EXHIBIT 10.13
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EQUIPMENT SALE & NETWORK SERVICE AGREEMENT
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This Equipment Sale & Network Service Agreement ("Agreement") is dated this
27th day of October, 2000, and entered into by and between Xxxxxxx.xxx, Inc., a
California corporation doing business as Zapdisc ("Manufacturer") and Enter Tech
Corporation, a Nevada corporation("ETC") with reference with the following facts
ZapDisc and ETC are sometimes referred to hereafter as the "Party" or
collectively as the "Parties".
RECITALS
WHEREAS, Manufacturer owns certain patented technology for the distribution
of digital products and is willing to sell certain equipment, license certain
technology and provide certain networking services as more particularized below,
WHEREAS, ETC desires to purchase Manufacturer's equipment, license certain
technology to be networked and serviced in accordance with the terms herein,
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto, intending to be legally bound, agree as follows:
1.0 DEFINITIONS. For purposes of this Agreement:
1.1 DVM. "DVM" shall mean Manufacturer's digital vending machine which
consists of a fully automated kiosk which can deliver digital products
in the form of custom music CDs.
1.2 Territory. "Territory" shall consist of the United States unless
otherwise mutually agreed to by the Parties hereto in writing.
1.3 Customers. "Customers" shall mean the purchasers of any custom music
CDs created by Manufacturer's DVMs.
1.4 Delivery Period. The "Delivery Period" for each DVM is the period
commencing on the first date Manufacturer receives an order and
payment for the purchase for each DVM consistent with the process set
forth in Paragraph 3.0 below and ending one (1) year from the date of
Manufacturer's receipt of each order.
1.5 Software. "Software" shall mean Manufacturer's propriety computer
programming and code which enables the DVMs to operate as well as the
proprietary interface with the Network.
1.6 Network. The "Network" consists of the database of digital content
stored on the DVMs and the servers located at Manufacturer's
facilities as well as the interface by which digital data may be
transmitted between the DVM and Manufacturer's facilities. The
physical communication medium through which said data will be
transmitted (bandwidth, e.g., DSL, satellite, T-1 or other method)
shall not be considered part of the Network.
2.0 SALE OF EQUIPMENT.
(a) Subject to the terms and conditions of this Agreement, ETC hereby
agrees to purchase from Manufacturer and Manufacturer hereby agrees to sell and
deliver to ETC the DVMs for the purchase price specified in Paragraph 3.5 of
this Agreement (the "Purchase Price"). Each DVM shall be purchased in accordance
with the procedures set forth in Paragraph 3.0 of this Agreement and shall be
subject to the terms and conditions specified herein.
(b) Manufacturer further agrees to provide ETC with a nonexclusive license
to use Manufacturer's Software and Network (hereinafter collectively referred to
as the "Programs") in connection with the DVM, subject to the terms and
conditions specified herein. Notwithstanding any provision in this Agreement to
the contrary, Manufacturer shall retain all right, title and interest in and to
any Programs provided to ETC in connection with the DVMs being acquired by ETC
hereunder. Manufacturer hereby grants to ETC a nonexclusive license to utilize
the Programs in connection with the operation and use of the DVMs pursuant to
Paragraph 6.0 of this Agreement. (c) In addition to any other remedy
Manufacturer may have, including the remedies set forth below, Manufacturer
reserves the right to terminate ETC's license if ETC fails to comply with any
term or condition hereof, subject to Paragraph 9.5 below. ETC agrees upon
written notice from Manufacturer of any termination of the license granted
pursuant to this paragraph and in accordance with any more specific directions
from Manufacturer, to deliver immediately to Manufacturer all Programs and
copies thereof, and all other tangible items and materials in the possession or
custody of Buyer embodying the Programs. (d) ETC shall not accept orders from
potential joint ventures or other purchasers of any DVMs to be delivered or
placed in service outside the Territory unless otherwise mutually agreed to by
the Parties hereto in writing.
(e) Nothing in this Agreement shall be construed to preclude Manufacturer
from marketing, selling, servicing or networking the DVMs directly in the
Territory or from marketing, selling, licensing or servicing DVMs to or for any
third party which might market, sell or lease DVMs in the Territory and
Manufacturer expressly reserves the right to do so; provided, however, that
Manufacturer agrees that it shall not sell or license DVMs to any other joint
venture which is structured in a manner as the ETC.
(f) Each and every DVM purchased from Manufacturer under this Agreement
must be marketed by ETC with Manufacturer's trademark logos and the tradename,
Zapdisc, consistent with the graphics set forth on Exhibit "A" attached hereto.
2.1 ETC Duties and Responsibilities.
ETC agrees to use its best efforts to promote, develop a market, sell, and
distribute custom music CD products created by the DVMs to Customers in the
Territory. Among such other actions as may be necessary to generate sales from
the DVMs in the Territory, ETC agrees to perform the following duties:
(a) ETC will engage in sales promotion activities in which each DVM shall
be designated by its trade name and identified as Manufacturer's DVM that is
being marketed by ETC as an independent entity, and ETC will maintain a
qualified administrative organization for the DVMs in the Territory.
(b) ETC will maintain an administrative staff in connection with the
installation and operation of each DVM as well as sufficient quantities of all
consumable items including, without limitation, recordable CDs, jewel cases and
appropriate paper stock for purchase receipts for the operation of each DVM, all
of which shall comply with Manufacturer's specifications. In addition, ETC will
maintain a customer service department to respond to any customer service calls
received by ETC from Customers who purchased products from the DVMs in the
Territory in a prompt and courteous manner.
(c) ETC shall at all times conduct its business in a manner that will
reflect favorably on Manufacturer as well as the DVMs and will not engage in any
deceptive, misleading, illegal or unethical business practice. ETC agrees not to
make any representations or give any warranties or guarantees to any person,
including, without limitation it joint venture partners, vendors or other third
parties with whom it contracts, concerning the DVMs or the Network Services as
set forth in Paragraph 8.0 below unless expressly authorized in writing by
Manufacturer.
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(d) Manufacturer shall have the right not more than once every three months
and on reasonable notice and during normal business hours to visit and inspect
ETC's places of business for the purpose of verifying to the satisfaction of
Manufacturer that ETC is performing its obligations under this Agreement and for
purposes of conducting an audit of ETC's business operations and sales.
(e) ETC, not later than the tenth day following the end of each month,
shall provide Manufacturer with a report as to the sales of digital products to
Customers for each DVM. The monthly sales report shall list for each DVM the
total dollar amount of digital products sold to Customers together with a
breakdown of the identity of each music track reproduced.
(f) ETC will assist Manufacturer in assessing customer requirements for the
DVMs and in developing modifications and improvements of the DVMs, with a view
towards maximizing the potential market for the DVMs in the Territory. ETC will
keep Manufacturer fully informed of all governmental, commercial and industrial
activities or plans that could or do affect the sale of DVMs in the Territory.
(g) ETC shall locate and negotiate the venue for each point of sale
location for the deployment of DVMs. Each point of sale location for each DVM
shall be a secure environment that is enclosed and does not expose the DVM to
the elements. With regard to dual terminal DVMs, Manufacturer recommends that
each point of sale location have established customer foot traffic of 750K to
1.5M people on a monthly basis.
