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.
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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.
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2.
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GRANT OF
DISTRIBUTION RIGHTS; LICENSE
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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.
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3.
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OBLIGATIONS
OF DISTRIBUTOR
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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).
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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
