Exhibit 10.1
EXCLUSIVE DISTRIBUTION
AGREEMENT
This exclusive distribution
agreement (this “Agreement’”) is entered
into as of July 8, 2005, between, on the one hand, Jason Gore and
Yamoto Motor Corporation, (f/k/a Winspeed Industries, Inc) a
corporation organized under the laws of the State of California,
having its principal place of business located at 900 San Martin
Place Fremont, California, 94539 (jointly “ Yamoto”
), and, on the other hand, Patriot Motorcycle Corporation, a
corporation organized under the laws of the State of Nevada, having
its principal place of business located at 930 Calle Negocio, Suite
A, San Clemente, CA 92673 (“Patriot”). Pursuant
to this Agreement, Yamoto agrees to grant to Patriot the exclusive
right to sell the Products worldwide.
RECITALS
On December 10, 2003, and again with
a revised agreement on June 25, 2005, Yamoto entered into a
exclusive distribution agreement with Chongqing Huansong Industries
(Group) Co. Ltd. (f/k/a Chongqing Wangguan Motorcycle Industry Ca.
Ltd.), a company incorporated and domiciled in China,
(“Chongqing”) whereby Chongqing granted to
Yamoto the exclusive right to distribute in the United States all
off road motorcycles and all terrain vehicles (“ATVs”)
manufactured by Chongqing..
Patriot desires to acquire the
exclusive right to be the sole distributor of all off-road
motorcycles and ATVs, as well as other products, and the parts
necessary to build and/or support them worldwide.
Yamoto and Patriot have expressly
and mutually agreed to terminate and cancel all prior agreements
between them, whether written or oral, express or implied,
including but not limited to the distribution agreement entered
into by the parties on August 10, 2004.
Concurrently with the execution of
this Agreement, Yamoto and Patriot have executed a Trademark
Assignment Agreement which is attached to this Agreement as exhibit
“A” and incorporated herein as if made a part
hereof.
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NOW THEREFORE, in consideration of
the foregoing promises and the mutual covenants herein set forth
and other good and valuable consideration, the parties agree as
follows:
ARTICLE SALE & DISTRIBUTION
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1.1
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Territory,
Products and Yamoto by Patriot Marks, Subject to all terms and conditions of this
Agreement, Yamoto hereby grants to Patriot any and all rights
Yamoto possesses to distribute, sell, market, and promote the
Products within the Territory. The “Products”
shall mean any and all motorcycles and ATV’s and any other
future products (e.g., generators) that are marketed and sold by
Yamoto presently or in the figure under the Yamoto by Patriot Marks
including, but not limited to, any and all parts and accessories
associated with those motorcycles and ATV’s and future
products. The “Yamoto by Patriot Marks” shall
mean the various Yamoto and/or Yamoto by Patriot trademarks,
service .marks, names, logos, and designs which are owned by or
licensed to Yamoto and/or Patriot. The “Territory”
shall mean the entire world.
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1.2
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Exclusive
Distribution. Patriot
shall be Yamoto’s sole distributor of Products within the
Territory. Yamoto, its officers, directors, predecessors,
affiliates, agents, employees, servants and any person or persons
acting on its behalf, shall not sell any Products to anyone within
the Territory other than Patriot, including but not limited to,
consumers and third-party distributors. Yamoto, its officers,
directors, predecessors, affiliates, agents, employees, servants
and any person or persons acting on its behalf; farther agree that
they shall not distribute, or import; directly or indirectly, any
Competing Products to anyone other than Patriot, (The term
“Competing Products” shall mean any and all
motorcycles, ATV’s, and any other products, parts, and
accessories which are of the same kind as, similar to or
competitive with Products.).
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In consideration of the exclusive
rights herein granted. (1) Yamoto shall in no way: (i) sell or
export Products to the Territory through any other channel than
Patriot or to any other distributor, person, consumer, or
third-party; (ii) directly or indirectly, sell, market, promote, or
distribute in the Territory any Competing Products; or (iii) make
any purchase of Competing Products without the prior written
consent of Patriot during the effective period of this Agreement,
(2)No other competing products purchased through any other source
by Patriot can he named Yamoto or Yamoto by Patriot without mutual
prior written consent.
