by letter of credit, the letter of credit shall include an amount equal to the
Company's then current cost of funds for the 60-day period and must be opened in
favor of the Company no later than 30 days prior to the ship date, issued by a
major international money bank that maintains a confirmation relationship with
the Company's bank and with terms as set forth herein.
5.3 With regard to sales of Product by Distributor to customers on a
direct import basis ("DI"), Distributor shall pay for such Product by either
transferable sight letter of credit or back-to-back sight letter of credit to be
opened in favor of the Company no later than 30 days prior to the ship date,
issued by a major international money bank that maintains a confirmation
relationship with the Company's bank and with terms as set forth herein.
5.4 Payment to be made by letter of credit, shall be drawn upon terms
established by the Company from time-to-time. The Letter of Credit representing
100% of the purchase price of the Order, plus interest as set forth in Section
5.2, shall be opened in favor of the Company by Distributor as set forth above.
Failure to open the required letter of credit in a timely fashion, or the
failure of Distributor to replace such letter of credit with another acceptable
letter of credit or to prepay or pay the purchase price prior to delivery if the
issuing bank fails or is prevented or refuses to pay thereon shall be a breach
of this Agreement entitling the Company to terminate this Agreement for cause
upon notice to Distributor, as provided in Section 18.
5.5 The letters of credit opened by Distributor in favor of the
Company shall be 1) issued in United States dollars; 2) irrevocable; 3)
transferable; 4) in the form of standby, and/or master and/or documentary; 5)
issued and confirmed by a major international money center bank with
correspondent bank offices in New York City, USA, Amsterdam, The Netherlands
and/or Hong Kong, which shall be satisfactory to the Company (Distributor agrees
to pay all charges relating to the confirmation of the letters of credit and
amendments to the letters of credit arising from Distributor's action(s) or
omission(s) to act); and 6) payable to the Company according to policies and
procedures set forth by the Company from time-to-time. Each letter of credit
shall provide for payment upon terms established by the Company from time-to-
time and shall:
(a) permit partial shipments and partial drawings;
(b) permit drawings either in Hong Kong, New York,
Amsterdam or the British Virgin Islands in United States
Dollars, as provided in the letter of credit, upon presentation
of drafts accompanied by copies of the invoices and original set
of transport documents relating to the order or orders to which
the letter of credit relates;
(c) have an expiration date at least 30 days later than the
last shipment date contemplated by such Order;
(d) be subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision, English Language Edition)
published by the International Chamber of Commerce (Publication
No.:500); and
(e) shall be in the form and substance reasonably acceptable by
the Company.
5.6 Payment for Distributor's purchases of Product(s) from Xxxxxxx
Canada inventory shall be made in Canadian Dollars. Payment for Distributor's
purchases of all other Product(s) from the Company and for all other costs
pursuant to the terms of this Agreement shall be made in U.S. Dollars.
6. NEW PRODUCTS.
Company may, from time to time, in its sole discretion, make available
to Distributor a notice containing a list of a new category of products not
previously offered ("New Product(s)") and their prices, and availability data.
Should it choose to offer a New Product, the Company shall furnish Distributor
with a description of the New Product and related specifications. Distributor
shall have 30 days after receipt of such notice to advise Company in writing
whether it is interested in acquiring the exclusive distribution rights for such
New Products for the Territory pursuant to such notice; if Distributor is
interested in acquiring such distribution rights, it shall include with the
written notice of its interest a.) reasonable and realistic monthly sales
projections for the 12 month period beginning with product availability; b.) a
market study; and c.) detailed assumptions supporting the projections, all of
which must be in a form acceptable to the Company. In the event the Company
accepts the market study, related sales projections and the assumptions
underlying same, the Company shall provide Distributor with written confirmation
that the New Product is added to the list of Products set forth on Exhibit A.
Should Distributor (i) refuse such offer or (ii) fail to exercise its rights
hereunder by providing Company with written notice and an acceptable market
study, sales projection or underlying assumptions within the prescribed time
period, then, in any such event, Distributor's rights hereunder with respect to
such New Product shall be waived and Company shall be free to sell or grant
distribution rights with respect to such New Product within the Territory. It
is agreed that this Section does not apply to the natural extension of the
Product categories set forth on Exhibit A.
7. COLLATERAL MATERIAL AND SAMPLES.
7.1 Company shall supply, as the Company deems necessary, to
Distributor reasonable quantities of instruction handbooks, catalogues and other
Product information literature. Distributor shall bear the cost for shipping
such material along with the variable cost charges for additional quantities
requested. The material will be available in the English language.
7.2 Distributor shall prepare and supply, at its sole cost which
shall be nonrefundable under any circumstances, a sufficient quantity to satisfy
the needs of customers and potential customers in the Territory of sales
promotional materials, including but not limited to all advertising material,
relating to the Products. All such sales promotional materials shall not be
prepared or distributed without the Company's prior review and written approval.
7.3 Distributor shall bear all the expenses for samples that are
made available to Distributor by the Company, as well as all the expenses that
will accrue because of the arrival of the Products in the Territory including
but not limited to freight, import duties, fees and expenses, insurance, and all
expenses relating to the distribution and handling and operation of the
Distributorship.
7.4 Distributor shall maintain in current condition all sales and
service publications, with updates as appropriate, which shall be supplied by
the Company in reasonable quantities, as may be appropriate for the Territory.
It shall circulate the same to appropriate service centers and dealers in the
Territory and shall obtain any necessary confidentiality agreements in favor of
the Company as the Company may reasonably request.
8. WARRANTY, SERVICE AND PRODUCTS LIABILITY INSURANCE.
8.1 As set forth in Section 3.5 of this Agreement, the Company
guarantees that the lifetime defective return rate by Product category shall not
exceed the percentages set forth on Exhibit F.
8.2 SUBJECT TO NORMAL MANUFACTURING TOLERANCES AND VARIANCES, COMPANY
WARRANTS THAT ITS PRODUCTS WILL COMPLY IN ALL MATERIAL RESPECTS WITH THE
SPECIFICATIONS FOR SUCH PRODUCTS AS DETERMINED BY THE VENDOR SUPPLYING THE
PRODUCT TO THE COMPANY. IF THE PRODUCT FAILS TO COMPLY WITH SUCH VENDOR
SPECIFICATIONS AND THE FAILURE RATE FOR SUCH NON-COMPLYING PRODUCTS EXCEEDS THE
EPIDEMIC RATE ASSIGNED TO THE PRODUCT (SEE EXHIBIT G ATTACHED HERETO FOR
DEFINITION OF THE CURRENT EPIDEMIC RATE WHICH MAY BE AMENDED FROM TIME TO TIME
UPON NOTICE BY THE COMPANY TO THE DISTRIBUTOR) AND IF DISTRIBUTOR NOTIFIES THE
COMPANY IN WRITING WITHIN TWELVE (12) MONTHS FOLLOWING THE DATE OF ARRIVAL OF
THE PRODUCTS IN THE TERRITORY OF SUCH DEFECT, THEN THE COMPANY, AT ITS OPTION,
SHALL EITHER REPAIR OR REPLACE SUCH NON-COMPLYING PRODUCTS. SUCH REPAIR OR
REPLACEMENT SHALL BE DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY FOR SUCH FAILURE.
