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Exhibit 10.5
DISTRIBUTOR AGREEMENT
This
Agreement is entered into as of January 21, 2005 (the
“Effective Date”) by and among VendingData Corporation,
a Nevada corporation (“Vendor”), and Technical Casino
Supplies Ltd, an English company
(“Distributor”).
RECITALS
WHEREAS,
Vendor is the owner of patents, patents pending, trademarks, and
other related intellectual property involving a full range of
shuffling machine products for the casino industry (collectively,
the “Products” and, individually, the
“Product”);
WHEREAS,
Distributor is in the business of distributing products to the
casino industry throughout the world and is a subsidiary of
Victoria Holdings Ltd; and
WHEREAS,
Vendor desires to grant to Distributor an exclusive right to
market, sell, rent, lease, service and maintain the Products
subject to the terms and conditions as set forth herein.
NOW,
THEREFORE, in consideration of the several and mutual promises,
agreements, covenants, understandings, undertakings,
representations and warranties hereinafter set forth the receipt
and sufficiency of which is hereby acknowledged, the parties to
this Agreement agree that the aforementioned recitals are true and
correct and by this reference incorporated herein as if fully set
forth and the parties further covenant and agree as
follows:
As
provided for in this Section 1, the term of this Agreement shall be
for a period of five (5) years, beginning on the Effective Date
(the “Initial Term”); provided, however, the Initial
Term shall be subject to automatic successive renewal terms of
three (3) years each (the “Renewal Terms” and together
with the Initial Term, the “Term”).
1.1.
Termination . This Agreement may be terminated subject to
the following clauses:
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1.1.1.
By either Vendor or Distributor, upon written notice of termination
of this Agreement no later than ninety (90) calendar days prior to
the expiration of the relevant Term, then in effect; |
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1.1.2.
By Vendor and Distributor, at any time, upon the mutual written
agreement of Vendor and Distributor; |
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1.1.3.
By either Vendor or Distributor, following a material or continuing
breach of this Agreement (in the case of a breach which is capable
of remedy) by the other party and the breaching party’s
failure to cure such breach within ninety (90) days of receiving
written notice of such breach, where a breach shall be considered
capable of remedy if the party in breach can comply with the
provision in question in all respects other than as to the time of
the performance (provided that the time of performance is not of
the essence); or |
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1.1.4.
Subject to Section 1.6, by Vendor (or successor to Vendor), upon
written notice to Distributor of a change of control of Vendor and
the election by Vendor (or successor to Vendor) to terminate this
Agreement, where a “change of control” shall mean a
change in ownership of the Vendor such that an unaffiliated third
party acquires a majority of the voting power of
Vendor; |
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1.1.5.
Subject to Section 1.6, with respect to any shuffler line, by
Vendor, upon written notice to Distributor of the transfer of
ownership of the relevant shuffler line ( i.e, , the
PokerOne™ Shuffler, the Random Plus™ Shuffler, the
Continuous Plus™ Shuffler and other future line of shuffler
products offered by Vendor) to an unaffiliated third party and the
election by the unaffiliated third party to terminate this
Agreement with respect to the relevant shuffler line. |
1.2.
No Responsibility . Upon termination of this Agreement in
accordance with the terms of this Section 1, the terminating party
shall not be responsible for any costs or damages incurred by the
other party resulting from the termination, subject to Section 1.6
of this Agreement.
1.3.
Distributor Credit . Except when this Agreement is
terminated due to the uncured breach of Distributor, Distributor
shall have within one (1) month of termination of this Agreement
the right to return the Products purchased by Distributor to Vendor
provided that the Products are unopened upon receipt by Vendor.
Distributor will receive a credit for the full price paid by
Distributor for the Products. Under such circumstances, Vendor
shall have the right to market and sell such returns to other
customers that may be interested in acquiring the goods referred to
herein.
1.4.
