DISTRIBUTOR AGREEMENT BETWEEN GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

 

 

 

 

 

 

 

 

DISTRIBUTOR AGREEMENT

 

 

BETWEEN

 

 

GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

 

 

AND

 

 

EGC International Corp

 

1

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

1.

TERM

3

2.

APPOINTMENT

4

3.

MUTUAL OBLIGATIONS

4

4.

DISTRIBUTOR’S OBLIGATIONS

4

5.

DISTRIBUTOR’S REPRESENTATIONS AND WARRANTIES

7

6.

GDTI’S OBLIGATIONS

8

7.

PRICE TERMS

9

8.

ORDERING PROCEDURE, PAYMENT TERMS, DELIVERY

9

9.

TITLE AND SHIPPING

12

10.

PRODUCT SPECIFICATION CHANGES

13

11.

SOFTWARE LICENSE

13

12.

INTELLECTUAL AND INDUSTRIAL PROPERTY RIGHTS

13

13.

PATENT, COPYRIGHT AND TRADE SECRET INFRINGEMENT

14

14.

PRODUCT WARRANTY

15

15.

DISCLAIMER OF EMPLOYMENT RELATIONSHIP

16

16.

NO ASSIGNMENT

16

17.

TERMINATION

16

18.

EFFECT OF TERMINATION

17

19.

FORCE MAJEURE

17

20.

MISCELLANEOUS

17

21.

DEFINITIONS

19

22.

SCHEDULE A……………………………………………………………………22

23.

SCHEDULE B……………………………………………………………………28

24.

SCHEDULE C……………………………………………………………………29

25.

SCHEDULE D……………………………………………………………………30

26.

SCHEDULE E……………………………………………………………………31

27.

SCHEDULE F

 

 

 

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DISTRIBUTOR AGREEMENT

 

 

THIS DISTRIBUTOR AGREEMENT (this “Agreement”) is made effective the 30^th day of March, 2005 (the “Effective Date”)

 

 

B E T W E E N:

 

Guardian Technologies International, Inc., a corporation organized and existing under the laws of the state of Delaware (hereinafter called "GDTI"),

 

and

 

EGC International Corp, a corporation organized and existing under the laws of the state of Florida (hereinafter called "Distributor").

 

WHEREAS GDTI has developed and owns the Intelligent Imaging Informatics (3i) suite of software, the source code and object code relating thereto, as well as considerable know-how and expertise relating thereto.

 

WHEREAS GDTI and Distributor desire that Distributor be appointed to actively promote the licensing and distribution of the GDTI products listed in Schedule A attached hereto and any updates, upgrades or new releases or versions thereof (the "Products") and to provide support to licensees of the Products.

 

NOW THEREFORE, in consideration of the mutual premises and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto mutually covenant and agree as follows:

1.

TERM

This Agreement shall remain in effect for a period of three years from the Effective Date.  It shall be automatically renewed thereafter for successive one year periods, unless terminated in accordance with a provision contained herein, or unless either party gives written notice to the other of its intention to terminate or re-negotiate the Agreement no less than one hundred and twenty (120) days prior to the end of the then-current period, in which case this Agreement shall terminate at the end of its then-current period unless the parties subsequently amend the Agreement to provide for an extension of the term.

 

2.

APPOINTMENT

A.

Subject to all of the terms and conditions of this Agreement, GDTI hereby appoints Distributor as distributor of the Products in the territory defined in Schedule B attached

 

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hereto (the "Authorized Area").  Distributor shall license and distribute the Products to end users intending to use the Products in the Authorized Area.  Distributor shall have the exclusive right (except as specified in Section 20.A) to license and distribute the Products in territories designated “exclusive” in Schedule B.  Distributor shall have the non-exclusive right to license and distribute the Products, and GDTI may grant rights to third parties to license and distribute the Products or may license or distribute the Products directly, in other territories defined in Schedule B.

B.

