Exhibit 10.4
DISTRIBUTION AGREEMENT
This Distribution Agreement made as of the 30th day of September
between Genio Inc., a New York corporation with principal offices located at
1120 Avenue of the Americas, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("Genio") and
TOMY UK Ltd., a United Kingdom limited liability company, with principal offices
located at Xx. Xxxxxxxx Xxxxx, Xx. Xxxxxxxx Xxxx, Xxxxxx Xxxxxx SMl 1EH England
(the "Distributor"),
WITNESSETH
Whereas, Genio has certain products that Genio wishes to sell to
Distributor and Distributor wishes to purchase such products for exclusive sale
in its territory on the term set forth herein.
Accordingly, the parties intending to be legally bound, agree as
follows:
1. Product. The term "Products" shall mean the products as described in
Appendix A annexed hereto (collectively, the "Products").
2. Appointment. Genio hereby appoints the Distributor and the
Distributor hereby agrees to act as the sole distributor of the Products for
sale in the territory as defined in Appendix B annexed hereto (the "Territory").
This appointment as distributor shall not be construed as a license and
Distributor may describe itself as a distributor of the Products but not as a
licensee or agent of Genio. Distributor agrees to utilize its best efforts to
promote and sell the Products in the Territory. The Distributor shall not engage
any sub-distributor or licensee to distribute the Products without obtaining the
prior written approval of Genio whose consent may be withheld in its sole
discretion, provided that Distributor shall submit a side letter contemporaneous
with the execution of this Agreement setting forth its present plan of
distribution of the Products in the Territory and explaining its role in such
distribution. Xxxxxxx Distributors is approved as a sub-distributor in Southern
Ireland and Magsons Ltd. is approved as a sub-distributor in the Territory for
the Products. Any approved sub-distributor shall be subject to all the terms and
conditions of this Distribution Agreement and the Distributor shall be liable
for any violation by any such approved sub-distributor of this Distribution
Agreement. The Distributor agrees that it shall not change, alter, or make
additions to or otherwise affect the artwork, content, commercials, or packaging
of the Products in any manner from the condition as it receives them from or on
behalf of Genio without the express written consent of Genio, which consent
shall not be unreasonably withheld. The Distributor agrees to utilize only the
advertising, promotional programs and all other material provided by Genio to
the Distributor in accordance with their terms, including the description of the
Products on Genio's website, xxx.XxxxxXxxxx.xxx in any website utilized by the
Distributor unless otherwise agreed to in writing by Genio, which may withhold
consent to any proposed changes by Distributor with such consent not to be
unreasonably withheld. Genio shall supply the Distributor with reasonable amount
of advertising copy and other promotional literature, including copies of
television commercials and Distributor shall reimburse Genio for any
out-of-pocket costs of \
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duplication for these materials. Genio shall provide Distributor with advice
regarding the marketing of the Products within the Territory. The Distributor
intends to edit a two minute infomercial that Genio has prepared for Genio
Products into a short form, fifteen second infomercial which edited infomercial
shall be subject to Genio's pre-approval before any airing or other transmission
by Distributor and which pre-approval shall not be unreasonably withheld.
Distributor may also seek to shoot its own infomercial for the Products but
shall obtain Genio's pre-approval before any airing or other transmission by
Distributor and which pre-approval shall not be unreasonably withheld.
3. Term. This Agreement shall be in effect from the date of the
execution by the parties to this Agreement (the "Effective Date") and shall
terminate on June 31, 2005 (the "Term"), provided that Genio and the Distributor
shall negotiate in good faith for an additional one year period through June 31,
2006 with minimum purchase requirements for such period to be negotiated and
with all other terms hereunder to remain in full force and effect for such
additional one year period if the parties reach an agreement on minimum purchase
requirements, provided, however, that (i) Genio may terminate this Agreement in
the event that the Distributor does not make full payment for any of the Minimum
Purchase Requirement, the Initial Order or any Quarterly Order each as set forth
in Appendix C annexed hereto within fifteen (15) days of the due date or (ii)
either Genio or the Distributor may terminate this Agreement if the
counter-party commits a material breach of this Agreement which remains uncured
for a period of thirty (30) days after either Genio or the Distributor, as the
case may be, provides written notice of such breach or (iii) the Distributor
becomes insolvent or fails to pay its debts and obligations on a current basis
or shall make an assignment for the benefit of creditors or becomes involved in
a receivership, bankruptcy, liquidation or other insolvency or debtor relief
proceedings on a voluntary or involuntary basis. On termination of this
Agreement, the Distributor shall stop using any know-how, trademark and
copyrights associated with the Products as well as not engage in any sales of
the Products. Any failure of Genio to deliver some or all of the Products
ordered by the Distributor as provided in Section 5 below shall not result in
material default by Genio hereunder but shall entitle the Distributor to either
(a) accept a reduced shipment of Products with a pro-rata reduction in the
purchase price for the Products or (b) provide Genio with written notice of
insufficiency of delivery of Products with a thirty (30) day period for Genio to
supply the remaining undelivered Products, failing which this Agreement shall
terminate and the parties shall have no further obligations hereunder except for
any payment obligations due as of the date of termination under Section 5 or the
obligations set forth in Sections 6, 8 and 13 below.
