DISTRIBUTORSHIP AGREEMENT

 

 

distributor, and the Company shall be entitled to make sales itself or to appoint other distributors of the Products in the Territory.

 

Section 1.2                                   Products. The Distributor is authorized to promote, distribute and sell in the Territory only those products specified in Schedule A attached hereto and incorporated herein, as such schedule A may be amended in writing by the parties hereto from time to time during the term hereof (all of such products hereinafter collectively referred to as the “Products”). The Company reserves the right, with respect to any of the Company’s products other than the Products, to make direct sales in the Territory or to appoint other distributors in the Territory.

 

Section 1.3                                   Territory. The territory in which the Distributor is authorized to solicit customers of the Products is limited to the geographic area(s) specified in Schedule B attached hereto and incorporated herein, as such Schedule B may be amended in writing by the parties hereto from time to time during the term hereof (hereinafter referred to as the “Territory”), and does not include any other place in the world. The Distributor shall not actively solicit sales of the Products outside the Territory and shall not establish any branch or maintain any distribution depot or warehouse outside the Territory for the Products, except with the prior written consent of the Company, which may be granted or denied in the Company’s sole discretion.

 

Section 1.4                                   Restrictions on Authority. For all purposes under this Agreement, the Distributor is an independent contractor and shall not be deemed to be an employee, agent, partner or legal representative of the Company. This Agreement does not grant, and the Distributor shall not have, any authority, express or implied, to create or assume any obligation, enter into any agreement, make any representation or warranty, file any document with any governmental body or serve or accept legal process on behalf of the Company, to settle any claim by or against the Company, or to bind or otherwise render the Company liable in any way in the Territory or anywhere else in the world, without the prior express written consent of the Company. The Distributor shall purchase the Products for its own account from the Company and shall re-sell the Products for its own account in the Territory.

 

Section 1.5                                   Employees of Distributor. The Distributor shall be responsible for the selection, training and supervision of, and the payment of remuneration and benefits to, its employees who assist it in the performance of its obligations

 

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hereunder and in no event shall the Company have any obligation to, or authority over, such employees of the Distributor.

 

Section 1.6                                   Non-competition.

 

1.6.1                                                   The Distributor shall use its best efforts to attain and sustain maximum sales of the Products in the Territory and shall refrain from diminishing or otherwise weakening the Company’s rights by engaging in any activities whatsoever in the Territory that might reasonably be deemed as injurious to the sales potential of the Products in the Territory.

 

1.6.2                                                   The Distributor represents and warrants to the Company that, as of the Effective Date of this Agreement (as defined in Article 17 hereof), the Distributor is not, directly or indirectly, acting as an agent, representative or distributor in the Territory for, and is not, directly or indirectly, selling or distributing in the Territory, any products that are similar to or competitive with the Products. Furthermore, during the term of this Agreement, the Distributor shall not, directly or indirectly, act as an agent, representative or distributor in the Territory for, and shall not, directly or indirectly, design, develop, manufacture, license, promote, sell or distribute in the Territory, any products that are similar to or competitive with the Products.

 

1.6.3                                                   The Distributor agrees that any breach by it of its obligations under this Section 1.6 shall be just cause for termination under Section 18.3 hereof.

 

ARTICLE 2.                             TERMS OF SALE

 

Section 2.1                                   Purchase Orders. In making its purchases of the Products from the Company, the Distributor shall submit written purchase orders to the Company at the address set forth in Article 15 below, which the Company may, in its sole discretion, accept or reject, in whole or in part, for any one of the following reasons:  the Company is unable to fill a purchase order due to commercial reasons; the Company has experienced an event of force majeure as defined in Article 14; the Company has decided to cease manufacturing the Products or to cease selling the Products in the Territory; the order(s) contain terms or conditions inconsistent with the terms of this Agreement or the course of dealing between the parties hereto or violative of applicable law; or if the Company determines that fulfilling the order would cause the Company to be in breach of any other contract, order, judgment, decree or other authority to which it is a party or by which it is bound. The Company reserves the right to distribute unusually large orders over an extended

 

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period of time. The Company may, in its sole discretion, determine whether an order is unusually large and what extended shipment period is appropriate. The Company may, in its sole discretion, accept and act on telecopy or telephone purchase orders issued by the Distributor; provided, however, that, upon the request of the Company, the Distributor shall promptly confirm telephone purchase orders in writing or by telecopy. No purchase orders accepted by the Company may be cancelled by either the Distributor or the Company, unless the parties hereto agree otherwise in writing.