Due to the need to maintain high standards for support of the Products, Distributor agrees not to (i) license, distribute or support the Products anywhere outside the Authorized Area or (ii) knowingly license or distribute the Products, directly or indirectly through one or more intermediaries, to end users who intend to use the Products outside the Authorized Area, in each case without the prior written consent of GDTI, which may be withheld in GDTI’s sole discretion.  Before giving such consent, GDTI reserves the right to require Distributor to provide such information as GDTI requires in order to determine Distributor's ability to adequately license, distribute and support the Products outside the Authorized Area

C.

Unauthorized shipment, licensing or distribution by Distributor of Products outside the Authorized Area will invalidate the warranty set forth in Section 14 and shall give GDTI the right to terminate this Agreement immediately upon notice to Distributor.

 

3.

MUTUAL OBLIGATIONS

In performing its duties under this Agreement, GDTI and Distributor, respectively, will:

A

Not do anything that would tend to discredit, dishonor, reflect adversely or unfavorably upon, or in any manner injure the reputation of, the other;

B.  

Endeavor to promote the licensing and distribution of the Products by providing leads to each other, as applicable;

C.  

At all times adhere to the highest standards of ethics in conducting its activities hereunder;

D.  At each party’s sole expense, comply with good business practices; and

E.  

At each party’s own expense, comply with the provisions of all federal, state and local laws, regulations, ordinances, requirements and codes that are applicable to or in connection with the performance of its duties and obligations hereunder.

 

4.

DISTRIBUTOR'S OBLIGATIONS

4.1

Distributor agrees:

A.                                                                                                                        

To use its best efforts to effectively market the Products;

B.                                                                                                                        

To maintain an adequate inventory of the Products to ensure rapid customer delivery.

C.                                                                                                                        

To make the minimum annual payments to GDTI specified in Schedule C.

D.                                                                                                                        

To promote the licensing and distribution of the Products through regular contact with customers in the Authorized Area.

 

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E.                                                                                                                        

To keep Distributor's customers in the Authorized Area advised of new GDTI products, as may be advised by GDTI from time to time and to distribute promptly to its customers any updates, upgrades, patches or revisions to the Products provided by GDTI.

F.                                                                                                                        

To cooperate with and assist in advertising and sales campaigns instituted by GDTI for the Products in the Authorized Area. This applies only in Authorized Area coverage. Distributor will develop promotional materials and make copies available at no charge to GDTI, subject to GDTI’s prior approval of any such materials.  GDTI may use, reproduce, distribute, publish, display and make derivative works of such materials as it sees fit.

G.                                                                                                                        

To provide, at its sole expense, an effective means of demonstrating the capabilities of the Products to potential and existing customers. To distribute to its customers technical material related to the Products, provided that all such material not provided directly by GDTI must be approved in writing by GDTI prior to distribution.  Such approval will not be unreasonably denied or delayed.  To request approval pursuant to this subsection, Distributor shall send copies of such material and a request for approval to the attention of GDTI President at the address specified in paragraph 20H.

H.                                                                                                                        

To conduct advertising and sales campaigns with respect to the Products using all kinds of promotional material including, but not limited to, press releases, exhibition panels, show boards and catalogues. Distributor agrees to refrain from making any claim, representation or warranty concerning the Products in excess of those made by GDTI, and shall not create any cartons, packaging or labels for the Products without GDTI's prior written approval of such cartons, packaging or labels.  GDTI shall have the continuing right to inspect and review Distributor's advertising and sales material, and packaging, and to disapprove it or require such modification as GDTI deems advisable.  In the event GDTI exercises its approval rights hereunder, Distributor, upon written notice, shall modify such material and/or packaging to comply with GDTI's instructions.  Distributor shall display the Products at those trade shows at which it exhibits any other products.

I.                                                                                                                        

To prominently display on all advertisements and sales material related to the Products, current GDTI trademarks and logos supplied or approved by GDTI.  All goodwill arising from such display of GDTI trademarks shall accrue to GDTI.

J.                                                                                                                        

Within 30 days following the end of each calendar quarter during the term of this Agreement, to furnish to GDTI a certified statement for such calendar quarter disclosing (i) the volume of each Product licensed and the types of license under which the Product was licensed, (ii) the gross revenue received by Distributor from licensing and distributing each Product and performing the Support Services during such calendar quarter, and (iii) the amount payable to GDTI with respect to the licensing and distribution of each Product and the performance of Support Services, in each case during such calendar quarter.  Concurrently with the delivery of such a statement, Distributor shall pay GDTI any amounts payable to GDTI with respect to such calendar quarter not previously paid to GDTI.  