4. Territory. The Distributor shall have the exclusive right to market
and sell the Products and use the advertising and promotional material developed
by or for Genio for the Products in the Territory. Genio reserves the right to
grant the privilege and authority to any other person, firm or company which it
may select to develop the sale and distribution of the Products in places or
countries outride the Territory. The Distributor shall not sell any of the
Products to any person, firm or company outside of the Territory. Genio shall
not knowingly distribute the Products to third parties who will export the
Products for sale or distribution in the Territory. Genio shall assist
Distributor to prevent
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the unauthorized sale by third parties of the Products in the Territory,
although Genio shall not be required to undertake any legal proceedings to
prevent such unauthorized sale of the Products by third parties. Genio has filed
or will shortly file a trademark application to register the Genio(TM) brand
name for the Products in the Territory and the Distributor shall undertake
appropriate legal proceedings within the Territory at its expense against any
third parties engaged in the sale of the Products in the Territory in violation
of this Distribution Agreement.
5. Purchase Requirements. The Distributor agrees to purchase minimum
aggregate amounts of the Products according to the schedule set forth in
Appendix C hereto, provided that in the event that the Distributor fails to
purchase the minimum aggregate amounts of the Products, then the Distributor
shall no longer have the exclusive right to market and sell the Products and use
the advertising and promotional material developed by or for Genio for the
Products in the Territory.
6. Intellectual Property. Distributor shall have the right during the
Term to use the Genio trademarks and the trademarks of its licensers only in
connection with the sale of the Products. Genio warrants that Genio has all
rights, including all rights from any licenser, to market, distribute and sell
the Products, including entering into this Distribution Agreement with the
Distributor. Distributor acknowledges that Genio is the licensee of the Products
and that the licensor is the exclusive owner of all right, title and interest in
the trademarks, and copyrights of the characters utilized in the Products and
that Distributor shall not at any time during or after this Agreement dispute
the licensor's exclusive rights and title to such characters, or the validity of
any licensing agreement of Genio and shall not assist others in so doing.
Distributor also acknowledges that Genio is the exclusive owner of all right,
title and interest in the trademarks and copyrights of the Genio(TM) brand.
Distributor shall not at any time during or after this Agreement dispute Genio's
exclusive rights and title to Genio(TM) name, as well as any other properties
owned by Genio which are not the subject of this Agreement, or the validity
thereof and shall not assist others in so doing. Distributor shall execute any
instruments requested by Genio to accomplish or confirm the foregoing and hereby
irrevocably appoints Genio as its attorney-in-fact to execute such instruments
if Distributor does not do so. Distributor shall defend, indemnify and hold
Genio harmless of, from and against any charges, suits, damages, costs, expenses
(including reasonable attorneys' fees, judgments, claims, liabilities or losses
of any kind or nature whatsoever which may be sustained or suffered by or
secured against Genio, its officers, directors, agents or shareholders based
upon or arising out of any actual or alleged trademark or copyright infringement
arising solely out of an unauthorized use by Distributor of any patent, trade
secret, process, idea, method or device, or any copyright or trademark, other
than as authorized in this Agreement.
7. Payment. The Distributor shall make payment for the Products set
forth in each Purchase Order Notice in one of two methods: (i) payment in full
by a stand-by Letter of Credit from a United States bank posted in favor of
Genio or (ii) payment in cash with fifty (50%) percent due at the time of
sending of a Purchase Order Notice and the remaining fifty (50%) of the purchase
price due no later than seven (7) days prior to shipment by Genio of the
Products ordered in the Purchase Order Notice. Payment shall
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be made in United States dollars at the exchange rate prevailing at bank which
has posted the stand-by Letter of Credit as provided in subsection (i) above.
Payment in cash shall be made by wire transfer to a bank account designated by
Genio with the following wire instructions (or as may be changed by the sending
of written notice to the Distributor: [insert bank wiring instructions-to be
provided by Genio]
8. Insurance. Distributor shall obtain at its own expense and maintain
during the Term the insurance as set forth in Appendix D hereto.
