EXHIBIT 10.10
EXCLUSIVE
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DISTRIBUTION AGREEMENT
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This Distribution Agreement is made and entered into as of this 29th
day of December, 1995, by and between HOME ARCADE SYSTEMS, INC., a California
corporation ("Home Arcade"), and SC&T2 INTERNATIONAL, INC., an Arizona
corporation ("SC&T").
RECITALS
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A. Home Arcade manufactures and sells products. Home Arcade's products
include a steering wheel for use on video arcade games. The steering wheels, as
well as any modifications thereto, are hereinafter referred to as the
"Products."
B. Home Arcade desires to engage SC&T as the exclusive distributor of
the Products to customers throughout the Territory, as hereinafter defined.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Appointment of SC&T. Subject to and in accordance with the terms and
conditions of this Agreement, Home Arcade appoints SC&T as the sole exclusive
distributor of the Products for Home Arcade in the Territory during the term of
this Agreement, and SC&T accepts such appointment and agrees to act as the
exclusive distributor of the Products in the Territory.
2. Territory. SC&T's area of responsibility shall be the territory
described in Schedule A attached hereto (the "Territory"). Home Arcade will
promptly forward to SC&T all leads and inquiries, from and subsequent to
December 15, 1995, with respect to the Products received by Home Arcade from
entities located in the Territory including, without limitation, prior customers
of Home Arcade.
3. Ordering Procedures. All orders of the Products pursuant to this
Agreement shall be subject to the terms and conditions set forth in this
Agreement, notwithstanding the terms specified in any purchase order. Whenever
SC&T desires to purchase any of the Products, it shall give to Home Arcade, at
least 15 days prior to the desired shipping date of such Products, a signed
written purchase order specifying the quantities and product numbers of the
Products desires to be purchased and, in the case of any Products to be shipped
directly to any customer of SC&T, the name and a shipping address of such
customer and the name and telephone number of a contact person at such customer.
Orders shall be deemed to be accepted by Home Arcade upon receipt unless, within
48 hours after receipt of an order, Home Arcade gives SC&T written notice of
non-acceptance.
4. Purchase Price. The initial purchase price for each unit of any
Product shall be the per unit purchase price for that product set forth on
Schedule B attached hereto, as amended or superseded from time to time as
provided herein. Home Arcade shall decrease the respective per unit purchase
prices for any or all Products as manufacturing costs drop so as to maintain the
gross profit margins of both SC&T and Home Arcade by written notice to SC&T.
Home Arcade may increase prices only if the direct cost of materials or
construction increase, in which case Home Arcade shall give SC&T at least 90
days' prior written notice of all price increases. The parties shall review
prices of Products approximately every 90 days during the term of this
agreement, in good faith, to ensure the prices remain proportionate to gross
profit margins received by SC&T and Home Arcade. SC&T's price for any Product
shall be the lower of the price on the date Home Arcade receives the order for
that Product, or the date the Product is shipped.
5. Pricing and Responsibility for Costs. All prices for the Products to
be sold hereunder are and shall be prices F.O.B. to SC&T's facility in Phoenix,
Arizona (the "Facility"). Products will be shipped in full truckload quantities
unless Home Arcade does not have products sufficient to meet such requirement
which will cause a partial shipment to be made to meet SC&T's order
requirements. The F.O.B. prices shall be determined in accordance with the
provisions of Section 4 hereof. All Products shall be packaged by Home Arcade as
necessary for protection against normal handling. In the absence of a separate
"ship to" designation on an acknowledgment of Home Arcade of a purchase order,
Home Arcade is authorized to ship the order to SC&T at SC&T's address. With
respect to any Products shipped to any addresses other than the Facility, SC&T
shall be responsible for (or shall receive a credit for, as the applicable case
may be) the difference in freight costs, actually incurred and the cost to ship
the same Products to the Facility. Upon each shipment of the Products, Home
Arcade shall notify SC&T of the shipment within 24 hours after shipment.