DISTRIBUTOR SHALL AFFORD THE COMPANY WITH A REASONABLE OPPORTUNITY TO EFFECT
REPAIR AND SHALL PROVIDE ADEQUATE POWER, TOOLS, FACILITIES AND CONDITIONS TO THE
COMPANY OR TO THE VENDOR TO THE COMPANY TO EFFECT SUCH REPAIR AT DISTRIBUTOR'S
FACILITY. FOR ANY COSTS IN EXCESS OF THE REPAIR OR REPLACEMENT OF NON-COMPLYING
PRODUCTS AS SET FORTH ABOVE, THE COMPANY AGREES TO USE BEST EFFORTS TO ASSIST
DISTRIBUTOR IN DISTRIBUTOR'S EFFORTS TO RECOVER SUCH ADDITIONAL COSTS FROM THE
MANUFACTURER.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE. EXCEPT AS STATED IN THIS PARAGRAPH, COMPANY SHALL NOT
BE LIABLE UNDER ANY THEORY INCLUDING, WITHOUT LIMITATION, CONTRACT, NEGLIGENCE,
STRICT LIABILITY IN TORT OR MISREPRESENTATION, FOR ANY DEFECT IN, BREACH OF ANY
OBLIGATION RELATED TO, THE QUALITY OF, OR FAILURE TO WARN CONCERNING, COMPANY'S
PRODUCTS OR INSTRUCTIONS, CATALOGUES OR LITERATURE RELATED TO SUCH PRODUCTS. IN
NO EVENT SHALL THE COMPANY BE LIABLE FOR ANY SPECIAL, INDIRECT OR INCIDENTAL OR
CONSEQUENTIAL DAMAGES. THE PURCHASE PRICE OF THE PRODUCTS REFLECTS THE
ALLOCATION OF THE WARRANTY RISK.
8.3 COMPANY MAKES NO WARRANTY WITH RESPECT TO PROTOTYPES, PRE-
PRODUCTION UNITS, UNITS SHIPPED AS OR LISTED AS "UNREPAIRED", "REBUILT",
"REFURBISHED", "/R", "/X", "X" OR "RB", OR UNITS SHIPPED AT CUSTOMER'S REQUEST
OR WITH NO TESTING.
8.4 Since the warranty provided by the Company hereunder is for the
sole benefit of Distributor, Distributor shall not extend the warranty and the
Company shall have no responsibility for after sale service, warranty repairs or
coverage for Products sold by Distributor except as set forth in Section 3.5.
Distributor shall provide after sale service, warranty repairs and all other
coverage, as set forth in Section 3.5, at its own cost and at no cost to the
Company. Pursuant to the terms of Section 3.5 of this Agreement, Distributor
shall be responsible for and shall indemnify, hold the Company harmless from and
against, and defend Company against, any claims for providing after sale
service, support and warranty coverage to consumers and end users in the
Territory, including any costs and expenses.
8.5 (a) Subject to the conditions in subparagraph (c) hereof and
except as hereinafter limited, Company shall defend and indemnify Distributor
from and against any liability, costs and expenses arising out of any claim that
the Product purchased hereunder infringes a patent, trademark or copyright or
other intellectual property right in Products or literature regarding the
Products which was designed and supplied by the Company provided that (i)
Distributor shall have promptly given Company timely written notice thereof and
reasonable cooperation, information, and assistance in connection therewith, and
(ii) Company shall have sole control and authority with respect to defense,
settlement, or compromise thereof. Should any Product delivered hereunder become
or in Company's opinion be likely to become the subject of such a claim, Company
may, at its option, either procure for Distributor the right to continue
selling or using such Product, or replace or modify the Product so that it
becomes non-infringing. Notwithstanding the foregoing, Company shall have no
right to admit any liability on behalf of Distributor or to create any kind of
duty, obligation or promise concerning the future sale of the Product on behalf
of Distributor without the Distributor's prior written consent, which shall
not be unreasonably withheld or delayed. However, to the extent that any
settlement, judgment or decree prohibits or restricts Company's right to sell
the goods covered hereby, it shall be released and discharged from any duty to
Distributor to supply the same.
(b) Company shall have no liability or obligation to Distributor
hereunder with respect to any patent or other intellectual property right
infringement or claim thereof based upon (i) compliance with designs, plans, or
specifications of Distributor, (ii) use of the Product in combination with
devices or products not purchased hereunder where the Product would not itself
be infringing, (iii) use of the Product in an application or environment for
which such Product was not designed or contemplated, (iv) modification of the
Product, or (v) any claims of an intellectual property right infringement in
which Distributor or any affiliate or customer of Distributor has an interest or
license.
(c) Company's liability under this Section 8.5 shall be to remit
any amounts owed to third parties pursuant to the provisions of Section 8.5 and
to reimburse Distributor for the purchase price paid by Distributor for Product
found to be infringing. Company shall not be liable to Distributor for any other
amounts including any special, incidental or consequential damages.
(d) The foregoing states the entire liability of Company with
respect to infringement of intellectual property rights by the Products,
literature or any part thereof.
8.6 Distributor shall obtain and continuously maintain, at its sole
cost and expense, product and completed operations liability insurance insuring
itself and the Company from and against any and all claims, losses, awards,
costs and other losses including, but not limited to, personal injury including
death and to property damage, including loss of use, arising out of the sale or
use of the Products. The insurance shall be in an amount of not less than the
equivalent of US $1,000,000. per occurrence or a combined single limit of US
$10,000,000. per contract year, and shall include appropriate provisions waiving
all subrogation as against the Company. All such insurance shall be written by
good and solvent insurance carriers acceptable to the Company. Distributor shall
furnish the Company with a certificate of insurance naming Company as a named
insured and pursuant to which the carrier shall agree to provide Company with 30
days' prior notification of cancellation or a change of such policy.
8.7 Except as otherwise provided in Section 8.5 of this Agreement,
Distributor agrees to indemnify, defend and hold the Company harmless from and
against any and all claims, costs, damages, expenses, judgments (including
reasonable attorneys' fees) suffered or incurred by the Company by reason of any
claim or action (whether or not groundless) arising out of Distributor's acts or
omissions or its negligence in performance of its obligations hereunder.
9. NAMES AND MARKS.
9.1 Distributor shall conduct its business in its own name and,
except as otherwise specifically provided, at its sole cost and expense.
Distributor acknowledges the validity of the Xxxx or any trademarks of the
Company (collectively, "Marks") and the exclusive title of the Company and its
affiliated companies therein and in the goodwill associated therewith.