9. Assignment; Entire Agreement; Waiver. Neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by the
Distributor (whether by operation of law or otherwise) without the prior written
consent of Genio, which may be withheld in its sole discretion and any attempted
assignment thereof without such consent shall be null and void. Genio may assign
this Agreement and its rights, interests or obligations hereunder to any third
party provided that such third party agrees to be bound by all of the provisions
of this Agreement. This Agreement, including the appendixes annexed hereto, sets
forth the entire agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersedes all prior agreements or
communications, whether oral or written, by any party hereto or by any related
or unrelated third party. No modification of this Agreement shall be valid
unless made in writing and duly agreed upon, executed by both parties of this
Agreement. A waiver of any breach of the provisions of this Agreement shall not
be considered to be a continuing waiver of other breaches of the same provision
or a waiver of any rights that the non-breaching party has with respect to any
other breach of the Agreement.
10. Notices. All notices provided for or permitted to be given under
this Agreement shall be in writing and shall be given by depositing the notice
in the United States Mail, addressed to the party to be notified, postage paid,
and registered or certified with return receipt requested, or by such notice
being delivered in person, or priority overnight by a recognized overnight
courier service company in the United States. Notices given or served pursuant
hereto shall be effective upon receipt by the party to be notified, and shall be
deemed received three (3) business days after mailing and one (1) business day
after being sent priority overnight. All notices to be sent to a party shall be
sent or made at the address set forth above or such other address as that party
may specify by written notice to the party given in accordance with this
Section.
11. Choice of Law; Jurisdiction. It is hereby agreed between the
parties that any dispute between the parties that results in litigation shall be
commenced exclusively in the Supreme Court, State of New York, County of New
York or the U. S. District Court for the Southern District of New York. The
parties hereby submit to the jurisdiction and venue of either such court. In all
circumstances, the law of the State of New York shall govern the issues to be
determined without regard to the choice or conflict of laws provisions thereof.
The non-prevailing party in any litigation arising out of this Agreement shall
pay all costs and expenses, including reasonable attorney's fees incurred by the
prevailing party.
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12. Severability. If any provision of this Agreement contravenes any
provision of any law, regulation, ordinance or the like, that provision shall be
deemed to be null and void or the scope of that provision shall be deemed to
have been limited to exclude such contravention. In that event, or in the event
of any provision of this Agreement being held to be invalid, the remaining
sections of this Agreement will not be affected unless either party can
establish in a court of law that it is adversely affected or prejudiced thereby
or if either party successfully relies on that provision in any legal
proceedings, in which event that party shall be entitled to cancel this
Agreement.
13. Non-Competition. Distributor shall not manufacture, distribute or
sell any product competitive with or of a similar nature to the Products during
the Term. In the event that this Agreement is terminated by either party for any
reason, including expiration of the Term, the Distributor shall not sell, deal
in or otherwise become involved with any of the Products or any product
competitive with or of a similar nature to the Products for a period of one (1)
year from the date of such termination. Notwithstanding the foregoing, the
Distributor shall be entitled to manufacture, distribute or sell only products
that may be competitive with or of a similar nature to the Products during the
Term, provided that such product or products are developed solely based on
existing product or products owned by Distributor or its parent and excluding
any third party products.
14. Independent Contractors. The Distributor shall for all purposes be
an independent contractor for Genio. Genio shall not be liable for or
responsible in any way for taxes or fees incurred on behalf of, or in connection
with the Distributor including, but not without limitation, any foreign or
federal or state taxes, all of which are the sole responsibility of the
Distributor. Neither party nor any of its employees, representatives or agents
will be or act or purport to act as an employee, representative or agent for the
other party for any reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
GENIO INC.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
TOMY UK, LTD.
By: /s/ Xxxx X. Xxxx
-----------------------------------------
Name: Xxxx X. Xxxx
Title: President and Chief Executive Officer
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APPENDIX A
PRODUCTS
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The Products are comprised of Genio Cards(TM) in four product
categories:
(i) Starter Kit that contains the 64 page Genio Cards(TM) album;
(ii) Pack of 9 Genio Cards(TM)and 9 adhesive sleeves;
(iii) MegaDeck that contains 36 Genio Cards(TM), including one of
five full size posters of a Marvel Super Hero(R)and
(iv) Pack of clear card sleeves
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APPENDIX B
TERRITORY
---------
The Distributor's exclusive territory for distribution of the Products
is the United Kingdom and the British Islands and Southern Ireland (Eire) but
does not include the British Commonwealth members or the British overseas
territories.
