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MEMORANDUM OF UNDERSTANDING

Purchase and Distribution Agreement

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This Purchase and Distribution Agreement involves

Quantum Fuel Systems Technologies Worldwide, Inc

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Title: MEMORANDUM OF UNDERSTANDING
Date: 7/1/2004
Industry: Auto and Truck Parts    

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EXHIBIT 10.31

 

MEMORANDUM OF UNDERSTANDING

 

This MEMORANDUM OF UNDERSTANDING (“Memorandum”) is made and entered into June 2, 2004 by and between Quantum Fuel Systems Technologies Worldwide, Inc., a Delaware corporation, having a place of business at 17872 Cartwright Road, Irvine, California 92614 USA (hereinafter referred to as “Quantum”) and Sumitomo Corporation, a Japanese company, having a principal address at 8-11, Harumi 1-chome, Chuo-ku, Tokyo, 104-8610 Japan (hereinafter referred to as “Sumitomo”) (each of Quantum and Sumitomo referred to herein as a “Party” and together as “Parties”).

 

WHEREAS, the Parties desire to continue discussions regarding the establishment of a long term business relationship (the “Business Relationship”) wherein Quantum’s advanced composite hydrogen and compressed natural gas storage cylinders (the “Cylinders”), natural gas and hydrogen refueling systems, hydrogen and alternative fuel systems and related componentry (the “Systems”)(the Cylinders, Systems, and the engineering development from which they are derived shall herein collectively be referred to as the “Products”) would be provided to Japanese companies and governmental agencies and their affiliates (the “Customers”) except as specifically identified within Paragraph 1.2.7; and

 

WHEREAS, Quantum desires to commercialize the sales of the Products; and

 

WHEREAS, the Parties agree to grant to Sumitomo exclusive sales and distribution rights for the Products, so that Sumitomo may interface directly with the Customers; and

 

WHEREAS, Sumitomo desires to market and sell the Products to the Customers and to provide regulatory compliance certification support for the Products to be offered for sale in Japan; and

 

WHEREAS, in furtherance of the objectives referred to in this Memorandum, the Parties agree to exercise reasonable efforts to negotiate and effectuate the Business Relationship to be documented by a further definitive written agreement (the “Agreement”).

 

NOW THEREFORE, it is agreed as follows:

 

1.

Purpose

 

 

1.1

The Parties hereby agree to undertake good faith negotiations regarding the Agreement for the purpose of establishment of the Business Relationship, in accordance with the provisions of this Memorandum.

 

 

1.2

Concurrent with the negotiation of the Agreement, and prior to (1) the formal establishment of a Business Relationship, or (2) the Target Date (as defined below), whichever is the first to occur, the Parties hereby agree that:

 

 

1.2.1

Sumitomo shall be granted exclusive distribution rights to market, offer for sale, and sell the Products to the Customers; and

 

 

1.2.2

            

 

 

1.2.3

Sumitomo is authorized to organize technical meetings with the Customers to discuss and market the Products and coordinate technical meetings with Customers and Quantum, when required by Customers; and

 

 

1.2.4

Sumitomo shall pay all promotional expenses relating to the sales, marketing, or distribution of the Products to the Customers; and

 

 

1.2.5

Sumitomo shall coordinate with Quantum, and, when required, shall act on behalf of Quantum and liaise directly with any applicable Japanese governmental certification and/or regulatory compliance agencies, relative to the use of the Products.

 

 

1.2.6

Compensation.

 

 

1.2.6.1

Quantum agrees to compensate Sumitomo on a commission-based basis for any Product sold to any General Motors Corporation affiliate within Japan (“GM”), including, without limiting to, Suzuki, Subaru, and Isuzu. The base commission structure is attached as Exhibit A. The Parties herein agree that sales to GM, may from time to time, require a strategic cost sharing due to competitive situations or other strategic pricing initiatives, and that any deviations in commission structure will be mutually agreed to by the Parties; and

 

 

1.2.6.2

Except as otherwise noted herein, Quantum shall sell Product directly to Sumitomo at Quantum’s price, wherein Sumitomo will then mark-up to any final Customer pricing based upon Sumitomo’s knowledge of the Customer markets.

 

 

1.2.7

Exceptions. The following programs are not included within the scope of this Memorandum and are therefore not subject to Sumitomo compensation:

 

 

1.2.7.1

Programs currently under contract between Quantum and Suzuki Motor Company as of the date hereof (Two (2) 70 MPa storage modules and accompanying validation systems); and

 

 

1.2.7.2

All costs incurred to-date relating to the engineering and development of the one hundred eighty-five liter tank systems (185L) being developed for Toyota Motor Company by Quantum; and


 

1.2.7.3

All costs covering the engineering and development program and delivery of one hundred forty (140) “B2” (34 Liter) fuel storage modules to Toyota Motor Company by Quantum.

 

 

1.2.7.4

All costs associated with the pending sale of twenty (20) 160 liter bus tanks to the Toyota Motor Company currently scheduled for delivery in June 2004.

 

2.

Basis of Negotiations

 

 

2.1

The Parties agree that the Agreement to effectuate the Business Relationship will incorporate specific terms and conditions, as negotiated by the Parties, which shall include, but not be limited to a mutually agreeable position on the following issues:

 

 

2.1.1

The renewal of the distribution rights granted to Sumitomo


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