(h) ETC shall arrange for the installation of and access to bandwidth at
each point of sale location for each DVM with sufficient capacity for the
operation of the Network Services to be provided by Manufacturer in accordance
with Paragraph 8.0 of this Agreement. ETC acknowledges and agrees that each
point of sale location for each DVM shall have minimum bandwidth of 512
kilobites to 1 megabite. ETC shall continue to make available to Manufacturer at
each point of sale location for each DVM sufficient bandwidth (512 kilobites to
1 megabite) for the operation of the Network Services to be provided by
Manufacturer in accordance with Paragraph 8.0 of this Agreement
(i) ETC will comply with all applicable laws and regulations and will not
knowingly assist or participate in any violation of laws or regulations
applicable to Manufacturer or ETC, including regulations promulgated by the U.S.
Department of Commerce prohibiting the export of DVMs to certain countries.
(j) In the event ETC receives written notice from Manufacturer that a
Customer has requested a refund consistent with Paragraph 2.5(f), ETC agrees to
remit payment to the Customer in the amount requested within fifteen (15) days
of the receipt of Manufacturer's notice and provide Manufacturer with written
confirmation that the refund by ETC has been disbursed.
2.2 Representations Regarding Ownership and Control of ETC.
The ETC represents and warrants to the Manufacturer that:
(a) The persons listed on Exhibit "B" are the only persons who have any
interest, of record or beneficially, in the joint ventures involving ETC. The
identification of the persons listed on Exhibit "B" is for informational
purposes only and so to enable Manufacture to determine whether it is obligated
to respond to information requests concerning the DVMs.
(b) Other than the person identified Paragraph 2.2(a) above, no other
person, firm or corporation has or will have any right, option or privilege
under any circumstances to acquire any interest, of record or beneficially, in
the joint ventures involving ETC.
(c) ETC will provide written notice to the Manufacturer no sooner than
twenty (20) days prior to any contemplated change in the ownership or interest
in ETC, or in the identity of the persons who have authority and responsibility
for the management of ETC's business, and will not enter into any agreement to
effect any such change without the prior written approval of the Manufacturer.
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2.3 ETC Milestones.
ETC agrees that a failure by ETC to order and take delivery of a sufficient
number of DVMs to meet the milestones set forth below shall be cause for
termination by Manufacturer of this Agreement and of all of ETC's rights
hereunder:
(a) Three Months : At least thirty (30) dual terminal DVMs (60 single
terminal DVMs at a purchase price which has yet to be determined).
(b) Nine Months : At least another thirty (30) DVMs (60 single terminal
DVMs at a purchase price which has yet to be determined).
2.4 ETC Expenses.
(a) ETC shall be responsible for all expenses incurred by it in connection
with the implementation and performance of its duties and obligations
under this Agreement, including but not limited to:
(i) Any and all costs incurred in fulfilling ETC's duties and
responsibilities as provided in Paragraph 2.1 above;
(ii) Salaries for ETC's personnel;
(iii) Any and all costs and expenses associated with establishing and
maintaining ETC's sales organization, customer service department
and general and administrative offices;
(iv) Advertising and promotion expenses; and
(v) Any and all taxes, duties, tariffs or charges which may be
imposed on ETC.
(b) In addition to the foregoing expenses, ETC shall be responsible for
each of the following expenses incurred in connection with the installation of
each DVM:
(i) Any and all costs incurred in fulfilling ETC's duties and
responsibilities as provided in Paragraph 2.1 above;
(ii) Transporting the DVM from Manufacturer's facilities to the point
of sale location in the Territory;
(iii) Any and all costs associated with identifying and securing the
point of sale location in the Territory;
(iv) Any and all costs associated with installing the communication
medium (bandwidth costs) through which Manufacturer will operate
the Network;
(v) Any and all other operational costs associated with the point of
sale location.
(c) In addition to the foregoing expenses, ETC shall be responsible for
each of the following expenses incurred in connection with the ongoing operation
and use of each DVM;
(i) Any and all costs associated with the point of sale location in
the Territory, including, by way of example, rent;
(ii) Any and all costs associated with maintaining the communication
medium (bandwith costs) through which Manufacturer will operate
the Network;
(iii) Any and all costs associated with maintaining an adequate supply
of all consumable items including, without limitation, recordable
CDs, jewel cases and appropriate paper stock for purchase
receipts for the operation of each DVM, all of which shall comply
with Manufacturer's specifications;
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(iv) Any and all costs associated with advertising displayed on the
plasma screen incorporated with each DVM. Manufacturer and ETC
agree that they shall use their best efforts and negotiate in
good faith in the event an opportunity arises for a national
advertising campaign incorporating DVMs owned by ETC and DVMs
owned by Manufacturer;
(v) Any and all costs associated with the sales and reporting of
sales of products by each DVM;
(vi) Any and all costs associated with the collection of cash,
processing of credit cards and issuances of any credits relative
to the sales of products to Customers.
2.5 Manufacturer's Obligations.
Manufacturer shall perform the following duties pursuant to this Agreement:
(a) Manufacturer will use its best efforts to supply ETC's purchase orders
for the DVMs on the terms and conditions of this Agreement; provided, however,
that Manufacturer shall be under no obligation to ETC to sell or continue
distribution of the DVMs, whether or not on the existing price list, beyond
sixty (60) days after notice of discontinuation from Manufacturer to ETC;
provided further, that Manufacturer reserves the right to make substitutions and
modifications in the DVMs if such substitutions or modifications do not
materially adversely affect overall DVM performance. ETC also acknowledges that,
because of manufacturing scheduling, Manufacturer may sometimes be unable to
supply orders to be delivered consistent with Paragraph 3.1 below. In this
event, Manufacturer shall advise ETC of its estimated delivery date as soon as
is reasonably practicable after receipt of the order but in no event shall
delivery of any DVM be greater than one (1) year from the date of Manufacturer's
receipt of a purchase order from ETC as provided for in Paragraph 3 below.
(b) Manufacturer will provide reasonable training for ETC's technical and
marketing personnel on an as needed basis, at no charge.
(c) Once the DVM is delivered by ETC at the point of sale location in the
Territory, Manufacturer will provide the initialization for each DVM. Such
initialization will include ensuring that the DVM database is secure and
operational and that access to Manufacturer's Network is established provided
that ETC has properly set up the point of sale location with the communication
medium (bandwidth) as set forth in Paragraphs 2.1(h) and 2.4(b)(iii) above.
(d) Once the DVM has been initialized, Manufacturer will maintain and
exclusively operate the Network as well as the databases on each DVM.
(e) Manufacturer will keep ETC informed of changes in DVMs, specifications
and deliveries and of governmental, commercial and industrial activities or
plans that affect the sale of DVMs in the Territory.
(f) Manufacturer will also maintain a customer service department including
a toll free number to respond to any customer service calls received by
Customers of ETC who purchased products from the DVMs in the Territory in a
prompt and courteous manner. Manufacturer agrees to keep ETC periodically
informed of Customer complaints. Manufacturer will advise ETC in writing in the
event of a Customer request for a refund. Such written advice shall include the
Customer's name address and reason for requesting a refund together with the
amount requested.
(g) Manufacturer will provide the warranty services as provided for in
Paragraph 4.0 below.
2.6 ETC's Right To Use Manufacturer's Documentation, Trademarks and
Markings.
(a) ETC is hereby granted the right to reproduce, at its expense,
Manufacturer's publicly distributed documentation relating to the DVMs and to
use such documentation in connection with the operation of the DVMs.
