DISTRIBUTION AGREEMENT
This AGREEMENT is made as of October 15, 1997, between MHM
Siebdruckmaschinen Gesmbh. KG., ("MHM") an Austrian corporation and its
affiliates, and ▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ("WG") a Delaware corporation and its
affiliates.
This Agreement shall take effect as of this date to govern the
distribution by WG in all countries in North America, Middle (Central) America,
South America (except Brazil) and the Caribbean Basin (the "Territory") of all
new screen printing machines ("Machines") and all spare or replacement parts
("Parts") for machines and related accessories and attachments manufactured or
sold by MHM and its Affiliates (collectively known as "Products").
1. APPOINTMENT
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1.1 Subject to the terms and conditions of this Agreement, MHM grants
to WG the exclusive right to promote and sell new Machines and Products and a
non exclusive right to sell Parts in the Territory.
For purposes of this Agreement, an "Affiliate" of a person shall mean: (i) a
corporation when more than 5% of the outstanding voting shares or total
outstanding shares is owned directly or indirectly by one of the partners of
this agreement, or (ii) a partnership, trust or other entity when the person
controls such entity or has any equity interest therein greater than 5%.
1.2 Except for replacement parts, used machines, dryers and automatic
screen printing machines with a base retail price under $45,000 which are not
manufactured by MHM, during the exclusive term of this Agreement, WG and its
Affiliates shall not engage in the sale or distribution of competitive Machines.
Used Machines are machines that have been use at customers for at least six
months.
If there any customers in the Territory who want to purchase
Products only from MHM, than MHM will inform WG about these customers and inform
WG further about the purchase price for these customers. If the purchase price
is equal or below the purchase price the purchase price that WG would offer
those customers, then MHM has the right to sell Products to customers within the
Territory. In such cases MHM will pay WG 50% of the profit MHM makes out of
these transactions.
Furthermore MHM has the right to control all of its Machines,
their installation and there adjustment on the site of the customer. WG will be
notified of these controls by MHM. Also these controls will be made only by a
technician of MHM.
Subject to the exceptions contained in this Agreement, during the
exclusive term of this Agreement WG and its Affiliates shall not directly or
indirectly (by equity or management participation, beneficial ownership,
contract arrangement or otherwise) contribute to, participate in or furnish
material goods or information for the selling, offering for sale or distribution
of competitive Products in the Territory, and shall each use its best efforts to
prevent any such sale, offer or distribution, other than by WG. Without
limitation, WG and its Affiliates shall not so contribute to, participate in, or
furnish material goods or information for the selling, offering for sale or
distribution of competitive Products in the Territory other than under the
Trademarks.
2. TERMS OF SALE
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2.1 MHM shall provide WG such technical assistance and such printed
material (including operating and service manuals and sales literature) as may
be reasonably required by WG in the promotion, sale and servicing of Products.
Technical assistance shall mean telephone assistance for service problems and
on-site assistance for assembly of Machines and Products until such time as WG
employees are qualified to provide said service. WG will pay all traveling
expenses (including airfares, motel and daily food allowance of $33 per day) for
MHM employees traveling out of the office of MHM. After the period of training
WG will pay for all expenses of MHM employees who provide any service.
2.2 WG shall purchase Machines, Parts and Products in US Dollars
("USD") at the wholesale price list (copy of current price list attached as
Exhibit "A") published by MHM ("Trader Price"), F.O.B. the factor in Kufstein,
Austria. WG will bear the cost of transportation, custom duties, etc. Prices are
subject to change from time to time by MHM on 120 days' written notice prior to
the effective date of any such change. Price changes shall apply to orders
submitted after the expiration of the 120-day period.
Changes in the USD rate in relation to the ATS that exceed 5% will
give MHM, upon notice, the right to immediate changes in its Trader Prices on
all orders submitted by WG after notice from MHM.
