EXHIBIT 10.1
THE ITEMS MARKED BY TWO ASTERISKS * * HAVE BEEN OMITTED FROM THIS FILING AND
HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement ("Agreement") is entered into as
of May 1, 1998 ("Effective Date") between Advantage Enterprises, Inc., a
Missouri corporation ("Advantage"), and SmarTire Systems Inc., a corporation
formed under the laws of the Province of British Columbia ("Distributor").
RECITALS:
A. Advantage is involved in the business of developing, manufacturing,
marketing, distributing and selling tire monitoring systems, know-how and
devices, including the tire monitoring system commonly known as TireMate.
B. Advantage has entered into an agreement dated April 29, 1998 as
amended by any amendment agreements thereto (collectively referred to as the
"ASD Agreement") with Auto Safe Devices, Inc. ("ASD") whereby ASD is currently
developing the next generation of tire monitoring system for Advantage, pursuant
to the specific Statement of Work ("SOW") incorporated within the ASD Agreement.
A copy of the ASD Agreement including the SOW, is attached as Annex A.
Distributor shall have the exclusive rights to market, distribute, sell and
otherwise commercialize such next generation tire monitoring system, in
accordance with the terms of this Agreement.
C. Advantage possesses the right to grant exclusive licenses to market,
distribute, sell and otherwise commercialize the Product (as defined below)
throughout the World.
D. Distributor desires to market, distribute, sell and otherwise
commercialize the Product Worldwide pursuant to rights granted under this
Agreement.
NOW, THEREFORE, it is agreed as follows:
1. DEFINITIONS. As used herein, the following terms shall have the meanings
set forth below:
a. "Existing Product" means all tire pressure monitoring systems, devices
and know-how in which business Advantage is currently involved, including the
tire monitoring system commonly known as TireMate including all data, designs,
drawings, specifications, inventions, processes, techniques, systems and
methods, and all developments, modifications, enhancements and other
improvements thereto and all patent, copyright, trademark, trade secret and
other intellectual property rights in respect thereof that may exist, however,
the definition of Existing Product specifically excludes the Product.
b. "Product" means the tire pressure monitoring system currently being
developed by ASD pursuant to the ASD Agreement, including all data designs,
drawings, specifications, inventions, know-how, processes, techniques, systems
and methods, all developments,
-2-
modifications, enhancements and other improvements thereto, whether undertaken
by ASD or any other party on behalf of Advantage, and all patent, copyright,
trademark, trade secret and other intellectual property rights in respect
thereof.
c. "Ready for Production" means:
(i) the Product has been satisfactorily tested by Distributor
for commercial use production based upon commercially reasonable
standards, including reasonable assurances by Goodyear Tire &
Rubber Company that the Product has been approved for use with
their "run-flat" tires;
(ii) all tests required by the Federal Communications Commission
("FCC") in order to obtain an FCC licence for the Product shall
have been successfully completed and approval for such licence
has been granted; and
(iii) the Product meets all specifications set out in the SOW.
d. "Term" means the period commencing on the Effective Date and
continuing for six (6) years from the date the Product is Ready for Production,
subject to the terms of this Agreement regarding termination of this Agreement.
e. "Territory" means the World.
2. GRANT OF RIGHTS.
Subject to the terms and conditions set forth herein, Advantage hereby
grants to Distributor, during the Term, the exclusive right to market,
distribute and sell the Existing Product and the Product in the Territory,
either directly or indirectly through its agents, dealers, subdistributors,
licensees and sales representatives.
Provided Distributor has complied with all its material covenants
hereunder, Distributor shall, at its sole option, be entitled to extend the Term
for a further three (3) years by delivering notice of such intention at least
ninety (90) days prior to the end of the Term. The parties shall negotiate in
good faith as to the minimum purchase order requirements and pricing to be in
place during the extension of the Term. If the parties have not agreed to such
minimum purchase order requirement or pricing prior to the expiry of the Term,
the minimum purchase order requirement per year during such extension shall be
that number of Units of Product that is twenty (20%) percent over the minimum
purchase order requirement in the last year of the Term and the price per Unit
shall be the average price per Unit during the last year of the Term.