Reproduction of Manufacturer trademarks, logos, symbols, etc., shall be true
reproductions.
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(b) During the term of this Agreement, ETC is hereby granted permission
to use Manufacturer's trademarks and trade names in connection with ETC's
obligations under this Agreement. ETC recognizes Manufacturer's exclusive
ownership of such marks and names and agrees not to take any action inconsistent
with such ownership. ETC shall discontinue using any of Manufacturer's
trademarks, trade names, logos and symbols immediately upon expiration or
termination of this Agreement subject to Paragraph 9.5 below.
(c) ETC will not remove or make or permit any alterations in any tags,
labels or other identifying markings placed by Manufacturer on any DVMs. ETC
will not add any identifying marks, tags, or labels to any DVMs; provided,
however, that ETC shall have the right to place a serial number of the back of
each DVM for purposes of maintaining ETC's business records and operations.
2.7 Independent Contractor Without Liability to Manufacturer.
ETC will act as an independent contractor under the terms of this Agreement
and not as an agent or legal representative of Manufacturer for any purpose, and
ETC has no right or authority to assume or create any obligation of any kind,
express or implied, on behalf of Manufacturer to ETC's customers or to any other
person. All agreements between ETC and its vendors, third parties with whom it
otherwise contracts and Customers are the sole responsibility of ETC, and shall
have no effect on ETC's obligations under this Agreement. Except for any product
liability claims, ETC shall be wholly responsible for, and shall indemnify and
hold Manufacturer free and harmless from, any and all claims, demands, actions,
any losses or damages arising therefrom and any fees, costs, and expenses
related thereto (including attorneys fees generated by counsel whose appointment
shall be at Manufacturer's election and discretion) arising out of the acts of
ETC, its agents, employees and servants, or any of them.
3.0 PURCHASE ORDERS AND DELIVERY.
3.1 Purchase Orders.
(a) During the term of this Agreement, ETC shall issue a written purchase
order to Manufacturer for each DVM, which purchase order shall state: "This
purchase order is placed under the terms and conditions of the ETC Agreement
between ETC and Manufacturer, dated October 27, 2000. Purchase orders from ETC
shall be deemed accepted by Manufacturer only upon execution by Manufacturer of
a written acknowledgment of the order. Delivery dates for each DVM so ordered
shall be determined by mutual agreement, which agreement shall be evidenced
solely by the delivery schedule set forth in Manufacturer's acknowledgment. The
foregoing method shall be the only method by which ETC commits to purchase DVMs
from Manufacturer and Manufacturer commits to sell DVMs to Buyer. ETC agrees to
assist Manufacturer in its production planning by providing Manufacturer each
calendar quarter with a forecast of ETC's anticipated orders during the next six
months.
(b) ETC hereby acknowledges that Manufacturer has not completed the design
for nor has Manufacturer built a single terminal DVM. Accordingly, in the event
ETC submits to Manufacturer a Purchase Order for the delivery of a single
terminal DVM(s), Manufacturer reserves the right to delay acceptance of that
portion of the Purchase Order which includes a single terminal DVM(s) for a
period not to exceed ninety (90) days so as to allow Manufacturer the time
necessary to complete the design and development of the single terminal DVM.
Manufacture will give ETC an artist rendering of the single terminal DVM as well
as the Purchase Price as soon as commerically practical. ETC shall have ten (10)
days from receipt of the rendering and Purchase Price to approve the same. In
the event ETC does not approve the rendering or the Purchase Price, ETC may
cancel that portion of the Purchase Order relating to the single terminal DVM
without charge.
(c) Initial Minimum Order. ETC agrees that its initial Purchase Order shall
not be for less than nine (9) dual terminal DVM's.
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3.2 Manufacturer's Rights Regarding Acceptance of Orders from ETC and
Allocation of Supplies.
Manufacturer shall use its best efforts, whenever orders for DVMs exceed
available supplies, to fairly and reasonably allocate the available supply;
however, Manufacturer shall have the right to reduce the quantities of DVMs
which may be ordered by ETC. In the event Manufacturer so reduces the quantities
of DVMs, ETC shall have no claim of any kind against the Manufacturer for its
refusal to accept orders by the Manufacturer as a result of allocations made by
the Manufacturer as described herein.
3.3 Cancellation.
(a) ETC may cancel any purchase order for a DVM by giving Manufacturer one
hundred twenty (120) days advance written notice of such cancellation.
(b) ETC may cancel any order by notice to Manufacturer, provided that ETC
shall pay a cancellation charge based upon the purchase price relating to the
DVMs canceled in accordance with the following schedule:
Number of Days Before Charge as a Percentage
Delivery Date of Purchase Price
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120 25%
90 35%
60 50%
30 80%
In the event of cancellation, ETC will have no rights in partially
completed goods.
(c) If ETC postpones delivery of an order and subsequently cancels that
order, Manufacturer may, at its option, use the original delivery date to
calculate the cancellation charge for that order.
3.4 Delivery & Acceptance.
(a) Each DVM shall be delivered to ETC F.O.B. Manufacturer's facilities.
Delivery of the DVM to a common carrier shall be deemed a satisfactory delivery
by Manufacturer to ETC. ETC agrees to pay all freight, insurance, packing and
other transportation charges related to said delivery. Manufacturer shall
arrange for the freight, insurance, packing and other transportation charges
related to said delivery and to prepay such charges, in which event ETC shall
reimburse Manufacturer in the amount thereof within ten (10) days of
presentation by Manufacturer of evidence of payment. In connection with the
delivery of the DVM, ETC may designate in writing, not less than ten (10)
business days prior to the shipment date, the carrier for shipment and the
amount of insurance and nature of coverage. If ETC fails to so designate any or
all such items, Manufacturer, at its discretion, may specify any item not so
designated. Manufacturer shall select, at its discretion, the types and amount
of crating.
(b) ETC shall inspect each DVM promptly upon receipt thereof at the
shipping destination and may reject any DVM which fail in any significant
respect to meet Manufacturer's written specifications as set forth on Exhibit
"C" attached hereto. DVMs not rejected by written notification to Manufacturer
within ten (10) days of receipt shall be deemed to have been accepted. ETC's
rejection shall not be effective unless the rejected DVM is returned freight
prepaid by ETC to Manufacturer in a timely fashion not to exceed thirty (30)
days of receipt. As promptly as commercially reasonable but not later than
thirty (30) days after receipt by Manufacturer of a properly rejected DVM,
Manufacturer shall, at its option and expense, either repair or replace said
properly rejected Equipment. Manufacturer will prepay transportation charges
back to ETC and credit ETC's account for any costs of transportation in the
United States incurred by ETC in connection with the return to Manufacturer of a
properly rejected DVM; otherwise ETC shall pay ground transportation charges in
both directions.
(c) Risk of loss or damage to the DVM shall pass to ETC upon delivery by
Manufacturer to a common carrier for shipment.
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3.5 Price.
(a) The Purchase Price for each dual terminal DVM purchased pursuant to
this Agreement shall be One Hundred Twenty Five Thousand Dollars ($125,000.00US)
together with an initialization fee for the services as set forth in Paragraph
2.5(c) in the amount of Twenty Five Hundred Dollars ($2,500.00) per day plus
travel expenses. The Purchase Price does not include the Network service charges
as set forth in Paragraph 8.0 below or the extended warranty maintenance charges
set forth in Paragraph 7.0 below. It is hereby expressly understood by ETC that
Manufacturer and ETC have not agreed upon a sales price for a single terminal
DVM.