2.3 MHM shall grant credit terms to WG as follows:
For the period ending twelve months after the date of this
agreement, terms will be as follows:
Down payment 20%
Credit terms 60 days
The down payment will be due and payable at the time the order is
submitted by W&G. 60 days after shipment from Kufstein, Austria, the balance of
the purchase price is due and payable (i.e.) the sum of 80% of the purchase
price has to be paid within 60 days upon delivery to carrier in Kufstein).
For subsequent periods:
Down payment 0%
Credit terms 60 days for Products sold in the USA
90 days for Products sold outside the USA
The credit terms of 60 or 90 days indicated above will be due and
payable, as mentioned above, will start with delivery to carriers in Kufstein,
Austria.
Notwithstanding the agreed credit terms indicated above, the total
credit to be extended by MHM (unless the excess is covered by irrevocable
Letters of Credit) will not exceed $500,000 (the "Credit Limit"). MHM therefore
has the right to stop deliveries until the total amount owed by WG is less than
$500,000 or the Credit Limit. It is the intention of the parties to review the
Credit Limit quarterly, starting with the beginning of 1999, then the Credit
Limit can be increased, as required by the agreed credit terms, as far as the
credit (soundness) of WG is given and no other important reasons on the side of
MHM contradict this increase.
2.4 MHM hereby extends to WG MHM's standard warranty included in MHM's
General Terms and Conditions of Sale as indicated in the attached Exhibit B with
respect to Products. MHM disclaims, both under this Agreement and in connection
with any sales pursuant hereto, in all express and implied warranties, including
any warranties of merchantability and fitness for purpose, other than those
express warranties specifically stated in MHM's then current standard warranty,
and MHM further excludes all remedies other than those specifically set forth in
such standard warranty. Under all circumstances special consequential, punitive,
and all other similar damages are excluded. WG agrees that it shall not give any
warranty or remedy in regard to Products that is any longer in duration or
broader in scope than such MHM's warranty without the prior written approval of
MHM. Warranty for customers, domestic & international will begin from the date
customer receives machine.
MHM's General Terms and Condition of Sale as indicated in the
attached Exhibit B are an integral part of this agreement and are in full force,
so far as there are not changes insofar stated explicitly within this agreement.
Any warranty of MHM, that goes beyond the warranty, as stated in MHM's General
Terms and Condition of Sale, shall be excluded.
2.5 If WG does not pay in the agreed time for payment as indicated in
Paragraph 2.4, MHM will have the right to stop all deliveries of goods to WG.
The further delivery of goods by MHM shall only take place when the unsettled
accounts are paid. WG recognizes that any warranty claims against MHM do not
entitle WG to stop payment to MHM or to compensate with claims by MHM and that
WG is furthermore not entitled to offset any claims by WG whatsoever against
delivery claims of MHM.
3. TRADEMARKS, TRADENAMES AND PATENTS
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3.1 MHM grants to WG the right and license to use in the Territory,
without right of sublicense, all of the following now or hereafter during the
term of the Agreement owned or possessed by MHM:
(i) all trademarks that are used in the manufacture, promotion or
sale of Products ("Trademarks");
(ii) the trademarks that are used in the manufacture, promotion or
sale of Products ("Tradenames"); and
(iii) all patents and patent applications relating to the
manufacture, use or sale of Products ("Patents");
but only for the purpose of promoting and selling Machines and Products in the
Territory and for no other purpose. The foregoing shall not constitute an
assignment of the Trademarks, Tradenames or Patents.
3.2 WG may place the Trademarks and Tradenames on its stationery,
catalogues, promotional literature, advertising material and signs, but only in
connection with the promotion, sale and servicing of Machines and Products in
the Territory and only during the continuance of this agreement.
4. RESPONSIBILITIES OF WG
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WG will use its best effort to perform the following:
4.1 Provide quarterly Machine and Product sales projections
(forecasts) to MHM in advance;
4.2 Maintain an inventory of an adequate number of MHM Machines to
satisfy sales and delivery needs;
4.3 Provide sufficient resources for advertising, promotion (including
trade shows) and marketing of MHM Machines and Products in order
to achieve sales goals. Pay 60% of the cost of booth space for up
to 5 international trade shows in the USA and 4 international
trade shows outside the USA pay 100% of all other expenses related
to said international trade shows. MHM shall pay the 40% balance
for booth space.