Distributor agrees that it shall not contest, directly or indirectly, the
Company's or its affiliates' ownership, title, right or interest in the Marks or
in the names and marks appearing on the Products, trade secrets, methods,
procedures and techniques or to the right of the Company or its affiliated
companies to register, use and to license others to use the Marks or any
"Xxxxxxx" brand name, in all languages. Distributor agrees that it will not
register or attempt to register in its name or that of any person or entity
affiliated with it any name or xxxx, corporate name or any designation of any
kind, in any language, which is the same as, similar to or a derivative of, or
otherwise utilizing any portion of the Marks or trade names of the Company or of
any of its affiliates. Distributor acknowledges that it does not have and has
not acquired any rights in or to the Marks, product names, likenesses or any
derivations of the foregoing. Upon termination of this Agreement, Distributor
shall immediately cease all use of the Marks.
9.2 Distributor may indicate in its advertising that it is the
exclusive Distributor of Company's Products in the Territory, but the
Distributor shall not incorporate or form any corporation or use any name which
is the same as, or which is likely to cause confusion or mistake with, any
corporate name of Company or of any of its subsidiaries or affiliates.
9.3 The Marks designated by Company shall be displayed by the
Distributor, without alteration, on all products sold by Company for resale by
Distributor and all use of such Marks shall inure to Company's benefit.
Distributor shall not relabel Company's Products.
9.4 Any copyright which may be created in any article, design, label
or the like, bearing any trademark of Company shall be subject to the prior
approval before use, and be the property, of the Company.
9.5 Distributor shall not use any trademark, brand or trade dress
which is the same as, or which is likely to cause confusion or mistake with any
trademark, brand or trade dress of Company, except that the trademarks, brands
and/or trade dress designated by Company shall be used on products of Company.
10. DISTRIBUTOR AS INDEPENDENT CONTRACTOR.
Nothing herein contained shall authorize or empower Distributor to
act on behalf of or in the name of Company, or to bind Company in any manner or
to make any representation, warranty or commitment on Company's behalf nor is it
authorized to issue warranties on behalf of Company nor is it appointed
Company's agent in any dealings with customers, persons possessing Products,
governmental agencies or authorities, or in any other capacity. Distributor is
an independent contractor and this Agreement does not create a joint venture,
partnership or agency. Any act or omission by either party shall not bind or
obligate the other.
11. CONFIDENTIALITY.
11.1 Company may, from time to time, give Distributor valuable
technical and non-technical information not generally known to the trade or
public ("Confidential Information"). Distributor agrees that, during the term
of this Agreement and thereafter, neither it nor any of the employees or agents
of the Distributor, will disclose to anyone or use in any manner whatsoever
(except as authorized by Company) any such Confidential Information including,
without limitation, information relating to customers, products, processes and
services of Company, which becomes known to Distributor during the term of this
Agreement.
11.2 Distributor may, from time to time, give Company valuable
technical and non-technical information not generally known to the trade or
public ("Confidential Information"). Company agrees that, during the term of
this Agreement and thereafter, neither it nor any of the employees or agents of
the Company, will disclose to anyone or use in any manner whatsoever (except as
authorized by Distributor) any such Confidential Information, excluding
technical information regarding the Products, including, without limitation,
information relating to customers, products, processes and services of
Distributor, (except regarding availability of After Sales Services for the
Products to consumers therefore, as provided in this Agreement) which becomes
known to Company during the term of this Agreement.
11.3 The provisions of this Section shall not apply to any information
which either party is compelled to make by administrative or judicial process
or, in the opinion of counsel, by the requirements of law or applicable
regulations of any relevant stock exchange or other governmental authority. In
each such case, each party shall inform the other parties as far in advance as
possible prior to making any such disclosure.
12. EXCHANGE OF INFORMATION AND REPORTS.
12.1 Distributor will immediately notify the Company of, and provide
full details concerning, any condition affecting Products and/or the Xxxx or any
of the Company's trademarks (whether a general condition or a specific condition
involving a limited number of items). In the event Distributor learns of any
regulation, ordinance, law, treaty, international agreement or other
governmental act or edict, restricting, governing or controlling, in any manner,
Distributor's or Company's activities and responsibilities under this Agreement
or Company's obligations hereunder or under its guarantee, or in the event
Distributor learns of, or becomes aware of any of the foregoing which requires a
modification in any warranty, practice, procedure, document or Product,
Distributor shall, immediately, notify Company and provide Company with such
information and inform the Company of the possible infringements of the
copyright, patent or trademarks within the Territory.
12.2 The Company will immediately notify the Distributor of, and
provide full details concerning, any condition affecting Products and/or the
Xxxx or any of the Company's trademarks (whether a general condition or a
specific condition involving a limited number of items). In the event the
Company learns of any regulation, ordinance, law, treaty, international
agreement or other governmental act or edict, restricting, governing or
controlling, in any manner, Distributor's or Company's activities and
responsibilities under this Agreement or Distributor's obligations hereunder or
under its guarantee, or in the event the Company learns of, or becomes aware of
any of the foregoing which requires a modification in any warranty, practice,
procedure, document or Product, Company shall, immediately, notify the
Distributor and provide Distributor with such information and inform the
Distributor of the possible infringements of the copyright, patent or trademarks
within the Territory.
12.3 Distributor shall furnish to the Company at such intervals as
may be required by Company, reports and such other information as Company may
reasonably request, including information regarding sales of Product and return,
advertising allowance and collection data, and permit representatives of Company
to make occasional visits to Distributor's customers and facilities.
13. NON-COMPETITION.
During the term of this Agreement, and any renewals thereof, Distributor
shall not represent, sell, solicit orders for or otherwise deal in any products
directly competitive with the Products sold by Distributor in the Territory
without the prior written consent of the Company, to be given in the Company's
sole discretion.
However, it is acknowledged and agreed by the Company that Distributor
presently represents, imports, distributes, solicits orders for and sells,
certain products which may be competitive with the Products, and shall continue
to do so, which products are specifically set forth in Exhibit H of this
Agreement.
It is agreed that in the event a branded supplier of product currently
distributed by Distributor introduces new product(s) which directly compete(s)
with the Products sold by Distributor, Distributor shall be able to distribute
such new product(s).
It is further agreed that Distributor shall not distribute any new branded
product lines, from branded suppliers not currently distributed by Distributor,
which directly competes with the Products distributed by Distributor.
It is also agreed that Distributor shall not introduce, under a brand it
controls, new product(s)(other than replacements of current models) which
compete directly with the Products.
For purposes of this Agreement, products which are directly competitive
with the Products are defined as those products with similar pricing, customer
base, retailer base, quality and features.
14. ROLLING FORECASTS; MINIMUM SALES REQUIREMENTS; CURRENT/IN-TRANSIT
INVENTORY AND PRODUCTION COMMITMENTS; DISCONTINUED CLOSE-OUT
INVENTORY; EXCESSIVE INVENTORY.