K.                                                                                                                        

To provide to GDTI within the 60 days following the Effective Date, a forecast of licensing and distribution by Product for the initial twelve (12) month period following the Effective Date, at the address specified in paragraph 20H. Monthly rolling forecasts

 

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of licensing and distribution by Product will be provided by Distributor thereafter every quarter.

L.                                                                                                                        

To assign an individual who will act as account coordination manager for GDTI and the Products.  This individual will assist GDTI and its representatives in the creation and dissemination of all necessary reports, policies and procedures in the fulfillment of this Agreement.

M.                                                                                                                        

To extend to customers any express warranty given by GDTI to Distributor relating to the Products.  Distributor itself may not provide any additional warranties relating to the Products for or on behalf of GDTI to customers.

N.                                                                                                                        

To use its best efforts to enforce or to assist GDTI in enforcing the terms and conditions of sub distributor agreements and end user license agreements.

O.                                                                                                                        

To provide support services to end users other than Tier 3 Support Services (as defined below), including on-site installation of the Products, the training of end users in the use of the Products, and the provision of technical assistance in the use and operation of the Products by telephone twenty-four (24) hours per day, seven days per week, three hundred sixty-five (365) days per year (collectively, the “Support Services”).

P.                                                                                                                        

Not to license, sell, lease, rent, license, sublicense or otherwise distribute in the Authorized Area any product that performs functions substantially similar to those performed by any GDTI Product.

 

4.2

Distributor acknowledges that GDTI may disclose to Distributor information, data, programming, systems, technical information, designs, ideas, data formats and files, plans, lists of customer and potential or prospective customers, specifications, formulas, drawings, sketches, prototypes, tools, samples, reports and notes, operating instructions, source code and similar information, whether of a technical, engineering, operating design or economic nature, forming part of or relating to the Products or otherwise relating to the subject matter of this Agreement, all of which Distributor agrees are confidential and proprietary to GDTI (collectively, the “Licensor Confidential Information”). Distributor hereby acknowledges and agrees that:

 

A.                                                                                                                        

The Licensor Confidential Information has been disclosed to it solely and exclusively for the purposes contemplated herein; and

 

B.                                                                                                                        

GDTI shall be materially injured by reason of any breach by Distributor of the provisions of this Section 4.2, and GDTI shall be entitled to injunctive relief to restrain any such breach or anticipated breach hereof and to specifically enforce the provisions hereof.  Distributor further acknowledges that the foregoing rights and remedies of GDTI are in addition to the rights and remedies otherwise available to GDTI in equity or at law.

 

C.                                                                                                                        

Distributor hereby covenants and agrees that it (i) shall treat the Licensor Confidential Information as strictly confidential, (ii) shall not disclose the Licensor Confidential Information to any third party except for its employees and independent contractors who need to know the Licensor Confidential Information in order to fulfill the obligations of Distributor under this Agreement, and (iii) shall make use of same solely and exclusively

 

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for the purpose of fulfilling the obligations of Distributor hereunder. Without in any way limiting the generality of the foregoing, Distributor hereby undertakes that it shall not use, provide, furnish, disclose or permit the use, provision, furnishing or disclosure of any part of the Licensor Confidential Information except for the purposes expressly permitted hereunder.

 

5.

DISTRIBUTOR'S REPRESENTATIONS AND WARRANTIES

 

Distributor represents and warrants that:

 

A.

Distributor is a corporation duly incorporated, organized and validly existing in good standing under the laws of its jurisdiction of incorporation;

 

B.

