1 EXHIBIT 10.4 MASTER DISTRIBUTOR AGREEMENT This Agreement effective as of the
30th day of September, 1997, by and between SAGE, INC., having offices at 4633
Old Ironsides, Santa Clara, California 95054, ("Manufacturer"), and AVNET,
INC., having offices at 2617 South 46th Street, Phoenix, Arizona ...
MASTER DISTRIBUTOR AGREEMENT
This Agreement effective as of the 30th day of September, 1997, by and between
SAGE, INC., having offices at 4633 Old Ironsides, Santa Clara, California
95054, ("Manufacturer"), and AVNET, INC., having offices at 2617 South 46th
Street, Phoenix, Arizona 85034 ("Distributor").
The term "Product" or "Products" as used herein shall mean the items
listed on Exhibit "A" hereto, as changed from time to time in accordance with
the provisions of this Agreement.
Manufacturer hereby appoints Distributor and Distributor hereby accepts
the appointment, as the non-exclusive distributor for the Products within the
following described territory: United States and Canada (the "Territory"), and
at all locations identified in Exhibit "B". This agreement shall automatically
be extended to any other Electronic Marketing Group division or subsidiary of
Avnet, Inc. which may hereafter be formed or acquired by Avnet.
The term of this Agreement shall be for twenty-four (24) months commencing
on the effective date hereof and this Agreement shall automatically be renewed
thereafter for additional one (1) year periods at all anniversary dates hereof
unless this Agreement is otherwise terminated as elsewhere provided herein.
4. DUTIES OF DISTRIBUTOR
(a) Distributor shall use its best efforts commensurate with its overall
business to promote the sale of the Products within the Territory.
(b) Distributor shall send to Manufacturer, within thirty (30) working
days after the end of each month, a sales activities report including the names
of purchasers, quantities of products purchased and dollar amounts invoiced to
the said purchasers.
5. OBLIGATIONS OF MANUFACTURER
(a) Manufacturer shall consistently keep Distributor informed on a timely
basis of changes and innovations in performance, serviceability, uses and
applications of all Products.
(b) Manufacturer, at its expense, shall provide training for personnel
designated by Distributor in marketing and servicing products. Such training
shall be held at the times and locations as mutually agreed by the parties.
(c) Manufacturer, at its expense, shall periodically provide Distributor
with reasonably sufficient quantities of Manufacturer's advertising and
promotional materials, pricing information and technical data related to the
6. PRICE/PRICE CHANGE
(a) The prices to be paid by Distributor for any Products ordered pursuant
to this Agreement are set forth in Exhibit "A".
(b) The prices contained in Exhibit "A" are subject to change by
Manufacturer at any time. Notwithstanding the aforesaid, such change shall not
become effective as to Distributor unless Manufacturer gives Distributor at
least thirty (30) days advance written notice thereof.
(c) In the event that the Manufacturer decreases the price of any Product,
Distributor will be entitled to a credit equal to the difference between the
net price paid by Distributor, less any prior credits granted by Manufacturer,
and the new decreased price for the Product multiplied by the quantity of such
Product in Distributor's inventory on the effective date of the reduction.
Similar price adjustment will also be made on all such Products in transit to
Distributor on the effective date of such price decrease.
(i) Distributor shall submit to Manufacturer, not later than sixty
(60) working days after receiving notice of such price decrease, after the
effective date of such price decrease, a Product inventory report as of the
effective date, together with a debit memo reflecting the credit described in
subparagraph 6(c) above.
(ii) Manufacturer shall be deemed to have verified the Product
inventory report and debit memo unless Manufacturer contests the same in
writing within sixty (60) days after receiving such report and memo.
Uncontested debit memos shall be credited to Distributor's account as of the
effective date of such price decrease.
(d) All Products shipped on or after the effective date of any price
decrease will be shipped and invoiced at the price in effect at the time of
(e) All Products shipped after the effective date of any price increase
will be shipped and invoiced at the price in effect at the time of order
Distributor shall not be liable for any taxes with respect to any order
other than municipal, state or federal sales taxes which Manufacturer is
required by law to collect from Distributor.
