1
EXHIBIT 10.15 DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made on the ______ day of July 1996, between
QUANTUM TOY CONCEPTS PTY, LTD., Xxxxx 00, 000 Xx. Xxxxx Xxxx, Xxxxxxxxx, 0000
Xxxxxxxxx ("Quantum") and JAKKS PACIFIC INC., 00000 Xxxxxxx Xxxxx Xxxxxxx,
Xxxxxx, Xxxxxxxxxx XXX ("Jakks").
WHEREAS, Quantum owns or controls all rights in respect of a radio
controlled vehicle known as the "The Reactor" ("the Property") and has appointed
Jakks as its exclusive distributor within the United States of America its
territories and possessions and Canada ("Xxx Xxxxxxxxx");
WHEREAS, Jakks desires to act as exclusive distributor to Quantum or its
nominated manufacturing company for the Property in the Territory.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. GRANT OF RIGHTS
On the terms and conditions hereof Quantum hereby grants to Jakks, and Jakks
hereby accepts the exclusive right to distribute, advertise and sell in the
Territory the Products based upon or adapted from the Property, being the Large
"Reactor", and any other size radio controlled "Reactor" vehicles which may be
developed by quantum ("the Products").
2. TERM
This Agreement shall commence as of the 1st day of July 1996 and shall continue
for a period of two years and six months or unless sooner terminated in
accordance with the provisions hereof.
3. SUPPLY OF THE PRODUCT
3.1 Jakks shall from time to time during the Term place orders with
Quantum for such Products as Jakks may require for sale in the
Territory, and Quantum agrees to supply Jakks with sufficient Products
to enable Jakks to promote the sale of the Products in the Territory.
2
3.2 Jakks agrees to send all orders for the Products to Quantum's office
in Australia as above or such other address as may be subsequently
notified by Quantum in writing, for acceptance or rejection by
Quantum.
3.3 Upon receipt of orders, Quantum shall use all reasonable endeavors to
meet the delivery date.
3.4 Jakks shall, in respect of each order for the Products to be supplied
hereunder, be responsible for:
3.4.1 ensuring the accuracy of the order;
3.4.2 providing Quantum with any information which is necessary in
order to enable Quantum to fulfill the order and comply with all
labeling, marketing and other applicable legal requirements in
the Territory;
3.4.3 obtaining any necessary import licenses or other requisite
documents, and paying all applicable customs, duties and taxes
in respect of the importation of the Products into the
Territory.
4. PAYMENT, ORDERS AND GUARANTEE
4.1 The prices for all Products to be supplied by Quantum hereunder shall
be at Quantum's standard Pricing Structure as or as advised by Quantum
from time to time. The standard price per unit of the large Reactor
Product shall be US$22.00 for the initial 18 months commencing July
1, 1996 ("the First Term"). Jakks shall have the right to resell the
Products in the Territory at whatever price or on whatever terms
Jakks determines in its discretion.
4.2 Payment for orders of Products shall be made by irrevocable letter of
credit, to be paid on shipment (F.O.B.) from China (or Hong Kong if so
elected by Quantum) for the full value of merchandise order, opened by
Jakks to Quantum or its Agent or such other entity as Quantum may
later designate.
4.3 Subject to the provisions of Clause 4.4, Jakks shall place minimum
orders for the Products in the Territory for the First Term follows:
2
3
100,000 units of the Large Reactor in respect of U.S.A. 5,000 units
of the Large Reactor in respect of Canada ("the Minimum Order")
4.4 In the event that Jakks fails to place the Minimum Order and effect
payment of same by irrevocable letter of credit in accordance with
Clause 4.2 then Jakks shall pay an agreed compensation to Quantum
("the Guaranteed Minimum Compensatory Payment") in accordance with
this clause:
Jakks acknowledge that this compensation is referable to the
minimum acceptable amortization by Quantum of its establishment
costs and in particular trading and design costs.
Jakks agrees that during the First Term Quantum will receive a
Guaranteed Minimum Compensatory Payment of Two Hundred Ninety Four
Thousand (US$294,000) Dollars, it being agreed that the price per
Product payable by Jakks shall be $22.00 of which $2.80 is the per
Product Guaranteed minimum Compensatory Payment.
