1
PATRIOT SCIENTIFIC CORPORATION
EXHIBIT 10.8
DISTRIBUTION AND REPRESENTATION AGREEMENT
30
2
DISTRIBUTION AND REPRESENTATION AGREEMENT
THIS NON-EXCLUSIVE DISTRIBUTION AGREEMENT ("Agreement") is made as of the 28th
day of February, 1996, by and between Patriot Scientific Corporation
("Patriot"), a Delaware corporation and Innoware, Inc. ("Distributor"), a
California corporation, with regard to the following facts:
RECITALS
A. Patriot is engaged in the business of developing, manufacturing and
distributing Internet connect devices, such as the CyberShark line of Internet
terminal adapters (digital modems) and related products.
B. Distributor is in the business of distributing multimedia products (sound
cards, video cards and communication cards for PCs) to first tier PC system
OEMs, PC peripheral distributors and computer retailers;
C. Patriot seeks to distribute its products to customers worldwide; and
D Patriot and Distributor desire for Distributor to become a non-exclusive
distributor of certain of its products to customers in the Territory.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
expressed in this Agreement, Distributor and Patriot agree as follows:
1. General Definitions. As used herein, the following terms have the indicated
meanings:
1.1 Confidential Information. "Confidential Information" shall mean any
information which is of a confidential and/or proprietary nature, including but
not limited to, financial, marketing or technical information such as price
guidelines, future product releases, trade secrets, know-how, inventions,
techniques, processes, programs, schematics, data, customer lists and sales and
marketing plans.
1.2 Distributor shall mean the party specified in the first paragraph of this
Agreement.
1.3 Products shall mean initially the CyberShark I, as described in Patriot's
materials and such future products as may be agreed by the parties from time to
time. Products may be changed, abandoned or added by Patriot at any time in
Patriot's sole discretion provided that proper advance notice is provided where
Patriot has any outstanding supply commitments. Patriot shall be under no
obligation to continue the production of any Product otherwise than provided
herein.
1.4 Purchase Price shall have the meaning as set forth in Section 2.8.3
("Payment Terms") of this Agreement.
1.5 Territory shall mean the geographical areas agreed to in writing between
the parties from time to time. Initially the Territory shall include North
America and Taiwan.
1.6 Patriot shall mean the party specified in the first paragraph of this
Agreement.
1.7 Patriot Trademarks shall have the meaning as set forth in Section 6
("Trademarks") of this Agreement.
1.8 Suggested Retail Price List is defined as the Suggested Retail Price List
for the Products as published from time to time by Patriot. The Suggested
Retail Price List is non-binding in terms of Product resale prices and
represents only a suggested price.
2. Appointment and Orders.
2.1 Appointment. Subject to Section 2.5 ("Initial Order and Minimum Quantity
Requirements"), Patriot hereby appoints Distributor to act on an non-exclusive
basis as Patriot's distributor for the Products in the Territory, and
Distributor hereby accepts such appointment. Distributor agrees that it shall
not, directly or indirectly, (i) purchase the Products from any party other
than Patriot; or (ii) offer to sell or sell the Products outside of the
Territory without the express prior written consent of Patriot.
2.2 Price. Patriot shall sell to Distributor, and Distributor shall purchase
from Patriot, the Products on terms and prices as Patriot shall provide to
Distributor in writing from time to time and shall be the latest price and
terms in effect at the time Patriot accepts Distributor's purchase order(s).
Patriot may at its sole discretion, change the prices and terms during the term
of this Agreement in writing which will be deemed effective at the time of
issuance to Distributor.
2.3 Taxes. Distributor's purchase price does not include any federal, state or
local taxes or import/export duties that may be applicable to the Products.
When Patriot has a legal obligation to collect such taxes, the appropriate
amount shall be
31
3
added to Distributor's invoice and paid by Distributor unless Distributor
provides Patriot with a valid tax exemption certificate authorized by the
appropriate taxing authority.