 

Section 2.2                                   Prices to Distributor. The purchase prices for the Products shall be the prices specified in Schedule A, as such Schedule A may be amended from time to time during the term hereof by the Company on each January 1, in its sole discretion, on sixty (60) days calendar days’ prior written Notice to the Distributor; provided, however, that, within the ten (10) calendar days following the date of such Notice by the Company, the Distributor may order, at the previously prevailing prices, such quantities of the Products as are reasonably needed by the Distributor during the thirty (30) calendar day period immediately following the date of such Notice to fill contracts and outstanding quotations existing on the date of the Company’s Notice of such price changes.

 

Section 2.3                                   Payment Terms.

 

2.3.1                                                   Each purchase order hereunder shall specify the amount, manner and timing of payment thereunder; provided, however, that, in all cases, the Company shall be paid in the same currency reflected on the Company’s invoices to the Distributor, and payment shall be made, at the option of the Company, by one of the following three methods:  a bank draft, a wire transfer of immediately available funds or by an irrevocable letter of credit drawn in favor of the Company, confirmed by a U.S. banking institution acceptable to the Company and on terms and conditions acceptable to the Company. In all cases, the payment terms shall be Net 30 days, less 20% on those prices specified in Schedule A attached hereto. Provided, however, that in the event the Company changes its payment terms applicable generally to substantially all of its distributors who conduct a comparable volume of business in the Products, then the Company may, in its sole discretion, upon Notice to the Distributor, alter the payment terms at any time during the term hereof and any such alteration shall be effective with respect to any and all purchase orders not theretofore accepted by the Company.

 

2.3.2                                                   Acceptance and endorsement by the Company of any instrument for less than the full amount that the Company

 

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claims to be due and payable to it under a purchase order or hereunder shall not be deemed to be an admission of payment in full, and any conditions to the contrary that are noted on such instrument shall not be binding on the Company.

 

Section 2.4                                   Delivery.

 

2.4.1                                                   Delivery schedules stated by the Company are estimates only and are not guaranteed by the Company, but the Company shall, subject to Article 14 hereof, attempt to make delivery within a reasonable time, taking into account the Distributor’s need to obtain the Products, the availability of transportation, the needs of other customers of the Company, the existence of special orders and other commercial matters. The Company shall not be obligated to deliver any Products without timely receipt of shipping instructions from the Distributor, and the Company shall not be obligated to ship Products that have been discontinued or that are temporarily out of stock.

 

2.4.2                                                   Unless the parties hereto otherwise agree in writing or by telecopy with respect to a given purchase order, the Distributor shall be solely responsible for all shipping, duty and customs charges applicable to the Products.

 

Section 2.5                                   Return of Products. Distributor agrees to abide by the terms of the Company’s returned goods policy, and no Product may be returned after shipment to the Distributor, except as permitted in the Company returned goods policy as such may be amended from time to time by the Company.

 

Section 2.6                                   Taxes. Any and all customs, tariffs and duties or excise, sales, use, value-added or other taxes or levies imposed by any governmental body in the Territory on the Distributor or the Company in connection with the sale of the Products to or by the Distributor shall be paid by the Distributor. The Distributor shall fully reimburse and indemnify the Company for any amount actually paid by the Company or withheld by the Distributor for any such taxes or levies within thirty (30) calendar days after the date on which the Company gives notice thereof to the Distributor or after the date of withholding by the Distributor, as the case may be.

 

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ARTICLE 3.                             INTELLECTUAL PROPERTY AND TRADEMARKS

 

Section 3.1                                   Certain Definitions.

 

3.1.1                                                   “Company’s Property” shall mean any and all inventions, trade secrets, manufacturing processes, know-how, product designs, formulas, formulations, machine designs, technical information, technical designs, engineering and product data, specifications, blueprints, drawings, manuals, customer lists, vendor and supplier lists and agreements, distributor and sales representative lists and agreements, marketing and other business strategies, forms, sales aids, and other confidential information and materials, whether or not in documentary form and whether or not patented by the Company or its parent, subsidiaries or other affiliates in the Territory or elsewhere, that are heretofore and hereafter owned or controlled by the Company or its parents, subsidiaries or other affiliates and that relate to the design, manufacturing, production, operations, marketing, sale, distribution and use of the Products or that otherwise relate to the business, products and services of the Company or its parents, subsidiaries or other affiliates.