The Guaranteed Minimum Compensatory Payment shall be subject to
adjustment as set forth below and shall be paid within 30 days of the
end of the First Term, and shall be calculated according to the
following formula
Guaranteed Minimum Compensatory Payment is equal to (M.O. minus A.O.) times
$2.80
Where M.O. equals the Minimum Order defined in Clause 4.3, and A.O.
equals the actual orders placed by Jakks and delivered by
Quantum during the First Term less any Products ordered by
Jakks and not delivered by Quantum or which Jakks has the
right to return as defective or otherwise not conforming to
the product specifications and which have not been replaced by
replacement Products. The Obligations of the parties under
this clause shall survive termination of this Agreement.
4.5 Jakks shall pay to Quantum a non-refundable Advance of US$73,500
being 25% of the Guaranteed Minimum Compensatory Payment which
shall be credited against payment of the Guaranteed Minimum
Compensatory Payment.
3
4
The sum of US$73,500 shall be paid immediately upon the signing
of the Agreement and remitted by bank draft to the account nominated
by Quantum. If at the end of the First Term, after deducting the
Advance, the calculation results in a negative figure, such amount
shall be refunded forthwith by Quantum to Jakks.
4.6 Jakks shall:
4.6.1 maintain an accurate account and record of all sales of Products
in the Territory in each month up to the close of business on
the last working day of each month, and shall prepare in a form
approved by Quantum a quarterly monthly financial statement
thereof and shall remit the same to the Company on or before
each Quarter.
4.6.2 keep sale accounts and records of sales of the Product in the
Territory and ensure that such accounts and records and all
supporting vouchers, invoices, delivery notes and the like shall
be open to inspection on at least two weeks notice to an
authorized representative of the Quantum who may make copies (at
Quantum's expense) of such accounts and records as it requires.
4.6.3 keep such accounts and records not less than three years.
4.7 Any claim by Jakks against Quantum in respect of defects or actual
faults in the Product shall be allowed only when it is submitted in
writing to Quantum within 30 days after discovery of the such defect.
Defective Products shall be clearly identified and made available to
Quantum for inspection, and subsequent acceptance or rejection of the
claim. Quantum may, at its option, require such defective product to
be returned by shipment.
In respect of a defective product return allowance, Jakks will bear
responsibility for 7% of the value of the orders for Products.
Thereafter Quantum will bear the responsibility. Quantum's liability
in respect to defective product shall be limited to the replacement of
the Products or at Quantum's option, a credit or cash payment
equivalent to the cost price of the defective product returned. After
April 30, 1998, Jakks shall not be bound to accept replacement product
in respect of defective product for which Quantum is liable.
4
5
5. MARKETING
5.1 Jakks shall use its best endeavors to promote the sale of the Products
throughout the Territory and to satisfy market demand thereof. Quantum
shall support Jakks efforts to promote the sale and distribution of
the Products in the Territory.
5.2 Jakks agrees to promote the Products in the USA and Canada by a
significant national television campaign at its cost.
5.3 Jakks shall maintain such stocks of the Products as may be reasonably
necessary to meet its customer request.
5.4 Quantum shall from time to time provide Jakks with samples,
catalogues, brochures and up to date information concerning the
Products in order to assist Jakks with the sale of the Product in the
Territory, and shall endeavor to answer as soon as practicable any
technical inquiries concerning the Products which are made by Jakks or
its customers.
6. SAMPLES
6.1 Quantum has supplied Jakks with a sample of the Product on July 3,
1996, ("the First Sample").
6.2 Quantum shall supply further Prototype samples of Products to Jakks in
October 1996 and thereafter Products to be available for shipment in
March 1997.
6.3 Quantum has supplied an additional sample on or about July 16, 1996
containing a new feature of sequential L.E.D. lights. The parties
agree that the initial standard price of $22.00 per unit
applies to the First Sample only and any further modification,
variations or new features shall remain the subject of further
negotiation and agreement.
5
6
7. PRODUCT LIABILITY INSURANCE
7.1 Jakks shall maintain with a reputable insurer product liability
insurance including Quantum as an additional named insured in the
amounts customary in the Territory. Jakks shall hold Quantum harmless
from any and all liability arising from the sale marketing and
distribution of any Products in the Territory.
7.2 Quantum hereby agrees to indemnify, defend and hold Jakks harmless
from any loss or claim, currently existing or arising in the future,
arising from any act, omission, event, conduct or transaction, to the
extent such claim relates to or arises out of the fact that the sale
of Products in the Territory in accordance with the terms and
conditions of this Agreement infringes upon the trademark, trade name
or other rights of any third party, other than Jakks.