2.4 Order and Acceptance. All orders for Products submitted by Distributor
shall be initiated by written purchase orders sent to Patriot during the term
of this Agreement. All Product orders must meet the minimum quantity
requirements specified by Patriot from time to time in writing. Distributor
shall submit purchase orders to Patriot with sufficient lead time to allow
production in the normal course. No order shall be binding upon Patriot until
accepted by Patriot in writing, and Patriot shall have no liability to
Distributor with respect to purchase orders that are not accepted. Patriot
shall use its reasonable best efforts to notify Distributor of acceptance or
rejection of an order within 30 days of receipt. Patriot shall use its
reasonable best efforts to deliver Products at the times specified either in
its quotation or in its written acceptance of Distributor's purchase orders,
however Patriot shall have no liability to Distributor for late deliveries.
2.5 Initial and Minimum Order Requirements. Within thirty (30) days after the
date of this Agreement, Distributor shall submit a written purchase order for
at least 900 units of Product. Distributor shall also comply with minimum
quantity and annual purchase requirements as may be mutually agreed by the
parties from time to time.
2.6 Terms of Purchase Orders Distributors purchase orders submitted to Patriot
form time to time shall be governed by the terms of this Agreement and nothing
therein shall modify such terms or add additional terms or conditions, except
to state Product quantity.
2.7 Order Delays. Distributor may delay delivery of any accepted order,
provided that the rescheduled delivery date occurs during the term of this
Agreement and provided further that Distributor shall pay a rescheduling fee
equal to ten percent (10%) of the Product order purchase price if Distributor's
change order is received by Patriot 20 days or later after order acceptance.
2.8 Other Conditions of Sale.
2.8.1 Purchase of Products Subject to Software License. The sale to Distributor
of any Product that contains software shall not include a sale of the software
or transfer of its title but shall instead include a fully paid up license for
Distributor to transfer the use of such software to its customers. Patriot
shall retain full title to any Product software and Distributor and its
customers may only use such software in conjunction with the Product. Neither
Distributor nor its customers shall have any access to or rights in any Product
software source code. Neither Distributor nor its customers shall have the
right to copy, modify, reverse engineer or remanufacture any Product or part
thereof.
2.8.2 Shipment Terms. All Products shall be shipped F.O.B. from Patriot's
facility in San Diego county, California from the departure location designated
by Patriot. Distributor may designate the carrier; provided, however that if no
carrier is specified in Distributor's purchase order, the carrier shall be
designated by Patriot. Patriot shall bear the risk of loss to Products at all
times until Patriot has delivered the Products to the carrier.
2.8.3 Payment Terms. Unless other terms are agreed in writing prior to order
acceptance, full payment of the purchase price for all Products shipped to
Distributor under a single order (including any freight, insurance, taxes or
other applicable costs to be born by Distributor) (the "Purchase Price") shall
be made by Distributor to Patriot at the time of shipment in U.S. dollars and
shall be in an amount equal to the total Purchase Price.
2.8.4 Reservation of Title. Transfer of title for each Product shipped to
Distributor shall be subject to full payment of the Purchase Price thereof.
Until such full payment, the Products shall remain the property of Patriot.
2.9 Resale Prices and Customer Obligations. Distributor shall be free to
determine in its sole discretion, its resale Product prices to customers in the
Territory. Distributor shall be responsible for collecting all applicable
sales, use, excise and other taxes due and owing from its customers as may be
required to comply with all laws and regulations applicable to the sale of the
Products in the Territory. All financial obligations of the Distributor's
business are Distributor's responsibility and Distributor shall be solely
responsible for and indemnify and hold Patriot free and harmless from, any and
all claims, damages or lawsuits (including Patriot attorney's fees) arising out
of the acts of Distributor, its employees or its agents.
3. Government Approvals. Distributor shall, at its own expense, pay all import
and export licenses and permits, customs charges and duty fees, and take all
other actions required to accomplish the export and import of the Products
purchased by Distributor into the Territory.
4. Patriot Warranties and Product Support.
4.1 Standard Limited Warranty. Distributor and its customers in North America
of new unopened Product shall receive Patriot's standard warranty as written
from time to time, unless otherwise agreed at the time of order. Patriot's
warrant is contingent upon proper use of a Product in the application for which
it was intended and does not cover Products that were modified without
Patriot's approval or subject to undue physical or electrical stress.