 

3.1.2                                                   “Company’s Trademarks” shall mean any and all of the trademarks, service marks or trade names, whether or not registered by the Company or its parents, subsidiaries or other affiliates in the Territory or elsewhere, and all good will related thereto, that are heretofore and hereafter owned or controlled by the Company or its parents, subsidiaries or other affiliates and that are associated with the Products.

 

Section 3.2                                   Ownership and Limited License to Reproduce Company’s Trademarks. Any and all of Company’s Property and Company’s Trademarks are and shall remain the exclusive property of the Company or its parents, subsidiaries or other affiliates. This Agreement affords the Distributor no rights therein; the Distributor shall have no rights therein; and the Distributor shall never assert any rights therein; provided, however, that the Company grants the Distributor a limited, non-exclusive, fully paid-up license to reproduce Company’s Trademarks in advertisements and other promotional materials during the term of this Agreement. Such license is granted for the sole purpose of assisting the Distributor in promoting the sale and use of the Products in the Territory under this Agreement. Subject to Section 18.7 hereof, such license shall expire immediately upon the expiration of this Agreement or the termination of this Agreement, with or without cause.

 

Section 3.3                                   Certain Additional Restrictions.

 

3.3.1                                                   The Products to be sold to the Distributor hereunder shall bear Company’s Trademarks. The Distributor shall not remove, conceal or alter any of Company’s Trademarks on the

 

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Products. The Distributor shall promote and sell all Products in their original packages and under the original labels provided by the Company; provided, however, that the Distributor shall fully and timely advise the Company of all laws and regulations of the Territory governing the packaging and labeling of the Products and provided further that, upon receipt of such information, the Company shall use its best efforts to ensure that the packaging and labeling of the Products are in substantial compliance with all such laws and regulations. The Distributor shall make no modifications, alterations, changes, enhancements or additions in or to the Products or the Company’s Trademarks, except for the addition of the name and address of the Distributor to the Products, displaying the name and address of the Distributor and the Company in the same-size print on the Products.

 

3.3.2                                                   The Distributor shall include an appropriate trademark or trade name notice on its advertisements, sales literature, press releases and all other marketing materials that use Company’s Trademarks.

 

3.3.3                                                   The Distributor shall not use Company’s Trademarks on its letterhead or in its Company name; provided, however, that the Distributor may include a short plain language statement on its letterhead and promotional literature to the effect that it is an authorized distributor of the Company’s Products.

 

3.3.4                                                   The Distributor represents and warrants that it has not sought or obtained, and agrees that it shall not seek or obtain, in the Territory or elsewhere, any trademark or tradename registration embodying Company’s Trademarks or any patent or other intellectual property protection for any of the Company’s Property, unless authorized to do so in advance in writing by the Company.

 

Section 3.5                                   Confidentiality.

 

3.5.1                                                   During the term of this Agreement at all times after the expiration of this Agreement or the termination of this Agreement, with or without cause, the Distributor shall treat all Company’s Property disclosed or supplied to it by the Company as confidential and shall cause, instruct and oblige its directors, officers, employees and agents and any other person acting in concert with it or on its behalf and having access to such Company’s Property to keep the same in confidence. The Distributor shall not, at any time, in any way, directly or

 

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indirectly, publicly or privately (i) communicate, disclose, disseminate, lecture upon or publish articles concerning Company’s Property nor (ii) aid anyone else in such communication, disclosure, dissemination, lecturing or publishing, nor (iii) use, nor aid anyone else in using, Company’s Property, without the prior express written consent of the Company. Provided, however, that the Distributor’s obligation of secrecy and non-use under this Agreement shall not apply to (a) information that the Distributor is using strictly in accordance with the terms of this Agreement for the limited purpose of promoting the sale and use of the Products in the Territory; (b) information that at the time of the disclosure by the Company to the Distributor is in the public domain; (c) information that, after disclosure by the Company to the Distributor, becomes part of the public domain by publication or otherwise, through an authorized source other than the Distributor and without the fault of the Distributor; and (d) information that the Distributor can show by written records was in the Distributor’s possession prior to the disclosure by the Company to the Distributor and was not acquired, directly or indirectly, from the Company. Provided further, however, in order for the above proviso in this Section 3.5.1 to be applicable, Distributor must make a claim to the Company in writing and with specificity that it contends this proviso applies to some or all of the Company’s Property disclosed to it by Company within ten (10) days of the date of Company’s disclosure. Such writing must identify the portion of the Company’s Property that Distributor contends is the subject of this proviso and the factual basis upon which its claim is grounded. If Company disputes such claims by Distributor then the parties shall submit the issues to JAMS - ENDISPUTE for binding arbitration in Orange County, California. The Distributor shall have the burden of proving that the exceptions set forth in the proviso apply by clear and convincing evidence and, until there is a final resolution of the dispute in Distributor’s favor. Distributor shall be bound by the provisions in the first part of Section 3.5.1. If Distributor fails to deliver timely notice under this Section, then all such information shall be conclusively deemed to be Company Property belonging to Company and subject to all of the other provisions of this Agreement.

