EXHIBIT 10.7
AUTHORIZED DISTRIBUTOR AGREEMENT
AUTHORIZED DISTRIBUTOR AGREEMENT, dated as of September 30,
1996, between DEFENSE TECHNOLOGY CORPORATION OF AMERICA, a Delaware corporation
(the "Company"), XM CORPORATION, a Wyoming corporation (the "Distributor") and
XXXXXX XXXXXX ("Executive").
WHEREAS, the Distributor desires to be an authorized
distributor of the Company's products for international sale only and the
Company desires that the Distributor be so engaged, all in accordance with the
terms of this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby agree as follows:
1. The Company hereby appoints, and the Distributor hereby
accepts the appointment of, the Distributor as the Company's master authorized
distributor of the Company's Product Line (as hereinafter defined), to
distribute and sell at prices to be determined by the Distributor, a full and
complete line of the Company's products ("Product Line"), and under the terms
and conditions contained in this Agreement. The term of this Agreement shall
begin on the date hereof and continue for a period of three years from the date
hereof, subject to earlier termination as herein provided. All services, duties
and obligations of Distributor to be performed hereunder shall be principally
rendered by or under the direct supervision and control of the Executive on
behalf of the Distributor.
2. The Company will from time to time, as the Company in its
sole discretion deems appropriate, provide the Distributor with catalogs and
other sales aids. These materials are for the Distributor's exclusive use to
assist the Distributor in selling the Company's products to the Distributor's
customers and are not to be given to any other person other than such
customers. The Company may from time to time, in its sole discretion as deemed
appropriate by the Company, provide demonstrations of its products and their
usage for the Distributor's sales associates.
3. The Distributor agrees to sell the Company's Product Line
only in international markets, excluding, Canada, the United States of America,
its territories and possessions, except that Distributor may sell the Company's
Product Line to customers within the United States with established
international distribution system, solely for export, subject to the prior
written consent of the Company. Distributor shall provide high quality,
superior and professional customer service including, without limitation,
trained sales associates who are knowledgeable of the Company's Product Line.
The Distributor shall only use logo signs that have been approved by the
Company
in advance. Any advertising or promotional activities involving the Company's
products or the Company brand name or logo (including any affiliates of the
Company) may only be conducted with the prior written permission of the
Company.
4. In the event that the total value of Orders (as
hereinafter defined) from the Company placed by Distributor for products within
the Product Line ("Total Orders") are equal to or greater than (A) $3,000,000
for the 12-month period ended September 30, 1997, (B) $3,500,000 for the
12-month period ended September 30, 1998, and (C) $4,000,000 for the 12-month
period ended September 30, 1999, (each such period being herein referred to as
"Target Year", and each such amount for the respective period indicated is
herein referred to as a "Target Level"), then commencing with the period
beginning October 1, 1996, the Company shall pay to the Distributor or, in the
event that the Distributor has been liquidated and dissolved, to the
Distributor's successor for such purpose, the following cash payments ("Fees"):
$250,000 per annum, payable on a monthly basis in arrears, as an advance for
achieving the Target Levels for each 12-month period herein specified (the
first such payment to be due and payable on October 31, 1996). All such Fees
paid in advance to the Distributor shall be subject to the Distributor
achieving the Target Level for the Target Year in question, and if any Target
Level for a Target Year is not attained by the Distributor, there shall be a
pro-rata reduction of the Fee paid to the Distributor, based upon the amount of
Total Orders, net of returns and allowances, for the Target Year in question in
relation to the Target Level for such Target Year, and the Distributor shall
refund to the Company any such excess payments. In the event that the
Distributor does not refund such excess payments to the Company, the Company
shall offset the amount of such refund from future advance payments of the Fee
to the Distributor. At no time during the term of this Agreement will the
Company be required to make payments of the Fee to the Distributor if at the
time of such payment, the Unearned Fee equals or exceeds $125,000. "Unearned
Fee" shall mean the Fees advanced to the Distributor hereunder, reduced by an
amount equal to the product of the Fees actually paid and a fraction, the
numerator of which is equal to the Total Orders, net of returns and allowances,
for the period in question, and the denominator of which is the Target Level
for the period in question. For purposes of this Agreement, an "Order" shall
mean an order for product from the Company's Product Line placed by Distributor
which shall be deemed received and counted toward achieving a Target Level upon
acceptance by the Company and receipt by the Company of payment in full or an
irrevocable letter of credit for the full amount of the invoice price for the
products purchased in such order, subject to reduction for returns and
allowances, other than returns, allowances or orders cancelled by a customer of
the Distributor solely as a result of the failure of the Company to fill such
order in a commercially reasonable time and
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manner. Pricing of the Company's products sold to Distributor hereunder shall
be agreed to in advance by and between the Company and the Distributor for each
12-month period ending September 30, 1997, 1998 and 1999 and shall be quoted
F.O.B. Casper, Wyoming, or as otherwise agreed. For the 12-month period ending
September 30, 1997, the Company and the Distributor hereby agree that the
pricing for the Company's products sold to the Distributor pursuant to this
Agreement shall equal the Company's cost for such product, as reflected on the
books and records of Defense Technology Corporation of America, a Wyoming
corporation, as of September 29, 1996, plus a 25% xxxx-up. Notwithstanding the
foregoing, the Distributor hereby agrees that the Company may from time to time
adjust its costs to take into account, among other things, increased carrying,
financing, development and sales and marketing costs. Without limiting the
generality of the foregoing, adjustments to the Company's costs of products
shall be made to take into account any increases to the Company's costs of raw
materials in excess of 3%, as well as increases in labor costs that may from
time to time occur. All costs shall be determined solely by the Company and
shall be conclusive and binding on the Distributor for all purposes under this
Agreement. In the event that any annual Target Level herein specified has not
been met by the Distributor, then the Company shall have the right, in its sole
and absolute discretion, to terminate this Agreement, upon written notice to
the Distributor, with no further obligation to the Distributor hereunder,
except for payment of Fees which have been earned but not yet paid.