Payment for all Products purchased hereunder by Distributor shall be 2%
10th and 25th or Net thirty (30) days from date of invoice or shipment,
whichever date is later.
In the event that at the close of each calendar month, sums owed to
Distributor from Manufacturer exceed (i) sums due from Distributor to
Manufacturer plus (ii) projected sums due from Distributor to Manufacturer in
respect of Products to be shipped in the succeeding 30 day period collectively
Net Manufacturer Receivable ("NMR"), Manufacturer shall remit to Distributor
payment of all NMRs, by check or wire transfer in Federal Funds, no later than
the close of the following calendar month.
9. WARRANTY OF TITLE
Manufacturer warrants the title to all Products to be sold to Distributor
hereunder and warrants that such Products are not subject to any security
interests, liens or other encumbrances.
10. SHIPMENT/RISK OF LOSS
Manufacturer agrees to deliver Products ordered by Distributor to the
location and within the time specified in Distributor's purchase order.
Distributor shall have the right to designate the common carrier to be used,
and, in absence of such specification by Distributor, Manufacturer shall
select the carrier in its reasonable discretion. Title to such Products and the
risk of loss therefor shall pass to Distributor upon delivery to the common
carrier. All shipments shall be F.O.B. Manufacturer's location closest to the
delivery point specified in Distributor's purchase order.
11. ORDER CHANGES
(a) Distributor may change or cancel orders or reschedule shipment dates
for any Products ordered, provided that Distributor notifies Manufacturer at
least ten (10) days prior to the originally-scheduled date.
(b) Manufacturer shall acknowledge Distributor's orders in writing or via
EDI within five (5) days of receipt. Order acknowledgements shall contain
Manufacturer's promised ship date.
(c) Should Manufacturer's promised ship date change, Manufacturer shall
notify Distributor in writing or via EDI within five (5) business days of the
change. Should Distributor's customer cancel its order with Distributor due to
a change to Manufacturer's promised ship date, Distributor may cancel its order
to Manufacturer without penalty.
(d) Any order shipped thirty (30) days or more in advance of Distributor's
request date may be rejected by Distributor and returned to Manufacturer.
Manufacturer shall be responsible for both incoming and return freight charges.
12. STOCK ROTATION/RETURN PRIVILEGE
(a) Distributor may return, FOB Distributor's location, a quantity of
Products to Manufacturer for credit provided that the total credit shall not
exceed 10% of the net sales dollars invoiced by Manufacturer to Distributor
during each one-year period of this Agreement (beginning with the effective
date hereof). Such returns may be made at Distributor's discretion in one or
more shipments from time to time during the applicable one-year period or
within thirty (30) days thereafter, however, unless otherwise agreed to in
writing by Manufacturer, any returns made prior to the end of the applicable
year shall not cumulatively exceed 10% of the net sales dollars which have been
invoiced by Manufacturer to Distributor from the beginning of the applicable
year up to the date of any such return or returns. The credit to be issued in
respect of each such Product returned shall be issued by Manufacturer within
thirty (30) calendar days after receipt of such Product by Manufacturer and
shall be issued in the amount of the actual net invoice price charged for same
by Manufacturer to Distributor less any prior credits granted by Manufacturer
to Distributor for the said Product. All Products returned in accordance with
this provision must be unused in commerce. In the event this Agreement is
terminated for any reason with outstanding credits existing in favor of
Distributor, Manufacturer shall promptly refund cash to Distributor in the
amount of the outstanding credits.
(b) Notwithstanding subparagraph (a) above, Distributor will have sixty
(60) days after the initial twelve (12) month period that any "New Product" is
in its inventory to return such "New Product" to Manufacturer for credit. Such
credit shall be equal to Distributor's purchase price for such "New Product"
less any prior credits. For purposes of this paragraph, a "New Product" is a
Product that is newly introduced by Manufacturer to the market.