Distributor has all necessary power, authority and capacity to enter into this Agreement and consummate the transactions contemplated hereby.  Neither the execution and delivery of this Agreement nor the performance of the transactions contemplated hereby will, with or without the giving of notice and/or the passage of time, or both, (i) conflict with, or constitute a default under, any applicable law in respect of Distributor, or require any action, consent, approval or authorization of, or any declaration, filing or registration with or notification to, any person, government agency or entity or any action, consent, approval or authorization under applicable law, (ii) result in the loss of any right under, conflict with or constitute a default under, or accelerate the date of performance of, any covenant, obligation or agreement to which GDTI may be a party or by which Distributor or any of its assets, rights or properties may be bound or (iii) conflict with or constitute a default under any of the charter documents or by-laws of Distributor. This Agreement constitutes a valid and binding obligation of Distributor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws relating to or affecting the enforcement of creditors' rights generally, and principles of equity.

 

C.

Distributor and its affiliates are not involved in any litigation which would materially affect Distributor's performance under this Agreement, excepting those matters previously disclosed to GDTI by Distributor in writing.

 

D.

Distributor shall maintain a high degree of financial integrity, service excellence and ethical conduct in its relations with end users of the Products.

 

6.

GDTI'S OBLIGATIONS

 

A.

GDTI agrees to license and deliver to Distributor the Products ordered by Distributor and any associated documentation to the extent that GDTI may accept Distributor's purchase orders in accordance with the terms of this Agreement.  GDTI reserves the right to add or delete Products from Schedule A, provided, however, that if GDTI intends to delete a

 

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Product from Schedule A it shall provide Distributor with ninety (90) days written notice of such action.  GDTI agrees that any Product cancellation from the current Schedule A shall be replaced by product or sub product of equal or greater functionality than the Product being canceled.

 

B.

Sales literature will be offered on a no charge basis in such quantities as GDTI deems advisable.  Product information such as, but not limited to, system documentation and other material related to the Products will be available at GDTI's then-current list price, subject to change with ninety (90) days written notice.  GDTI agrees to provide price protection to the Distributor on all valid signed contracts in which Products have not been delivered and would be affected by proposed price change. All sales literature will be offered by GDTI in the applicable country language (Spanish or Portuguese). GDTI agrees to provide the first copy of all product information, system documentation and other material related to the Products for each country within the Authorized Area at no cost to the Distributor.

 

C.

GDTI and its affiliates are not involved in any litigation which would materially affect GDTI’s performance under this Agreement, excepting those matters previously disclosed to Distributor by GDTI in writing.

 

D.

GDTI agrees to provide Distributor with current samples of GDTI's trademarks and logos for use, where appropriate and subject to the terms and conditions of this Agreement, by Distributor in Distributor's advertising and sales material related to the Products.

 

E.

GDTI agrees to provide Distributor with a reasonably sufficient supply of Products to assist Distributor in its sales efforts.  Should a sufficient supply of Products not be available, and the failure to provide the Products inhibits sales by the Distributor, Distributor shall have the right to reset the start date of the first year’s revenue guarantee.

 

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F.

GDTI agrees to support Distributor at local trade shows with additional Product literature and support personnel as is mutually agreed to by GDTI and Distributor.

 

G.

All sales leads from GDTI advertising and sales programs will be provided to Distributor for the exclusive territories covered in Schedule B of this Agreement.

 

H.

GDTI agrees to maintain the confidentiality of customer information provided to it by Distributor.

 

I.

GDTI agrees to provide Tier 3 Support Services to Distributor between the hours of 9 a.m. and 5 p.m. Eastern time on weekdays other than standard U.S. holidays.  “Tier 3 Support Services” shall mean the provision of commercially reasonable efforts to assist Distributor with the substantial failure of any Product to operate as a result of defective coding or other defects in the Product.

 

J.

GDTI agrees to complete the development within one hundred and eighty (180) days of PinPoint for small scale use in office buildings, terminals, and other low volume areas.  Deployment of PinPoint on these smaller scanner machines will require that the scanners be able to produce a minimum image quality and possess the necessary intelligence to communicate with PinPoint.

 

7.

PRICE TERMS

 

A.

Distributor will pay GDTI an amount for each Product ordered by Distributor and delivered by GDTI equal to GDTI's then-current applicable list price for the type of license under which such Product is licensed.  The initial list prices for Products are set forth in Schedule A.  In addition to the foregoing, Distributor shall pay GDTI an amount equal to twenty percent (20%) of all fees for Support Services received by Distributor in each calendar month, such payment to be made to GDTI within thirty (30) days after the end of such calendar month.