6. Payment of Home Arcade. Except as otherwise expressly agreed in
writing by Home Arcade, payment for the Products shall be made in United States
dollars in an amount adequate to cover the full purchase price plus all other
charges, if any, incurred by Home Arcade for the account of SC&T, and shall be
due and payable within 30 days after the shipping date of such Products.
7. Warranty. Home Arcade warrants that for the period of 12 months
after delivery of the Products (the "Warranty Period"), the Products (a) will,
when delivered, conform to the description on the face of SC&T's purchase order
relating to such Products, and (b) will be free of defects in design, materials
and workmanship. Home Arcade shall, at SC&T's option, replace (F.O.B. the
Facility), or issue a credit or refund to SC&T for, any nonconforming Products,
provided that both (i) SC&T furnishes to Home Arcade written notice, in
reasonable detail, of the nonconformity of the Products within the Warranty
Period, and (ii) if Home Arcade requests, SC&T delivers the Products claimed to
be nonconforming to Home Arcade, within 20 days after the notification by SC&T
pursuant to subsection (i) above. A new Warranty period shall be established
pursuant to this Section for any replaced products. This warranty shall extend
to SC&T's customers.
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8. Duties of SC&T. Home Arcade shall exercise no control over the
management and operation of SC&T, and, except as otherwise set forth herein,
SC&T shall have full discretion as to the price charged, marketing techniques
used, resale, method of payment accepted and all other facets of its
distribution business, including, without limitation, the selection and control
of any persons or entities through which it may elect to conduct sales.
9. Representations and Warranties of SC&T. SC&T represents, warrants
and agrees that it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona, with the full right, power and
authority, corporate or otherwise, to purchase, own and sell the products and to
carry on its business as it is now being conducted and as intended to be
conducted in accordance with this Agreement. The execution and delivery of this
Agreement, the timely consummation of the transactions contemplated hereby and
the full and timely fulfillment of the terms hereof have been duly and validly
authorized by all necessary action on the part of SC&T, and this Agreement
constitutes the legal, valid and binding obligation of SC&T, enforceable against
SC&T in accordance with its terms.
10. Representations and Warranties of Home Arcade. Home Arcade
represents, warrants and agrees that it is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, with
the full right, power and authority, corporate or otherwise, to sell and own the
Products and to carry on its business as it is now being conducted and as
intended to be conducted in accordance with this Agreement. The execution and
delivery of this Agreement, the timely consummation of the transactions
contemplated hereby and the full and timely fulfillment of the terms hereof have
been duly and validly authorized by all necessary action on the part of Home
Arcade, and this Agreement constitutes the legal, valid and binding obligation
of Home Arcade, enforceable against Home Arcade in accordance with its terms.
11. Assurance of Home Arcade. Home Arcade shall use its best efforts to
manufacture, sell and deliver the Products to SC&T in sufficient quantities to
meet the requirements of SC&T, provided, however, that Home Arcade shall be
excused for any failure to satisfy such requirements of SC&T in the event of any
force majeure or the effects thereof, pursuant to Section 22 hereof.
12. Technical Support. Home Arcade shall provide to SC&T technical
support with respect to the Products. SC&T shall provide, by telephone, during
SC&T's normal working hours, reasonable technical support to its customers.
13. Trademarks, Trade Names and Corporate Names. The use of any party's
trademarks, symbols, trade names, corporate names or other intellectual property
rights by the other party shall inure to owner's benefit and shall not give the
other party any proprietary rights therein.
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14. Nondisclosure and Limited Use of Confidential or Proprietary
Information. Each party shall refrain from disclosing to any third parties, or
using for any purpose, any operating, product marketing or sales management
information or other confidential or proprietary information, including, without
limitation, information as to the other party's customers, obtained from the
other party pursuant to this Agreement or the relationship established
hereunder; and each party shall cause its employees and agents to refrain from
disclosing to any third parties, or using for any purpose, any such confidential
or proprietary information. Each party shall limit its use of such confidential
or proprietary information received hereunder to the purposes of this Agreement.
Notwithstanding anything to the contrary contained herein, SC&T shall be
entitled to solicit any customers for the Products for sale of any other product
produced or distributed by SC&T.