14.1 ROLLING FORECASTS. On or before February 1, l997, Distributor
shall provide the Company with a forecast of the number of units of Product
which Distributor reasonably anticipates buying during the twelve (12) months
thereafter. Distributor shall regularly update the forecast and compare same to
on hand inventory to ensure a sufficient stock to meet expected demands in the
Territory and agrees to keep the forecast current on a monthly basis (which it
shall provide in writing to Company) so that at all times it represents a
rolling twelve (12) month forecast of the Distributor's needs. The parties
recognize that such forecasts are not commitments to sell or to purchase any
specific quantity of goods but are intended to represent the good faith
projection of Distributor so as to enable the Company to schedule and
anticipate its and its customer's needs.
14.2 MINIMUM SALES REQUIREMENTS. During the term of this Agreement,
Distributor shall make every good faith effort to promote and effectuate the
sales of the Products in the Territory to the greatest extent possible. There
shall be a minimum sales requirement in each year of the term for sales by
Distributor of Products as follows:
YEAR GROSS DISTRIBUTOR SALES
1/1/97 - 12/31/97 $3,000,000 Canadian
1/1/98 - 12/31/98 $5,000,000 Canadian
1/1/99 - 12/31/99 6% of the Company's Gross US sales for the
period 1/1/98-12/31/98, exchanged into
Canadian Dollars using an average exchange
rate, as defined herein.
In the event that Distributor fulfills the minimum sales requirement as set
forth herein, except as otherwise provided herein, this Agreement shall be
automatically renewed for a three (3) year term ("First Renewal Term") with a
minimum sales requirement for each year of the First Renewal Term as follows:
(a) for the first year of the First Renewal Term - 7% of the
Company's Gross US sales, to be exchanged as set forth herein, for the
immediately preceding calendar year;
(b) for the second year of the First Renewal Term - 8% of the
Company's Gross US sales, to be exchanged as set forth herein, for the
immediately preceding calendar year; and,
(c) for the third year of the First Renewal Term - 8% of the
Company's Gross US sales, to be exchanged as set forth herein, for the
immediately preceding calendar year.
Thereafter, in the event that Distributor fulfills the minimum sales
requirement for the First Renewal Term as set forth herein, except as otherwise
provided herein, this Agreement shall be automatically renewed for successive
three (3) year terms so long as, during each year of the renewal term(s),
Distributor sells quantities equal to or in excess of 8% of the Company's Gross
US sales for the calendar year immediately preceding the year in question to be
exchanged as set forth herein.
In calculating "the Company's Gross US Sales", the Company shall exclude
from any such calculation 1.) US sales of products sold in the US which products
or product categories have not been offered to Distributor for sale in the
Territory and 2.) Products or Product categories which Distributor is prevented
from selling in Canada, due to regulatory restrictions.
The Company shall provide to the Distributor the amount of the Company's
Gross US Sales in respect of any given calendar year within ninety (90) days
following such year together with the details as to how same has been computed.
The Distributor shall provide to the Company the amount of the
Distributor's Gross Distributor Sales in respect of any given calendar year
within ninety (90) days following such year together with the details as to how
same has been computed.
For purposes of this Agreement, the "average exchange rate" shall be the
average exchange rate for the calendar year in question [i.e. (sum of 12 month-
end exchange rates) divided by 12].
14.3 CURRENT AND IN-TRANSIT INVENTORY AND PRODUCTION COMMITMENTS.
(A) CURRENT INVENTORY AND IN TRANSIT INVENTORY - Xxxxxxx Canada
shall continue to own and hold title to its current inventory owned on
the Commencement Date. Title and risk of loss for any such current
inventory shall pass to Distributor on date of shipment to a customer
of Distributor and Distributor shall hold the receivable thereof.
Pricing for such current inventory shall be on standard terms at
prices calculated as set forth herein (landed cost with sourcing load
and fee). Payment for such current inventory shall be as set forth in
this Agreement.
(B) PRODUCTION COMMITMENTS - Within 30 days of the Commencement
Date, Distributor shall advise the Company which production
commitments, outstanding as of the Commencement Date, Distributor
shall assume. Pricing for any production commitments so assumed shall
be on standard terms at prices calculated as set forth herein (FOB or
landed cost, as appropriate, with sourcing load and fee). Payment for
such assumed production commitments shall be as set forth in this
Agreement.
(C) UNASSUMED PRODUCTION COMMITMENTS - The provisions set forth
in Section 14.4 of this Agreement regarding disposition of
Discontinued/Close-Out Inventory not sold by Distributor shall apply
to all production commitments not assumed by Distributor.
(D) FUTURE ORDERS FOR PRODUCTION - Distributor shall not ship any
Product model purchased from the Company until all existing Current
and In Transit Inventory owned by Xxxxxxx Canada of a given model is
sold.
14.4 DISCONTINUED/CLOSE-OUT INVENTORY. On the Commencement Date, the
Company shall provide Distributor with a list of all of Xxxxxxx Canada's
available discontinued/close-out inventory. Distributor shall have the exclusive
right to sell the discontinued/close-out inventory for 45 days from the
Commencement Date after which the Company may sell or otherwise dispose of such
inventory as it sees fit except the Company shall not sell or otherwise dispose
of such inventory in the Territory. Xxxxxxx Canada shall retain ownership and
possession of all discontinued/close-out inventory presently owned by Xxxxxxx
Canada. Title and risk of loss of such inventory shall pass to Distributor on
date of shipment to Distributor or a customer of Distributor, and Distributor
shall hold the receivable thereof. Distributor shall bear all freight costs to
the customers and sales representative commissions for such purchases and shall
be responsible for all coop advertising claims, terms discounts and all other
chargebacks or deductions taken by customers. Pricing for the discontinued/
close-out inventory shall be as follows:
Account pricing for the discontinued/close-out inventory, defined as
pricing to be offered to Distributor's customers, as has been determined by
the parties. Distributor may later propose deviations from this initial
price list which the Company may or may not, in its sole discretion,
approve. The account pricing shall be net of all co-op advertising, terms
discounts and other discounts to the accounts. Distributor shall be
responsible for building such discounts into the invoice price and for
remitting such discounts to the accounts. The Company's pricing to
Distributor shall be calculated as the account price, as defined above,
less 1% freight allowance, less 1% commission allowance, less a provision
for warranty costs for audio only, less 5% Distributor profit margin for
video product and 8% Distributor profit margin for all other product. The
provision for warranty and return costs shall be calculated as agreed to by
the parties, based on the warranty caps in Exhibit F.
Upon receiving a valid purchase order from a customer, Distributor shall
approve same and forward a copy to the Company for approval and who shall
ship the customer and xxxx Distributor, at the Distributor's price
calculated above.