Provided Distributor has complied with all its material covenants
hereunder and subject to section 6.b., Advantage shall not, directly or
indirectly, market, distribute or sell the Existing Product or the Product or
any other tire pressure monitor product anywhere in the Territory during the
Term, shall not use the trademark TIREMATE or any confusing variant thereof in
association with any such products and shall not authorize or assist any other
party to do so. Distributor shall market, distribute and sell the Existing
Product and the Product under any trademark or trademarks it deems advisable,
other than TIREMATE. Provided that Advantage is
-3-
materially in compliance with this Agreement, Distributor shall not, during the
Term, market, distribute or sell any externally mounted tire pressure monitoring
device other than the Product or the Existing Product, provided that Distributor
may market, distribute or sell such other external devices if Advantage is
unable to fill purchase orders for the Product submitted by Distributor or if
such other external devices are of comparable quality at a materially lower
price than the Product or if such other external devices are of materially
better quality and/or have additional or improved features that materially add
value to the Product at the same or lower price than the Product. An example of
such an additional feature is a battery powered receiver.
3. FINANCIAL CONSIDERATIONS.
In consideration for the exclusive rights granted herein, and the
obligations of Advantage under the Agreement, Distributor shall remit to
Advantage, and otherwise undertake the following obligations:
a. Concurrently with the execution of this Agreement,
Distributor shall remit to Advantage via wire transfer or certified check
$200,000US, representing the non-refundable consideration for the goodwill,
customer lists and the exclusive, worldwide marketing, distribution and sales
rights for the Existing Product and for all the remaining inventory of the
Existing Product in the possession or control of Advantage and any current
distributors, dealers or sales representatives of Advantage.
b. (i) In the event the Product is "Ready for Production" (as
defined in Section 1 above) on or before July 1, 1998 ("Completion Date"),
Distributor shall remit to Advantage on the Date the Product is Ready for
Production via wire transfer or certified check $500,000US, representing the
non-refundable consideration for the goodwill, customer lists and exclusive
worldwide rights to market, distribute and sell the Product as granted herein.
(ii) The $500,000 payment referenced above shall be
reduced by $2,500 per day for each day beyond the Completion Date that the
Product is not Ready for Production.
If the Product is not Ready for Production by that date that is
120 days after July 1, 1998, Distributor may at its sole option at any time
thereafter, on provision of five (5) days written notice:
A. Terminate this Agreement and all of its further
obligations relating to the Product;
B. Require Advantage to terminate the ASD Agreement for
cause and appoint another manufacturer acceptable to Distributor acting
reasonably and acceptable to Advantage on commercially reasonable terms; or
C. Affirm this Agreement.
(iii) All payments due Advantage under this Section 3
-4-
shall be payable in United States dollars.
4. COVENANTS AND FURTHER OBLIGATIONS OF ADVANTAGE.
In addition to the other obligations as set forth herein, Advantage agrees
to perform the following under this Agreement:
a. Provided Distributor has complied with all its material covenants
hereunder, Advantage shall discontinue all research, development, marketing,
distribution, sales and other commercialization of the Existing Product
throughout the Territory. All Inquiries received by Advantage regarding the
purchase of the Existing Product shall be referred to Distributor. Subject to
satisfaction of the minimum purchase order requirements set forth in Section
6.a. below, Advantage shall refer all inquiries, leads, contacts, customers,
referrals and sales relating to the Product to Distributor. There are no
minimum purchase order requirements with respect to the Existing Product.
b. In the event a bona fide offer is tendered for the acquisition of
Advantage (whether stock or substantially all of its assets or any of
Advantage's rights to the Product) Distributor shall have the first right of
refusal to match such offer. Advantage shall immediately provide Distributor
written notice setting forth the terms of such offer. Following receipt of such
notice, Distributor shall have thirty days to notify Advantage that it will
match the terms offered by the potential bona fide third-party purchaser and a
further fifteen (15) days to close the transaction contemplated in the offer.
