EXHIBIT 10.3
EXCLUSIVE SUPPLY AND DISTRIBUTION AGREEMENT
This Exclusive Supply Distribution of Product Agreement is entered into
this 13th day of December 2005, by and between AUTOMOTIVE ENERGY SYSTEMS, LLC a
California limited liability company ("Supplier"), and PORTAGY CORP., a Delaware
corporation ("Distributor").
WITNESSETH
WHEREAS, Distributor is engaged in the sale and distribution of various
products;
WHEREAS, Supplier desires to engage Distributor to sell and distribute
its portable energy products and Distributor desires to purchase such products
from Supplier for sale to third parties in certain geographic regions; and
WHEREAS, the parties desire to set forth their understanding in writing
regarding the purchase and sale of certain portable energy products and certain
other agreements related thereto, all in accordance with the provisions set
forth below.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements set forth herein, Supplier and Distributor hereby agree as follows:
1. DISTRIBUTION RIGHTS.
A. Exclusive Distributorship. Subject to the terms and
conditions of this Agreement, Supplier grants to Distributor, and Distributor
hereby accepts, the exclusive right to distribute those certain products set
forth on Exhibit "A" hereto (the "Products") in the territories set forth on
Exhibit "B" hereto (collectively, the "Territory"). No right, title or interest
is granted, whether express or implied, by Supplier to Distributor relating to
the right to distribute any of the other products of Supplier.
B. Exclusivity Requirements. Distributor must meet the
following minimum purchase requirements during the Term of this Agreement,
commencing with the 120th day following the execution of this Agreement (the
"Commencement Date") in order to maintain the exclusive distribution rights for
the Territory with respect to the Products.
i. The minimum unit requirement are as follows:
a. Distributor must place orders for the
purchase of at least (i) 250,000 units to be sold in North America and (ii)
250,000 units to be sold in the remainder of the Territory during the first
twelve month period commencing with the Commencement Date; provided, however,
that any orders placed by Distributor commencing with the date of this Agreement
and prior to the Commencement Date shall count towards this requirement;
b. Distributor must place orders for the
purchase of at least (i) 287,500 units to be sold in North America and (ii)
287,500 units to be sold in the remainder of the Territory during the second
twelve month period commencing with the Commencement Date;
c. Distributor must place orders for the
purchase of at least (i) 325,000 units to be sold in North America and (ii)
325,000 units to be sold in the remainder of the Territory during the third
twelve month period commencing with the Commencement Date;
d. Distributor must place orders for the
purchase of at least (i) 362,500 units to be sold in North America and (ii)
362,500 units to be sold in the remainder of the Territory during the fourth
twelve month period commencing with the Commencement Date;
e. Distributor must place orders for the
purchase of at least (i) 400,000 units to be sold in North America and (ii)
400,000 units to be sold in the remainder of the Territory during the fifth
twelve month period commencing with the Commencement Date;
For purposes of determining whether Distributor meets the minimum units set
forth in this subparagraph B.i for any twelve-month period, all sales in North
America and any other portion of the Territory shall be aggregated.
ii. The minimum dollar requirements are as
follows:
a. Distributor must place orders of at least
$300,000 per month during the first three month period commencing with the
Commencement Date; provided, however, that any orders placed by Distributor
commencing with the date of this Agreement and prior to the Commencement Date
shall count towards this requirement and the requirement set forth in Section
1.B.ii.e.;
b. Distributor must place orders of at least
$400,000 per month during the second three-month period commencing with the
Commencement Date;
c. Distributor must place orders of at least
$400,000 per month during the third three-month period commencing with the
Commencement Date;
d. Distributor must place orders of at least
$500,000 per month during the fourth three-month period commencing with the
Commencement Date;
e. Distributor must place orders of at
$5,000,000 during the first twelve-month period commencing with the Commencement
Date;
f. Distributor must place orders of at
$5,750,000 during the second twelve-month period commencing with the
Commencement Date;
g. Distributor must place orders of at
$6,500,000 during the third twelve-month period commencing with the Commencement
Date;
h. Distributor must place orders of at
$7,250,000 during the fourth twelve month period commencing with the
Commencement Date; and
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i. Distributor must place orders of at
$8,000,000 during the fifth twelve-month period commencing with the Commencement
Date.
C. Failure to Attain Sales Targets. In the event that
Distributor fails to attain any of the purchase requirements set forth in
Section 1.B., Supplier may, in its sole and absolute discretion, at any time (i)
revoke the exclusive distribution rights originally granted to Distributor with
respect to the Products or (ii) terminate this Agreement upon thirty (30) days
written notice to Distributor.
D. Sub-Distributors. Distributor, in its sole
discretion, shall have the right to appoint and authorize sub-distributors to
distribute the Products in the Territory; provided, however, all purchase orders
shall be placed by Distributor with Supplier. The Distributor shall use
reasonable commercial efforts to ensure compliance by such sub-distributors with
all of the Distributor's obligations under this Agreement. Should this Agreement
be terminated during the Term, Distributor will provide Supplier with an
accurate list of all such sub-distributors with full contact information for
each.