(b) Payment terms are seventy five percent (75%) of the Purchase Price at
the time Manufacturer accepts a purchase order with the balance payable prior to
shipment of the DVM. All payments shall be made at Manufacturer's principal
place of business in Irvine, California, without deduction or offset. Each
invoice submitted by Manufacturer shall reference ETC's purchase order number.
Payment shall be made without regard to whether ETC has made or may make any
inspection or use of the DVM.
(c) Each shipment shall be treated as a separate transaction, but in the
event of any default of ETC, Manufacturer may decline to make further shipments
without in any way affecting its rights hereunder. If, despite any default by
ETC, Manufacturer elects to continue to make shipments, Manufacturer's action
shall not constitute a waiver of any default by ETC or in any way affect
Manufacturer's legal remedies for any such default.
(d) Manufacturer may assess service charges not exceeding one and one-half
percent (1.5%) per month, or such lesser amount as may be permitted by
applicable law, on past due accounts.
(e) Manufacturer retains a security interest in each DVM to secure
performance of ETC's payment obligations for the Purchase Price. If ETC shall
fail to pay any portion of the Purchase Price, Manufacturer shall have the
right, without liability, to repossess the DVM and to avail itself of any legal
remedy. ETC agrees to execute and deliver such financing statements and other
documentation as Manufacturer may reasonably request to perfect and protect
Manufacturer's interests in the DVM. Title to the DVM shall remain with
Manufacturer until the total Purchase Price, together with any service charges
assessed thereon, has been paid in full.
3.6 Taxes.
The Purchase Price set forth in Paragraph 3.5(a) above is exclusive of any
sales, use or privilege tax, customs duty or import, excise tax based on gross
revenue or any similar tax or charge which might be levied as a result of the
production, sale or shipment of any DVM or the use of any DVM by ETC. ETC agrees
to pay and otherwise be fully responsible for any such taxes (except for taxes
based on the net income of Manufacturer). Any personal property taxes assessable
on the DVM after delivery shall be borne by ETC. Manufacturer shall have the
right, but shall not be obligated, to pay any such taxes directly, in which
event ETC shall promptly reimburse Manufacturer in the amount thereof upon
presentation by Manufacturer of evidence of payment.
4.0 LIMITED WARRANTY.
(a) Manufacturer warrants to Buyer that, for a period of one hundred twenty
(120) days from delivery, each DVM will conform in all material respects to
Manufacturer's written specifications for the item attached hereto as Exhibit
"C" and will be free from defects in materials and workmanship. Manufacturer's
obligation under this warranty is limited to, at Manufacturer's option,
repairing or replacing, at Manufacturer's facility or at the location of the
DVM, at Manufacturer's option, any DVM or parts thereof that Manufacturer
determines not to conform to this warranty. ETC shall promptly notify
Manufacturer in writing of any alleged defects in the DVM and specifically
describe the problem. Manufacturer shall have no obligations under this warranty
with respect to any defect unless it receives notice and a description of such
defect no later than ten (10) business days following the expiration of the
warranty period. Upon receipt of such notice, Manufacturer shall either advise
ETC that warranty service shall be provided at the location of the DVM or shall
instruct ETC as to the part or parts of the DVM that ETC shall ship back to
Manufacturer for repair or replacement. Manufacturer will pay the costs of
transporting repaired or replaced DVM back to ETC and will reimburse ETC for
costs of transporting the DVM to Manufacturer which Manufacturer determines to
have been defective; otherwise, ETC shall pay all costs of transportation in
both directions.
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(b) Manufacturer represents and warrants that it has title to the DVMs to
be conveyed hereunder and has the right to sell the same and that at the time of
delivery, each DVM shall be free of any security.
(c) The limited warranty provided by Manufacturer does not impose any duty
or liability upon Manufacturer for:
(i) Any damage or defect occurring, at any time, during shipment of
products. When returning products to Manufacturer for repair or
replacement, ETC assumes all risk of loss or damage, and agree to use
any shipping containers which might be provided by Manufacturer and to
ship the products in the manner prescribed by Manufacturer;
(ii) Any damage caused by unauthorized adjustment, repair or service by
anyone other than personnel of Manufacturer or ETC's trained and
authorized repair agents;
(iii) Repair, damage or increase in service time caused by the failure to
provide a continuously suitable installation environment, including,
but not limited to: (1) neglect or misuse, (2) a failure or sudden
surge of electrical power, (3) improper air conditioning or humidity
control, or (4) any other cause other than ordinary use;
(iv) Repair, damage or increase in service time caused by fire, flood,
earthquake, water, wind, lightning or other natural disaster, strike,
inability to obtain materials or utilities, war, civil disturbance or
any other cause beyond Manufacturer's reasonable control;
(v) Failure of the communication medium (bandwidth) supplied by ETC for
purposes of Manufacturer operation of the Network as provided for
herein;
(vi) Any statements made about the DVM by ETC, its representatives or
agents, unless such statements are in a written document signed by an
officer of Manufacturer. Such statements as are not included in a
signed writing do not constitute warranties, shall not be relied upon
by ETC and are not part of the contract of sale;
(vii) Any damage arising from the use of the DVMs in any application, other
than the retail application for which they are intended, unless, upon
request, such use is specifically approved in writing by Manufacturer.
DVMs are sophisticated CD duplication units and are not sold or
distributed for personal, family or household purposes; or
(viii) All statements, technical information and recommendations contained
in this Agreement are based on tests Manufacturer believes to be
reliable, but the accuracy or completeness thereof is not guaranteed
and Manufacturer neither assumes nor authorizes any person to assume
any other liability or warranty in connection with its DVMs.
(d) Upgraded limited warranty. In the event ETC requests that Manufacturer
provide on-site repair of any defects in the materials and workmanship of a DVM
for the limited warranty period consistent with Paragraph 4.0(a) above, ETC
shall pay in advance to Manufacturer at time of delivery an on-site warranty
service fee in the amount of Twenty Five Thousand Dollars ($25,000.00).
THE FOREGOING WARRANTIES APPLY ONLY TO THE ETC AND ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(e) Manufacturer shall in no event have obligations or liabilities to ETC
or any other person for loss of profits, loss of use or incidental, special or
consequential damages, whether based on contract, tort (including negligence),
strict liability, or any other theory or form of action, even if Manufacturer
has been advised of the possibility thereof, arising out of or in connection
with the sale, delivery, use, repair or performance of the DVM or the Programs,
or any failure or delay in connection with any of the foregoing. Without
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limiting the generality of the preceding sentence, Manufacturer shall not be
liable for personal injury or property damage with the exception of product
liability claims. In no event shall the liability of Manufacturer arising in
connection with any DVM sold hereunder exceed the actual amount paid by ETC to
Manufacturer for a single DVM delivered hereunder.