(c) Notwithstanding subparagraph (a) above, Distributor will have sixty
(60) days after the initial twelve (12) month period that its "Initial Stocking
Order" is in its inventory to return any of its "Initial Stocking Order" to
Manufacturer for credit. Such credit shall be equal to Distributor's purchase
price therefor less any prior credits. For purposes of this paragraph, the
"Initial Stocking Order" is the first purchase order placed by Distributor
under this Agreement.
Manufacturer warrants the Products in accordance with its standard
warranty as set forth in Exhibit "C". Distributor is authorized to pass this
warranty through to Distributor's customers and to end users. The warranty
period as stated in Exhibit "C" shall begin to run with respect to any end user
upon delivery of the Product to the end user. Any Product to be returned under
the terms of the warranty may be shipped to Manufacturer either by Distributor
or directly by a re-seller customer or end user.
14. DEFECTIVE PRODUCTS
Notwithstanding any other provision of this Agreement or of any Exhibit
hereto, Distributor may return for full credit, any and all Products found to
be defective upon delivery, or within a reasonable time thereafter, provided,
however, that any such defective Products are returned to Manufacturer, freight
collect, within ninety (90) days of the discovery of the defect.
If Products are received by Distributor with quality problems and
Distributor deems it practical to institute testing
and/or rework of such Products in order to sell the same, such problems shall
be reported to Manufacturer in writing and Manufacturer shall reimburse
Distributor for its direct cost of labor and material.
16. DISCONTINUED PRODUCTS
Manufacturer may discontinue the manufacture and/or sale of any Product.
In the event of any such discontinuance, Manufacturer shall give Distributor at
least ninety (90) days advance written notice thereof. Distributor may, in its
sole discretion, within sixty (60) days after receipt of such notice, notify
Manufacturer in writing of Distributor's intention to return any or all
Products in its inventory which have been so discontinued. Distributor shall
receive full credit for all such Products so returned. Any such credit shall be
in the amount of the actual net invoice price paid by Distributor for the
discontinued Products less any prior credits. All freight charges shall be paid
17. ENGINEERING CHANGES/OBSOLESCENCE
Manufacturer shall give Distributor at least ninety (90) days advance
written notice of engineering changes that will affect any Products in
Distributor's inventory. If these modifications, in Distributor's sole
judgment, will adversely affect the sale of Distributor's inventory of such
Products once the engineering modifications are implemented, then Manufacturer
shall cooperate with Distributor to sell such affected inventory. If, after the
aforementioned efforts (but in no event later than one hundred twenty (120)
days after the first public announcement of such modification or the first
shipment of the modified Product, whichever occurs first), any of the affected
Product still remains in Distributor's inventory, Manufacturer agrees, at
Distributor's election to (a) replace it with upgraded Products, or (b)
repurchase any or all of the affected inventory at Distributor's actual net
invoice cost less any prior credits. Manufacturer shall pay all freight charges
associated with return of affected Products to Manufacturer and/or shipment of
upgraded Products to Distributor.
18. SPARE PARTS
Manufacturer shall provide spare parts for the Products sold under this
Agreement for a period of no less than five (5) years after shipment of the
last Products to Distributor. Such spare parts shall be made available to
Distributor at a non-discriminatory price based upon the pricing in effect at
the time such spare parts are ordered.
(a) This Agreement may be terminated at any time, without cause, by
either party upon giving the other party at least sixty (60) days prior written
notice. Such termination shall be effective on the date stated in the said
(b) This Agreement may be terminated immediately for cause by either
party in the event the other party:
(i) shall become insolvent, or
(ii) admits in writing its inability to pay its debts as they
(iii) ceases to function as a going concern or to conduct its
operations in the normal course of business, or
(iv) assigns or transfers, either voluntarily or by operation of
law, any or all of its rights or obligations under this Agreement without
having obtained the prior written consent of the other party; or
(v) effects any material change in its management or ownership (for
the purposes of this subparagraph, a change in the Chief Executive Officer or
the Chief Operating Officer shall be deemed a material change of management,
and a change of 25% or more in ownership shall be deemed a material change in
(vi) upon the filing of a petition by or against it under any state
or federal bankruptcy or insolvency law, fails to tender to the other party a
guaranty of its obligations under this Agreement by a person, firm or other
entity having a net worth of at least 85% of its own net worth as of the
commencement of this Agreement, such guaranty to be in a form satisfactory to
the other party; or
(vii) fails to perform any of its obligations under this Agreement so
as to be in default hereunder and fails to cure such default within thirty (30)
days after written notice thereof.