15. Advertising and Promotion. SC&T shall not publish or permit to be
published any advertising relating to the Products that is likely to mislead or
deceive the public or to impair the goodwill of Home Arcade the reputation of
the Products. Nonetheless, SC&T shall have the right to advertise and to promote
the Products by any reasonable means including telephone, mail, newspaper,
magazine, radio and television. Home Arcade has prepared and expects to continue
to develop certain sales materials regarding the Products, and shall, from time
to time, make these materials available to SC&T. If SC&T uses Home Arcade's
sales materials, it shall do so only in connection with sales of the Products
and upon the termination of this Agreement shall promptly cease using the same
and shall immediately return to Home Arcade any and all such sales materials
(including all copies thereof and excerpts therefrom). From time to time Home
Arcade may elect to participate in certain advertising and/or promotional costs
if agreed to between the parties.
16. Packaging. Between the effective date of this Agreement and the
date when Home Arcade's existing packaging is depleted, Home Arcade shall put a
sticker on the packaging of all Products stating that Home Arcade Products are
exclusively distributed in the United States, Canada and Europe by SC&T2
International, Inc. Such sticker shall also include SC&T's Arizona and Belgium
phone numbers and all addresses. Stickers for existing packaging will be
supplied by SC&T. All new packaging ordered by Home Arcade shall include on it
such information in a prominent place.
17. Publicity. Home Arcade shall not issue any press release or make
any public statement regarding the transactions contemplated hereby, including
but not limited to a press release or public statement announcing the execution
of this Agreement or any orders of Product hereunder, without the prior written
approval of SC&T.
18. Projections. SC&T makes no, and shall make no projections with
respect to the sales of the Products. No orders or statements by SC&T shall be
deemed to constitute a projection.
19. Term of Agreement. The term of this Agreement shall commence on the
date first above written and shall continue until January 1, 1998 and for
another two year term thereafter unless terminated sooner in accordance with the
provisions hereof.
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20. Termination
(a) Either party may terminate this Agreement with appropriate
cause upon 45 days prior written notice to the other.
(b) If either party fails to perform any of its obligations to
timely pay or ship under this Agreement, the other party may defer payments,
shipments or receipt of deliveries until the default is cured. If the default is
not cured within 30 days after the giving of written notice thereof to the
defaulting party, at the option of the nondefaulting party, this Agreement shall
terminate at the end of the 30 day period.
(c) If either party hereto becomes or is adjudicated insolvent
or bankrupt, or if a receiver or trustee is appointed for a party or its
property, or if a petition for reorganization or arrangement under any
bankruptcy or insolvency law regarding a party is approved, or if any assignment
is made for the benefit of a party's creditors, or if a party files a voluntary
petition in bankruptcy or a petition or answer seeking to take advantage of any
insolvency or bankruptcy law, then, in addition to such other remedies as may be
available in law or equity, the other party shall have the right to terminate
this Agreement on five days' prior notice.
(d) Notwithstanding any other provisions in this Agreement,
for a period of six months following the termination of this Agreement for any
reason whatsoever, other than a termination by Home Arcade pursuant to
subsection (c) above, Home Arcade shall pay to SC&T, within 30 days after the
shipment of any Products to any entity to which SC&T had sold Product during the
term of this Agreement as it may have been extended from time to time, whether
on a wholesale or retail basis, an amount per Product equal to the average gross
profit for such Product earned by SC&T during the three month period immediately
prior to the effective date of termination for all sales of such Product.
21. Post-Termination Deliveries and Repurchases. Within 30 days after
the termination of this Agreement, SC&T at its option, may sell to Home Arcade,
and Home Arcade may repurchase, any or all of the Products in SC&T's possession
that SC&T has not previously contracted to sell to a third party or have been
returned (including, without limitation, RMA returns). If SC&T elects to sell
any or all of such Products to Home Arcade, Home Arcade shall pay to SC&T,
SC&T's purchase price for the Products repurchased by Home Arcade, less any
monies due to Home Arcade under this Agreement.