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1.3
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Assignment
and Subdistribution. Patriot has the right to appoint
sub-distributors and dealers in the Territory so that the market
share for the Products can be expanded as much as possible. To
support Patriot’s sales promotion, Yamoto shall provide
Patriot free of charge a reasonable quantity of Advertising or
sales promotion material such as advertising literature, catalogs,
brochures, and other material, which Patriot deems useful to
Patriot in its activities under this Agreement, Patriot may assign
or delegate any of its rights or obligations under this Agreement
to its distribution network, in whole or in part, whether by
operation of law or otherwise, without Yamato’s written
consent. Patriot expressly reserves its right to purchase Products
directly from Chongqing on behalf of Yamoto or any other
manufacturer or supplier of the Products in the event that Yamoto
is unable to supply the Products to Patriot in a reasonable timely
manner.
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1.4
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Pricing. Yamoto shall sell the Products to Patriot at the
pre-determined prices set forth in Exhibit B hereto. Yamoto shall
be prohibited from increasing the prices of the Products set forth
in exhibit B attached hereto for a period of two years from the
date of this .Agreement; provided, however, that Yamoto may
increase the prices of the Products if Chongqing raises its selling
prices to Yamoto due to industry-wide increase of raw material or
labor costs. Thereafter, Yamoto may raise prices if it first
negotiates these price increases with Patriot and provides to
Patriot justification for the increases, such as product
improvements, competitive market factors, etc. Price(s) for New
Product(s) not listed on Exhibit B will subject to mutually agreed
upon pricing.
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1.5
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Minimum
Order. Minimum Order.
Patriot shall use its best efforts to submit purchase orders for
twenty thousand (20,000) units of the Products annually during the
terns of this Agreement (the “Minimum Annual Unit
Volume”). This annual unit volume level shall be reduced by
the number of units which are found by Patriot to be subject to a
manufacturing, engineering or other product defect. In the
event that Patriot fails to reacts the Minimum Annual Unit Volume
during any annual period, then Patriot may correct the unit
shortfall during the following annual period.
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1.6
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Payment. Upon execution of this agreement Patriot shall
pay by wire transfer of funds to Yamoto for all orders for Products
being delivered within the United States in United Stales dollars,
(However both parties agree to discuss vase by case the deposit for
the order within Unites States if a single order from Patriot
exceed USD3000000.00) The wire transfer payment shall occur within
fifteen (15) days after the Products clear United States Customs
and are delivered to Patriot’s designated warehouse. Yamoto
shall be entitled to file and record UCC financing statement(s)
with the Secretary of State of. Nevada or any other state in the
United States to encumbrance the unpaid-for Products. Patriot shall
pay for all orders for Products sold outside the United States in
United States Dollars and shall pay by electronic bank transfer,
certified cheek, or bank draft in favor of Yamoto. Thirty percent
(30%) of the purchase price of each order for Products delivered
outside the United States is due when Patriot receives
Yamoto ’ s acceptance of the order. The
remaining seventy percent (70%) of the purchase price for each
order for Products delivered outside the United States is due when
Patriot receives notice that the Products are ready for shipment
from China. If Patriot fails to submit to Yamoto the wire transfer
payment for ordered Products, within the applicable fifteen (15)
day period, then Patriot shall have thirty (30) days following
receipt of written notice from Yamoto in which to submit payment
for the order. In the event that Patriot fails to do so, then
Yamoto may thereafter sell the products to any third-party
purchaser of the Products.
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1.7
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Initial Term
and Renewal Periods. Subject to Article 5 of this Agreement, the term
of this Agreement shall be from the date of this Agreement until
December 11, 2040, at which time this Agreement shall expire. The
parties acknowledge and agree that if Yamoto’s
current
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distribution agreement with
Chongqing (the “Distribution Agreement”), expires, or
is otherwise terminated at any time prior to December 31, 2040,
then Patriot may in its sole discretion elect to: (1) purchase from
Yamoto its ownership interest in the Yamoto by Patriot Marks at
fair market value, but in no event less than Five Million
dollars (US$5,OOO,OOO); and, (ii) thereafter purchase Products
directly from Chongqing or Chongqing Affiliates or any other
manufacturer or other source for producing Products under the
Yamoto by Patriot Marks . “Chongqing Affiliate(s)”
means Chongqing’
s
officers, directors,
predecessors, affiliates, agents, employees, servants and any
person or persons acting on its behalf or any entity that is
directly or indirectly owning or controlling Chongqing, directly or
indirectly owned or controlled by Chongqing, or under common
ownership or control with, Chongqing by more than fifty percent
(50%) of the voting power.