Delivery upon Termination . In the event of termination for
whatever reason, Vendor and Distributor agree to complete the
delivery of each order of the Product received by Distributor and
each unfulfilled order for the Product prior to the termination
date.
1.5.
Effect . In the event of the termination of this Agreement
for any reason whatsoever, the exclusive distribution right and
license granted to Distributor pursuant to this Agreement shall
automatically revert to Vendor as Vendor’s sole
property.
1.6.
Monthly Compensation . In the event that this Agreement is
terminated pursuant to either Section 1.1.4 or 1.1.5 of this
Agreement, this shall not of itself be deemed a breach hereof but
Distributor shall have the right to receive monthly compensation
from Vendor, or successor to the Vendor, representing the amount of
profit to Distributor lost as a result of the termination (the
“Monthly Compensation”).
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1.6.1.
Calculation. The amount of the Monthly Compensation shall be
determined by taking average gross profit related to the relevant
Products for each of the monthly periods completed since the
beginning of this Agreement, where “gross profit” shall
mean the difference between the revenue generated by Distributor
during the relevant period less any commissions paid by Distributor
to third parties and less the Price paid by Distributor to Vendor
for the relevant Products (exclusive of any taxes, charges, fees or
impositions related to sales or delivery). |
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1.6.2.
Payment. The Monthly Compensation shall be paid for the remaining
monthly periods remaining in the Term, as if the termination of
this Agreement had not occurred, or twenty four (24) calendar
months, which ever period is less, where payment shall be made no
later than thirty (30) calendar days after the end of the relevant
monthly period. |
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1.6.3.
Reservation of Rights. For the avoidance of doubt,
Distributor’s right to compensation shall be without
prejudice to its rights in respect of any breach by Vendor of this
Agreement. |
| 2. |
GRANT OF DISTRIBUTION RIGHTS; LICENSE |
In
consideration for the purchase of the Products by Distributor from
Vendor, Vendor grants Distributor the exclusive right to market,
sell, rent, lease, service and maintain the Products and all
improvements thereon within the Territory (as defined herein)
according to the terms and conditions as set forth herein. As part
of the exclusive distribution right granted in this Section 2,
Vendor hereby grants Distributor the non-exclusive,
non-transferable right to use and display Vendor’s
trademarks, logos, Product photographs and images, Product
advertising and promotional copy, including but not limited to the
materials contained in Vendor’s website, in connection with
the promotion, advertising and distribution of the
Products.
2.1.
Definition of “Territory.” For the purposes of
this Agreement, the “Territory” shall mean all
countries and territories throughout the world with the exception
of the United States of America, the Caribbean and cruise ships
based from ports within the United States of America or the
Caribbean.
2.2.
Limitations . Notwithstanding any other provision of this
Agreement, the Distributor specifically agrees that any and all
marks, logos, images and copy related to the Products are solely
the property of Vendor. Distributor agrees not to use in any manner
whatsoever the marks, logos, images and copy of Vendor following
the expiration or termination of this Agreement, except as may be
needed to sell any Products remaining in Distributor’s
inventory.
2.3.
Design and Specification . In its sole discretion and
without any liability to Distributor, Vendor shall have final
decision-making power with respect to, from time to time, alter the
design or construction of any Products, add new and additional
Products and discontinue any Products; provided, however, in the
event of any such action on Vendor’s part, Vendor shall give
reasonable notice to Distributor.
2.4.
Prosecution of the Patent Applications . Vendor shall retain
full and complete control over the prosecution of any patent
applications and any related disclaimer proceedings.
2.5.
Ownership of Future Inventions and Improvements . Any and
all future inventions and improvements related to the Products
licensed pursuant to this Agreement shall be the property of
Vendor.
2.6.