22. Force Majeure. Neither SC&T nor Home Arcade shall be responsible
for any loss or damage resulting from any delay or failure in performing any
provision of this Agreement if the delay or failure results from: (1)
transportation shortages, inadequate supply of labor, material or energy, or the
voluntary foregoing of the right to acquire or use of any of the foregoing in
order to accommodate or comply with the orders, requests, regulations,
recommendations or instructions of any government or any department or agency
there; (2) compliance with any law, ruling, order, regulation, requirement or
instruction of any government or any department or agency thereof; (3) acts of
God; or (4) fires, strikes, labor
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troubles, embargoes, war or riot. Any delay resulting from any of such causes
shall extend performance accordingly or excuse performance in whole or in part,
as may be necessary.
23. Independent Contractor. SC&T and Home Arcade each acknowledges and
agrees that SC&T is an independent contractor and that under this Agreement
neither SC&T nor Home Arcade shall be considered for any purpose to be the
agent, partner, franchisor, franchisee or joint venturer of the other. Nor shall
Home Arcade or SC&T have any obligation or responsibility to act on behalf of or
in the name of the other, or the power or authority to bind the other in any
manner whatsoever. Any representation to the contrary by SC&T or by Home Arcade,
or the employees or agents of either, shall be sufficient grounds for the
termination of this Agreement.
24. Indemnification. Each party hereto shall indemnify, defend and hold
the other, its officers, directors, shareholders, employees, agents and
representatives harmless for, from and against any claims, losses, costs,
damages, expenses or liabilities to third parties, including, without
limitation, any governmental agencies (including, without limitation, reasonable
attorneys' fees) arising out of or resulting from the performance or
nonperformance by the indemnifying party of any obligation or agreement of the
indemnifying party under this Agreement, or any misrepresentation or a breach of
warranty made in this Agreement, or in connection with the performance of its
duties hereunder, by the indemnifying party, whether intentional or
unintentional. In addition, Home Arcade shall indemnify, defend and hold SC&T
and its officers, directors, shareholders, employees, agents and representatives
harmless for, from and against any claims, losses, costs, damages, expenses or
liabilities to third parties, including, without limitation, any governmental
agencies (including, without limitation, reasonable attorneys' fees) arising out
of or resulting from the Products, including any product liability or warranty
claims, etc. Notwithstanding anything contained herein to the contrary, this
indemnification shall survive the termination of this Agreement.
25. Insurance. During the term of this Agreement and any extensions
thereof, Home Arcade shall obtain and maintain general liability and products
liability insurance from an insurance company reasonably, satisfactory to SC&T
in amounts reasonably satisfactory to SC&T, but in no event less than an
aggregate amount of $1,000,000. Upon the request of SC&T, Home Arcade shall
promptly provide SC&T with a certificate of insurance. SC&T shall be a named
insured on all such insurance policies of Home Arcade, and each such insurance
policy shall require the insurer to give SC&T 30 days written notice prior to
cancelling the policy. Any insurance premiums paid by SC&T on behalf of Home
Arcade shall be immediately reimbursed by Home Arcade to SC&T at 110% of the
amount paid by SC&T.
26. Right of First Refusal.
(a) In the event that Home Arcade should develop any products
in addition to the Products, prior to granting any distribution rights to any
third party or parties, Home Arcade shall offer the distribution rights to SC&T.
In the event that SC&T rejects the
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terms of distribution offered by Home Arcade, prior to entering into any sales,
marketing, licensing, or distribution arrangement with any third party or
parties, Home Arcade shall deliver to SC&T a bona fide written offer from such
third party or parties to enter into any such sales marketing, licensing, or
distribution arrangement. Thereafter, SC&T shall have 30 days to advise Home
Arcade, in writing, that it, or its designee, shall enter into such arrangement
for the same price and on the same terms as set forth in the offer.
(b) Prior to selling all or substantially all of the stock or
assets of Home Arcade to a third party or parties, Home Arcade shall, or shall
cause its shareholders, to deliver to SC&T a bona fide written offer from such
third party or parties. Thereafter, SC&T shall have 30 days to advise Home
Arcade, in writing, that it, or its designee shall purchase the stock or assets,
as the case may be, for the same price and on the same terms as set forth in the
offer.