 

B.

GDTI has the right to change the applicable list price for any Product at any time provided that GDTI notifies Distributor in writing ninety (90) days prior to the effective date of such change.  

 

C.

All prices are FCA GDTI shipping point (Incoterms 1990).  Freight will be collect and shown separately.  The price payable by Distributor shall be the price in effect as of the date of acceptance of the purchase order.

 

8.

ORDERING PROCEDURE, PAYMENT TERMS, DELIVERY

 

A.

Distributor shall order the Products by delivery to GDTI of a written purchase order.  Each purchase order shall include the quantity of Product, the type of license under which such Product will be licensed to an end user, a requested ship date for each item,

 

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the method of shipment (which shall be mutually agreeable to the parties) and the location to which the Product should be shipped.

 

B.

In the event Distributor is in default of any obligation under this Agreement, GDTI need not accept any purchase order issued by Distributor and will not be liable to Distributor or to any other person if it decides not to accept a purchase order as a result of such default or for products not covered under Schedule A of this Agreement.

 

C.

GDTI will use its commercially reasonable efforts to meet the requested ship date in Distributor's purchase order but will not be liable to Distributor or to any other person if it fails to meet the requested ship date.  Orders without requested ship date will be processed for shipment within five business days.

 

D.

GDTI has the right to reject a purchase order or part thereof for late payment of invoices, or failure to provide adequate assurances of Distributor's ability to make the required payments in a timely fashion or to meet its other obligations under this Agreement.

 

E.

GDTI will invoice Distributor for Products shipped at the time of shipment or after shipment.  Distributor shall pay to GDTI the applicable price for any item within thirty (30) days after delivery to Distributor of the invoice for such item.  In the event that Distributor fails to make any payments required hereunder on a timely basis, GDTI may require that payment of subsequent invoices be made by certified check made payable to "Guardian Technologies International, Inc." or by bank wire transfer to a bank account specified by GDTI, or as otherwise determined by GDTI.  Late payment charges shall be the lesser of two percent (2%) per month (24% per annum) or the highest rate allowable under applicable law.  All payments made under this Agreement shall be in U.S. dollars.

 

F.

Minimum Annual Payments.

 

 

(i)

In the event that the aggregate amount actually paid by Distributor to GDTI under this Agreement with respect to the licensing and distribution of the Products and performance of the Support Services during the twelve (12) month period commencing six (6) months from the Effective Date (“Year 1,” and such aggregate amount, the “Year 1 Actual Payment”) is less than the minimum annual payment for Year 1 shown on Schedule C (the “Year 1 Minimum Payment”), Distributor shall pay GDTI a 10% penalty on the balance not achieved in “Year 1” and the balance of the “Year 1 Minimum Payment” not achieved will be additive to the next subsequent year and the amount by which the Year 1 Minimum Payment exceeds the Year 1 Actual Payment, such payment to be made to GDTI within forty-five (45) days after the end of Year 1.

 

(ii)

In the event that the aggregate amount actually paid by Distributor to GDTI under this Agreement with respect to the licensing and distribution of the Products and performance of the Support Services during the twelve (12) month period immediately following Year 1 (“Year 2,” and such aggregate amount, the “Year 2 Actual Payment”) is less than the minimum annual payment for Year 2 shown on Schedule C (the “Year 2 Minimum Payment”), Distributor shall pay GDTI a 10%

 

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penalty on the balance not achieved in “Year 2” and the balance of the “Year 2 Minimum Payment” not achieved will be additive to the next subsequent year and the amount by which the Year 2 Minimum Payment exceeds the Year 2 Actual Payment, such payment to be made to GDTI within forty-five (45) days after the end of Year 2.