14.5 EXCESSIVE INVENTORY. A-Stock inventory owned by Distributor and
purchased from the Company may be returned to and accepted by the Company should
such inventory be determined by Distributor to be excessive. Such returned
inventory shall be priced at the most recent FOB price, plus sourcing load plus
fee, less a 9.5% restocking fee to the Company and shall be delivered FOB US
warehouse designated by the Company. Return of excessive inventory shall be
limited to 5% of annual inventory purchases and with a minimum purchase volume
of 200 units per model. Such inventory must be A Stock, never have been sold by
Distributor and returned in unopened cartons. Pricing for discontinued models
returned after the model year shall be subject to an additional discount of 10%.
For purposes of this agreement, "discontinued" models and inventory shall mean
models and inventory no longer carried in the Company's current line of Products
and not purchased by Distributor for the prior six (6) months. The Company
agrees to advise Distributor in writing 30 days prior to discontinuing any
Product from its current line of Products.
Distributor agrees to provide the Company with timely monthly data on sales and
inventories by model so that the Company can track its potential exposure under
this provision.
15. ORDERS, LETTERS OF CREDIT, DELIVERY.
15.1 At periodic intervals during this Agreement, Distributor
shall submit to Company written purchase orders ("Orders") for the Products.
Such Orders shall not be deemed to be accepted by the Company until it delivers
to Distributor a Notice of Confirmation. The issuance of a Notice of
Confirmation shall be in the sole discretion of the Company. The Company may
grant partial orders. In the event Distributor cancels a purchase order after
the Company has issued a Notice of Confirmation, Distributor shall, upon
cancellation of the purchase order, immediately reimburse the Company for all
actual costs, non-recoverable from third parties, incurred as a result of such
cancellation.
15.2 If applicable, as set forth in Section 5 of this Agreement, upon
receipt of Notice of Confirmation, and 30 days prior to ship date, Distributor
shall issue a letter of credit for the full purchase price of the goods covered
by the order in form and substance, and issued by an institution, acceptable to
Company. Each Order shall specify a delivery date at least 60 days from the
date of such order.
15.3 The cost of insurance, shipping and freight shall be paid
directly by Distributor. All shipments shall be made in Company's standard
shipping packages to Distributor at the address in the Territory designated by
Distributor. Unless otherwise instructed in writing by Distributor, Company
shall select a method of conveyance conforming to the standard commercial
practices of Company for shipments. Any additional packing, handling, shipping,
consolidating and freight costs shall be borne by the Distributor.
15.4 Title to Products sold to Distributor and risk of loss shall
pass to Distributor upon delivery of the Product to the common carrier or its
designated agent. In the event of any loss of the Product following delivery to
the carrier, Company shall, upon request, cooperate with Distributor in
connection with the proof of loss claims presented by Distributor to the
carrier and/or insurer.
15.5 Distributor shall be responsible for the payment of all taxes,
duties, levies and assessments, including GST and PST, pertaining to the sale of
the Product, except taxes based upon Company's net income from the transactions.
Distributor shall be responsible for completing in a timely manner all
documentation necessary to (i) permit Company to refrain from collecting taxes
or assessments it would otherwise be obligated to collect or (ii) to assist the
Company in deriving duty drawbacks.
15.6 Delivery shall be FOB the point of embarkation or EX WORKS (as
defined by INCOTERMS 1990 Edition), as provided in the acceptance memorandum
relating to the Order. In no event, however, shall Company be liable to
Distributor for damages which directly or indirectly arise from failures
relating to canceled and/or late shipments, late sailing, failures of
consolidators or freight forwarders or handlers, or from failures to give notice
thereof.
15.7 Notwithstanding the provisions of Section 15.6 above, Distributor
shall be responsible for procuring and obtaining all necessary entrance permits
and customs declarations.
16. LOCAL COMPLIANCE
16.1 Distributor represents and warrants that it is formed under the
laws of Ontario, Canada and that (i) it is wholly-owned by Canadian citizens
and (ii) it, and each of its affiliates, where applicable, possesses all
necessary registrations, licenses and permits to engage in distribution
activities of the type contemplated by this Agreement throughout the Territory
and it, and each of its affiliates, is and during the term of this Agreement
will use its best efforts to remain in compliance with, and not knowingly
violate, all local laws, rules, ordinances and regulations throughout the
Territory relating to the activities to be performed hereunder, including those
affecting the importation, sale, servicing and marketing of Products.
16.2 In the event that a local registration is required in any region
of the Territory, Distributor undertakes that within one (1) month of the date
hereof to have this Agreement registered with the applicable local agencies and
will promptly thereafter provide the Company with a copy of the certificate
evidencing such registration.
16.3 Should this Agreement expire or be terminated in accordance with
its terms, Distributor will cooperate with the Company and any new Distributor
or agent designated by the Company to cancel such registration and/or transfer
it to the new agent or Distributor. Distributor shall, at its own cost, take
all such other action as may be necessary or appropriate for it to fully perform
this Agreement and sell the Products under the laws, rules and regulations of
each of the jurisdictions in the Territory. All such permits, licenses,
certificates, approvals, franchises and registrations shall indicate that
Company is the owner of all rights therein. Upon termination of this Agreement,
to the extent permitted by local law, all transferable permits, licenses,
certificates, approvals, franchises and registrations shall be transferred to
Company free of all manner of liens and encumbrances. The Company or its
designee shall either agree to pay all costs and expenses of such transfer or it
shall waive transfer thereof.
17. TERM; RENEWAL.
The "term" of this Agreement shall commence on the date hereof and shall
continue until December 31, 1999 ("Initial Term") renewal for additional three
(3) year periods upon Distributor fulfilling minimum sales requirements as set
forth, and on the conditions contained, in Section 14 herein.
18. TERMINATION AND EXPIRATION.
18.1 This Agreement shall expire as provided above. It may also be
terminated by the Company upon not less than ten (10) days' written notice to
Distributor upon any of the following:
(a) If there is a change in i.) the beneficial ownership of 50.1%
or more of Distributor's voting stock, based upon the ownership of Distributor's
stock as of the Commencement Date, or ii.) the direct or indirect control or
management of Distributor. Such change shall include but shall not be limited
to any sale, lease, transfer or disposal, whether by contract, will, intestacy,
or otherwise. Distributor agrees to furnish Company, at Company's request,
with the names of all persons and other legal entities having any beneficial
ownership, management or control of Distributor, as well as the exact nature of
such ownership, management or control;
(b) If in any calendar year Distributor fails to satisfy the minimum
sales requirements set forth in this Agreement for such year provided that
notice to such effect is delivered to Distributor, pursuant to the terms of this
Agreement, within thirty (30) days following receipt of information regarding
Distributor's sales in the Territory as provided in Section 14.2 of this
Agreement;
(c) If Distributor fails to open any required letter of credit in a
timely fashion, as provided in Section 5, or fails to replace such letter of
credit with another acceptable Letter of Credit or to prepay or pay the purchase
price prior to delivery if the issuing bank fails, is prevented or refuses to
pay thereon, unless cured within such ten (10) day notice period;
(d) If Distributor fails to remain in compliance with local laws,
rules and regulations throughout the Territory, in accordance with Section 16.1,
relating to the activities to be performed hereunder, or any necessary
registration, license or permit filed on Distributor's behalf in the Territory
is revoked, lapses or is otherwise no longer in effect during the term of this
Agreement, unless cured within such ten (10) day cure period.