Commission to Vendor For Sales Lead to Distributor. Subject
to the mutual agreement of Vendor and Distributor, in the event
that Vendor provides a new sales lead to Distributor that results
in the sale of the Products, Distributor shall pay to Vendor a
commission equal to twenty-five percent (25%) of the gross profit
for the Products, where gross profit shall mean the difference
between the price paid by the customer (where Distributor will
determine the customer price for the Products on a case by case
basis) and the price paid by Distributor for the Products. Sales
leads for rental contracts provided by Vendor to Distributor will
be dealt with on a case by case basis by mutual agreement between
Vendor and Distributor. Any repeat orders will be dealt with on a
case by case basis by mutual agreement between Vendor and
Distributor.
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2.6.1.
Payment. Distributor hereby agrees to provide to Vendor payment of
the commission no later than thirty (30) calendar days after the
receipt of full payment from the customer. |
| 3. |
OBLIGATIONS OF DISTRIBUTOR |
In
exchange for the exclusive distribution right and license provided
in Section 2 of this Agreement, Distributor hereby agrees during
the Term to use its best commercial efforts to promote, advertise
and distribute the Products throughout the Territory, including,
without limitation, the following:
3.1.
Distributor will purchase the Products from Vendor in accordance
with the parameters set forth in Sections 5 and 6 of this
Agreement;
3.2.
Distributor will be responsible for all marketing, selling and
servicing efforts for the Products within the Territory;
3.3.
Distributor shall, in the event of any actual or alleged
infringement of the Products comes to the attention of Distributor,
promptly notify Vendor, in writing, of the actual or alleged
infringement;
3.4.
Distributor shall not obtain, purchase, receive or source any other
card shuffling machine from any third party or other source under
any circumstance other than from Vendor with the exception of all
Shuffle Master, Inc. shuffling machines which are held in stock at
the Effective Date which Distributor is free to sell, rent purchase
or lease until all of the said stock has been depleted.
3.5.
Distributor shall not sell or otherwise transfer any of the rights
granted pursuant to this Agreement to any third party without the
prior written consent of Vendor; provided, however, Distributor may
enter into distribution arrangements with regional distributors
within the Territory in its efforts to promote, advertise and
distribute the Products in accordance with this
Agreement;
3.6.
Distributor shall provide written updates to Vendor at the end of
each calendar quarter of any distribution arrangements entered into
by Distributor as permitted by Section 3.5 of this Agreement, where
said notice shall contain the name and location of the regional
distributor, and a brief statement on the experience and history of
the regional distributor;
3.7.
Distributor shall not make any modifications to the Products
without prior written consent of Vendor;
3.8.
Distributor shall provide to Vendor: (1) monthly sales figures no
later than fifteen (15) calendar days after the end of the relevant
monthly period that provides information with respect to sales for
each Product; and (2) a non binding three (3) month forecast on a
quarterly basis;
3.9.
Distributor shall demonstrate the Products at the following
international gaming exhibitions, ICE (London), G2E (Las Vegas),
SAGSE (Buenos Aires), EELEX (Moscow) and AGE (Sydney), or any
successors or equivalents to the aforementioned exhibitions.
Distributor may also demonstrate the products at other gaming
exhibitions where Distributor decides to exhibit, subject to there
being a good business case to do so; and
3.10.
Distributor shall be responsible for the retention, use and actions
of any third parties used to distribute the Products, including any
claims, liabilities or other damages associated with such third
parties.
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In
exchange for the marketing and selling of the Products provided in
Section 3, Vendor hereby agrees:
4.1. To
provide Distributor with the appropriate product brochures, and two
(2) fully working and fit for purpose samples of each model of
shuffling machine free of charge;
4.2. To
prominently display and advertise that Distributor is the sole and
exclusive distributor of Vendor for the Products in the
Territory;
4.3.
Subject to Section 2.6 of this Agreement, not to market,
distribute, sell or supply the Products covered by this Agreement
to any individual or entity in the Territory directly in response
to a request from that person or entity without the prior written
consent of Distributor;
4.4.