 

(iii)

In the event that the aggregate amount actually paid by Distributor to GDTI under this Agreement with respect to the licensing and distribution of the Products and performance of the Support Services during any twelve (12) month period after Year 2 (each such period, a “Subsequent Year,” and such aggregate amount, the “Subsequent Year Actual Payment”) is less than the minimum annual payment for each Subsequent Year shown on Schedule C (the “Subsequent Year Minimum Payment”), Distributor shall pay GDTI a 10% penalty on the balance not achieved in “Subsequent Year” and the balance of the “Subsequent Year Minimum Payment” not achieved will be additive to the next subsequent year if the agreement is mutually extended and the amount by which the Subsequent Year Minimum Payment exceeds the Subsequent Year Actual Payment for the applicable Subsequent Year, such payment to be made to GDTI within forty-five (45) days after the end of the applicable Subsequent Year.

 

(iv)

In the event that Distributor grants a Rental License to an end user pursuant to this Agreement, then, upon the payment to GDTI of the initial monthly payment with respect to such Rental License, (i) Distributor shall be deemed to have paid GDTI the aggregate license fees for the initial three (3) year term of such Rental License solely for the purpose of determining whether Distributor has paid GDTI the applicable minimum annual payment under this Section 8.F with respect to the twelve (12) month period in which Distributor grants the Rental License to the end user, and (ii) in each subsequent twelve (12) month period, the actual payments made by Distributor to GDTI with respect to such Rental License shall not be considered in determining whether Distributor has paid GDTI the applicable minimum annual payment under this Section 8.F with respect to such twelve (12) month period.  Nothing in this paragraph shall relieve Distributor of its obligation to pay GDTI the monthly fee set forth in Exhibit A with respect to such Rental License.  If the Distributor fails to pay GDTI any amount payable to GDTI with respect to a Rental License during the initial three (3) year term, whether as a result of the termination of the Rental License or for any other reason, the minimum annual payment for the year in which such default occurs shall be increased by an amount equal to the aggregate license fees payable for the balance of the initial three (3) year term.

 

(v)

In the event that Distributor grants a Lease-to-Ownership License to an end user pursuant to this Agreement, then, upon the payment to GDTI of the initial monthly payment with respect to such Lease-to-Ownership License, (i) Distributor shall be deemed to have paid GDTI the aggregate license fees for the four (4) year term of such Lease-to-Ownership License solely for the purpose of determining whether Distributor has paid GDTI the applicable minimum annual payment under this Section 8.F with respect to the twelve (12) month period in which Distributor grants the Lease-to-Ownership License to the end

 

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user, and (ii) in each subsequent twelve (12) month period, the actual payments made by Distributor to GDTI with respect to such Lease-to-Ownership License shall not be considered in determining whether Distributor has paid GDTI the applicable minimum annual payment under this Section 8.F with respect to such twelve (12) month period.  Nothing in this paragraph shall relieve Distributor of its obligation to pay GDTI the monthly fee set forth in Exhibit A with respect to such Lease-to-Ownership License.  If the Distributor fails to pay GDTI any amount payable to GDTI with respect to a Lease-to-Ownership License during the four (4) year term, whether as a result of the termination of the Lease-to-Ownership License or for any other reason, the minimum annual payment for the year in which such default occurs shall be increased by an amount equal to the aggregate license fees payable for the balance of the four (4) year term.

 

(vii)

In the event that this Agreement is terminated for any reason other than at the end of Year 1, Year 2 or a Subsequent Year, Distributor shall pay GDTI the amount by which the minimum payment applicable to the twelve (12) month period during which this Agreement was terminated (pro rated for the period between the commencement of such period and the date of termination of this Agreement) exceeds the aggregate amount actually paid by Distributor to GDTI under this Agreement with respect to the licensing and distribution of the Products and performance of the Support Services between the commencement of such period and the date of termination of this Agreement.

 

G.

In the event that the amount actually paid by Distributor to GDTI with respect to the licensing and distribution of a particular Product (either PinPoint 3i Engine or FlowPoint) in the Authorized Area in any twelve (12) month period is less than twenty percent (20%) of the total amount actually paid by Distributor to GDTI with respect to the marketing, distribution, licensing and sublicensing of all Products in the Authorized Area during such twelve (12) month period, Distributor’s exclusive right to market, distribute, license and sublicense such Product in the Authorized Area, or any part thereof, shall terminate automatically as of the end of such twelve (12) month period, and shall be converted automatically into a non-exclusive right to license, distribute and support such Product in the Authorized Area.

 

H.