18.2 This Agreement shall terminate immediately by its own force upon
notice from the Company upon any of the following:
a) Company ceases distributing the Product(s) under the Company
trademark;
(b) Distributor makes an assignment for the benefit of
creditors, or a public or written admission of insolvency, or a
trustee, receiver or liquidator is appointed for Distributor or for
any material or substantial part of its property or its business
relating to the distribution or sale of Products or other consumer
electronic wares;
(c) Distributor is dissolved or loses its charter by forfeiture
or otherwise, or Distributor's rights or permits to conduct any of
its businesses are suspended or revoked;
(d) Distributor (i) ceases to function as a going concern or (ii)
becomes nationalized;
(e) Any court or governmental authority or agency shall have
taken jurisdiction of the property or business of Distributor, or any
substantial part thereof, whether or not in any proceedings for the
reorganization, dissolution, liquidation, marshaling or winding up of
the Distributor;
(f) The insolvency of Distributor shall immediately terminate
this Agreement. For this purpose, insolvency shall include, but shall
not be limited to the inability of Distributor to pay its debts as
they mature, or its liabilities being in excess of the fair market
value of its assets, or such other causes as may permit Distributor
to seek relief under any insolvency laws.
18.3 In the event that Distributor shall at any time (i) commit or
allow to be committed a breach of any material obligation set forth in this
Agreement, (ii) fails to fulfill the obligations of Section 3.3 of this
Agreement, (iii) render an incorrect, material representation in connection with
the rights granted herein, (iv) commit intentional or negligent damage or omits
or fails to take steps within its power to prevent damage to the Company's
business, reputation, distribution channels or value of the Marks, (v) fail to
conduct its business ethically in accordance with reasonable commercial
practices or (vi) fail to remain in compliance with local laws, rules and
regulations throughout the Territory, in accordance with the provisions of
Section 16.1, relating to the activities to be performed hereunder or any
necessary registration, license or permit filed either on Distributor's behalf
in the Territory is revoked, lapses or is otherwise no longer in effect during
the term of this Agreement, then, in addition to the rights available under law
or in equity, the Company may, by notice in writing given to Distributor,
require such breach or event to be remedied and if such breach or event is not
remedied within thirty (30) days after the giving of such notice, the Company
shall have the right to terminate this Agreement forthwith by a further notice
in writing.
18.4 In the event that in any of the three calendar years of the term
(commencing as of January 1, l997), or any year of any renewal term thereof, the
Company loses money from purchases of Product made by Distributor pursuant to
the terms of the distribution arrangement covered by this Agreement (excluding
any purchase of the Current, In Transit, Discontinued and Close-Out Inventory as
set forth in this Agreement), the Company shall, for 90 days following the close
of the initial three-year term or of any such subsequent year, have the right to
terminate the Agreement upon 30 days written notice unless Distributor shall
guarantee that the Company shall in future years make a profit equal to at least
1% of Distributor's purchases from the distribution arrangement covered by the
terms of this Agreement, or any renewal term thereof, or reimburse the Company
for the shortfall arising therefrom. For purposes of this Agreement,
calculations of whether or not the Company is losing money shall be based solely
on the fee revenue received by the Company (not including the sourcing load) and
the costs to the Company of the Distributor's business, including costs due to
the excess warranty cost provision and the Excessive Inventory provision of this
Agreement. Direct costs shall not include arbitrary allocations of overhead, or
general office expenses such as phone, fax or travel.
18.5 Should this Agreement be terminated for any reason, or expire in
accordance with its terms, the effects of such termination or expiration shall
be governed by this Section.
(a) At the Company's option, exercised by notice to Distributor, any
orders accepted by Company from Distributor prior to the effective date of
termination pursuant to this paragraph and remaining uncompleted on such date
shall not survive such termination unless any such orders are required by
Distributor to fill existing orders.
(b) The parties will proceed in good faith to the settlement of the
operations in progress, which shall be settled within six months from the date
of termination.
(c) The Company may, but shall not be obligated to, purchase existing
inventory from Distributor at (i) Distributor's cost for factory new and
sealed cartons of merchantable Products; and (ii) salvage value for any other
Products or parts. Such right may be exercised by the Company or by its
designee by a notice given to Distributor on or before the 30th day following
the expiration or termination date. Terms shall be net 60 days for inventory
purchased by the Company under this clause. During such period, the parties
shall cooperate with the Company in valuing the inventory. However, the Company
shall not be able to purchase any existing inventory that is required by
Distributor to fill orders existing at the time of termination or expiration of
this Agreement.
(d) Following the giving of a notice of default or a notice of termination
or, if this Agreement is expiring in accordance with its terms, then during the
6 months prior to such expiration date, the Company may and shall be free to
actively seek and to retain a replacement for Distributor. The Company may
accept orders from the replacement Distributor and the replacement Distributor
may register its agreement with the local agency immediately upon the effective
date of termination or expiration.
(e) Upon the expiration or earlier termination of this Agreement,
excluding any sale of existing inventory during period for settlement of
operations in progress as provided in this Agreement and agreed to by the
parties, Distributor shall cease using the Xxxx and shall suspend all publicity
in which its name appeared linked to that of the Company or to Products.
(f) The confidentiality provisions and obligations of indemnification and
Section 9.5 of this Agreement shall survive any expiration or termination of
this Agreement. Similarly, the obligations to provide warranty service to
customers and end-users of the Product shall continue following the termination
or expiration hereof. It is understood that Distributor shall not be responsible
for warranty services for any consumer electronic product bearing the Xxxx which
is sold in the Territory by the Company or a third party after the termination
or expiration of this Agreement unless sold by or on behalf of Distributor
during any period for settlement of operations in progress as agreed to by the
parties.
(g) Distributor shall not be entitled to any indemnity or other
compensation in the event of termination, non-renewal or expiration of this
Agreement.
19. IMPOSSIBILITY OF PERFORMANCE AND FORCE MAJEURE.
19.1 Neither party shall have any liability to the other by reason of
any failure or delay in performance of any provision of this Agreement or Orders
pursuant hereto (other than the obligation to timely post a letter of credit and
to make payment for Products hereunder), if and to the extent such failure or
delay is due to any occurrence (other than financial) beyond the reasonable
control of the party failing or delaying to perform, including but not limited
to, acts of God or a public enemy, war, civil unrest, sabotage, labor disputes,
natural disasters such as storms, cyclones, earthquakes, tidal waves, floods,
destruction by lightning, explosions, fires, boycotts, transportation failure or
delays, shortages of materials, failures of suppliers, breakdowns in factories,
or the acts, rules, regulations, orders or directives of any governmental body
(including any agency or subdivision thereof).