Any sale to a third party shall have no effect on this Agreement and such third
party shall acknowledge in writing that it is bound by the terms of this
Agreement as a condition of such sale.
c. The principals of Advantage shall be available to consult with
Distributor in connection with the commercialization of the Product, upon terms
and conditions mutually agreed upon, however Distributor is under no obligation
to utilize or contract for such services.
d. If Advantage, ASD or any person on behalf of Advantage or ASD develops
or designs any new tire pressure monitor products or technology (other than
improvements to the Product or Existing Product, which are automatically
included as part of this Agreement), Distributor shall have the first option to
acquire the exclusive rights to market, distribute and sell such new product or
technology throughout the Territory, on terms to be negotiated by the parties
acting reasonably, before such new product or technology is offered to any other
party. Such negotiations shall be concluded within thirty (30) days of the date
Advantage first notifies Distributor of the new product or technology and
Distributor shall have a further fifteen (15) days to close the transaction
negotiated, if any.
e. At any time during the Term, Distributor may, at its sole option,
carry out a patent infringement search with respect to the Product in any or all
of the United States, Canada, Mexico, Germany, France and the United Kingdom. If
as a result of any such search, Distributor determines that the Product
infringes the valid patent rights of a third party, Distributor shall promptly
notify Advantage of such determination in writing. Upon receipt of such notice
Advantage may promptly review the allegation of infringement with its own patent
attorneys and if such patent attorneys provide an opinion that there is no
infringement as alleged within thirty (30) days of the date Distributor notifies
Advantage of the alleged infringement, Distributor shall continue to distribute
-5-
the Product in the country in issue provided that Advantage shall: (i) arrange
and pay for patent infringement insurance in favour of Distributor and Advantage
providing for coverage in such amounts and with such reputable insurers as the
parties agree to, acting reasonably; and (ii) fully and promptly indemnify and
save harmless Distributor from all damage, cost, loss, expense and liability
that Distributor may suffer or incur, including all reasonable legal fees and
expenses billed to Distributor, as a result of the continued marketing, sale and
distribution of the Product in the country in issue. If, on reviewing the
Distributor's allegation of infringement Advantage does not dispute such
allegation within the thirty (30) day period set out above, Advantage shall
promptly, at Advantage's sole cost, arrange to either: (iii) redesign the
Product so that it is no longer infringing, without loss of quality or
functionality; or (iv) arrange for a licence or purchase of the patent which is
being infringed. If neither such action is completed within sixty (60) days of
the date Advantage received notice of such infringement, Advantage shall, if
requested by Distributor, refund to Distributor the amount paid by Distributor
pursuant to Section 3(b) above, and in such event this Agreement shall be
terminated upon such payment being received in full by Distributor. Advantage
shall or shall cause ASD to provide to Distributor all drawings, schematics,
specifications, know-how and assistance reasonably required by Distributor to
carry out the patent infringement searches referred to herein, such information
to be used solely for such purpose and not to be disclosed to any other party
without Advantage's prior written consent.
f. Advantage shall itself or shall cause ASD to, at all times during the
Term, take out and maintain in good standing third party liability (including
product liability) insurance providing for a minimum of $5,000,000 coverage per
single occurrence. All insurance of Advantage and/or ASD as required by this
Agreement shall be with insurers acceptable to Distributor, acting reasonably,
shall provide that Distributor is an additional insured, and shall not be
cancellable until Advantage has provided Distributor with thirty (30) days prior
written notice of its intention to cancel. Advantage shall itself or shall
cause ASD to provide a copy of all such insurance policies to Distributor, on
request.
5. COVENANTS AND FURTHER OBLIGATIONS OF DISTRIBUTOR.
In addition to the other obligations as set forth herein, Distributor
agrees to perform the following under this Agreement:
a. Throughout the Term, Distributor may offer to Advantage, feedback
received by Distributor from customers, sub-distributors, dealers and the like
regarding the Product and may offer suggestions for improvements to the Product.
Any improvements to the Product created or discovered by Advantage or any third
party on behalf of Advantage shall be promptly communicated to Distributor in
writing and all such improvements and any new patents and/or products resulting
from such improvements shall be owned by Advantage and shall immediately be
included within the scope of the exclusive rights granted to Distributor under
this Agreement. If Distributor creates or discovers an improvement to the
Product, Distributor shall own all rights to such improvement. The terms of any
proposed joint development of new products and/or technology by the parties
shall be agreed to in writing before proceeding with such joint development.
-6-
b. Within 90 days from the Effective Date, Distributor shall provide
Advantage with a Business and Marketing Plan setting forth its marketing
strategy in the Territory. Distributor and Advantage shall collectively be
involved in the initial testing of the Product at Distributor's premises.
c. Concurrently with execution of this Agreement, Distributor shall
submit an initial purchase order for 50,000 units covering a six month period
("Initial Purchase Order") from the date the Product is Ready for Production.