5. Except as otherwise provided herein, the Distributor
agrees to pay for all Orders within thirty (30) days from the date of issuance
of an invoice by the Company or on such other terms as set by the Company. For
sales in excess of $20,000 per Order or $80,000 in the aggregate for all unpaid
Orders, the total sales value shall be paid in advance or by delivery of an
acceptable irrevocable Letter of Credit for the full invoice price. The Company
may in its sole discretion require the prepayment for any Order. The Company
shall charge interest on all past due balances at the rate of one and one-half
percent (1 1/2%) per month or the highest rate permitted by law, whichever is
lower.
6. The Distributor will arrange for all shipping and
insurance. The Distributor will be responsible for payment of
all shipping and insurance charges.
7. Any and all claims or adjustments by Distributor must be
presented to the Company for approval within 10 days of receipt by the
Distributor of notice of a claim from a customer of the Distributor (provided
such claim is made within the Company's warranty period), except for any claim
of shortages or patent damages in transit to any Order which claim must be made
within thirty (30) days of delivery of such Order, prior to any
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deduction from invoice. Distributor shall be responsible and shall pay for all
of its expenses, costs and disbursements in connection with the performance of
its duties and obligations hereunder or the sale of products sold by
Distributor hereunder.
8. The status as Distributor of the Company is not assignable
to any other individual or entity without the Company's prior written consent,
which consent shall not be unreasonably withheld, provided the services to be
performed by the assignee Distributor hereunder shall be principally performed
by or under the direct supervision and control of the Executive. Any change of
ownership, control or management of the Distributor shall be deemed an
assignment.
9. For purposes of Section 9, Section 10 and Section 11, all
references to the Company shall be deemed to include all of the Company's
affiliates and subsidiaries and all references to the Distributor shall be
deemed to include the Executive, as well as Distributor's affiliates and
subsidiaries.
(a) The Distributor acknowledges that as a result
of its relationship with the Company, the Distributor has and will continue to
have knowledge of, and access to, proprietary and confidential information of
the Company, including, without limitation, inventions, trade secrets,
technical information, know-how, plans, specifications, methods of operations,
financial and marketing information and the identity of customers and suppliers
(collectively, the "Confidential Information"), and that such information, even
though it may be contributed, developed or acquired by the Distributor,
constitutes valuable, special and unique assets of the Company developed at
great expense which are the exclusive property of the Company. Accordingly, the
Distributor shall not, at any time, either during or subsequent to the term of
this Agreement, use, reveal, report, publish, transfer or otherwise disclose to
any person, corporation or other entity, any of the Confidential Information
without the prior written consent of the Company, except to responsible
officers and employees of the Company and other responsible persons who are in
a contractual or fiduciary relationship with the Company and who have a need
for such information for purposes in the best interests of the Company, and
except for such information which is or becomes of general public knowledge
from authorized sources other than the Distributor. The Distributor
acknowledges that the Company would not enter into this Agreement without the
assurance that all such confidential and proprietary information will be used
for the exclusive benefit of the Company.
(b) Upon the termination of the Distributor's
engagement with the Company, the Distributor shall promptly deliver to the
Company all drawings, manuals, letters, notes, notebooks, reports and copies
thereof and all other materials
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relating to the Company's business, including without limitation any materials
incorporating Confidential Information, which are in the Distributor's
possession or control.