2. TERMS AND CONDITIONS OF PURCHASE AND SUPPLY
A. Purchase and Supply. Distributor shall purchase the
Products from Supplier and Supplier shall sell the Products to Distributor in
accordance with the terms of this Agreement.
B. Prices. Subject to Section 2.C., the prices for the
Products are set forth in Exhibit "C", which may not be changed prior to the
Commencement Date without the written consent of Distributor. Notwithstanding
the preceding, the prices set forth in Exhibit "C' shall not be guaranteed in
the event that Distributor does not place its initial purchase order on or
before December 13, 2005 with delivery of packaged product requested no later
than February 1, 2006. In the event of a price change, Supplier shall provide
notice to Distributor setting forth the new price and the date such price change
shall go into effect. If the price change is a price increase, the effective
date of the price increase shall be no earlier than ninety (90) days from the
date of receipt by Distributor of Supplier's notice of the price increase.
C. Competitive Price. Supplier agrees that the prices
and terms it offers to Distributor are now and will continue to be at least as
low as those it offers to any person or entity anywhere in the world. If
Supplier offers a lower price, including, but not limited to, sales price,
volume discount, extended terms, or any other element affecting the total price
of the Product, to any other person or entity, then Supplier will immediately
offer that lower price to Distributor. Distributor shall also be entitled to
participate in and receive notice of the same no later than the time such lower
price is offered to any other person or entity. In addition, Supplier will issue
Distributor a credit to reflect the difference in price in accordance with
Section 1.B. In the event that Supplier sells to an OEM or non-retail purchaser
where packaging and other customary costs associated with the retail sale of a
product are not applicable, the actual sales price shall be adjusted for these
factors in applying this Section 2.C.
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D. Terms. Distributor shall submit any amount payable to
Supplier pursuant to this Section 2 as follows: (x) 30% deposit within ten (10)
days of the initial purchase order to be placed on or by December 13th, 2005;
and (y) 30% deposit with purchase order on any and all subsequent orders; and
(z) the balance of monies due on all orders within seven (7) days following
delivery of the Products to Distributor's designated bonded warehouse in China.
All payments due hereunder shall be paid in United States Dollars by wire
transfer or by such other means agreed upon by the parties in writing. Unless
otherwise specifically agreed to in writing by the parties hereto, payment shall
be made on a letter of credit or cash in advance basis. Each letter of credit
shall be in form reasonably acceptable to Distributor.
E. Order. Distributor shall order Products by issuing
written purchase orders to Supplier. All purchase orders shall set forth the
identification of the Products ordered, the quantity ordered, applicable price,
any customized or special package markings or stickers to be applied, and a
requested delivery date no earlier than four (4) weeks from the date of the
purchase order on standard orders and six (6) weeks from the date of the
purchase order on any customized or special packaging orders. Notwithstanding
the preceding, the first purchase order placed by Distributor shall require a
delivery date no earlier than February 1, 2006.
F. Purchase Order Alterations or Cancellations. Prior to
shipment of Products, Supplier shall accept alterations or cancellation to a
purchase order in order to: (i) change a location for delivery, (ii) modify the
quantity or type of Products to be delivered or (iii) correct typographical or
clerical errors.
G. Shipment. Supplier shall ship the ordered quantities
of the Products to Distributor F.O.B. Distributor's designated port in China no
later than the delivery dates provided in Distributor's purchase orders. Title
and risk of loss will pass to Distributor when each order of the Products is
delivered to and accepted by Distributor at its designated port.
H. Inspection. Distributor, upon receipt of the Products
from Supplier, shall have seven (7) days to inspect such Products. In the event
Distributor believes that the Products do not conform to the Specifications,
Distributor shall provide to Supplier, within three (3) days of discovery of the
defect, a notice of rejection in accordance with the notice provisions of
Section 16.A. Supplier will correct and fully remedy any such non-conformation
issues within thirty (30) days from receipt of such notice of rejection at
Supplier's sole expense.
I. Defects. In lieu of repairing or replacing any
defective Products, Supplier shall provide Distributor with additional Products,
at no cost to Distributor, with delivery of Products pursuant to each purchase
order placed by Distributor, in an amount equal to 1% of each such purchase
order placed by Distributor; provided, however, in the event that the amount of
defective Products exceeds 1%, Supplier shall promptly provide a credit to
Distributor in an amount equal to the excess over the 1% of such free Products.
J. Invoicing. For each Product shipment to Distributor,
Supplier shall issue to Distributor an invoice showing Distributor's order
number, a description of the Product, the number of units of Product, the price
of the Products and any applicable discounts. Supplier shall also provide
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Distributor with a current statement of account listing all invoices outstanding
and any payments made and credits given since the date of the previous statement
upon request by Distributor.