The form of Purchase Order is attached as Annex C. The price per unit (receiver
and four sensors) ("Unit") for the Initial Purchase Order shall be $**. Such
$** per Unit price is exclusive of shipping and does not include a battery
powered option for the receiver, but does include sensor batteries and a
standard mount (optional mounting brackets are at additional cost to be agreed
upon). If the price at which Advantage is purchasing the Product from ASD
exceeds $** per Unit, the price per Unit to Distributor shall increase by 50% of
the excess above $**, but in no event shall such increase exceed $**. Advantage
shall provide to Distributor, at the request of Distributor, documentation
verifying the price being charged by ASD, including a breakdown of the component
costs of the Product.
Thereafter, Distributor shall provide, on a monthly basis, a rolling six
month purchase order of which the first 90 days will be confirmed. Distributor
agrees that the Unit price for such subsequent purchase orders shall be reduced
to a maximum of $**. Except for the Initial Purchase Order, Advantage agrees to
negotiate in good faith with Distributor to arrive at a discounted Unit price in
the event of "substantial" orders (e.g., orders in the range of 400,000 Units
from WalMart, etc.) or if a competitor makes a comparable product available at a
materially lower price or a materially better quality product or one with
additional or improved features that materially add value to the Product
available at the same or lower price. Such discounted Unit prices for
"substantial orders" shall be determined following projections as to the cost
and manufacturing savings attributable to such bulk orders of the Product.
All orders shall be delivered on terms FCA ASD's manufacturing plant in
California or Nevada, or FCA such other approved manufacturer's plant in the
continental United States.
The term "FCA" or Free Carrier shall have the meaning set forth in the
publication "Incoterms 1990" published by the International Chamber of Commerce.
If at any time during the Term, Advantage, ASD or any other approved
manufacturer of the Product is unable to deliver the volume of Product required
in any purchase order, Distributor may require Advantage to appoint another
manufacturer for the Product within ninety (90) days, such manufacturer to be
acceptable to both parties acting reasonably and such appointment to be on
commercially reasonable terms.
d. Distributor shall provide reasonable assistance from time to time, to
help Advantage procure various components for the Product at the most attractive
rates possible, and where appropriate shall introduce potential manufacturers to
Advantage, with the understanding that the parties shall discuss in good faith
reductions in the Unit price corresponding to reductions in the manufacturing
cost associated with the Product.
-7-
e. It is acknowledged that any material modifications to the Product made
at the request of the Distributor may affect the price per Unit. Any such
modifications shall be mutually agreed upon by the parties.
f. Upon the Product being Ready for Production, Distributor shall arrange
for a Letter of Credit (in the form attached as Annex B) supporting one-half of
the first ninety (90) days of the Initial Purchase Order. For all subsequent
orders, Distributor shall arrange for a Letter of Credit (in the form attached
as Annex B), supporting one-half of the rolling 90-day confirmed purchase order.
The balance of each payment for the purchase order shall be paid within thirty
(30) days of each shipment under such purchase order. Advantage, shall, on
behalf of Distributor, inspect each shipment of Product. If any shipment
contains less than the quantity of Product ordered or contains defective
Products, Advantage shall cause ASD to immediately remedy such shortage or
defect or to credit Distributor for the cost of such shortage or defect on the
next invoice. Repeated shortages or defects shall entitle Distributor to demand
that Advantage terminate the ASD Agreement for breach, and arrange for a new
manufacturer for the Product within ninety (90) days, such manufacturer to be
acceptable to Distributor and Advantage acting reasonably and such appointment
to be on commercially reasonable terms.
g. Distributor shall maintain in place during the Term, commercial
general liability insurance providing for $5,000,000 coverage per single
occurrence and naming Advantage as an additional insured but only with respect
to the liability arising from the operations of Distributor, its agents and
employees, and shall otherwise comply with all legal and regulatory obligations
relating to the sale or distribution of the Product within the various countries
and states in the Territory. All insurance of Distributor as required by the
Agreement shall be with insurers acceptable to Advantage, acting reasonably,
shall provide that Advantage is an additional insured, and shall not be
cancellable until Distributor has provided Advantage with thirty (30) days prior
written notice of its intention to cancel. Distributor shall provide a copy of
all such insurance policies to Advantage, on request.
h. Distributor shall provide all packaging materials, instruction manuals
and product decals to be used for the Product to be distributed by Distributor.