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1.8
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No Agency
Relationship. No agency,
partnership, or similar relationship is created by thin Agreement.
Neither party has any authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or
in the name of the other party or to bind the other party in any
manner and neither party shall represent to any third party that
such authority exists.
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1.9
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Change in
Ownership or Control of Yamoto. If at any time, Yamoto desires to effect a
change in ownership, or a transfer of its business operations or
its principal, assets to any person or entity, then Yamoto must
give Patriot six (6) months ’ prior written notice of any proposed
change or transfer described in this Paragraph 1.8. in such an
event, Patriot will have a right of first refusal to purchase
Yamoto’s assets or stock on the same terms and conditions
proposed to be transferred to a bona fide buyer. If Patriot chooses
to exercise this right, Patriot must pay to Yamoto a refundable
good faith deposit of one hundred thousand dollars ($100,000),
Patriot will have a reasonable opportunity to inspect the assets,
including real estate and corporate records, subject to a non
disclosure agreement to he executed by the parties, Following the
submission of the good-faith deposit, Patriot shall have ninety
(90) days in which to exercise its right of first refusal, and
thereafter close the transaction.
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1.10
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Pre-Product
Run Samples. Yamoto
agrees to deliver, with shipping costs prepaid by Patriot, to
Patriot three product run samples via Federal Express or other
overnight delivery service for full testing and evaluation prior to
full production runs and delivery to fulfillment destinations.
Yamoto will deliver to Patriot such pre-product run samples on all
new or updated product models involving changes to the drive train,
transmission, electrical system, and brakes.
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1.11
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Quality
Warranty and After-Sole Service . Yamoto will provide spare parts for after-sale
service and Patriot shall arrange for after-sale service in the
Territory in accordance with the local situation. For each order of
Products to be shipped to United States, Yamoto will provide
Patriot, free of charge, spare parts worth up to 2% of the total
order value, as chosen by Patriot.
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ARTICLE 2: ORDER & DELIVERY
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2.1
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Orders. Patriot shall submit written purchase orders to
Yamoto specifying the number of Products required. Yamoto shall
accept each order ‘ within five (5) business days of
receiving the order, and must provide to Patriot within this time
period written notification stating that the order has been placed
and accepted by Yamoto. Patriot may cancel an order at any time
within this live (5) day period, with or without cause, and
Patriot’s liability for such cancellation shall be limited to
Yamoto’s out-of-pocket costs and expenses incurred in
connection with the cancelled order which in no event shall exceed
$150.00. The parties agree that Yamoto will provide to Patriot a
status update on all unfilled Product orders within fifteen (15)
days following Patriot’s placement of each order with
Yamoto.
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2.2
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Shipment. All Products ordered by Patriot shall be shipped
within forty five (45) days of the date that Yamoto notifies
Patriot of its acceptance of each order. In the event that Yamoto
fair to ship the Products within the applicable forty-five (45) day
period, Yamoto must provide Patriot with immediate written notice
of its failure to do so, together with a detailed written
explanation of the facts and circumstances causing the delay in
such
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event, Yamoto shall immediately
identify in writing its revised shipping date, Patriot, in its sole
discretion, shall control the destination, method, and route of
shipment of Products by Yamoto, subject only to the
manufacturer’s previously established written guidelines for
the method and conditions of shipment. Unless otherwise specified
in the purchase order, Yamoto may select the carrier, which must be
approved by Patriot, belay in approval by Patriot shall release
Yasnoto’s any and all liability for late shipment.
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2.3
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Delivery. Yamoto shall deliver the Products Free on Board
(F.O.B.) to the warehouse destination designated by Patriot. Title
to the Products and the risk of loss of the Products shall pass to
Patriot only when the Products have been delivered to
Patriot’s designated warehouse, Except for the UCC filing
authorized in this Agreement, Yamoto shall deliver the Products to
Patriot free and clear of all liens, encumbrances and. security
interests and shall not, without the prior written consent of
Patriot, encumber or otherwise assign any rights to the Products to
anyone other than Patriot.