4.4 Provide sufficient resources for the training and servicing of MHM
Machines sold in the Territory;
4.5 Maintain an inventory of spare parts which is adequate to satisfy
the service needs of customers;
4.6 Work closely with MHM to provide the highest degree of quality and
service to the end user. WG will be solely responsible for
providing service to the end user except as otherwise stated
herein;
4.7 Provide MHM with the names and addresses of all customers after
delivery to these customers.
5. RESPONSIBILITIES OF MHM
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MHM will use its best efforts to perform the following:
5.1 Provide sales and service training to WG employees. For a period
of one year or until such time as WG employees are qualified,
service training shall include the on-site assembly of Machines
delivered to customers. WG shall pay for all traveling expenses of
these MHM employees for outside the office of MHM (including
airfare, motel and daily food allowance of $33 per day);
5.2 Maintain an inventory of Machines and Products equal to the
greater of 6 machines or two average months' supply based on WG's
latest six months purchases. Machines in transit shall be
considered inventory. This clause shall take effect only six
months after the beginning of this agreement, i.e. from the
seventh month after the beginning of this agreement.
5.3 Inventory spare parts in sufficient quantity to satisfy service
needs;
5.4 Deliver goods according to the date of delivery, as published by
MHM (confirmation of order), in a timely manner;
5.5 Provide a complete list of current MHM customers and prospective
customers in the Territory and forward all sales leads directly to
WG for follow-up and sale.
6. TERMINATION
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6.1 Except as stated herein, this Agreement shall continue in full
force and effect on an exclusive basis until December 31, 2002. It shall
automatically be renewed on such exclusive basis for successive periods of two
years each, unless one of the parties to this Agreement gives written notice of
termination to the other at least six (6) months prior to the expiration of said
initial period or any successive two-year period, whichever is applicable.
6.2 MHM shall have the right to terminate this Agreement upon 30 days
prior written notice given within days after the end of any calendar year ending
after January 1, 1999, if in the calendar year in question WG failed to purchase
Machines and Products having an aggregate Trader Price, based upon the invoice
price set forth on this invoice from MHM to WG (without consideration of any
charges for taxes, freight, shipping costs, or the like), (the "Purchase Price")
equal to the amounts set forth below:
Number of
Machines Purchase Price
14 months ended Dec. 31, 1998 40 $2,500,000
12 months ended Dec. 31, 1999 60 3,750,000
12 months ended Dec. 31, 2000 80 5,000,000
12 months ended Dec. 31, 2001 90 5,805,000
12 months ended Dec. 31, 2002 100 6,250,000
If MHM exercises its right to terminate this agreement as provided in
this Section 6.2, and WG fails to purchase Machines during each 30 day
period included in the 120 day period mentioned above in at least the
same quantity purchased in the prior year period, MHM will be entitled
to distribute Machines in the territory through other distributors or
directly by MHM.
For purposes of this Section 6.2:
(i) Machines and Products purchased during a calendar year shall
mean Machines and Products actually invoiced by MHM during such year
plus Machines and Products on order as of October 1 of such year but
not delivered during the year, provided, however, that such ordered
but not delivered Machines and Products shall not be included in the
calculation of purchases the following year.
(ii) If purchases of Machines and Products by WG during the
calendar year immediately preceding the calendar year in question
exceeded the amount of purchases required for such year in order to
meet the aforesaid purchases of Machines and Products, the amount of
such excess may be carried forward and applied as a credit against the
purchase requirement for the subsequent calendar year or years.
6.3 Notwithstanding the provisions of Section 6.2, MHM, beginning with
the first quarter of 1999, shall have the right to terminate this agreement upon
written notice given within 30 days after the end of each quarter in which WG
fails to order Machines and Products with a Purchase price of $900,000 per
quarter.