ASD shall provide all warranty information, including a copy of the Limited
Warranty attached as Annex D. On termination of this Agreement for any reason,
Advantage shall be responsible to return all unused packaging materials,
instruction manuals and product decals then in its or ASD's or any other
approved manufacturer's possession or control.
i. Distributor shall use reasonable commercial efforts in the marketing
and distribution of the Product and the Existing Product, and shall include
within the Business and Marketing Plan referenced in Section 5.b. above, a
marketing and advertising plan relating to the worldwide distribution of the
Product. All such activity shall be undertaken at Distributor's sole expense.
In this regard, Distributor acknowledges that it shall spend at least $500,000
during the first 12 months of the Term on marketing efforts for the Product and
thereafter shall incur commercially reasonable amounts on marketing efforts.
-8-
6. MINIMUM PURCHASE ORDER REQUIREMENTS.
a. Distributor agrees to submit Purchase Orders representing the
following minimum sales of the Product for each of the years during the Term.
There is no minimum purchase order requirement for the Existing Product. It is
acknowledged that the minimum purchase order requirement as set forth below is
contingent upon the Product being Ready for Production on or before July 1,
1998. In the event that the Product is not Ready for Production on or before
July 1, 1998, the minimum purchase order requirement for 1998 shall be reduced
proportionately for the remainder of 1998. The minimum purchase order
requirement below is also contingent on ASD delivering a sufficient number of
Units to fulfil the minimum purchase order requirement.
Year Units
---- -----
i. 1998 - 50,000
ii. 1999 - 100,000
iii. 2000 - 120,000
iv. 2001 - 144,000
v. 2002 - 172,000
vi. 2003 - 207,000
b. Subject as set out in Section 6.a. above, in the event Distributor
fails to meet the purchase order requirements set forth in Section 6.a. above
based on an annual review for 1998 and based on a semi-annual review, as
annualized for the years 1999 - 2003, Distributor may at its option pay $10 per
Unit for such shortfall to Advantage in order to retain its exclusivity under
this Agreement, such payment to be made within 30 days of the end of the period
being reviewed. If Distributor does not make such payment within the time
required, Advantage shall thereafter, have the right to distribute the Product
in any other manner it deems appropriate, but Distributor shall retain the right
to be a non-exclusive distributor of the Product in the Territory for the
remainder of the Term, but limited to the tire manufacturing and tire
distribution industries.
7. ADVANTAGE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Advantage
represents and warrants to Distributor as follows:
a. Advantage is a corporation duly organized and in good standing under
the laws of the State of Missouri and has the corporate power to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance by Advantage of this Agreement has been authorized by all necessary
corporate action of Advantage. This Agreement is the valid and binding
obligation of Advantage enforceable in accordance with its terms.
b. Advantage will be the sole owner of the Product on the date the
Product is Ready for Production and throughout the Term . Advantage has the
authority to grant to Distributor the rights to the Product as set forth in this
Agreement, free and clear of any liens, charges, restrictions, pledges, security
interests or similar encumbrances and has not granted any such rights to any
other party;
c. The Product does not and will not throughout the Term infringe the
patent, copyright, trademark, trade secret or other intellectual property rights
of any third party in the
-0-
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxx, Xxxxxxx, Xxxxxx or the United Kingdom, and
Advantage is not aware of any third party claims of infringement with respect to
the Product;
d. The ASD Agreement is in good standing and neither Advantage or ASD is
in breach of any provision of that agreement;
e. With the sole exception of ASD and Distributor (and Columbia Research
& Development, L.L.C. in furtherance of a previously contemplated commercial
arrangement), Advantage has not disclosed any confidential information,
including trade secrets, relating to the Product to any other party;
f. Advantage covenants and agrees as follows:
(i) During the Term, except as expressly provided in this
Agreement, Advantage and its principals shall not engage,
directly or indirectly, in any business that designs, develops,
manufactures, tests, markets, distributes or sells products that
are competitive with the Existing Product or the Product, namely
external or internal tire pressure monitor systems for the
automotive industry. Advantage's principals shall execute and
deliver a separate agreement confirming this covenant in the form
attached as Annex E concurrently with the execution and delivery
of this Agreement;
(ii) Advantage acknowledges that monetary damages may not be an
adequate remedy to Distributor in the event of a breach by
Advantage or its principals of its covenants herein. Accordingly,
in the event of such breach, in addition to its other rights and
remedies, Distributor may apply to a court of competent
jurisdiction for an order enjoining or restraining such activity
and Advantage hereby agrees that such an order is necessary to
protect the legitimate and reasonable business interests of
Distributor. For the purpose of this Agreement, engaging in a
competitive business includes carrying on such business directly
or advising, investing in, lending funds or consulting to such
business, or acting as a director, officer, manager or employee.