19.2 A party seeking relief shall, as soon as practicable after the
impediment and its effects upon its ability to perform become known to it, give
notice to the other party of such impediment and its effects on its ability to
perform. Notice shall also be given when the ground for relief ceases. Upon
the giving of such notice, and during the continuance of such impediment and for
a reasonable period thereafter, this Article relieves the failing party from
damages, penalties and other contractual sanctions, except from duty to pay
interest on money owing and the duty to amend and keep open letters of credit
relating to payment for Products for a period expiring not sooner than 30 days
from the date of shipment of the Products affected by the impediment.
19.3 If the impediment shall continue for a period in excess of 90
days, then either party may terminate the affected Order or this Agreement, in
total.
20. INTERPRETATION AND GOVERNING LAW. All questions relating to the
validity, interpretation, performance or breach of this Agreement, including
without limitation all claims and damages, shall be determined in accordance
with the law of the State of New Jersey, USA, applicable to agreements made in,
and to be fully performed in, that jurisdiction. THE 1980 UNITED NATIONS
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO
THIS AGREEMENT OR TO THE DUTIES OR OBLIGATIONS OF THE PARTIES HEREUNDER.
21. MISCELLANEOUS.
21.1 Waiver of Rights. The waiver or the failure by Company or
Distributor to claim a breach of any provision of this Agreement shall not
constitute a waiver of any subsequent breach or affect in any way the
effectiveness of such provisions.
21.2 Assignment. Distributor shall not assign this Agreement or any
right granted hereunder to any individual or entity without the prior written
consent of the Company. Distributor may not delegate any duty hereunder without
the prior written consent of the Company in each instance. For purposes of this
agreement, the terms "assign" and "assignment" shall be deemed to include all
transfers of control of Distributor, whether accomplished by means of a
transfer of equity, voting trust, merger, consolidation, amalgamation,
combination, reorganization or other means.
21.3 General Standards of Conduct. Distributor shall deal fairly and
honestly with the public, comply at all times, with all international, national,
state, provincial, county, city and other local laws, regulations and
ordinances. Distributor warrants that it has not, and covenants that it shall
not, directly or indirectly, make any loans or gifts or any thing of value to or
for the benefit of the following persons/entities if it would violate United
States or local law: (i) any government employee or official; (ii) any
political party, faction or candidate for office; (iii) any other person if
Distributor has reason to know that any part thereof would go to anyone
mentioned above,; or (iv) to any other person or entity to whom a payment or
gift would violate the laws or policies of the United States or of the
jurisdiction to whose authority such person or entity is subject.
21.4 Subdistributorships. Distributor shall not create any
subdistributorships, agencies, participations, joint ventures, rights, or other
similar arrangements delegating its duties hereunder or otherwise dealing with
the sale, repair, import, export, service or promotion of Products without the
prior written consent of the Company in each instance. It is agreed that
Distributor shall be permitted to sell Product(s) to regional distributors in
the Territory subject to the prior written consent of the Company.
21.5 Entire Agreement. This Agreement and the accompanying Exhibits,
and the terms of the Confidentiality Agreement letter dated June 19, 1996, the
terms of which are incorporated herein, sets forth the entire agreement and
understanding between the parties relating to the subject matter contained
herein, any course of prior dealings or usage of the trade notwithstanding,
supersedes all other agreements, oral or written, heretofore made between the
parties and supersedes any standard terms and conditions of purchase and any
standard terms and conditions of sale of purchaser and seller, respectively,
whether on purchase orders, confirmations or any other document exchanged
between them. Any amendment or additions to this Agreement shall be in writing
and signed by an authorized officer or agent of Company and Distributor. The
terms and conditions herein shall supersede any inconsistent provisions in
Company's or Distributor's orders, confirmations or other documentation. No
additional terms may be added and no terms may be deleted from this Agreement
unless the same is reflected in a writing referring to this Agreement which is
executed by both parties.
21.6 Notices. All notices required or given in connection with this
Agreement shall be in writing and shall be delivered by hand, facsimile, telex,
over night delivery service, or by registered mail, return receipt requested, to
the other party at the address set forth on page one of this Agreement, or to
such other address as a party may designate by written notice. Notice by hand
delivery, facsimile, telex, or overnight delivery service shall be effective
upon receipt. Notice by registered mail shall be deemed to have been given seven
(7) days after posting.
21.7 LAW; JURISDICTION. This Agreement shall be deemed to have been
made, executed and delivered in and shall be governed by and enforced in
accordance with the laws of, the State of New Jersey, United States of America.
Any controversy or claim arising out of or relating to this contract, or the
breach thereof, shall be governed by and enforced in accordance with the laws of
the State of New Jersey regardless of the choice of law rules and conflict of
law principles. Any dispute arising as to the legal nature of this Agreement
shall be settled in the courts of the State of New Jersey, in Xxxxxx County,
which shall have exclusive jurisdiction over all controversies that may arise
under or in relation to this Agreement, especially with respect to its validity,
execution, interpretation, enforcement, or compliance, the parties hereby
consenting to service, jurisdiction, and venue of such courts for any litigation
arising from this Agreement, and waiving any other venue to which they may be
entitled to by virtue of domicile, residence, or otherwise.
21.8 SEVERABILITY AND HEADINGS. IF AND TO EXTENT THAT ANY PROVISION OF
THIS AGREEMENT SHALL BE DETERMINED BY ANY LEGISLATURE OR COURT TO BE IN WHOLE OR
IN PART INVALID OR UNENFORCEABLE, SUCH PROVISION OR PART THEREOF SHALL BE DEEMED
TO BE SURPLUSAGE AND, TO THE EXTENT NOT SO DETERMINED TO BE INVALID OR
UNENFORCEABLE, EACH PROVISION HEREOF SHALL REMAIN IN FULL FORCE AND EFFECT. THE
HEADINGS TO THE PARAGRAPHS OF THIS AGREEMENT ARE INCLUDED MERELY FOR CONVENIENCE
OF REFERENCE AND SHALL NOT AFFECT THE MEANING OF THE LANGUAGE INCLUDED THEREIN.
21.9 SAVINGS CLAUSE. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
21.10 TIME PERIODS. The time periods referred to in this Agreement
will be calculated in accordance with the Gregorian Calendar.
21.11 ENGLISH LANGUAGE. The parties have requested that this
Agreement be drawn up in the English language; les parties ont demande que cette
entente et les documents accessoires soient redigees en langue anglaise.
21.12 EXECUTION OF AGREEMENT. The parties agree that this Agreement
may be executed in any number of counterparts and by facsimile(s), which
counterparts and facsimile(s) together shall constitute one agreement.