K. Forecasts. Distributor shall, on a quarterly basis,
submit to Supplier a non-binding rolling forecast of Distributor's demand for
Products that are to be delivered within the twelve (12) month period
immediately succeeding the month in which the forecast is issued.
L. Product Availability. Supplier agrees to use
commercially reasonable efforts to maintain sufficient Product inventory to fill
Distributor's orders. If a shortage of any Product exists, Supplier agrees to
allocate its available inventory of such Product to Distributor in proportion to
Distributor's percentage of all of Supplier's customer orders for such product
during the previous sixty (60) day period.
M. Specification Changes. In the event Distributor
changes the specifications of the Products, Distributor shall advise Supplier in
writing of such changes, and Supplier shall promptly advise Distributor as to
any scheduling and/or price adjustments that reasonably may result from such
changes. Such changes to specifications of the Products are subject to
Supplier's approval, which shall not be unreasonably withheld.
N. New Products. Supplier shall endeavor to notify
Distributor at least one hundred fifty (150) days before the date any new
Product is introduced. Supplier shall make such Product available for
distribution by Distributor no later than the date it is first offered for sale
in the marketplace.
3. TERM AND TERMINATION.
A. Term. The term of this Agreement shall be five (5)
years commencing on the date this Agreement is executed, plus the time elapsed
between such date and the date of the later of (i) one hundred twenty (120) days
following the date of this Agreement and (ii) initial delivery by Supplier to
Distributor of the first Product, unless earlier terminated pursuant to the
terms of this Agreement (the "Term"). Thereafter, subject to Section 1.C., this
Agreement shall automatically renew on the expiration of the then current Term
for succeeding terms of one (1) year, unless either party gives written notice
to the other party sixty (60) days prior to the end of the then current Term
that it does not desire to extend the Term.
B. Termination for Breach. If a material breach of this
Agreement is committed by either party and the material breach is not cured
within thirty (30) days, or ten (10) days in the case of the breach of a
financial obligation hereunder, after notice by the non-breaching party, the
non-breaching party shall have the right to terminate this Agreement upon
written notice to the breaching party. Provided, however, there shall be no cure
period for violations of Section 1.C, Section 5 or Section 9.
C. Bankruptcy/ Insolvency. This Agreement may be
terminated by either party upon notice if the other party liquidates or
terminates its business, is adjudicated a bankrupt, makes an assignment for the
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benefit of creditors, has a custodian, receiver, trustee or similar official
appointed to take possession, custody or control of the property of the other
party, invokes the provisions of any law for the relief of debtors (including,
without limitation, laws relating to reorganization, insolvency or moratorium)
or files or has filed against it any similar proceeding.
4. INSPECTION/TESTING/LOGISTICS
A. Inspections by Distributor. Supplier, in its
discretion, may permit Distributor and its agents to inspect the portions of
Supplier's facilities where the Products are manufactured and to review such
Product documents, as Distributor deems reasonably necessary to assess
Supplier's compliance with applicable regulations and this Agreement.
B. Records. Supplier shall maintain all manufacturing
and analytical records and all records of shipments of the Products from
Supplier for the time periods required by applicable laws and regulations with
respect to the Products. Supplier shall make such records and data available for
review by Distributor at Supplier's facility upon prior written notice from
Distributor to Supplier. In addition, upon termination or expiration of this
Agreement, whichever occurs first, Supplier will, upon Distributor's written
request, make for and delivery to Purchaser copies of such records and data.
C. Quality Control/Product Complaints. Supplier agrees
to maintain ongoing quality assurance and testing procedures sufficient to
satisfy applicable regulatory requirements. Supplier shall be responsible for
responding to all product complaints, including whatever response may be
required to any governmental or certification authority, subject to the
reasonable cooperation of Distributor. Both parties shall keep the other
informed of information in or coming into their possession or control concerning
safety, effectiveness, defects, and injury associated with the use of the
Products.
D. Scientific and Technical Information. Supplier shall
provide to Distributor scientific and technical information available to
Supplier and required to obtain registrations, licenses, and permits required
for the sale and distribution of Products in the Territory, or to respond to
inquiries from customers, or governmental or regulatory authorities.
E. Sales Presentations. Any costs incurred by Supplier
in assisting with or attending sales presentations at the request of
Distributor, shall be reimbursed by Distributor within fifteen (15) days
following the submission of evidence to Purchaser of such costs; provided that
such costs were itemized and agreed to in advance between the parties.
F. Support. Supplier, at its own expense, and as deemed
reasonable by Distributor, shall provide consultation to Distributor in a timely
fashion concerning technical aspects and use of the Products as requested by
Distributor.
G. Logistics. Supplier shall maintain a capable
designated logistics liaison for all production of the Products and sales to
Distributor.
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5. CONFIDENTIALITY AND NONSOLICITATION.