A breach of this covenant by either of Advantage's principals
will be deemed to be a breach by Advantage.
g. Advantage, or its designee, shall promptly upon the Product being
Ready for Production but prior to any public disclosure of the Product, apply
for patent protection for the Product at the United States Patent and Trademark
Office and shall concurrently reserve the right, under appropriate international
treaties, to file corresponding patents in Canada, Mexico and all of the
European Union member countries, all at the sole expense of Advantage, and
Advantage shall be the owner of all such patent applications. The claims
covered by such patent applications shall be determined by mutual agreement and
in consultation with a firm of patent agents agreeable to Distributor, acting
reasonably. Advantage shall be solely responsible for the cost of filing all
such applications and paying all filing, registration and maintenance fees
throughout the full term of all such patents.
-10-
h. Advantage shall be responsible at its own cost for obtaining, as
quickly as reasonably possible, and for maintaining and paying for all
telecommunications and other regulatory licences necessary to use the Product in
the United States, Canada, Mexico, Germany, France and the United Kingdom.
Distributor shall provide reasonable assistance to Advantage in applying for and
obtaining such licences. For all other countries in the Territory, Distributor
shall first request that Advantage obtain such licences for such countries and
Advantage shall obtain, maintain and pay for all such licences if such countries
represent a commercially viable market for the Product, at the sole discretion
of Advantage.
8. DISTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Distributor
represents and warrants to Advantage as follows:
a. Distributor is a corporation duly organized and in good standing under
the laws of the Province of British Columbia and has the corporate power to
enter into and perform its obligations under this Agreement. The execution,
delivery and performance by Distributor of this Agreement has been authorized by
all necessary corporate action of Distributor. This Agreement is the valid and
binding obligation of Distributor enforceable in accordance with its terms.
b. Distributor acknowledges and understands that the ability of Advantage
to provide the Product as otherwise contemplated under this Agreement is
contingent upon the development of the Product pursuant to the ASD Agreement.
Notwithstanding such reliance, if ASD is in breach of the ASD Agreement, and
subject to the provisions of this paragraph, such breach shall not relieve
Advantage of its covenants and obligations hereunder and Advantage shall, if
requested by Distributor, locate and contract with another manufacturer
acceptable to Distributor acting reasonably and acceptable to Advantage, on
commercially reasonable terms. Such action is the only remedy of Distributor
against Advantage for a breach by ASD. Distributor further acknowledges that
Advantage is the owner of the Product (and corresponding patent, trade secret,
copyright and other non-trademark intellectual property rights) and
Distributor's rights shall only be as set forth in this Agreement with regard to
the distribution of the Product in the Territory.
c. Distributor and its marketing agents and representatives shall not
initiate or be involved in any proceedings or commercial activities to
invalidate any patent obtained by Advantage with respect to the Product or to
invalidate Advantage's ownership rights in the Product. Distributor shall be
responsible for applying for trademark protection for whatever trademarks it
sells the Product and the Existing Product in association with and Distributor
shall own all such trademarks and applicable registrations, and all goodwill
arising from the marketing, distribution and sale of the Existing Product and
the Product in association with such trademarks. Upon termination of this
Agreement for any reason, Advantage shall have no rights in any such trademarks
and shall not market, distribute or sell the Product, the Existing Product or
any other product in association with any such trademarks or any confusing
variants thereof, without the prior express written consent of Distributor.
Advantage shall not initiate or be involved in any proceedings or commercial
activities to invalidate Distributor's trademarks used in association with the
Product or the Existing Product or Distributor's ownership rights in such
trademarks.
d. Distributor shall cooperate at Advantage's cost (for Distributor's
out-of-pocket costs) with Advantage in the preparation and filing and
prosecution of applications for registration, or extensions of existing
registrations, or other documentation relative to the patents and intellectual
-11-
property matters related to the Product (other than trademarks), and shall
execute any other documents Advantage may reasonably require to register and
maintain its registrations of the related patents and intellectual property as
may be required to give effect to this license in any country within the
Territory.