27. General Provisions
(a) Further Assurances. Each of the parties hereto shall
execute and deliver all such other instruments and take all such actions as
either party may reasonably request from time to time in order to effectuate the
purposes of this Agreement and the transactions provided for herein.
(b) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered
against receipt, or twelve hours after being sent by fax, or 5 days after being
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed to the recipient's address as set forth below:
SC&T(2) International, Inc.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Attention: President
Home Arcade Systems, Inc.
00000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: President
Either party may alter the address to which communications are to be sent by
giving notice of the change of address in conformity with the provisions of this
paragraph for the giving of notice.
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(c) Binding Nature of Agreement; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and except
for any assignments by SC&T to related entities, or through a merger or
acquisition of SC&T, shall not be assigned by either party without the prior
written consent of the other.
(d) Entire Agreement; Amendment. This Agreement contains the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof, and supersedes and is in lieu of all prior and
contemporaneous agreements, understandings, inducements and conditions, express
or implied, oral or written, of any nature whatsoever with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance or usage of the trade inconsistent with any of the terms hereof.
(e) Controlling Law; Exclusive Jurisdiction and Venue. This
Agreement and all questions relating to its validity, interpretation,
performance and enforcement, shall be governed by and construed, interpreted and
enforced in accordance with the law of the state of Arizona, notwithstanding any
Arizona or other conflict-of-laws provisions to the contrary. The parties agree
that any action brought by either party against the other arising out of or in
connection with this Agreement, or the rights or obligations hereunder shall be
instituted properly in a United States Federal Court or State Court of competent
jurisdiction with venue only in the County of Maricopa, State of Arizona, or in
the Federal District Court of Arizona, and each party agrees to submit
personally to the jurisdiction thereof.
(f) Indulgences Not Waivers. Neither the failure not any delay
on the party of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(g) Provisions Severable. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(h) Numbers of Days. In computing the numbers of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays in the State of Arizona; provided, however, that if the
final day of any time period falls on a Saturday, Sunday or holiday, then the
final day shall be deemed to be the first day that is not a Saturday, Sunday or
holiday.
(i) Construction. The parties hereto acknowledge and agree
that each party has participated in the drafting of this Agreement and has had
the opportunity to
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have this document reviewed by the respective legal counsel for the parties
hereto and that the rule of construction to the effect that any ambiguities are
to be resolved against the drafting party will not be applied to the
interpretation of this Agreement. No inference in favor of, or against any party
shall be drawn from the fact that one party has drafted any portion hereof.
(j) Amendment. This Agreement may only be amended or modified
by written agreement signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their proper and duly authorized officers as of the
date first above written.
SC&T(2) INTERNATIONAL, INC.
By: (Signature not legible)
Its: Vice President of Finance
HOME ARCADE SYSTEMS, INC.
By: (Signature not legible)
Its: President
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SCHEDULE A
TERRITORY
The Territory shall include the United States and all of its
territories and possessions, Canada and Europe. In addition, SC&T shall be the
exclusive distributor of the Products to all entities that intend to use or sell
any of the Products in the Territory and any other territories that may be
agreed upon by the parties during the term of this Agreement including any
extensions thereof.
Home Arcade shall, by written notice, grant to SC&T the right of first
refusal to enter into an exclusive distribution agreement in any country or
territory not included above that SC&T has established a distribution base, as
agreed by both parties, sufficient to properly distribute products to that
market prior to granting any entity other than SC&T the right to distribute said
products. The terms and conditions will be substantially similar to the terms
and conditions agreed to by Home Arcade and the third party entity.
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SCHEDULE B
PURCHASE PRICES
SC&T pricing schedule:
Product Per Unit Pricing*
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SEGA $35.50
SNES $35.50
PCIBM $35.50
SONY To be determined
*Prices subject to adjustment pursuant to paragraph 4 of this Agreement.
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