 

3.5.2                                                   During the term of this Agreement, the Distributor shall not, under any circumstances, copy, replicate, imitate, or reverse engineer any products of the Company, including, but not limited to, the Products.

 

3.5.3                                                   Upon the expiration of this Agreement or the termination of this Agreement, with or without cause, the

 

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Distributor shall, subject to Section 18.7 hereof, immediately return to the Company any and all Company’s Property, including, but not limited to, any documentary embodiment thereof.

 

Section 3.6                                   Infringement. The Distributor shall give immediate Notice to the Company of any and all infringements of Company’s Property Trademarks that come to the Distributor’s attention during the term of this Agreement and shall assist the Company in taking such action against such infringement as the Company may, in its sole discretion, decide to take; provided, however, that all costs and expenses, including reasonable attorneys’ fees incurred by counsel approved by the Company, incurred in connection with any such infringement action shall be borne by the Company. The Company shall hold the Distributor harmless from, and shall indemnify the Distributor against, any and all claims, losses, liabilities, damages and costs and expenses (including, but not limited to, costs of investigation, court costs, arbitrators’ fees and attorneys’ fees) that the Distributor may incur by reason of any infringement by the Company of any trademark or patent or other proprietary right of any third party.

 

Section 3.7                                   Injunctive Relief. The parties hereto understand and agree that remedies at law may be inadequate to protect against any breach of any of the provisions of this Article 3 by the Distributor or any of its employees, agents, officers or directors or any other person acting in concert with it or on its behalf. Accordingly, the Company shall be entitled to the granting of injunctive relief by a court of competent jurisdiction against any action that constitutes any such breach of this Article 3. It is understood that such injunctive relief is intended solely as provisional relief pending arbitration in accordance with Article 10 hereof.

 

Section 3.8                                   Indemnification. Each party shall hold the other harmless from, and shall indemnify the other against, any and all claims, losses, liabilities, damages and costs and expenses (including, but not limited to, costs of investigation, court costs, arbitrators’ fees and attorneys’ fees) that the indemnified party may incur by reason of any breach of any of the provisions of this Article 3 by the indemnifying party or any of its employees, agents, officers, or directors or any other person acting in concert with it or on its behalf.

 

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ARTICLE 4.                             PROMOTIONAL ACTIVITIES

 

Section 4.1                                   Promotional Activities of the Distributor. During the term hereof, the Distributor, at its sole cost and expense, covenants and agrees to:

 

4.1.1                                                   Assign at least one (1) full-time product manager, whose sole responsibility shall be to promote vigorously and consistently the sale of the Products and provide technical support regarding the Products for the Distributor’s customers;

 

4.1.2                                                   Monitor closely the activities of sub-distributors, if any, all of which must be approved by Company in writing in advance;

 

4.1.3                                                   Participate actively and engage in sufficient advertising and publicity campaigns, scientific meetings and exhibitions, trade fairs and shows, and other marketing activities, to promote vigorously and consistently the sale of the Products throughout the Territory.