5.0 PATENT AND TRADEMARK INDEMNITY.
5.1 Indemnity.
Manufacturer will defend, at its own expense, any suit or proceeding
against ETC in a court of the United States for the direct infringement of
United States patents and trademarks by the DVM purchased from Manufacturer
hereunder. Manufacturer shall pay all damages and costs finally awarded against
ETC because of direct infringement; provided, however, that Manufacturer shall
not be obligated to defend or be liable for costs or damages awarded in any suit
or proceeding for infringement of patents by any other products, or any
completed DVM, system, assembly, combination, method or process, in which, or in
the manufacture or testing of which, any DVM purchased from Manufacturer may be
used; and provided further that Manufacturer's obligations to pay such damages
and costs shall not apply to any alleged infringement occurring after ETC has
received notice of such alleged Infringement unless Manufacturer thereafter
gives to ETC written consent for such continuing alleged infringement.
Manufacturer's liability hereunder shall not exceed the purchase price paid by
ETC for the infringing DVM, and Manufacturer shall not be liable for any
collateral, incidental or consequential damages awarded against ETC.
5.2 Notice.
Manufacturer's duties under this Paragraph 5.1 are conditioned upon ETC
giving Manufacturer prompt written notice of commencement of any suit or
proceeding or any claim of infringement and furnishing to Manufacturer a copy of
each communication relating to the alleged infringement and giving to
Manufacturer all authority (including the right to exclusive control of the
defense of any such suit or proceeding), information and assistance (at
Manufacturer's expense) necessary to defend or settle such suit or proceeding.
Manufacturer shall not be bound by any settlement made without Manufacturer's
prior written consent.
5.3 Injunction.
If in any such suit or proceeding ETC's continued use of any item of DVM is
enjoined, or if by reason of any claim of infringement Manufacturer deems it
advisable to do so, Manufacturer may at its option and expense, (i) procure for
ETC the right to continue using such DVM, (ii) modify or replace such DVM with
noninfringing DVM, provided that such modification does not materially affect
performance, or (iii) remove such DVM, grant ETC a credit thereon as depreciated
on a straight_line 3_year basis and accept its return. If infringement is
alleged prior to completion of deliveries of the DVM, Manufacturer may decline
to make further shipments without being in breach of this Agreement.
THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF MANUFACTURER FOR
PATENT, TRADEMARK AND COPYRIGHT INFRINGEMENT AND IS IN LIEU OF ANY AND ALL
WARRANTIES OR SIMILAR OBLIGATIONS, EXPRESS OR IMPLIED, IN REGARD THERETO.
6.0 SOFTWARE LICENSE.
6.1 Software.
Notwithstanding any contrary provision in this Agreement, Manufacturer
shall retain all right, title and interest in and to any Programs provided to
ETC in connection with the DVMs being acquired by ETC hereunder. Manufacturer
hereby grants to ETC a restrictive, nonexclusive license under which ETC may use
the Programs solely in connection with the DVMs pursuant to the terms and
conditions of the Zapdisc Digital Vending Machine Software System License
attached hereto, marked Exhibit "D" and fully incorporated hereat by this
reference. In the event of a conflict in the terms or conditions of this
Agreement and the Zapdisc Digital Vending Machine Software System License
attached hereto, marked Exhibit "D", the terms and conditions of the latter
10
shall control. ETC agrees to maintain the confidentiality of the Programs and to
instruct and obligate their employees and agents to do the same. Without
limiting the generality of the foregoing, ETC shall not reproduce or modify all
or any portion of the Programs, nor shall ETC disclose, sell, sublicense or
otherwise transfer or make available all or any portion of the Programs to any
third party, without the prior express written consent of Manufacturer.
6.2 Termination.
In addition to any other remedy Manufacturer may have, Manufacturer
reserves the right to terminate ETC's license if ETC fails to comply with any
term or condition hereof, subject to Paragraph 9.5 below. ETC agrees upon
written notice from Manufacturer of any termination of the license granted
pursuant to this Paragraph 6.2 and in accordance with any more specific
directions from Manufacturer, subject to Paragraph 9.5 below, to deliver
immediately to Manufacturer all Software and copies thereof and all other
tangible items and materials in the possession or custody of ETC embodying the
Software.
7.0 EXTENDED WARRANTY SERVICE.
Upon expiration of the initial limited warranty as set forth in Paragraph
4.0 above, and upon the request of ETC, Manufacturer (or its authorized
representative) will provide on-site technical support for situations where
ETC's personnel have been unable to correct problems associated with the DVMs.
It is agreed that if the required on-site technical support is mutually
determined by ETC and Manufacturer (or its authorized representative) to be
necessary due to a defect under the DVM warranty or is readily correctable with
normal maintenance procedures, ETC shall be billed at the then prevailing
Manufacturer rate for such on-site technical support.
8.0 NETWORK SERVICES
8.1 In addition to the sale of the DVM, Manufacturer will provide ETC with
access to its propriety database for the digital distribution and sale of custom
music CDs. The Network services to be provided by Manufacturer are set forth on
Exhibit "E" attached hereto. Manufacturer's obligation to provide ETC with the
Network Services as provided for in this Paragraph 8.0 shall be conditioned upon
ETC's compliance with its obligations hereunder, including, without limitation,
Paragraph 2.1.
8.2 In consideration for the Network Services to be provided hereunder, ETC
shall, on no less than a monthly basis, pay Manufacturer a fee of no less than
Thirty Five Cents ($0.35) per sound track reproduced ("Royalty Fee") based upon
Manufacturer's current licensing agreements. Manufacturer reserves the right to
increase the Royalty Fee upon thirty (30) days notice to ETC in the event of an
increase in Manufacturer's existing or new licensing agreements. In addition to
the Royalty Fee, ETC shall pay to Manufacturer a monthly "Network Service Fee"
as follows:
(ii) Five Hundred Dollars ($500.00) per DVM for the first ten (10) units
payable in advance on the first of each month as well as a license
fee, payable within ten (10) days after the end of each month, for
Manufacturer's patented technology as well as twenty five percent
(25%) of the net revenue generated by each DVM;
(iii) From eleven (11) to twenty five (25) units, the Network Service Fee
for Manufacturer's patented technology and proprietary software shall
be equal to five percent (5%) of the gross monthly revenue and twenty
five percent (25%) of the net monthly revenue generated by each DVM,
payable within ten (10) days after the end of each month, with a
guaranteed minimum of Four Hundred Fifty Dollars ($450.00) per DVM per
month payable in advance on the first of each month;
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(iv) From twenty six (26) to fifty (50) units, the Network Service Fee for
Manufacturer's patented technology and proprietary software shall be
equal to two and one-half percent (2.5%) of gross monthly revenue and
twenty five percent (25%) of the net monthly revenue generated by each
DVM, payable within ten (10) days after the end of each month, with a
guaranteed minimum of Four Hundred Fifty Dollars ($450.00) per DVM per
month payable in advance on the first of each month; and
(v) After the sale of fifty (50) units, the Network Service Fee shall
computed at two and one-half percent (2.5%) of gross monthly revenue
as well as twenty five percent (25%) of the net monthly revenue
generated by all DVMs, payable within ten (10) days after the end of
each month, with a guaranteed minimum of fifty (50) DVMs at Four
Hundred Fifty Dollars ($450.00) per unit per month, payable in advance
on the first of each month, together with two and one-half percent
(2.5%) of gross monthly revenue on a maximum of fifty (50) DVMs,
payable within ten (10) days after the end of each month. In the event
there are no net revenues, ETC and Manufacturer shall renegotiate in
good faith the Network Service Fee. For purposes of this Paragraph
8.2, "net revenue" shall be calculated consistent with the formula set
forth on Exhibit "F" hereto.