22. COLLECTION OF ACCOUNTS RECEIVABLE.
Distributor agrees to collect the Company's outstanding accounts
receivable. Distributor shall receive a fee for such services in the amount of
2.5% for cash collected for all receivables which are current or less than 31
days overdue as of the Commencement Date and 5% for cash collected for all other
receivables. Distributor shall have customers remit the collected accounts
receivable directly to the Company's designated lock box and the Company shall,
within thirty days after the close of each month, remit to Distributor the
applicable commissions as set forth herein. [It is agreed and understood that
Distributor shall make all reasonable efforts to collect the Company's
outstanding accounts receivable in Distributor's normal course of business.
Distributor is not required to initiate legal proceedings against any customer
to collect outstanding overdue accounts receivable and Distributor is not
responsible for the failure to collect from any account. Distributor's services
hereunder are nonexclusive.] The provisions herein are not applicable to the
Distributor accounts receivable, Venator accounts receivable and Xxxxxxx -
Xxxxxxx HK - Xxxxxxx Canada intercompany accounts receivable, which accounts
receivable are excluded. The Company shall provide Distributor with weekly cash
receipts data.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
XXXXXXX RADIO CORP.
(SEAL) BY: /s/ Xxxxxx X. Xxxxx
(NAME)
Xxxxxx X. Xxxxx, President
Print Name and Title
XXXXXXX RADIO CANADA LTD.
(SEAL) BY: /s/ Xxxxxx X. Xxxxx
(NAME)
Xxxxxx X. Xxxxx, President
Print Name and Title
AVS TECHNOLOGIES, INC.
(SEAL) BY: /s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx, President
Print Name and Title
BY: /s/ Xxxxxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx, EVP
Print Name and Title
SCHEDULE OF EXHIBITS
Exhibit A Products
Exhibit B Marks
Exhibit C Territory
Exhibit D Customer Classifications
Exhibit E Customer Exclusions
Exhibit F Guaranteed Cap For Defective Returns
Exhibit G Epidemic Failure
Exhibit H Competitive Products
EXHIBIT A
PRODUCTS
Color televisions
Black & White televisions
Video Cassette Recorders and Players
TV/VCR Combination Units
Portable and Clock Radios
Radio/Cassette/CD Players
Audio Systems
Microwave Ovens
Car Audio
Security Products
Home Theater Products
Clocks
ALL PRODUCTS SHALL BE A STOCK PRODUCTS ONLY
For purposes of this Agreement, "A Stock Product" shall be defined as new
product (manufactured of new material and parts and not repaired, remanufactured
or rebuilt), which has not been subjected to use after original manufacture.
Products shall also be defined as including consumer electronic products not
defined herein which the Company may introduce in the future to be sold with the
Xxxxxxx Trademark as defined herein and which are reasonably interpreted as
natural extensions of the Product categories specifically defined herein.
This Agreement does not and shall not be interpreted as appointing Distributor
as the exclusive distributor for any Products other than the consumer
electronics products and any extensions thereof, as set forth herein. With
regard to any product lines which the Company may introduce which are not
consumer electronic products and/or any natural extensions thereof, as set forth
herein, the Company may in its sole discretion, but is not obligated to, offer
such lines to Distributor for sales in the Territory pursuant to Section 6 of
this Agreement.
EXHIBIT B
XXXXX
Xxxxxxx with G-Clef
EXHIBIT C
TERRITORY
Canada, as such country is known as of the Commencement Date.
EXHIBIT D
CUSTOMER CLASSIFICATIONS
All customers except those specifically excluded in Exhibit E.
EXHIBIT E
CUSTOMER EXCLUSIONS
1. Sales of video Products to Wal-Mart Canada, which sales are covered by that
certain License Agreement entered into by Xxxxxxx and a Supplier regarding sales
of such video Products. In the event such video Products become no longer
covered by the provisions of that certain License Agreement, or any renewals or
extensions thereof, then AVS shall be permitted to sell video Products to Wal-
Mart Canada pursuant to the provisions of this Agreement.
2. AVS shall not sell Products to Future Shop Ltd. or its subsidiaries or
affiliates ("Future Shop Ltd.") which Products knowingly are to be shipped to
the Future Shop Ltd. locations in the US. Xxxxxxx shall not sell Products to
Future Shop Ltd. locations in the US which Products knowingly are to be shipped
to the Future Shop Ltd. locations in Canada.
3. AVS shall not knowingly sell product to any customer who will transship
such product out of Canada. Xxxxxxx shall not knowingly sell product to any
customer who will transship into Canada.
EXHIBIT F
GUARANTEED CAP FOR DEFECTIVE RETURNS
GUARANTEED CAP (NOT
PRODUCT CATEGORY GREATER THAN)
Audio I (Portable Radios) 7%
Audio II (Clock Radios) 7%
Audio III (Personal Stereos) 7%
Audio IV (Personal CDs) 17%
Audio V (Portable Radio/Cassettes) 7%
Audio VI (Portable CD/Radios) 15%
Audio VII (Non-CD Shelf Systems) 7%
Audio VIII (CD Shelf Systems) 12%
TV I (Under 13" Color TVs) 12%
All Other TVs 6%
VCRs 12%
Microwave Ovens 6%
Home Theater 10%
Car Stereos 20%
Clocks 5%
Security Products 10%
(Home Security: CO Detector
Personal Security: Personal Alarm; Safety Light with Motion Detector;
Door/Window Alarm; Motion Detector; Door/Window Alarm
with Booster Siren; Motion Detector with Booster Siren)
EXHIBIT G
EPIDEMIC FAILURE
An epidemic failure occurs when there is a failure of more than 2.5% of
mechanical, electrical or cosmetic components, as defined below, in a Product
lot.
1. Mechanical components shall include, but shall not be limited to: motors,
cassette decks, cd decks, video decks, connectors, disk drives, switches, tape
drives, relays, condenser canisters, etc. Electrical components shall include,
but shall not be limited to: semi-conductors (ICs, memories, transistors,
diodes, computer chips, etc.), CRT, LCD, LED, FLD, transformers, capacitors,
resistors, printed circuit boards, rectifiers, solenoids, logic circuits,
sockets, pickups, power supplies, etc. Cosmetic components and critical defects
shall include, but shall be limited to: cabinet, panel, overlay, door, cover,
knob, labels, fit, finish, color, etc.
2. Epidemic failure means that the same parts or type of parts or assemblies
applied to the same circuitry of the purchased products have the same or similar
nature of defects or failures or failures or defects of a related kind or
nature.
EXHIBIT H
COMPETITIVE PRODUCTS
BRAND MODEL DESCRIPTION
NIKKO NHT2500 Home theatre system with 6 speakers
(registered xxxx) and Dolby (registered xxxx) Pro Logic Amplifier
NHT1000 5 speakers and surround amplifier
built into TV/VCR stand
NHT2000 5 speakers and surround amplifier
built into TV/VCR stand
NHT3000 6 speakers and Pro Logic amplifier
built into TV/VCR stand
Eversafe MAA2 Motion activated alarm
(regis- WEA2 Door/window alarm
tered MAL2 Motion activated light/alarm
xxxx) MWA1 Window Alarm