32
4
4.2 Other Customer Warranties. Outside of North America, Distributor shall be
solely responsible for handling directly all warranty claims made by its
customers in any Territory. Patriot shall only be obligated to accept returned
product for warranty reasons, if returns is a provision of the North American
warranty, if such Product returns exceed 7.5% of shipments and the time of
return is adequately documented to be comparable to that provided in North
America, if any.
4.3 No Other Warranty. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION, PATRIOT
GRANTS NO OTHER WARRANTY TO DISTRIBUTOR, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO NONINFRINGEMENT OF THIRD PARTIES' PROPRIETARY RIGHTS AND THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
4.4 Product and Customer Support. Prior to agreeing on prices and terms, the
parties shall agree on plans and procedures for product and customer support to
end-users as is customary for Products. In no event shall Patriot be
responsible for product support functions for any customers outside North
America. Should Distributor provide product and customer support, then it shall
be performed in a manner customary in the industry and at Distributor's sole
expense. Should Partriot be responsible for supporting Distributor's customers,
then this shall be a factor in pricing and Patriot shall endeavor to perform
customer supportn functions in a manner customary in the industry.
5. Marketing and Promotional Materials.
5.1 Packaging and Promotional Materials. Patriot shall provide Distributor with
Product packaging and instruction manual(s) in the English language.
Distributor may at its expense translate into other languages for the
Territory.
5.2 Marketing. Distributor shall use its best efforts to promote and market the
Products in the Territory and further agrees that its marketing and advertising
efforts will be of high quality and in good taste and will preserve the
professional image and reputation of Patriot and the Products. Distributor
agrees to include in advertising applicable copyright and trademark notices of
Patriot as they appear on or in the Products.
6. Representation and Agency. There may be customers of Distributor whereby the
Distributor believes it may be in the interests of both Patriot and Distributor
that Distributor serve as an independent non-exclusive representative or sales
agent of Patriot in dealing directly with a customer. Likewise there may be
instances wherein Patriot desires to use Distributor's expertise in dealing on
an agency basis with certain prospective customers of Patriot. In this
capacity, Distributor shall solicit take orders in Patriot's name, with all
sales subject to the approval and acceptance of Patriot. Patriot shall xxxx and
be responsible for the terms of orders. On such transactions, Patriot agrees to
pay Distributor a commission percentage, as agreed between the parties from
time to time, on the net sales within 20 days of receipt of funds from
customers. Distributor shall not represent other products which Patriot deems
competitive to the Products.
7. Trademarks. Patriot hereby grants to Distributor a non-exclusive,
non-transferable limited right, to use the Patriot trademarks, in existence
from time to time in connection with promoting and distributing Products in the
Territory.
8. Proprietary Rights and Confidentiality.
8.1 Proprietary Rights. Distributor agrees that Patriot owns all right, title,
and interest in the product lines that include the Products, Patriot Trademarks
and Patriot patents, patent applications, inventions, copyrights, know-how, and
trade secrets relating to the design, manufacture, operation or service of the
Products. Any permitted use by Distributor of any of these property rights is
authorized only for the purpose set forth herein, and upon termination of this
Agreement for any reason such authorization shall cease.
8.2 Sale Conveys No Right to Manufacture or Copy. The Products are offered for
sale and are sold by Patriot subject in every case to the condition that such
sale does not convey any license, expressly or by implication, to manufacture,
duplicate or otherwise copy or reproduce any of the Products. Distributor shall
take appropriate steps with its customers, as Patriot may reasonably request,
to inform them of and assure compliance with the restrictions contained in this
Section 7.2.