8.3 In the event ETC fails to pay any of the fees required by Paragraph 8.2
above, in addition to any other remedy available at law or in equity,
Manufacturer shall have the right to immediately notify ETC of the default in
payment in writing. ETC shall have the right to cure the default within ten (10)
days of Manufacturer's notice. In the event, ETC fails to cure said default
within ten (10) days, ETC's access to the Network may be terminated by
Manufacturer without any further notice.
8.4 ETC hereby acknowledges that the content database which will be
available through the Network presently consists solely of independent music
sound tracks which are made available to Manufacturer pursuant to Manufacturer's
existing licensing agreement with The Orchard, LLC, an independent music label.
ETC hereby further acknowledges that Manufacturer makes no representations or
warranties whatsoever as to: (1) the continued availability of content from The
Orchard, LLC for the Term as defined below; (2)the popularity of the independent
content licensed from The Orchard, LLC; or (3) the rate or cost at which such
music sounds tracks may be sold through the DVMs.
9.0 TERM & TERMINATION.
9.1 Term.
The initial term of this agreement shall become effective and commence on
the date Manufacturer receives the first purchase order and shall continue for
five (5) years, unless earlier terminated as otherwise provided herein. After
the initial five (5) year term, this Agreement shall continue in effect until
terminated by either party as otherwise provided herein for additional periods
of one (1) year duration each. Either Party shall have the right, upon one
hundred twenty (120) days written notice delivered by either party to the other,
to terminate this Agreement effective on any anniversary of the effective date,
provided that this Agreement shall not be terminated pursuant to this sentence
prior to the expiration of the initial five (5) year term described above.
9.2 Renewal.
This Agreement may be renewed by a written renewal agreement consented to
by Manufacturer and ETC, which renewal agreement shall specify the renewal
period and the terms and conditions to be applicable in said renewal period. In
the absence of such a written renewal agreement, this Agreement will terminate
as set forth in Paragraph 9.1, unless it is terminated earlier in accordance
with Paragraphs 9.3 and 9.4.
9.3 Termination by Manufacturer.
Manufacturer may terminate this Agreement prior to the termination date set
forth in paragraph 9.1 upon failure by the ETC to meet any of the milestones set
forth in paragraph 2.3 by giving notice to ETC. Further and notwithstanding any
provision herein to the contrary, in the event Manufacturer's existing licensing
12
agreement with The Orchard, LLC as set forth in Paragraph 8.4 is terminated or
not renewed, Manufacturer has the right, upon thirty (30) days advance written
notice to ETC, to terminate the Network Services to be provided in Paragraph 8.0
of this Agreement.
9.4 Termination by Either Party.
Either Party may, by written notice to the other party, terminate this
Agreement in any one or more of the following events:
(vi) Failure to Pay: Failure of the other party to make any payment when
due in accordance with the terms of this Agreement, if such default
continues for five (5) business days or more after notice to such
other party;
(vii) Material Default: Material failure of the other Party to observe,
keep or perform any of the covenants, terms or conditions herein, if
such default continues for ten (10) business days or more after notice
to such other party; or
(viii) Insolvency. In the event:
(i) A receiver is appointed for the other Party or for substantially
all of such Party's assets;
(ii) The other Party becomes insolvent or unable to pay its debts as
they mature in the ordinary course of business;
(iii) The other Party makes an assignment for the benefit of its
creditors;
(iv) Proceedings are commenced by or for the other Party under
bankruptcy, insolvency or debtor's relief law; or
(v) The other Party is sequestered by any government authority or is
liquidated or dissolved.
9.5 Consequences upon Termination.
(a) In the event this Agreement is terminated for reasons other than
a non-monetary default, ETC shall continue to have the rights in
Paragraph 2.6 and Manufacturer will continue to provide the
Network Services set forth in Paragraph 8.0 to ETC for each DVM
purchased hereunder and operating at a point of sale location for
a period of one hundred eighty (180) days from the date of
termination, provided ETC complies with each of the following
conditions:
(i) Perform all of the duties and responsibilities as set forth
in Paragraph 2.1; and
(ii) Pay all monies due Manufacturer under this Agreement,
including, without limitation, the fees due under Paragraphs
3.5(a) and 8.2.
(b) Notwithstanding any provision herein to the contrary, in the event
Manufacturer's existing licensing agreement with The Orchard, LLC as set forth
in Paragraph 8.4 is terminated or not renewed, Manufacturer has the right, upon
thirty (30) days advance written notice to ETC, to terminate, without any
liability, the Network Services to be provided in Paragraph 8.0 of this
Agreement.
9.6 Return of the Programs Required.
Upon termination of this Agreement for any reason whatsoever, ETC shall
return to Manufacturer, at Manufacturer's expense, promptly and without charge
(except as hereinafter provided) the Software and Network for all DVMs.
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9.7 ETC's Duty To Cease Advertising and Turn Over Records to Manufacturer.
Upon termination of this Agreement, ETC shall:
(a) Return to Manufacturer each sign having any Manufacturer name or
trademark (whether or not any such material or signs have been paid
for in full by ETC) and discontinue advertising such DVMs and parts;
and
(b) Turn over to the Manufacturer, free of charge, copies of all of its
sales records, service records and other records and data relating to
sales of products by each DVM.
9.8 No Release of ETC from Obligations.
Any termination of this Agreement shall not release ETC from paying any
amount which may then be owing to Manufacturer or from any obligation to pay for
any DVMs or parts which may have been ordered by ETC and not shipped prior to
such termination. In the event of any termination of this Agreement, all
obligations owed by ETC to Manufacturer and to its affiliates shall become
immediately due and payable on the effective date of termination whether
otherwise then due or not (without presentment, demand, protest or notice of any
kind, all of which are hereby waived by ETC); and Manufacturer may offset and
deduct from any or all amounts owed to ETC, any or all amounts owed by ETC to
Manufacturer, rendering to ETC the excess, if any.
9.9 Manufacturer Relieved from Obligation To Ship DVMs to ETC.
(a) In the event of termination of this Agreement by either party or
automatically as provided herein, Manufacturer is relieved from any obligation
to make any further shipments hereunder, and may cancel all of ETC's unshipped
orders for DVMs or parts, irrespective of previous acceptance by Manufacturer,
except those DVMs or parts which are proved to Manufacturer's satisfaction to
have been sold by ETC pursuant to a valid and binding obligation prior to the
receipt by ETC of notice of termination; provided, however, that payment
therefor shall be cash in advance Manufacturer shall have no obligation or
liability to ETC or its prospective customers in connection with any such
cancellation.
(b) In the event of termination of this Agreement by either party or
automatically as provided herein, ETC will be entitled to a refund less a
cancellation fee in accordance with the following schedule:
Number of Days Before Charge as a Percentage
Termination Date of Purchase Price
--------------------- ----------------------
120 25%
90 35%
60 50%
30 80%
10.0 PROPRIETARY MATERIALS.
(a) Any and all documentation, patents, manuals, designs, drawings and
plans relating to the DVMs (collectively, "Proprietary Technical Materials")
that Manufacturer may furnish to ETC shall be in ETC's possession solely for the
purpose of operating, servicing and repairing the DVMs and for no other purpose.
ETC is not hereby granted a license nor authorized to grant any license or
sublicenses to use the Proprietary Technical Materials. ETC agrees to maintain
the confidentiality of all Proprietary Technical Materials and to instruct and
obligate their employees and customers to do the same.