9. ACKNOWLEDGMENT OF ASD AGREEMENT.
Advantage shall not terminate, extend, provide approvals or consents,
modify, amend, revise, or breach the ASD Agreement, or waive a breach by ASD of
the ASD Agreement or grant any licence to ASD that would in any way negatively
affect the rights of Distributor hereunder, without the prior written consent of
Distributor.
10. QUALITY STANDARDS.
The Product shall be of such high standard quality as to be merchantable
and commercially suited for its intended use, as appropriate for a safety
device in the automotive industry. All Product will be manufactured in
accordance with applicable Federal, State and local laws and in accordance with
the specifications in the SOW. Distributor acknowledges that the only warranty
being provided in connection with the Product shall be the limited warranty
received from ASD pursuant to the ASD Agreement, which warranty shall
specifically acknowledge its applicability to the end user. The form of Limited
Warranty is attached as Annex D.
11. INDEMNIFICATION.
a. Advantage (in this Section 11.a. referred to as "Indemnitor") agrees
to indemnify and hold Distributor and its successors, agents, shareholders,
directors, officers and employees of the foregoing (in this capacity referred to
as "Indemnitees") harmless from and against any and all damages, costs, claims,
charges, losses, expenses (including, but not limited to, reasonable attorneys'
fees), liabilities, judgments, settlements, penalties or any other loss of any
kind or nature whatsoever which may be made, asserted, maintained, secured
against or suffered by the Indemnitees and directly caused by:
(i) any breach by Indemnitor of any provision of this
Agreement;
(ii) any bona fide claim by a third party that the Product
infringes the intellectual property rights of such third party;
(iii) any claim by a third party for product liability (namely
death or injury to persons or damage, destruction or loss of
property) relating to the design or manufacture of the Product or
any failure to warn by the manufacturer of the Product; or
(iv) any claims made by end users directly against Distributor
as a result of Product or Existing Product failure, defects,
breakage and the like (other than as a result of acts or
omissions of Distributor) where such claims are not fully
satisfied by ASD or any other approved manufacturer.
-12-
b. Distributor (in this Section 11.b. referred to as "Indemnitor") agrees
to indemnify and hold Advantage and its successors, agents, shareholders,
directors, officers, and employees of the foregoing (in this capacity referred
to "Indemnitees") harmless from and against any and all damages, costs, claims,
charges, losses, expenses (including, but not limited to, reasonable attorneys'
fees), liabilities, judgments, settlements, penalties or any other loss of any
kind or nature whatsoever which may be made, asserted, maintained, secured
against or suffered by the Indemnitees and directly caused by any breach by
Indemnitor of any provision of this Agreement or as a result of any acts or
omissions to act of Distributor, its agents or employees.
c. In any case of such application of these indemnification provisions,
Indemnitees (as the case may be) agrees to provide the Indemnitor (as the case
may be) a written notice of any claim, demand or action which is or may be
subject to this Section 11.c. ("Claim") promptly after obtaining knowledge
thereof and shall make available to the other party all documents and
information in possession of that party material to the Claim. Promptly upon
receipt of such notice of any Claim, Indemnitor agrees to assume the defense of
the Claim on behalf of itself and Indemnitees. Indemnitees or each of them shall
have the right to participate in the defense of any Claim through counsel of
their choice. If Indemnitor fails to promptly assume the defense of any Claim,
Indemnitees or any of them may do so and Indemnitor shall promptly reimburse
Indemnitees for all reasonable costs and expenses (including, but not limited
to, reasonable attorneys' fees) incurred in connection therewith as such are
incurred. Indemnitees shall not settle or compromise any Claim without the prior
written consent of Indemnitor, unless Indemnitor shall fail or refuse for any
reason to reimburse costs and expenses of defense as incurred by Indemnitees.
Both parties agree to fully cooperate with the other in the defense of all
Claims initially made by third parties.
12. ASSIGNABILITY
Distributor shall have the right to assign its rights under this Agreement
to an affiliate controlled by Distributor without the consent of Advantage,
provided, however, Distributor shall remain primarily liable for performance of
all of its obligations under this Agreement. Advantage shall not assign this
Agreement or subcontract any of its obligation hereunder without the prior
written consent of Distributor.