7.3 Except for the first 7% of the defective product return allowance,
Quantum agrees to indemnify defend and hold harmless Jakks from any
loss or claim arising out of defects in any Product existing at the
time such Product is sold by Quantum to Jakks provided that Jakks
gives Quantum reasonable notice of any such loss or claim and
cooperates with Quantum in the handling thereof.
8. TERMINATION
This Agreement may be terminated at the option of Jakks or Quantum
forthwith upon written notice to the applicable other party in any of the
following events:
8.1 If either party becomes insolvent or makes a general assignment for
the benefit of creditors or if a petition in bankruptcy is filed
against either party or if either party is adjudged bankrupt or
insolvent;
8.2 If a receiver or other custodian (permanent or temporary) is appointed
for either party by instrument or by a court of competent jurisdiction
or if any proceeding for a compromise of creditors to be instituted by
or against either party is not satisfied, lifted, vacated or dismissed
within fifteen (15) days or if the assets of either party are sold or
levied by a sheriff or any other authority duly authorized on his
behalf;
6
7
8.3 If either party (the "defaulting party") is in default under any
obligation on its part contained herein and the defaulting party fails
to cure such default to the satisfaction of the other party within
thirty (30) days of receiving written notice from the other party to
cure such default.
9. INTELLECTUAL PROPERTY
9.1 Quantum hereby authorizes Jakks to use the trademarks and the
copyrights in the Territory on or in relation to the Products for the
purposes of exercising its rights and performing its obligations under
the Agreement.
9.2 Jakks may utilize and attach its logos, trademarks or trade names to
the packaging of the Products in connection with Jakks' marketing,
distribution and sale of the Products.
9.3 Jakks hereby agrees to indemnify, defend and hold Quantum harmless
from any loss or claim currently existing or arising in the future
arising from any act, omission, event, conduct or transaction to the
extent such claim relates to or arises out of the fact that the sale
of Products in the Territory infringes upon the Jakks trademark, or
trade name.
10. REPRESENTATIONS AND WARRANTIES
10.1 Quantum and Jakks have the right and power to enter into and perform
this Agreement and have taken all steps necessary and appropriate to
authorize the execution and performance hereof. This Agreement is a
valid and legally binding obligation of Quantum and Jakks and is fully
enforceable against the other party in accordance with its terms.
10.2 Quantum owns or controls all rights necessary to grant Jakks the
rights granted to it hereunder.
10.3 The execution, delivery and performance of this Agreement by quantum
does not and shall not conflict with the terms of any agreement or
other instrument to which Quantum is a party or by which quantum, or
any of its properties, is
7
8
bound.
11. GENERAL PROVISIONS
11.1 In this Agreement, words importing the singular include the plural and
vice versa and words importing gender include all genders.
11.2 The insertion of headings and the division of this Agreement into
articles and sections are for convenience of reference only and shall
not affect the interpretation hereof.
11.3 This Agreement and any documents incorporated by reference herein
constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions with respect to the
subject matter hereof whether oral or written. No supplements,
modification or waiver of this Agreement shall be binding unless
executed in writing by officers of Jakks and Quantum.
11.4 The invalidity of any provision of this Agreement or any covenant
herein contained shall not affect the validity or enforceability of
any other provision or covenant hereof or herein contained and any
such invalid provision or covenant shall be deemed to be severable.
11.5 This Agreement shall be binding upon and endure to the benefit of the
parties hereto and their permitted assigns and successors.
11.6 Notice - All notices, consents and approvals (herein referred to as
"Notice") permitted or required to be given or made hereunder shall be
in writing and shall be deemed to be sufficiently and duly given or
made if delivered personally or if sent by prepaid registered mail or
if transmitted by telex or facsimile transmission, to the address
hereinbefore referred to. Any party from time to time by Notice may
change its address for the purpose of this Agreement. In the event of
actual or threatened disruption of postal service, a notice shall be
delivered or sent by telex or other form of recorded communication
tested prior to transmission.
8
9
11.7 Time of Essence - The parties agree that time is of the essence in
this Agreement.
11.8 Further Assurance - The parties agree to do or cause to be done all
acts or things necessary to implement and carry into effect this
Agreement to its full extent.
11.9 Proper Law - This Agreement shall be construed in accordance with the
Laws of Australia.
IN WITNESS WHEREOF, the parties have executed this Agreement as an
agreement in two counterparts on the date hereinbefore set out:
SIGNED BY: DATE:
QUANTUM DEVELOPMENTS:
SIGNED BY: DATE:
JAKKS PACIFIC INC.
9