A. Mutual Confidentiality Agreement.
i Each party acknowledges that, by reason of their
relationship with each other under this Agreement, they will or may have access
to confidential and proprietary information of the other's, including, without
limitation, each other's present and future products, business plans, client and
customer lists or profiles, and other information relating to the sale, further
manufacturing and/or distribution of the Products, all of which are not
otherwise readily available from public or published sources (collectively, the
"Confidential Information"). Both parties agree that they will maintain in
confidence all such Confidential Information and that they will not, for any
reason, directly or indirectly, use for the benefit of themselves, or for any
person, firm, corporation, limited liability company, partnership, joint venture
or any other entity whatsoever, or disclose to any person, firm, corporation,
limited liability company, partnership, joint venture or other entity
whatsoever, any of the Confidential Information of the other party, without the
prior written authorization of the other party. Each party shall limit the
dissemination of Confidential Information to only those of either party's
employees who have a need to know to perform their duties related to the
obligations of their entity pursuant to this Agreement and, prior to showing the
Confidential Information or discussing the same with them, each party shall
require that they enter into an agreement for the benefit of each other which
contains substantially the same terms as this Section 5A.
ii Upon termination of this Agreement, both parties
shall return all notices, memoranda, lists, reports and all other documents and
materials, and all copies thereof, which contain or relate to the Confidential
Information of the other party, including all copies and records thereof, to the
other upon receipt of request therefore.
B. Nonsolicitation Agreement.Both parties acknowledge
and agree that as a result of their relationship with each other they are, and
continue to be privy to the Confidential Information of the other party, and
that such Confidential Information is valuable and material to the businesses
and competitive position of the other party, and that the covenants herein
contained are a material consideration and inducement to both parties to enter
into this Agreement. Accordingly, both parties agree that during the term of
this Agreement and for a period of two (2) years thereafter, they will not,
without the prior written consent of the other, directly or indirectly, for
themselves or others, or as owners, consultants, joint venturers, independent
contractors, advisors, agents or otherwise: directly or indirectly, or for or
with any other person, firm, corporation, limited liability company,
partnership, joint venture or other entity whatsoever, knowingly solicit or
endeavor to entice away from the other any person employed by the other party,
or with whom the other party has a business relationship, in order to accept an
employment or establish an association with them, or any other person, firm,
corporation, limited liability company, partnership, joint venture or entity
whatsoever, and approach any such person for any such purpose or authorize or
knowingly cooperate with the taking of any such action by any other person,
firm, corporation, limited liability company, partnership, joint venture or
entity whatsoever.
C. Remedies for Breach of Section 5. Both parties agree
that upon breach of this Section 5, the other party to this Agreement shall be
entitled to all profits realized by that party as a result of any violation and,
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in addition, as a matter of right, to injunctive relief in any court of
competent jurisdiction, all of which remedies either party shall be entitled to
pursue simultaneously and cumulatively.
D. Independence of Section 5. The agreements contained
in this Section 5 are to be construed as being independent of any other
agreements in this Agreement and the existence of any cause of action in favor
of either party against the other, whether predicated on this Agreement or
otherwise, shall not constitute a defense to enforcement by either party of the
provisions of this Section 5.
E. Severability of Section 5. The activities,
territories, time, customers, persons and institutions to which the restrictions
herein above set forth are applicable, are separate and divisible covenants and
agreements. If any restriction is held by any court of competent jurisdiction to
be unenforceable as to any one activity, territory, time, customers, persons,
and/or institutions above listed or a variation thereof, such restriction shall
nonetheless be operative as to all other activities, territories, time,
customers, persons, or institutions. In the event that any court of competent
jurisdiction determines that a restriction as to any activity, territory, time,
customers, persons, and/or institutions above listed, or a variation thereof, is
unenforceable, then such restriction as to a lessor activity, territory, time,
customers, persons and/or institutions as determined to be enforceable by the
court shall be enforced against Distributor or Supplier, as applicable.
F. Broad Interpretation of Section 5. The provisions of
this Section 5 shall be construed and interpreted so as to afford the full
measure of protection to be given by each party to the other. For purposes of
this Section 5, the term Distributor shall include any of its affiliates and the
term Supplier shall include any of its affiliates. An "affiliate" shall mean an
entity directly or indirectly controlling, controlled by, or under common
control with Distributor or Supplier, as applicable.
G. Survival of Section 5. This Section 5 shall survive
the termination of this Agreement and shall continue to bind Distributor and
Supplier, their affiliates, successors, and heirs and permitted assigns.
6. RECORDS/ REPORTS. Distributor shall maintain all sales and
analytical records and all records of shipments of the Products from Distributor
for the time periods required by applicable laws and regulations with respect to
the Products, but not less than three (3) years following termination of this
Agreement. Distributor shall provide Supplier with a separate quarterly
accounting report of U.S.-only sales.