13. MISCELLANEOUS.
a. ENTIRE AGREEMENT. This Agreement sets forth, and is intended to be an
integration of, all agreements, understandings, representations and warranties
between the parties with respect to the subject matter of this Agreement, and
there are no agreements, understandings representations or warranties, oral or
written, express or implied, between the parties with respect to the subject
matter of this Agreement other than as set forth herein.
b. AMENDMENT; WAIVER. No amendment of this Agreement shall be valid
unless in writing and signed by both parties. No waiver of any provision of
this Agreement shall be valid unless in writing and signed by the party against
whom it is sought to be enforced.
c. GOVERNING LAW. This Agreement shall be governed in accordance with
the laws of the State of California, without reference to its conflict of laws
rules. Any dispute regarding this
-13-
Agreement shall be resolved by a court of competent jurisdiction in California
and the parties hereby attorn to the jurisdiction of such courts.
d. CONFIDENTIALITY; PUBLIC DISCLOSURES. Subject as set out below, the
terms and conditions of this Agreement shall remain confidential between the
parties, and shall not be discussed with any third party without the prior
consent of the other party. Advantage acknowledges that Distributor is a
publicly traded company and as a result, must publicly disclose information with
respect to this Agreement and the transactions contemplated herein. Advantage
agrees to cooperate with Distributor in this regard to the extent required by
Distributor and any applicable regulatory body and hereby consents to public
disclosure of the terms of this Agreement and the transactions contemplated
herein. Any public announcement regarding the relationship between the parties
or developments involving the Product shall be made only following consultation
between the parties and joint approval of the timing and content of such public
announcement, such approval not to be unreasonably withheld or delayed.
e. NOTICES. Any notice required or desired to be given hereunder shall
be in writing and may be personally delivered or sent by telecopier, addressed
as follows:
(i) To Advantage: Advantage Enterprises, Inc.
0000 Xxx Xxxxxx
Xxxxxxxxxxxxx, Xxxxxxxx, 00000
Attn: Xxxxxxx Zaroor
Xxxxx XxXxxxx
Fax: (000) 000-0000
with a copy to:
(ii) Xxxxxxx X. Xxxxx, Esquire
Fried & Company, P.C.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
and:
(iii) To Distributor:
SmarTire Systems Inc.
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
(iv) Xxxxx, Xxxxxx
Xxxxx 000-000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attn: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
-14-
Any notice so sent shall be deemed received, if delivered, upon
delivery and if sent by telecopier, upon successful transmission.
f. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
g. FURTHER ASSURANCES. The parties shall execute and deliver all such
further documents, do or cause to be done all such further acts and things, and
give all such further assurances as may be necessary to give full effect to the
provisions and intent of this Agreement.
h. ENUREMENT. This Agreement shall enure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns.
i. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original and all of which shall together
constitute one and the same instrument.
j. ELECTRONIC MEANS. Delivery of an executed copy of this Agreement by
electronic facsimile transmission or other means of electronic communication
capable of producing a printed copy shall be deemed to be execution and delivery
of this Agreement as of the Effective Date.
k. SEVERABILITY. If any covenant or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by reason of any rule of law or
public policy, then such covenant or other provision shall be severed from and
shall not affect any other covenant or other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal, or unenforceable
covenant or provision had never been contained in this Agreement. All other
covenants and provisions of this Agreement shall, nevertheless, remain in full
force and effect and no covenant or provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
l. NON-WAIVER. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision (whether or not similar), nor
shall any waiver constitute a continuing waiver unless otherwise expressly
agreed in writing.
m. UN CONVENTION NOT APPLICABLE. The provisions of the UN Convention on
Contracts for the International Sale of Goods (1980) shall not be applicable to
this Agreement or any order by Distributor for the Product hereunder.
-15-
n. RELATIONSHIP OF THE PARTIES. The relationship of the parties is that
of independent contractors. This Agreement does not create a relationship of
partnership, joint venturers, principal and agent or employer and employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Attest: Advantage Enterprises, Inc.
By:
---------------------- ----------------------
Xxxxx XxXxxxx Xxxxxxx Zaroor
SmarTire Systems Inc.:
By:
---------------------- ----------------------
President
Attachments:
Annex A- ASD Agreement
Annex B- Form of Letter of Credit
Annex C- Form of Purchase Order
Annex D- Limited Warranty
Annex E- Non-Disclosure, Non-Competition and Non-Solicitation Agreement