(b) Without limiting the generality of the foregoing, ETC may not reproduce
or copy any Proprietary Technical Materials or transfer, assign, license,
sublicense, loan, pledge, encumber, disclose or otherwise make available all or
any portion of such Proprietary Technical Materials to any other person or
entity, without the prior express written consent of Manufacturer. Title to and
ownership of the Proprietary Technical Materials shall at all times remain in
Manufacturer. ETC agrees, upon notice from Manufacturer of any termination of
the license granted pursuant to this Agreement and in accordance with any more
specific directions from Manufacturer, to deliver immediately to Manufacturer
all Proprietary Technical Materials and all copies thereof.
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11.0 INDUSTRIAL PROPERTY RIGHTS
(a) ETC agrees that all industrial property rights to the DVMs are and
shall remain the sole property of Manufacturer. The use of ETC of any Industrial
Property Rights (including, but not limited to, any trademark, trade name or
copyrighted material) is authorized only for the purposes herein set forth; and
upon termination of this Agreement for any reason, such authorization shall
cease. ETC agrees to identify Manufacturer as the owner of the industrial
property rights to the DVMs provided hereunder in any use of such DVMs,
including without limitation, business dealings with any vendor or other third
party(s) with whom ETC contracts, and to require each such part(y) to identify
Manufacturer in the same manner. ETC is authorized to use Manufacturer's
trademarks, tradenames and copyrighted material in the name of DVMs under this
Agreement, provided that any materials so used shall be identified as subject to
a trademark, tradename or copyright as applicable and subject to the terms of
the Software License Agreement attached hereto as Exhibit "D" for any software
licensed hereunder.
(b) ETC acknowledges that by reason of its relationship to Manufacturer
hereunder it will have access to certain information and materials concerning
Manufacturer's patents, manuals, designs, drawings and plans relating to the
DVMs (including but not limited to information and materials contained in
Technical Data which may be provided by Manufacturer) which is confidential and
of substantial value to Manufacturer, which value would be impaired if such
information were disclosed to third parties. ETC agrees that it shall not use in
any way for its own account or the account of any third party, nor disclose to
any third party, any such confidential information which is revealed to it by
Manufacturer or which it obtains as a result of the relationship created by this
Agreement. ETC will take every reasonable precaution to protect the
confidentiality of such information, treating such information as if it were
ETC's own confidential business information. Upon request by ETC, Manufacturer
shall advise if it considers any particular information or materials to be
confidential. ETC will not publish any technical description of the DVMs beyond
the descriptions published by Manufacturer. ETC's obligations with regard to
confidentiality and Industrial Property Rights as established by this Agreement
shall survive the termination of this Agreement.
12.0 NON-DISCLOSURE AND CONFIDENTIALITY.
The Parties acknowledge that during the course of this association with
each other and their respective subsidiaries and affiliates, each will be
exposed to documents and other information regarding the confidential affairs of
the other and their respective subsidiaries and affiliates, including without
limitation information about their respective past, present and future financial
condition, the markets for their respective products, key personnel, trade
secrets, current and prospective customer lists, operational methods,
acquisition plans, prospects, plans for future development and other business
affairs and information about each other and their respective subsidiaries and
affiliates, all of which is information not readily available to the public (the
"Confidential Information"). The Parties further acknowledge that the services
to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. In recognition of the foregoing, the
Parties covenant and agree as follows:
12.01 No Disclosure or Use of Confidential Information. At no time shall
either Party ever divulge, disclose, or otherwise use any Confidential
Information, unless and until such information is easily available in the public
domain by reason other than that Party's unauthorized disclosure or use thereof,
unless such disclosure or use is expressly authorized by that Party's President
in writing in advance of such disclosure or use.
12.02 Return of Manufacturer's Property, Records and Files. Upon the
termination of this Agreement at any time and for any reason, or at any other
time as a Party's President may so direct, each Party shall promptly deliver to
the other all of the property and equipment of that Party and its subsidiaries
(including any cell phones, pagers, credit cards, personal computers, etc.) and
any and all documents, records, and files, including any notes, memoranda,
customer lists, reports or any and all other documents, including any copies
thereof, whether in hard copy form or on a computer disk o hard drive, which
relate to that Party, its subsidiaries, affiliates, successors or assigns,
and/or their respective past and present officers, directors, employees of that
Party (collectively, the "Party's Property, Records and Files"); it being
15
expressly understood that, upon termination of this Agreement, neither Party
shall be authorized to retain any of the other Party's Property, Records and
Files, except to the extent expressly so authorized in writing by the other
Party's President.
13. NONCOMPETITION AND NON-SOLICITATION.
13.1. Noncompetition and Other Matters. During the term of this Agreement
and for a five (5) year period immediately following the date of termination of
this Agreement at any time and for any reason ("Restrictive Period"), ETC shall
not in any city, town, county, parish or other municipality in any state of the
United States (the names of each such city, town, parish, or other municipality,
including, without limitation, the name of each county in the State of
California, being expressly incorporated by reference herein), or any other
place in the world, where Manufacturer, or its subsidiaries, affiliates,
successors, or assigns, engages in Manufacturer's business as described herein
(the "Business"), directly or indirectly, (i) engage in a competing business for
ETC's own account; (ii) enter the employ of, or render any consulting services
to, any entity that competes with Manufacturer, or its subsidiaries, affiliates,
successors, or assigns, in the Business; or (iii) become interested in any such
entity in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or consultant
provided, however, ETC may own, directly or indirectly, solely as a passive
investment, securities of any entity traded on any national securities exchange
if ETC is not a controlling person of, or a member of a group which controls,
such entity and does not, directly or indirectly own 1% or more of any class of
securities of such entity.
13.2 Noninterference. During the Restrictive Period, ETC shall not,
directly or indirectly, solicit, induce, or attempt to solicit or induce any
officer, director, employee, agent or consultant of Manufacturer or any of its
subsidiaries, affiliates, successors or assigns to terminate his or her
employment or other relationship with the Manufacturer or its subsidiaries,
affiliates, successors or assigns for the purpose of associating with any
competitor of Manufacturer or its subsidiaries, affiliates, successors or
assigns, or otherwise encourage any such person or entity to leave or sever his,
her or its employment or other relationship with Manufacturer or its
subsidiaries, affiliates, successors or assigns for any other reason.
13.3 Nonsolicitation. During the Restrictive Period, ETC shall not,
directly or indirectly, solicit, induce, or attempt to solicit or induce, any
customers, clients, vendors, suppliers or consultants then under contract to
Manufacturer or its subsidiaries, affiliates, successors or assigns, to
terminate his, her or its relationship with Manufacturer or its subsidiaries,
affiliates, successors or assigns, for the purpose of associating with any
competitor of Manufacturer or its subsidiaries, affiliates, successors or
assigns, or otherwise encourage such customers, clients, vendors, suppliers or
consultants then under contract to terminate his, her or its relationship with
the Manufacturer or its subsidiaries, affiliates, successors or assigns for any
reason.
14. RIGHTS AND REMEDIES UPON BREACH.
If either Party breaches, or threatens to commit a breach of, any of the
provisions of Paragraphs 11, 123 or 13 above (the "Restrictive Covenants"), the
non-breaching Party and its subsidiaries, affiliates, successors or assigns
shall have the following rights and remedies, each of which shall be independent
of the others and severally enforceable, and each of which shall be in addition
to, and not in lieu of, any other rights or remedies available to the
non-breaching Party or its subsidiaries, affiliates, successors or assigns at
law or in equity.