7. ADVERTISING, MARKETING, AND PROMOTION.
A. Duties of Distributor. Distributor shall use its
commercially reasonable efforts to advertise, market and promote the Products in
the Territory through existing and new distribution channels.
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B. Expenditures. Distributor shall be responsible for
any and all expenditures that it incurs, in its sole discretion, in connection
with advertising, marketing, and promoting the Products to third parties.
C. Marketing Materials. Supplier agrees to provide
Distributor, at no cost to Distributor, such promotional materials for the
Products in camera ready or electronic format as Supplier generally makes
available to its resellers and distributors, including technical specifications,
prices, drawings, and advertisements. Distributor may reproduce such promotional
materials as reasonably required in connection with its promotional, advertising
and/or marketing activities in connection its obligations under this Agreement,
provided that all copyright, trademark and other property markings of Supplier
are reproduced. Such promotional materials, including all copies and
reproductions made by Distributor, remain the property of Supplier and, except
insofar as they are distributed by Distributor in the course of its performance
of its duties under this Agreement, must be promptly returned to Supplier upon
the expiration or termination of this Agreement. Distributor may develop its own
promotional materials for Supplier, provided that Distributor shall submit any
such promotional materials to Supplier for Supplier's review, and Supplier shall
have the right to approve or reject any such promotional materials in Supplier's
sole discretion.
D. Samples. Supplier shall make samples available to
Distributor through the 1% "overrun" for defective Products as described in
Section 2.I.
E. Website/Inquiries/Leads. Supplier's website shall
list Distributor as the sole distributor for the Territory, and all inquiries
and leads for the Territory shall be directed to Distributor.
8. COMPETITION.
A. Except outside the Territory, Supplier shall have no
right to directly or indirectly manufacture, sell or distribute any product that
may be construed in any way as being competitive with the Products (the
"Competitive Products") unless Supplier offers Distributor a perpetual first
right of refusal for the exclusive sales and marketing rights for each such
Competitive Product ("First Right of Refusal"). Supplier shall provide
Distributor with written notice of any such First Right of Refusal prior to any
solicitation or sale or distribution of a Competitive Product.
B. If Distributor does not provide written notice to
Supplier of its intent to exercise its First Right of Refusal within forty-five
(45) days of Distributor's receipt of Supplier's notice pursuant to Section 8.A,
Supplier shall have the right to manufacture, sell or distribute the Competitive
Products (whether in or outside the Territory).
C. Notwithstanding Sections 8.A and 8.B, Distributor
shall have the option at any time to provide Supplier with notice of its intent
to exercise a First Right of Refusal upon forty-five (45) days notice. In such
event, Supplier shall immediately cease its solicitation and selling activities
on any such product and turn over such activities in their entirety to
Distributor.
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9. TRADEMARKS
A. Licenses. Subject to the terms and conditions of this
Agreement, each party hereby grants to the other party a nonexclusive limited
license in the Territory to use the other party's name, logo and trademark, in
each instance solely for the purpose of promoting, distributing and selling the
Products in the Territory in accordance with the terms and conditions of this
Agreement.
B. Use of Trade Names and Logos. Each party recognizes
that the name, logo and trademark of the other party represents a valuable asset
of such entity and that substantial recognition and goodwill are associated with
such intangibles. Each party hereby agrees that, without prior written
authorization of the other party, it shall not use the name, logo, or trademark
of the other party for any purpose other than the promotion, distribution, and
sale of the Products in the Territory solely to the extent required to fulfill
its obligations under this Agreement.
C. Sublicense. Distributor shall be entitled to
sublicense the rights set forth in this Section 9 to sub-distributors in
connection with the sub-distribution of the Products in the Territory. The
rights set forth in this Section 9 may not be otherwise sublicensed,
transferred, or delegated without the prior written consent of the other party.
D. Injunctive Relief. Each Party acknowledges that a
violation of this Section 9 would cause irreparable harm to the other party for
which no adequate remedy at law exists, and each party therefore agrees that, in
addition to any other remedies available, and notwithstanding any other
provision in this Agreement, the aggrieved party shall be entitled to injunctive
relief to enforce the terms of this Section 9. If either party prevails in any
such action, it shall be entitled to recover all costs and expenses, including
reasonable attorney's fees and other professional fees and expenses incurred
because of any legal action arising in relation to this Section 9.
E. Notification of Infringement and Enforcement. Each
party shall notify the other party of any infringement or misuse of its name,
logo, or trademarks of which such party becomes aware. Each party shall be
solely responsible to prosecute any such infringement of its trademark(s).
10. INDEMINIFICATION.
A. Each party shall indemnify, defend, and hold harmless
the other party from and against all loss, cost, liability and expense which may
be imposed upon or reasonably incurred by the other party, including reasonable
attorneys' fees and disbursements and reasonable settlement payments, in
connection with any claim, action, suit or proceeding or threat thereof, made or
instituted in which the other party may be involved or be made a party by reason
of a breach of such party's representations or covenants.