10. The Distributor will not utilize its special knowledge of
the business of the Company and its relationships with customers, suppliers of
the Company and others to compete with the Company. During the term of this
Agreement and for a period of two (2) years after the expiration or termination
of this Agreement (provided, however, that in the event that this Agreement is
terminated prior to June 30, 1999, the Distributor shall be bound by the
provisions of this Section 10 during the time period that would have remained
through June 30, 1999, plus a period of two (2) years thereafter), the
Distributor shall not engage, directly or indirectly or have an interest,
directly or indirectly, anywhere in the United States of America or any other
geographic area where the Company does business or in which its products are
marketed, alone or in association with others, as principal, officer, agent,
employee, director, partner or stockholder, or through the investment of
capital, lending of money or property, rendering of services or otherwise, in
any business competitive with or substantially similar to that engaged in by
the Company, including without limitation, the manufacture, marketing and
distribution (other than in accordance with the terms hereof) of less than
lethal products and such other products as may from time to time be
manufactured, marketed or distributed by the Company (it being understood
hereby, that the ownership by the Distributor of 5% or less of the stock of any
company listed on a national securities exchange shall not be deemed a
violation of this Section 10). During the same period, the Distributor shall
not, and shall not permit any of its employees, agents or others under its
control to, directly or indirectly, on behalf of itself or any other person,
(i) call upon, accept business from, or solicit the business of any person who
is, or who had been at any time during the preceding two (2) years, a customer
of the Company or any successor to the business of the Company, except on
behalf of the Company, or otherwise divert or attempt to divert any business
from the Company or any such successor, or (ii) directly or indirectly recruit
or otherwise solicit or induce any person who is an employee of, or otherwise
engaged by, the Company or any successor to the business of the Company to
terminate his or her employment or other relationship with the Company or such
successor, or hire any person who has left the employ of the Company or any
such successor during the preceding two (2) years. The Distributor shall not at
any time, directly or indirectly, use or purport to authorize any person to
use, except pursuant to Section 3 hereof, any name, xxxx, logo, trade dress or
other identifying words or images which are the same as or similar to those
used at any time by the Company in connection with any product or service,
whether or not such use would be in a business competitive with that of the
Company.
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11. The restrictions set forth in Sections 9 and 10 are
considered by the parties to be fair and reasonable. The Distributor
acknowledges that the restrictions contained in Sections 9 and 10 will not
prevent the Distributor from being gainfully engaged in business. The
Distributor further acknowledges that the Company would be irreparably harmed
and that monetary damages would not provide an adequate remedy in the event of
a breach of the provisions of Sections 9 or 10. Accordingly, the Distributor
agrees that, in addition to any other remedies available to the Company, the
Company shall be entitled to injunctive and other equitable relief to secure
the enforcement of these provisions, and shall be entitled to receive
reimbursement from the Distributor for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions, provided equitable
relief is awarded to the Company. The Company shall not be required to post
bond in connection with any such equitable remedy. If any provisions of
Sections 9, 10, or 11 relating to the time period, scope of activities or
geographic area of restrictions is declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court
deems enforceable. If any provisions of Sections 9, 10, or 11 other than those
described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
12. The Company and the Distributor mutually agree that:
(a) The Company reserves the right to cease doing
business with the Distributor at any time with cause. Termination for cause by
the Company shall include, without limitation: (i) inadequate service by the
Distributor to customers; (ii) any failure to pay an invoice in accordance with
the terms hereof; (iii) selling merchandise in contravention of any term of
this Agreement, including, but not limited to, sales to unauthorized or
undisclosed parties or sales from or to an unauthorized location; (iv) failure
to provide the Company with a copy of valid export documents, permits and
authorizations from all relevant governmental authorities with respect to each
Order; (v) failure to meet any Target Level as herein provided; (vi)
termination of the Distributor's business; (vii) breach by Distributor or
Executive of any other condition or obligation or agreement to be performed by
Distributor or Executive hereunder as the case may be, not cured within ten
(10) days following the giving of written notice thereof; and/or (viii)
bankruptcy,
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liquidation or death of the Distributor or the Executive, as the case may be.
(b) In the event of termination, the Distributor
shall, at the Company's pre-authorized cost and expense, return to the Company
any and all catalogs and advertising materials provided by the Company and
shall not present itself as an authorized Company distributor. All Company logo
signs remain the property of the Company and, upon termination, the Distributor
agrees to remove them and return them promptly to the Company.
(c) Upon any termination of this Agreement, (i)
the Company shall have no further obligation to the Distributor hereunder, and
(ii) the provisions of Sections 9, 10 and 11 shall survive any such termination
and shall be binding upon the Distributor.
13. No indemnity, severance, damages, or compensation shall
be paid by the Company to the Distributor should this Agreement terminate or
expire. No indemnity, severance, damages, or compensation shall be deemed
earned or payable to the Distributor upon termination or expiration because of
the Distributor's activities done or performed while this Agreement was in
effect, or because of the expenditures, investments, leases, agreements, or
commitments given or made in connection with the creation, development,
maintenance, growth, expansion, and financing of such distributorship, or
because of the creation or existence of distributorship goodwill.