(c) In the event of termination of this Agreement, Manufacturer shall
repurchase, at Distributor's election, any or all unsold Products in
Distributor's inventory or in transit to Distributor on the effective date of
termination, along with any or all technical and promotional material designed
to promote the sale of the Products. The repurchase price for such unsold
Products and other material shall be the actual net invoice price paid by
Distributor less any prior credits.
(d) In the event Manufacturer terminates for its convenience or for any
reason other than those listed in subparagraph 19(b), or Distributor terminates
for cause, then all freight charges associated with such repurchase of Products
under this paragraph 19 shall be paid by Manufacturer. In the event Distributor
terminates for its convenience or for any other reason other than those listed
in subparagraph 19(b), or Manufacturer terminates for cause, then such freight
charges shall be paid by Distributor.
(e) All Products to be repurchased pursuant to this paragraph 19 must be
in unused, factory-shipped condition and must be returned in original cartons
or the equivalent.
(f) After any termination of this Agreement Manufacturer agrees to sell
to Distributor any Products which Distributor is contractually obligated to
furnish to a customer and which Distributor does not have in its inventory,
provided that Distributor orders such Products within ten (10) days after the
effective date of termination.
If either party hereto receives from the other party written information
which is marked "Confidential" and/or "Proprietary", the receiving party agrees
not to use such information except in the performance of this Agreement, and
to treat such information in the same manner as it treats its own confidential
information. The obligation to keep information confidential shall not apply to
any such information that has been disclosed in publicly available sources, is,
through no fault of the party receiving the confidential information, hereafter
disclosed in a publicly available source; is in the rightful possession of the
party receiving the confidential information without an obligation of
confidentiality; or is required to be disclosed by operation of law. Except as
otherwise provided herein, the obligation not to disclose shall be for a period
of one year after the termination of this Agreement.
21. PATENT/COPYRIGHT/TRADEMARK INDEMNIFICATION
Manufacturer warrants that any and all Products purchased hereunder,
and the manufacture, sale or use thereof, do not and will not violate or
infringe upon any patent, copyright, trademark, trade secret or other property
right of any third party; that Manufacturer will, at its own cost and expense,
defend any suit that may arise in respect thereto or in respect to the
combination of any Product with any equipment, data or programming, to the
extent that the claim alleges that the Product standing alone infringes such
rights, and provided Manufacturer is notified thereof, and that Manufacturer
will indemnify and hold harmless Distributor, its successors and assigns, and
the customers of any of them, from all loss, damages, costs and expenses
(including reasonable attorneys' fees and costs of establishing rights to
indemnification) which may be incurred on account of the assertion of any such
property rights by any person.
22. GENERAL INDEMNIFICATION
(a) Manufacturer and Distributor each agrees to indemnify and hold the
other harmless from and against any and all claims, damages and liabilities
asserted by any person or entity resulting directly from:
(i) any breach by it, or by any of its employees or agents, of
this Agreement or any of its warranties, representations, covenants or
obligations as provided for in this Agreement; or
(ii) any negligent act, or affirmative act of any of its
employees or agents.
Such indemnification shall include the payment of all reasonable
attorneys' fees and other costs (including costs of establishing rights to
indemnification) incurred by the party seeking indemnification in defending
(b) Notwithstanding any other provision of this Agreement or any
Exhibit or Appendix hereto, Manufacturer agrees to indemnify and hold the
Distributor harmless of and from any and all liabilities, losses and damages
(including costs, expenses and attorneys' fees, and costs of establishing rights
to indemnification) resulting from any claim of any of Distributor's customers
or any other third party, including employees of Distributor or Manufacturer,
for death, personal injury, breach of warranty, or damage to property arising
out of, or in any way connected with, the Products or the use or operation
thereof. Manufacturer at its sole cost and expense agrees to defend any and all
claims, actions, suits or proceedings brought against Distributor in connection
therewith, upon notice of pendency thereof, and to pay and satisfy any and all
judgments, costs, attorneys' fees, awards or recoveries relating thereto.