B. Supplier shall indemnify, defend, and hold harmless
Distributor from and against all loss, cost, liability and expense which may be
imposed upon or reasonably incurred by Distributor, including reasonable
attorneys' fees and disbursements and reasonable settlement payments, in
connection with any claim, action, suit or proceeding or threat thereof, made or
instituted by any third parties in which Distributor may be involved or be made
a party by reason of which Distributor may suffer as a result of any loss to the
persons or property of a third party arising directly or indirectly from use of
a Product.
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C. Promptly after receipt by a person or entity
indemnified under any express provision of this Agreement (the "Indemnified
Party") of notice of the commencement of any action against the Indemnified
Party, such Indemnified Party shall give notice to the person or persons or
entity or entities obligated to indemnify the Indemnified Party pursuant to the
express provisions of this Agreement (the "Indemnifying Party"). The
Indemnifying Party shall be entitled to participate in the defense of the action
and, to the extent that it may elect, in its discretion, by written notice to
the Indemnified Party, to assume the control and defense and/or settlement of
such action and the Indemnified Party shall execute such documents or otherwise
to permit the Indemnifying Party to do so; provided, however, that (i) both the
Indemnifying Party and the Indemnified Party must consent and agree to any
settlement of any such action, except that if the Indemnifying Party has reached
a bona fide settlement agreement with the plaintiff(s) in any such action and
the Indemnified Party does not consent to such settlement agreement, then the
dollar amount specified in the settlement agreement shall act as an absolute
maximum limit on the indemnification obligation of the Indemnifying Party, and
(ii) if the defendants in any such action include both the Indemnifying Party
and the Indemnified Party and if the Indemnified Party shall have reasonably
concluded that there are legal defenses available to it which are in conflict
with those available to the Indemnifying Party, then the Indemnified Party shall
have the right to select separate counsel to assert such legal defenses and
otherwise to participate in the defense of such action on its own behalf, and
the fees and disbursements of such separate counsel shall be included in the
amount which the Indemnified Party is entitled to recover under the terms and
subject to the conditions of this Agreement.
11. REPRESENTATIONS AND WARRANTIES.
A. Each party hereby represents and warrants to the
other party that such party (i) is duly organized, validly existing and in good
standing under the laws of the state in which it is organized, (ii) has the
power and authority and the legal right to own and operate its property and
assets, and to carry on its business as it is now being conducted, and (iii) is
in compliance with all requirements of applicable law, except to the extent that
any noncompliance would not materially adversely affect such party's ability to
perform its obligations under this Agreement.
B. Each party hereby represents and warrants to the
other party that such party (i) has the power and authority and the legal right
to enter into this Agreement and perform its obligations hereunder and (ii) has
taken all necessary action on its part to authorize the execution and delivery
of the Agreement and the performance of its obligations hereunder. The Agreement
has been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation enforceable against such party in accordance
with its terms.
C. Each party hereby represents and warrants to the
other party that the execution and delivery of the Agreement and the performance
of such party's obligations hereunder and thereunder (i) do not conflict with or
violate any requirement of applicable laws or regulations or any material
contractual obligation of such party and (ii) do not materially conflict with,
or constitute a material default or require any consent thereunder, any material
contractual obligation of such party.
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D. Each party agrees to prepare and file whatever
filings, requests, or applications are required to be filed with any
governmental authority in connection with this Agreement and to cooperate with
one another as reasonably necessary to accomplish the foregoing.
E. Each party covenants that it will comply with all
applicable federal, state, local and international laws and regulations related
to its development, manufacture, marketing, selling, and importing of the
Products, as applicable.
F. Each party represents and agrees that all
contingencies, qualifications, and requirements incumbent upon each respective
party to satisfy the terms of this Agreement have been met and fully satisfied
as of the execution of this Agreement.
12. WARRANTIES
A. End User Warranty. Supplier shall provide a one (1)
year limited warranty for defective parts and labor with the Products for end
user benefit. This warranty shall commence upon the Products delivery to
end-user and shall be valid for two (2) year(s) from the date of shipment by
Distributor to the end user.
B. General Warranty. Supplier represents and warrants
that (i) it has good and transferable title to the Products, (ii) the Products
shall (x) be free from material defect, (y) be reasonably suitable for resale,
and (y) perform in conformity with specifications and documentation supplied by
Supplier, (iii) the Products or their use does not infringe any patents,
copyrights, trademarks, trade secrets, or any other intellectual property
rights, (iv) that there are no suits or proceedings pending or threatened which
allege any infringement of such proprietary rights, and (v) the Products sales
to and by Distributor do not in any way constitute violations of any law,
ordinance, rule or regulation in the Territory. This Section shall apply
throughout the Term and shall survive the termination of this Agreement.
C. Manufacturing Standards. Supplier warrants to
Distributor that the Products are manufactured in accordance with all good
manufacturing practices and as required by the pertinent law, rules, and
regulations, which govern its operations.