6.4 Notwithstanding the provisions of Sections 6.2 and 6.3, MHM shall
have the right to terminate this agreement with immediate effect upon written
notice if WG fails to pay MHM on the due date (i.e., within 14 days upon written
demand for payment). WG recognizes that MHM has the right to charge 15% interest
if WG fails to pay on the due date.
6.5 This Agreement may be terminated by the aggrieved party
immediately upon written notice to the other ("Defaulting Party") in the event
that after the date hereof the Defaulting Party commits a material breach or
default under this Agreement, which breach or default shall not be remedied
within 30 days after giving of notice thereof to the Defaulting Party.
6.6 Upon termination of this Agreement, MHM is entitled to restrict or
even stop entirely deliveries of Machines and Products to WG, including
deliveries on orders already received at the time of notice of termination.
However, MHM is required to make Products available to WG in order to enable WG
to maintain its own delivery commitments existing before termination becomes
effective subject to proof of being given by WG to MHM.
6.7 Upon termination of this Agreement, all of WG's rights with
respect to the Trademarks shall immediately cease, and MHM shall repurchase all
new spare parts held by WG. MHM shall pay 50% of the selling price for the new
spare parts. WG shall pay the freight charges incurred in returning the said
spare parts to MHM. WG shall return to MHM all unused advertising and printed
matter which had been provided by MHM. WG shall have no further right to use the
designation "MHM" in any manner.
6.8 Neither party hereto is under any obligation to continue this
Agreement in effect, nor to continue the legal and contractual arrangement
established hereunder, after termination of this Agreement in accordance with
this Article 6. Both parties recognize the necessity of making expenditures in
performing and in preparing this Agreement. The parties nevertheless agree that
neither party shall be liable to the other for termination of this Agreement in
accordance with this Article 6, including, but not limited to, for loss or
damage due to investments, leases and sales, and advertising and promotional
activities, whether incurred in connection with the preparation to perform or
the performance of this Agreement or in the expectation of its renewal or
extension.
7. NON-COMPETITION
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Subject to the exceptions contained in Section 1, during the
exclusive term of this Agreement MHM and its Affiliates shall not directly or
indirectly (by equity or management participation, beneficial ownership,
contract arrangement or otherwise) contribute to, participate in or furnish
material goods or information for the selling, offering for sale or distribution
of Products in the Territory, and shall each use its best efforts to prevent any
such sale, offer or distribution, other than by WG. Without limitation, MHM and
its Affiliates shall not so contribute to, participate in, or furnish material
goods or information for the selling, offering for sale or distribution of
Machines and Products in the Territory other than under one of the Trademarks.
8. MISCELLANEOUS PROVISIONS
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8.1 Neither of the parties hereto shall be responsible for or liable
to the other party for any damages or loss of any kind, directly or indirectly
resulting from fire, flood, explosion, riot, rebellion, revolution, war, labor
trouble (whether or not due to the fault of either party), requirements or acts
of any government or subdivision thereof, mechanical breakdown or any other
cause beyond the reasonable control of the party. The occurrence and the
termination of such force majeure shall be promptly communicated to the other
party.
8.2 All notices, requests, demands, and other communications hereunder
shall be in writing and shall be given by delivery against receipt, by facsimile
transmission, by telex or by registered or certified mail, postage prepaid,
addressed as follows, or such other address or person as a party may designate
by notice to the other party hereunder:
(i) If to WG, to: (ii) If to MHM, to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. MHM Siebdruckmaschinen Gesmbh KG.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ A-6330 Kufstein
United States of America Austria
Communications hereunder by facsimile transmission or telex shall be deemed
given at the time of transmission and communications hereunder by mail shall be
deemed given ten (10) days after the date of registration or certification.
8.3 This Agreement shall be governed by the laws of Austria. All
disputes arising out of this contract or related to its violation, termination
or nullity shall be finally settled under the Rules of Arbitration and
Conciliation of the International Arbitral Centre of the Austrian Federal
Economic Chamber in Vienna (Vienna Rules) by one or more arbitrators appointed
in accordance with these rules.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day first above written.
MHM Siebdruckmaschinen Gesmbh KG ▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
By:______________________________ By:______________________________