 

Section 4.2                                   Promotional Activities of the Company. During the term hereof, the Company, at its sole cost and expense, covenants and agrees to:

 

4.2.1                                                   Provide at least one (1) technical support specialist to (a) conduct appropriate training sessions and workshops for all employees of the Distributor engaged in promoting the Products, and (b) conduct in-service support for key purchasers and users of the Products;

 

4.2.2                                                   Make such contributions to the Distributor’s marketing budget as the Company may determine in its discretion;

 

4.2.3                                                   Make such contributions to the Distributor’s new product launch budget as the Company may determine in its discretion, including product literature, samples and other informational materials;

 

4.2.4                                                   Conduct an annual training workshop.

 

ARTICLE 5.                             MINIMUM SALES

 

Section 5.1                                                Minimum Sales. In addition to all of its other obligations under this Agreement, the Distributor shall achieve the annual minimum sales of the Products specified on Schedule A attached hereto, as such Schedule A may be amended in writing by the parties hereto from time to time during the term hereof. The Distributor understands and acknowledges that its strict fulfillment of such minimum sales is an essential

 

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condition to this Agreement and that its failure to make any of such sales shall be just cause for termination of this Agreement pursuant to Section 18.3 hereof.

 

Section 5.2                                                Reporting Obligations.

 

5.2.1                                                   During the term hereof, the Distributor shall provide: (a) quarterly in arrears, a sales report, on a customer by customer basis, including detail as to type of customer, and (b) a current inventory report within ten (10) days of the Company’s request therefor.

 

5.2.2                                                   To underscore that the arrangement contemplated by this Agreement is an exclusive distributorship and not a sales agency, the parties hereto agree that under no circumstances shall the Distributor be required to provide the Company at any time after its expiration or termination, the names and addresses of any of the Distributor’s customers of the Products in the Territory.

 

ARTICLE 6.                             WARRANTY COVERAGE

 

Section 6.1                                   Warranty Limitation. The sole warranties that the Company makes with respect to the Products are set forth on the Products or their packaging. EXCEPT AS STATED IN THE FOREGOING SENTENCE, THE COMPANY DISCLAIMS ANY AND ALL WARRANTIES ON THE PRODUCTS, WHETHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF THEIR MERCHANTABILITY OR THEIR FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE. TO THE EXTENT THAT ANY IMPLIED WARRANTIES MAY NOT BE DISCLAIMED, SUCH WARRANTIES ARE EXPRESSLY LIMITED TO THE DURATION OF THE EXPRESS WARRANTY STATED BY THE COMPANY ON THE PRODUCTS OR THEIR PACKAGING.

 

Section 6.2                                   Warranty Claims.

 

6.2.1                                                   All of the Products shall be received by the Distributor subject to the Distributor’s visual inspection and may be rejected on the grounds that the warranties that the Company states on the Products or their packages have been breached. The Distributor shall assert all such warranty claims in writing to the Company as soon as possible but in any event during the warranty period stated in the warranty on the Products or their packaging. At the Company’s request, the Distributor shall promptly supply such evidence of warranty breach as the Company may reasonably request.

 

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6.2.2                                                   THE DISTRIBUTOR’S EXCLUSIVE REMEDY AND THE COMPANY’S LIMIT OF LIABILITY FOR ANY AND ALL WARRANTY CLAIMS HEREUNDER, SHALL BE FOR THE REPLACEMENT OF THE PARTICULAR PRODUCTS WITH RESPECT TO WHICH SUCH CLAIMS ARE ASSERTED. THE COMPANY SHALL NOT BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES RESULTING FROM THE USE OF THE PRODUCTS OR ARISING OUT OF ANY BREACH OF ANY OF THE WARRANTIES THAT THE COMPANY STATES ON THE PRODUCTS OR THEIR PACKAGING OR ANY BREACH BY THE COMPANY OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR APPLICABLE LAW.

 

Section 6.3                                                Indemnification for Unauthorized Warranties. The Company shall not be responsible for any warranty that the Distributor or any of its sub-distributors makes concerning the Products other than those warranties made by the Company as set forth in Section 6.1 hereof. The Distributor shall hold the Company harmless from and indemnify it against any and all claims, losses, liabilities, damages, and costs and expenses (including, but not limited to, costs of investigation, court costs, arbitrators’ fees and attorneys’ fees) that the Company may incur arising out of or relating to (i) any such additional warranty made by the Distributor or any of its agents, employees or sub-distributors, (ii) the act or omission of the Distributor or any of its agents, employees or sub-distributors in connection with the transporting, receiving, handling, storing, advertising, promoting, selling and distributing any of the Products, and (iii) any breach by the Distributor of any of its obligations under this Agreement or any purchase order issued by the Distributor and accepted by the Company hereunder or under applicable law.

 

Section 6.4                                                P