8.3 Confidentiality. During the term of this Agreement, and for a period of two
(2) years after this Agreement expires or terminates, a party receiving
Confidential Information of the other party will: (i) maintain in confidence
such Confidential Information to the same extent such party maintains its own
proprietary information (but at a minimum each party will use reasonable
efforts); (ii) not disclose such Confidential Information to any third party
without prior written consent of the disclosing party; and (iii) not use .such
Confidential Information for any purpose except those permitted by this
Agreement. A party shall have no such obligation with respect to any portion of
such Confidential Information which the receiving party can demonstrate was:
8.3.1 publicly disclosed by the disclosing party, or is otherwise
publicly disclosed without the fault of the receiving party, either
before or after it becomes known to the receiving party; or
8.3.2 known to the receiving party prior to when it was received from
the disclosing party; or
33
5
8.3.3 subsequently disclosed to the receiving party in good faith by a
third party who has a right to make such a disclosure; or
8.3.4 published by a third party as a matter of right; or
8.3.5 independently developed by the receiving party without the aid,
application or use of Confidential Information from the disclosing
party; or
8.3.6 required by law to be disclosed, but then only to the limited
extent of such legally required disclosure.
9. Term and Termination. The term of this Agreement shall be a period of two
years commencing on the date set forth in the first paragraph of this
Agreement. This Agreement shall automatically renew for successive one (1) year
terms unless either party provides the other party of notice of termination at
least sixty days prior to expiration of the then current term.
10. Limitation of Liability. PATRIOT SHALL NOT BE LIABLE TO DISTRIBUTOR OR ANY
THIRD PARTY FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSS OF
PROFITS OR REVENUE, OR INTERRUPTION OF BUSINESS IN ANY WAY ARISING OUT OF OR
RELATED TO THIS AGREEMENT, ON ANY THEORY OF LIABILITY, EVEN IF ANY
REPRESENTATIVE OF PATRIOT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11. General Provisions.
11.1 Independent Contractor. The parties expressly intend and agree that they
are acting as independent contractors and not as employees, joint venturers,
partners or agents of the other party. Neither party is authorized or empowered
to act as agent for, nor to transact business, or incur obligations in the
other party's name and no party shall in any way be bound by any acts,
representations or conduct of the other party.
11.2 Arbitration. Any controversy or claim arising in connection with this
Agreement or any modification or extension hereof, including any breach, claim
for damages rescission, shall be settled by arbitration in San Diego,
California, U.S.A. according to the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators shall be
final and may be entered in any court having jurisdiction thereof.
Notwithstanding this provision and the agreement between the parties to submit
their disputes to binding arbitration, nothing in this Agreement shall prevent
either party from seeking injunctive relief (or any other provisional remedy)
from any court having jurisdiction over the parties and the subject matter of
their dispute.
11.3 Governing Law. This Agreement shall be governed as to all matters,
including validity, construction and performance, by the laws of the State of
California as such laws are applied to agreements entered into and to be
performed entirely within California between California residents.
11.4 Assignment. Neither party may transfer or assign this Agreement without
the prior written consent of the other party.
11.5 Notice. Notice between the parties shall be in writing and may be
delivered by any means at the addresses set forth below, or such address as
either party shall furnish to the other in writing. Notice shall be effective
on actual receipt.
Distributor contact name and address:
Xxxx Xxx, Ph.D.
Innoware, Inc.
0000 Xxxxxxxx Xxxxxx Xxxx., Xxx. X
Xxx Xxxxx, XX 00000
Phone 0-000-000-0000
Fax 0-000-000-0000
Patriot contact name and address:
Patriot Scientific Corporation
00000 Xxxxxxxxxxxx Xxxxx, Xxxxx #000
Xxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxxx of America
Phone 0-000-000-0000
Fax 0-000-000-0000
34
6
11.6 Entire Agreement. This Agreement constitutes the entire agreement between
the parties in connection with the subject matter hereof and supersedes all
prior agreements, whether oral or written, which have been entered into prior
to the execution of this Agreement.
The parties have caused this Agreement to be executed by their duly authorized
representatives as of the date first written above.
PATRIOT INNOWARE
PATRIOT SCIENTIFIC CORPORATION INNOWARE, INC.
XXXXXX X. XXXXXX XXXX XXX
---------------------------------- -----------------
Xxxxxx X. Xxxxxx, President and CEO Xxxx Xxx, President
35