14.01 Specific Performance. The right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent jurisdiction by
injunctive decree or otherwise, it being agreed that any breach or threatened
breach of the Restrictive Covenants would cause irreparable injury to the
non-breaching Party or its subsidiaries, affiliates, successors or assigns and
that money damages would not provide an adequate remedy to the non-breaching
Party or its subsidiaries, affiliates, successors or assigns.
14.02 Accounting. The right and remedy to require the breaching Party to
account for and pay over to the non-breaching Party or its subsidiaries,
affiliates, successors or assigns, as the case may be, all compensation,
profits, monies, accruals, increments or other benefits derived or received by
the breaching Party as a result of any transaction or activity constituting a
breach of any of the Restrictive Covenants.
16
14.03 Severability of Covenants. The Parties acknowledge and agree that the
Restrictive Covenants are reasonable and valid in geographic and temporal scope
and in all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be effected and shall be given full
force and effect without regard to the invalid portions.
14.04 Modification by the Court. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be (it being
the intent of the parties that any such reduction be limited to the minimum
extent necessary to render such provision enforceable), and, in its reduced
form, such provision shall then be enforceable.
14.05 Enforceability in Jurisdictions. Each Party intends to and hereby
confers jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographic scope of such covenants. If the courts of any
one or more of such jurisdictions hold the Restrictive Covenants unenforceable
by reason of the breadth of such scope or otherwise, it is the intention of each
Party that such determination not bat or in any way effect the right of the
non-breaching Party or its subsidiaries, affiliates, successors or assigns to
the relief provided herein in the courts of any other jurisdiction within the
geographic scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
15. GENERAL.
15.1 Entire Agreement.
This Agreement constitutes the entire agreement and understanding between
the parties concerning the subject matter hereof and supersedes all prior
agreements, negotiations and understandings of the parties. No representation,
promise, modification or amendment shall be binding upon either party as a
warranty or otherwise, unless in writing and signed on behalf of each party by a
duly authorized representative. Although ETC may use its standard purchase order
form to give any order or other notice provided for hereunder, said order or
notice will be governed by the terms and conditions of this Agreement, and any
term or condition set forth in any such standard form which is inconsistent with
or in addition to the terms and conditions of this Agreement shall have no force
or effect.
15.2 Notices.
All notices and other communications under this Agreement shall be in
writing and shall be given by facsimile or first class mail, certified or
registered with return receipt requested, and shall be deemed to have been duly
given three (3) days after mailing or twenty-four (24) hours after transmission
of a facsimile to the respective persons named below:
If to Manufacturer: Xx. Xxxx X. Xxxxxxxxx, CEO
Xxxxxxx.xxx, Inc.
0 Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Fax: 000.000.0000
If to Supplier: Xx. Xxxx Xxxxxx
President
Enter Tech Corporation
000 Xxxx 0xx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax: 000.000.0000
17
Any party may change such party's address for notices by notice duly given
pursuant hereto.
15.3 Assignment.
Neither Party may assign this Agreement, in whole or in part, without the
prior written consent of the other, except that the Manufacturer may assign this
Agreement without such consent to any successor in interest or to any parent,
subsidiary or affiliated company of the Manufacturer in connection with a sale
or merger. Any assignment in violation of this section shall be void.
15.4 Force Majeure.
If the performance of this Agreement or any obligation hereunder, except
the making of payments hereunder, is prevented, restricted or interfered with by
reason of fire, flood, earthquake, explosion or other casualty or accident;
strikes or labor disputes; inability to procure parts, supplies or power; war or
other violence; any law, order, proclamation, regulation, ordinance, demand or
requirement of any government agency; or any other act or condition whatsoever
beyond the reasonable control of the affected party, the party so affected, upon
giving prompt notice to the other party, shall be excused from such performance
to the extent of such prevention, restriction or interference; provided,
however, that the party so affected shall take all reasonable steps to avoid or
remove such causes of nonperformance and shall resume performance hereunder with
dispatch whenever such causes are removed.
15.5 Amendments; Waivers.
This Agreement may be amended, modified, superseded, canceled, renewed or
extended, and the terms or covenants hereof may be waived, only by a written
instrument executed by the parties, or in the case of a waiver, by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner effect the right of such
party at a later time to enforce the same. No waiver by any party of the breach
of any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such breach, or a waive of the breach of
any other term or covenant contained in this Agreement.
15.6 No Other Warranty or Representation.
ETC hereby acknowledges that it has not entered into this Agreement in
reliance upon any warranty or representation by any person or entity, verbal or
written, including, without limitation, any representation or warranty
concerning the projected sales of custom music CDs by the DVMs, the cost of such
products, the rate at which advertising may be charged or any other financial
projections concerning the operation or use of DVMs, except for the limited
warranties or representations specifically set forth herein.
15.7 Arbitration.
Any claim, dispute or controversy arising out of or in connection with or
relating to this Agreement or the breach or alleged breach thereof shall be
submitted by the parties to binding arbitration in the County of Orange, State
of California, before a panel of three (3) arbitrators agreeable to both
Parties. The cost of the arbitration shall be equally divided between the
Parties. If the Parties cannot agree on a panel within two (2) weeks after
arbitration is requested in writing by either of them, the arbitration shall
proceed in Orange County, California, before a panel appointed by the American
Arbitration Association and under the rules then obtaining of that Association.
The award shall be binding, each Party hereby expressly waiving its right to
appeal, and rendered in such form that judgment may be entered thereon in any
court having jurisdiction thereof.
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15.8 Attorneys' Fees.
If any legal or arbitration or other proceeding is initiated so as to
enforce the terms of this Agreement, or as a result of an alleged breach,
dispute, default or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party within the meaning of
Civil Code section 1717 shall be entitled to recover reasonable attorney fees
and other costs incurred in the action or proceeding, in addition to any other
relief to which he, she or it is entitled as a matter of law.
15.9 Interpretation.
This Agreement has been negotiated at arms length in California between
persons knowledgeable in the matters addressed herein. Each party hereby
represents that he, she or it has been represented or had the opportunity to be
represented by experienced and knowledgeable legal counsel. Accordingly, any
rule of law, including without limitation, Civil Code section 1654, or any other
statutes, legal decisions or common law principles of similar effect, which
would require interpretation of any ambiguities in this Agreement
15.10 Press Releases.
This Agreement and/or its contents is not to be publicly announced without
prior written consent from ETC and Manufacturer.
15.11 Applicable Law.
This Agreement shall be governed by the laws of the State of California as
such laws are applied to contracts between California residents entered into and
to be performed entirely within the State of California.
15.12 Counterparts.
This Agreement may be executed by the Parties hereto via facsimile in
separate counterparts, each of which, when so executed and delivered, shall be
an original, but all such counterparts together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MANUFACTURER: Enter Tech Corporation:
Xxxxxxxx.xxx, Inc.
/s/ Xxxx X. Xxxxxxxxx /s/ Xxxx Xxxxxx
------------------------------- ---------------------------------
By: Xxxx X. Xxxxxxxxx By: Xxxx Xxxxxx
Its: CEO Its: President
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