D. Compliance with Laws. Supplier warrants to
Distributor that Supplier shall comply with all federal, international, sate and
local laws, rules and regulations.
E. Shelf-Life. Supplier hereby warrants to Distributor
that the Products purchased by Distributor shall be in saleable condition with a
minimum of five (5) years shelf life from the date of shipment (or such other
shelf life as agreed to in writing by Distributor and Supplier.
13. ADDITIONAL COVENANTS
A. Evidence of Patent. Supplier hereby covenants to
deliver to Distributor, upon execution of this Agreement by both parties, a copy
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of the new patent application in the United States on the Products. If Supplier
fails to satisfy this covenant, Supplier shall immediately refund $40,000 of the
$50,000 exclusivity payment made by Distributor to Supplier pursuant to Section
1.E.i.
B. Project. Distributor and Supplier hereby covenant to
work together on plans to produce disposable battery products in the United
States, with an analysis of the recycled battery market and consequent sales
opportunities, based on Supplier's progress and achievement in applying recycled
batteries to be used in products.
14. INTELLECTUAL PROPERTY
Supplier hereby represents and warrants to Distributor:
A. Title and Contest. Supplier is the sole owner of all
rights to manufacture, license and exploit the intellectual property related to
the Products (the "Intellectual Property"), including without limitation all
rights, title, and interest in the Intellectual Property to sue for infringement
thereof. The Intellectual Property is free and clear of all liens, mortgages,
security interests or other encumbrances, and restrictions on transfer. There
are no co-owners, actions, suits, investigations, claims, or proceedings
threatened, pending or in progress relating in any way to the Intellectual
Property. Except as set forth herein, there are no existing contracts,
agreements, options, or commitments, or rights with, to, or in any person to
acquire any of the Intellectual Property.
B. Existing Licenses. Except as set forth herein, no
rights or licenses have been granted under with regard to the Intellectual
Property.
C. Validity and Enforceability. The Intellectual
Property has never been found invalid or unenforceable for any reason in any
administrative, arbitration, judicial or other proceeding, and Supplier has not
received any notice or information of any kind from any source suggesting that
the Intellectual Property may be invalid or unenforceable.
D. Prosecution. Supplier will use its best endeavors to
diligently pursue and prosecute those parties or individuals involved in any
infringement or any attempt to compromise the Intellectual Property or
unauthorized replication or use of the Intellectual Property rights subsisting
in the Intellectual Property once such an infringement is brought to the
attention of or otherwise becomes known to Supplier, provided that Supplier
shall not be required to pursue and prosecute any such action outside the United
States.
E. Indemnity. Any use of the Intellectual Property by
Distributor or its appointed sub-distributors or approved licensees
(collectively, an "Indemnitee") in accordance with the provisions of this
Agreement, will not infringe any third party's rights of any kind including any
relevant Intellectual Property rights, and in the event that any such
infringement does occur, Supplier will indemnify, defend, and hold harmless from
and against all loss, cost, liability, and expenses, which may be imposed upon
or reasonably incurred by Indemnitee, including reasonable attorneys' fees and
disbursements and reasonable settlement payments, in connection with any claim,
action, suit, or proceeding or threat thereof, made or instituted by any third
parties in which Indemnitee may be involved or be made a party by reason of
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which Indemnitee may suffer, as a result of any loss arising directly or
indirectly from any such infringement.
15. RIGHT OF FIRST REFUSAL
(i) Patrick Dickson and Supplier hereby grant Distributor a right
of first refusal to purchase a majority equity interest in Supplier. If Mr.
Dickson or Supplier propose to enter into a transaction or series of
transactions resulting in one or more persons other than Mr. Dickson owning more
than 50% of Supplier, Distributor shall have the right to purchase the same
percentage of ownership interest involved in the transaction or transactions on
substantially the same terms and conditions. Mr. Dickson and Supplier are free
to enter into any equity transactions free of any right of first refusal that do
not result in Mr. Dickson owning less than 50.1% of the equity interest in
Supplier.
(ii) In the event Supplier receives an offer from a third party to
purchase the assets or stock of Supplier, Distributor shall be entitled to a
first right of refusal to purchase the same for the purchase price set forth in
the third party offer. At the time of such right of first refusal, or any
circumstance of negotiation for purchase of Supplier's company, both parties
agree to negotiate wholly in good faith.
16. MISCELLANEOUS.
A. All notices, offers, acceptance and any other acts
under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar overnight next business day delivery, or by facsimile delivery
followed by overnight next business day delivery, as follows:
If to Distributor, the notice should be sent to the attention of:
Portagy Corp.
9812 Falls Road
Suite 114-198
Potomac, MD 20854
Attention: Mark Levin
with a copy to: Portagy Corp.
21800 Burbank Blvd.
Suite 150
Woodland Hills, CA 91367
Attention: Todd Ruhalter
with a copy to: Harris Cramer LLP
1555 Palm Beach Lakes Blvd.
Suite 310
West Palm Beach, FL 33401
Attn: Daryl B. Cramer, Esq.