(c) Manufacturer agrees to name Distributor as an additional insured on
any and all product liability insurance policies it may have in effect from
time to time with respect to any Products.
23. USE OF TRADEMARKS/TRADE NAMES
During the term of this Agreement, Distributor is authorized to use
Manufacturer's trademarks, trade names and logos in connection with
Distributor's sale, advertisement and promotion of Products. Distributor shall
have the right to pass on this right of usage to its re-seller customers. Upon
termination of this Agreement and sale or other disposition of any products
remaining in inventory, Distributor shall cease to use any of such marks, names
or logos and shall, within a reasonable time, remove any reference to
Manufacturer from its advertising and promotional material.
24. CO-OP FUND
A cooperative advertising fund shall be established to which
Manufacturer and Distributor shall contribute at least once every six (6)
months. Each party shall contribute to the fund an amount equal to __% of the
gross sales dollars invoiced by Manufacturer to Distributor during the said
six-month period. The fund is to be used for mutually agreed upon projects such
as promotion, advertising and training. All particulars with respect to the
establishment of the fund and the return of unused monies shall be by mutual
agreement. Upon the termination of this Agreement, any monies remaining in the
fund shall be appropriately returned to the parties.
Any and all software included as Products hereunder shall be acquired
by Distributor subject to the terms of a Master Distributor License, a copy of
which is attached as Exhibit "D" and is made a part hereof.
26. SUPPLIER QUALITY HANDBOOK
Manufacturer agrees to use reasonable best efforts to attain the goals
established in the Avnet Supplier Quality Handbook as may be amended from time
to time. Manufacturer agrees to work with Distributor to establish improvement
plans and performance milestones in those areas when Manufacturer falls under
the published goal.
(a) INDEPENDENT CONTRACTORS. It is understood and agreed that
Manufacturer and Distributor are independent contractors and each is engaged in
the operation of its own business and neither will be considered the agent of
for any purpose whatsoever. Nothing contained in this Agreement will be
construed to establish a relationship that would allow either party to make
representations or warranties on behalf of the other except as expressly set
(b) ASSIGNMENT. This Agreement may not be assigned partially or
completely by either party without the prior written consent of the other which
shall not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns.
(c) NOTICES. Any notice provided for or permitted in this Agreement
will be deemed to have been given when mailed postage prepaid by certified mail
or registered mail, return receipt requested, to the party to be notified, at
the address set forth below:
4633 Old Ironsides
Santa Clara, California 95054
Attn: Vijay Desai
2617 South 46th Street
Phoenix, Arizona 85034
Attn: Donald Sweet, Senior Vice President
Global Supplier Management
with a copy simultaneously to:
80 Cutter Mill Road
Great Neck, New York 11021
Attn: Senior Vice President and General Counsel
(d) ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements relating thereto, written or oral, between the parties.
Amendments to this Agreement must be in writing, signed by the duly authorized
officers of the parties, specifically stating that such amendments are made
pursuant to this subparagraph (d).
(e) NO IMPLIED WAIVERS. The failure of either party at any time to
require performance by the other of any provision hereof shall not affect the
right of such party to require performance at any time thereafter, nor shall
the waiver of either party of a breach of any provision hereof be taken or held
to be a waiver of a provision itself.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of California, other
than the conflicts of laws principles thereof.
(g) STATUTORY CONFORMANCE. With respect to the products ordered under
this Agreement, Manufacturer warrants and agrees that it has complied with the
requirements of: (i) the Fair Labor Standards Act of 1938, as amended, and its
invoices shall so state; (ii) Social Security and Workers Compensation laws, if
work is performed on Distributor's premises; (iii) Equal Opportunity clause in
Section 202 of Executive Order 11246, as the same may be amended; (iv) Section
503 of the Rehabilitation Act of 1973; (v) The Vietnam Veterans Readjustment
Assistance Act of 1974; and (vi) all other applicable federal, state and local
laws, codes and requirements.