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APPENDIX C
PURCHASE REQUIREMENTS
---------------------
The Distributor guarantees to purchase $251,300 of the Products by way
of an initial order set forth below (the "Initial Order") and intends but does
not guarantee to purchase additional Products in the aggregate amount of
$979,400 (including the Initial Order) and $1,439,850 for the periods ending
June 30, 2004 and June 30, 2005, respectively (each a "Minimum Purchase
Requirement"). The purchase price for the Products shall be as set forth in the
purchase price list set forth below and shall not be amended unless agreed upon
by both Genio and the Distributor. The Distributor shall satisfy the Minimum
Purchase Requirement by making payments according to the following schedule:
A. $251,300(US$) on the Effective Date (the "Initial Order") comprised
of the following Products:
Product PCS US$PC US%Extn
9pk Toy (clamshel1) 50,000 0.90 45,000
9pk CTN (Foil) 80,000 0.70 56,000
3 6pk Mega 50,000 2.38 119,000
Album +9pk +
Wrap/header 10,000 3.13 31,300
--------
Total $251,300
The Distributor guarantees placing the Initial Order. Subsequent orders
in subsections (B) through (G) as listed below relate to planned purchases only
and are not a guaranteed commitment by the Distributor to purchase Products.
Orders associated with payments for the amounts set forth in subsections (B)
through (G) are to be used as a measure of performance against the Minimum
Purchase Requirements.
B. $283,300 on or before March 31,2004
C. $444,800 on or before June 30, 2004
D. $460,450 on or before September 30, 2004
E. $251,300 on or before November 30, 2004
F. $283,300 on or before Xxxxx 00, 0000
X. $444,800 on or before June 30, 2005
(each of the orders set forth in subsections B through G above shall be referred
to as a "Quarterly Order"). Annexed hereto as Exhibit A is the budget plan of
the Distributor setting forth the number of each of the Products comprising each
Quarterly Order that the Distributor is presently planning to purchase. In the
event that the Distributor purchases Products in excess of any amount required
in any Quarterly Order, the Distributor shall be entitled to adjust one or more
subsequent Quarterly Order downward so that the aggregate amount of each
Quarterly Order shall cumulatively equal the Minimum Purchase Requirement. The
Distributor shall provide written notice to Genio of the Products that it is
purchasing as part of its purchase requirement (the "Purchase Order Notice").
Genio shall ship the Products to the Distributor as designated in the Purchase
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Order Notice to the address of the Distributor as set forth herein or such other
address as the Distributor shall designate in writing. Genio shall deliver the
Products as set forth in the Purchase Order Notice within forty-five(45) days of
receipt of the Purchase Order Notice, provided that the Distributor shall have
no right to take action against Genio for delay in delivery of Products
occasioned by shortage of stock, delays in transit, accidents, or strikes and
provided further that such delay will extend any outstanding payment obligations
of Distributor for the period of such delay and Distributor will not be in
breach thereof during such period of delay.
The Distributor shall place any Purchase Order Notice with Genio and
make payment as provided in Section 7 of the Agreement. In the event that the
Distributor fails to place any Purchase Order Notice on a timely basis for any
Quarterly Order set forth in subsections (B) through (G) above, the Distributor
shall thereafter no longer have the exclusive right to market the Products in
the Territory.
The purchase price for each of the Products shall be as set forth below:
Product Purchase Price $US
9pk Toy (Clamshell) 0.90
9pk CTN(Foi1) 0.70
36pk Mega in pack plus poster 2.38
Album +9pk +wrap/header 3.13
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APPENDIX D
INSURANCE
---------
Distributor shall obtain at its own expense and maintain during the
Term the insurance as set forth in Appendix D hereto and for three (3) years
thereafter, general liability insurance including advertising, blanket
contractual, product liability and completed operations liability coverages.
Distributor shall also obtain at its own expense and maintain during the Term
and for three (3) years (five (5) years if the policy form is claims made)
thereafter multi-media liability insurance which provides coverage for claims
arising out of the published material and shall include but not be limited to
the allegations of defamation, copyright, infringement, invasion of right of
privacy or other personal injury and breach of implied contract. All insurance
must be provided by a recognized insurance company having a Best's Rating of no
less than "A" providing adequate protection at least the amounts of combined
single limit of $3,000,000 per occurrence for personal bodily injury and
property damage for Genio. Such insurance shall be primary and non-contributory
with respect to an insurance carried by Genio. Notwithstanding anything herein
to the contrary, in the event that the Distributor is not able to obtain, or
fails to maintain any of the insurances coverages in the amounts contemplated
herein, Distributor shall defend, indemnify, and hold Genio, its parents,
subsidiaries, affiliates and licensors harmless of, from and against any
charges, suits damages, costs, expenses (including reasonable attorneys' fees),
judgments, penalties, claims, liabilities or losses of any kind or nature
whatsoever which may be sustained or suffered by or secured against Genio or any
of its parents, subsidiaries, affiliates and licensors.
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