Subject to Section 4.5 of this Agreement, for a period of
twenty-four (24) months after the Effective Date, not to develop,
manufacture, market, distribute, sell or supply anywhere in the
world to any individual or entity a gaming chip-sorting machine for
use in a casino; and
4.5.
Notwithstanding Section 4.4 of this Agreement, use its best
commercial efforts to enter into a separate agreement with
Distributor for the manufacture of a gaming chip-sorting machine or
the manufacture of components of a gaming chip-sorting machine for
use by the casino industry, where a condition of the agreement will
be that Vendor will not compete with Distributor in any way in
relation to the manufacture, supply, sale and distribution of
gaming chip-sorting machines. It is understood that if Vendor and
Distributor fail to reach an agreement then the twenty-four (24)
month restriction detailed in Section 4.4 above will remain in
force..
The
obligation detailed under Section 4.4 above will cease immediately
if Distributor fails to complete its obligations under Section 5.1
below, where such failure is not a result of any default by Vendor,
or if Distributor fails to provide payment for the Products within
one hundred and eighty (180) days after the delivery of the
same.
5.1.
Purchase . In exchange for the exclusive distribution right
and license granted to Distributor pursuant to this Agreement,
during the Term, Distributor hereby agrees to purchase the Products
from Vendor, where such Products are fit for purpose and ready for
sale in the Territory, as determined by Distributor, as
follows:
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5.1.1.
As of the Effective Date, one hundred (100) units of the
PokerOne™ Shuffler at a price of Four Thousand Nine Hundred
Dollars ($4,950.00 U.S.) per unit, where Vendor shall ship the
units no later than the end of January 2005; |
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5.1.2.
Upon the delivery of two (2) units of the Random Plus™
Shuffler to Distributor and the expiration of a review period
ending thirty (30) calendar days after the receipt of delivery by
Distributor,, where such review by Distributor determines that the
Random Plus™ Shuffler is fit for purpose and ready for
commercial sale in the Territory, one hundred (100) units of the
Random Plus™ Shuffler at a price of Four Thousand Nine
Hundred Fifty Dollars ($4,950.00 U.S.) per unit, where Vendor shall
ship the units no later than 30 days after the review
period; |
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5.1.3.
Upon the receipt of any necessary approvals or approval waivers and
the expiration of a review period ending thirty (30) calendar days
after the receipt of delivery by Distributor of two (2) units of
the Continuous Plus™ Shuffler, where such review by
Distributor determines that the Continuous Plus™ Shuffler is
fit for purpose and ready for commercial sale in the Territory, one
hundred (100) units of the Continuous Plus™ Shuffler at a
price of Five Thousand Nine Hundred Fifty Dollars ($5,950.00
U.S.); |
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5.1.4.
Within thirty (30) days of the one (1) year anniversary of the
Effective Date, an additional two hundred (200) units of the
Products comprising any mix of the shuffler products offered by
Vendor; and |
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5.1.5.
Any additional number of units of the Products as may be submitted
by Distributor to Vendor pursuant to a Purchase Order (as defined
herein). |
5.2.
Purchase Order . Unless otherwise provided for in this
Agreement, all orders for the purchase of the Products shall be
made through the submission of a purchase order (a “Purchase
Order”), where such Purchase Order shall set forth: (1) the
relevant monthly period to which the Purchase Order relates; (2)
the Products to be ordered; (3) the quantity of the Products
ordered; (4) the relevant price for the Products ordered; (5) the
requested shipping date and destination of the Products ordered;
(6) the Purchase Order number; and (7) the name and authorized
signature of Distributor.
5.3.
Shipping . Unless otherwise provided for in this Agreement,
upon the acceptance of a Purchase Order by Vendor, Vendor shall, in
the normal course of business, package, crate and insure the
Products at its cost (including any applicable export duties and
export taxes) and deliver the Products to Distributor F.O.B.
Zhongshan City, China. Vendor will advise Distributor immediately
of any delay but will use all reasonable means to dispatch the
Products within four (4) weeks of an order
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