(h) OZONE DEPLETING SUBSTANCES. Distributor reserves the right to
reject any Products containing or manufactured with substances identified as a
Class I or Class II ozone depleting substances by the U.S. Environmental
Protection Agency pursuant to Title VI of the Clean Air Act Amendments of 1990,
and any amendments thereto, whether or not such Products shall be required to
(i) SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or unenforceability of such provision in any other jurisdiction.
(j) SURVIVORSHIP. All obligations and duties hereunder which shall by
their nature extend beyond the expiration or termination of this Agreement,
shall survive and remain in effect beyond any expiration or termination hereof.
(k) FORCE MAJEURE. Neither party shall be liable for failure to fulfill
its obligations under this Agreement or any purchase order issued hereunder or
for delays in delivery due to causes beyond its reasonable control, including,
but not limited to, acts of God, acts or omissions of the other party, man-made
or natural disasters, material shortages, strikes, delays in transportation or
inability to obtain labor or materials through its regular sources. The time
for performance of any such obligation shall be extended for the time period
lost by reason of the delay.
(l) FAVORED NATIONS. Notwithstanding any other provision contained
herein, if Manufacturer shall sell any Products to any other domestic
Distributor at a price for the same or a lesser quantity which is lower than
the prices set forth on Exhibit "A" (as changed from time to time in accordance
with the provisions hereof), the Distributor shall simultaneously be given the
benefit of such lower purchase price. For the purposes of this subparagraph, a
distributor is a person, firm or corporation that acquires Products from
Manufacturer, inventories the same, and transfers those Products to customers
or end users.
(m) CONFLICTING TERMS. The parties agree that the terms and conditions
of this Agreement shall prevail, notwithstanding contrary or additional terms,
in any purchase order, sales acknowledgment, confirmation or any other document
issued by either party effecting the purchase and/or sale of Products.
(n) CONSENTS AND APPROVALS. Any consents or approvals required
hereunder shall not be unreasonably withheld.
(o) HEADINGS. The Table of Contents, if any, and headings of paragraphs
herein are inserted for convenience of reference only and shall be ignored in
the construction or interpretation hereof.
(p) U.S. MILITARY PRODUCT VALUE-ADDED TESTING. Manufacturer hereby
authorizes Distributor to perform, and/or to subcontract to independent test
labs, value-added testing on Manufacturer's military integrated circuit
products which are sold by Manufacturer as "JAN" products or are otherwise
classified as conforming with JEDEC 108/109, U.S. MIL-STD-38510 and/or
MIL-S-19500 specifications ("Military IC's"). Value-added testing shall be
performed in accordance with Distributor's then applicable military value-added
policy. However, Distributor shall not materially amend its military
value-added policy as applied to Manufacturer's Military IC's without the prior
approval of Manufacturer. Manufacturer shall warrant tested Military IC's in
accordance with Manufacturer's standard warranty for Military IC's which have
not been subjected to value-added testing, and Distributor shall be authorized
to pass through such warrant to its customers.
(q) LIFE SUPPORT POLICY. MANUFACTURER PRODUCTS SHOULD NOT BE USED IN
MEDICAL DEVICES WITH LIFE SUPPORT FUNCTIONS NOR IN SAFETY EQUIPMENT (OR SIMILAR
APPLICATIONS) WHERE COMPONENT FAILURE MIGHT RESULT IN LOSS OF LIFE OR PHYSICAL
HARM WITHOUT THE WRITTEN APPROVAL OF AN OFFICER OF MANUFACTURER.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above set forth.
SAGE, INC. AVNET, INC.
By: /s/ VIJAY P. DESAI By: /s/ STEVE CHURCH
Name: VIJAY P. DESAI Name: STEVE CHURCH
(Typed or Printed) (Typed or Printed)
Title: Vice President, Title: PRESIDENT, AVNET OMG
Management and Sales SENIOR VICE PRESIDENT, AVNET, INC.
Date: 10/29/97 Date: 10/16/97