EXCLUSIVE DISTRIBUTION AGREEMENTDistribution Agreement |
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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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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. |
ARTICLE 2: ORDER & DELIVERY
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2.1 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