14. Distributor agrees to indemnify, defend and hold the
Company harmless from and against any and all claims, costs, damages, expenses,
judgments (including all attorneys fees and expenses) suffered or incurred by
the Company by reason of any claim or action (whether or not groundless)
arising out of the Distributor's acts or omissions or its negligence in the
performance of its obligations hereunder.
15. (a) The Distributor shall conduct its business in its own
name and at its sole cost and expense. Distributor acknowledges the validity of
the patents, trademarks, trade names, service marks, trade secrets, copyrights
and other intellectual property rights of the Company and its affiliated
companies (collectively, the "Rights") and the exclusive title of the Company
and its affiliated companies therein and in the goodwill associated therewith.
Distributor agrees that it shall not contest, directly or indirectly, the
Company's or its affiliates' ownership, title, right or interest in and to the
Rights or in the names and marks appearing on the products sold by the Company
to the Distributor, trade secrets, methods, procedures and techniques or to the
right of the Company or its affiliated companies to register, use and to
license others to
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use the Rights or any Company or affiliated company brand name in all
languages. Distributor agrees that it will not register or attempt to register
in its name or that of any person or entity affiliated with it any name or
xxxx, corporate name or any designation of any kind, in any language, which is
the same as, similar to or a derivative of, or otherwise utilizing any portion
of the Rights or trade names of the Company or of any of its affiliates.
Distributor acknowledges that it does not have and has not acquired any rights
in or to the Rights, product names, likenesses or any derivations of the
foregoing. Upon termination of this Agreement, Distributor shall immediately
cease all use of the Rights.
(b) The trademarks designated by the Company
shall be displayed by the Distributor, without alteration, on all products sold
by the Company for resale by the Distributor and all use of such trademarks
shall inure to the Company's benefit. Distributor shall not relabel the
Company's products without the Company's prior written consent and approval of
all such labels.
(c) Any copyrights which may be created in any
article, design, label or the like, on any product of the Company or its
affiliates shall be the property of the Company and its affiliates.
(d) The Distributor shall not use any trademark,
brand or trade dress which is the same as, or which is likely to cause
confusion or mistake with any trademark, brand or trade dress of the Company or
any of its affiliates, except that the trademarks, brands and/or trade dress
designated by the Company shall be used on products of the Company.
16. The Distributor hereby covenants and agrees that it will
advise the Company in writing of the identity of the Distributor's customers
with respect to each Order, and if any such customer is a distributor, the
identity of the end user of the Company's product that is the subject of each
Order. The Distributor further covenants that there will be no violation of any
laws, rules or regulations applicable to the Company based upon sales to the
Distributor, its customers and any end users of any products that are the
subject of any Orders. The Distributor acknowledges that the covenants
contained in this Section 16 are a material inducement for the Company to enter
into this Agreement.
17. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to its conflict of laws rules.
18. The Distributor agrees that in the event any suit
is necessary to be brought involving any of the parties, it shall
be brought in the courts of the State of New York, New York
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County, and the Distributor consents to jurisdiction of the courts of the State
of New York.
19. Any notice or demand required or to be given by the
Company or the Distributor must be in writing, sent by certified or registered
mail, return receipt requested, or by facsimile and will be considered received
within 3 days of mailing, or upon transmission if sent by facsimile with
confirmation of receipt thereof. The addresses for the Company and the
Distributor are as follows:
For the Company:
Defense Technology Corporation of America
000 Xxxxxx Xxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
For the Distributor and Executive:
____________________________________
____________________________________
____________________________________
____________________________________
and if any address changes, notice must be given in the same manner, and shall
be effective upon receipt.
20. No waiver of any term of this Agreement shall be
valid unless it is in writing and is signed by both parties.
21. If a party defaults in performing any obligation under
this Agreement so that the other party is required to engage the services of an
attorney, the defaulting party shall pay all reasonable attorneys' fees,
expenses, and costs incurred.
22. Each party acknowledges that it has carefully read this
Agreement, including all exhibits and other documents to which it refers, and
that this Agreement expresses the entire agreement between the parties
concerning the subjects it purports to cover.
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23. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. Any reference to the Company contained in this Agreement
shall be deemed to include any successors or assigns. The Distributor may not
assign its rights, obligations or duties hereunder whether by merger, operation
of law or otherwise, without the Company's prior written consent; provided,
however, this agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs, personal
representatives, legal representatives, and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed the
Agreement as of the date first written above.
XM CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA
By: /s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Vice President
EXECUTIVE:
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
ABOVE ACKNOWLEDGED, AGREED TO
AND ACCEPTED:
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Sole Shareholder of XM Corporation
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