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2.4
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Conformity
of Shipments. If there is
a shortage of Products in a shipment, Patriot must give written
notice to Yamoto within seven (7) days following the date of
delivery of such shipment of Products to Patriot at its designated
warehouse, together with a reasonable description and verification
of the shortage, Yamoto, at Patriot’s option, shall deliver
to Patriot or Patriot’s customer(s) at such location(s) as
Patriot may designate, at Yamoto’s risk and expense, the
number of Products in shortage, or, alternatively, credit to
Patriot the purchase price and chipping costs incurred by Patriot
in commotion with such shortage. Yamoto may credit Patriot on
subsequent orders for Products or remit to Patriot funds in United
States Dollars sufficient to compensate Patriot for the shortage as
set forth in the previous sentence.
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2.5
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Conformity
of Products. If the
Products in a shipment are iron-conforming with Chongqing factory
written specification or Patriot written order which are accepted
by Yamoto for any reason other than a shortage, then Patriot may
reject these Products by giving written notice to Yamoto within
thirty (30) days (“Acceptance Period”) after receipt of
such shipment by Patriot’s designated warehouse, together
with a reasonable description
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and explanation of the basis for the
rejection, such as manufacturing end/or engineering defects.
Patriot shall, at Yamoto ’ s option and at Yamoto’s risk
and expense, return to Yamoto any rejected Products, Yamoto shall,
at: Patriots option, deliver to Patriot’s designated
warehouse, at Yamoto’s risk and expense, replacements for the
rejected Products, or, alternatively, credit to Patriot the
purchase price and shipping costs incurred by Patriot in connection
with the rejected Products. In the event that a dispute arises
regarding the rejection of a Product, the parties acknowledge and
agree that a third party professional inspector agreeable by both
parties shall be hired to determine whether or riot the Product(s)
are non-conforming, All Products that are not rejected during the
said thirty (30) days Acceptance Period will be deemed finally
accepted by Patriot.
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2.6
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Manufacturer’s Warranty.
Notwithstanding the foregoing, the
manufacturer’s warranty by Chongqing for defective parts for
the Products shall be applicable to all sales of the parts for the
Products by Yamoto to Patriot. Yamoto agrees to reimburse Patriot
parts (not labor) expenses for all warranty claims . Yamoto shall
pay these amounts within thirty (30) days. of receiving from
Patriot a written statement of these expenses. The parties
acknowledge and agree that it’s Yamoto’s responsibility
to facilitate the transmission of approved warranty claims to
Patriot, and warranty payments to Patriot on behalf of its dealers.
Patriot shall be solely responsible for the approval and payment of
any and all warranty claims and related expenses, Yamoto further
agrees that it shall uses its best efforts to mutually agree upon
the timely reimbursement to Patriot for 1/3 of all parts and labor
costs and expenses incurred by Patriot or its distributor and
dealer network in connection with any Product recalls.
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2.7
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Factory
Negotiations. The parties
acknowledge and agree that Patriot has a legitimate interest in the
discussions between Yamoto and Chongqing and other Product
suppliers regarding the Products. Patriot may provide to Mr, Gore
and/or Yamoto its input regarding the Products, such as quality
control, suggested product improvements, production deadlines, or
manufacturing costs, and Yamoto agrees to convey all of
Patriot’s concerns to Chongqing or other suppliers of the
Products as soon as possible, Yamoto shall provide to Patriot all
explanations and comments from Chongqing and ether
suppliers
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in connection with Patriot’s
concerns, Yamoto acknowledges and agrees that it is responsible for
obtaining a signed acknowledgement from Chongqing and other
suppliers of Products which states that it received Patriot’s
suggested changes and that Chongqing and other suppliers either:
(i) have accepted the suggested changes, along with implementation
dates; or (ii) have rejected the suggested changes and have
explained to Yamoto their reasons for such rejection, Yamoto shall
provide to . Patriot nil explanations and
comments from Chongqing , and other suppliers in connection
with Patriot’s concerns, The parties further agree that
Yamoto shall use its best efforts to permit direct contact and
communications between Chongqing or other suppliers and Patriot.
Patriot will hire an assistant who will act as Patriot’s
contact person at Chongqing and other suppliers which are producing
or may produce Products to facilitate communication with Patriot
regarding product development, engineering changes, technical
matters, product updates, and other such matters.
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2.8
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Change in
Supplier. In the event
that Yamoto plans to change Its supplier(s) of Products, Yamoto
acknowledges and agrees that it must provide Patriot with written
notice of such proposed change within 90 days of the change, The
notice must provide the company name, address, and telephone
numbers, the contact person, the qualifications of the new
supplier, and Yamot
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