Facsimile: 561-659-0701
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If to Supplier, the notice should be sent to the attention of:
Automotive Energy Systems, LLC
1861 Sunkist Circle
Oxnard, CA 93033
Attn: Patrick Dickson
Facsimile: (805) 435-7434
or to such other address as any of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be counted from the date of transmission.
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
B. This Agreement (which term includes all exhibits
hereto) constitutes the entire agreement between the parties hereto pertaining
in any manner to the subject matter hereto, and supersedes any prior oral or
written agreement or understanding between the parties with respect to such
subject matter.
C. Neither this Agreement, nor any right, interest or
obligation hereunder of each party, shall be assigned or assignable by either
party without the written consent of the other. Notwithstanding the preceding,
this Agreement may be assigned by Distributor to an affiliated entity upon
notice to Supplier.
D. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
E. The Parties agree to submit any disputes between them
involving money or damages greater than $5,000 relating to this Agreement and/or
transactions, duties, or obligations to be performed under this Agreement, to
mediation with a mediator approved by the Parties to the dispute. If the Parties
resolve their disputes through mediation, the Parties shall share the mediator's
fees evenly but pay their own attorneys' fees and other expenses related to
mediation. If mediation fails to resolve all disputes within thirty (30) days
after the Parties submit the dispute to a mediator, then either Party may file a
court action or request arbitration. The Parties agree that mediation is a
pre-condition to filing an action of any kind. The prevailing Party in any
action or arbitration relating to transactions contemplated by this Agreement
shall be entitled to costs, expenses, and reasonable attorneys fees, including
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(a) reasonable attorneys fees, costs, and expenses incurred in connection with
mediation that failed to resolve the dispute and (b) reasonable attorneys fees,
expenses, and costs of appeal, if any. Claims of $5,000 or less may be submitted
to mediation or small claims court.
F. In the case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and any other application thereof
shall not in any way be affected or impaired thereby.
G. Except as otherwise provided to the contrary herein,
this Agreement shall be binding upon, and inure to the benefit of, each party
and their respective heirs, executors, administrators, successors and permitted
assigns.
H. Amendments to this Agreement shall be in writing and
signed by each party hereto.
I. This Agreement may be executed in several
counterparts and all so executed shall constitute one agreement binding on all
the parties hereto, notwithstanding that all the parties are not signatory to
the original counterpart. Any facsimile signature of any party hereto shall
constitute a legal, valid, and binding execution hereof by such party.
J. Wherever the context shall so require, all words
herein in a particular gender shall be deemed to include other genders where
applicable. In addition, singular words shall include the plural and plural
words shall include the singular where applicable.
K. Titles of Sections, paragraphs and subparagraphs are
for convenience only, and neither limit nor amplify the provisions of the
Agreement itself, and all references herein to Sections, paragraphs or
subparagraphs thereof shall refer to the corresponding Sections, paragraphs or
subparagraphs of this Agreement unless specific reference is made to such
Section, paragraph or subparagraph of another document or instrument.
L. All representations, warranties and provisions hereof
without limitation shall survive the termination of this Agreement, the
liquation or dissolution of each party, if any, and shall thereby continue in
full force and effect at all times thereafter.
M. The waiver or inaction by either party hereto of a
breach of any condition of this Agreement by the other party shall not be
construed as a waiver of any subsequent breach by such party, nor shall it
constitute a waiver of any subsequent breach by such party, nor shall it
constitute a waiver of that party's rights, actual or inherent. The failure of
any party hereto in any instance to insist upon a strict performance of the
terms of this Agreement or to exercise any option herein shall not be construed
as a waiver or relinquishment in the future of such term or option, but that the
same shall continue in full force and effect.
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N. The fact that the first (or later) draft of this
Agreement was prepared by counsel for either party shall create no presumptions
and specifically shall not cause any ambiguities to be construed against the
drafting party.
O. Nothing contained in this Agreement shall create a
joint venture or partnership between the parties. Supplier and Distributor shall
be independent contractors in performing their respective obligations. No party
shall be liable for any of the debts or obligations of the others and no party
shall have any authority or right to act for or incur any liability of any kind,
express or implied, on the name of or on behalf of the other parties.
P. Each of the parties submits to the jurisdiction of
any state or federal court sitting in Ventura County, California, in any action
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other party with respect
thereto. Each party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or in equity.
Q. No party shall be responsible or liable for any loss,
damage, detention or delay caused by fire, strike, civil or military authority,
insurrection or riot, railroad embargoes, lock-out, tempest, accident, breakdown
of machinery, delay in delivery by other parties or by any other cause which is
unavoidable or beyond its reasonable control, or in any event for the
consequential damages.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the 13th day of December, 2005.
DISTRIBUTOR
PORTAGY CORP.
By: _____________________________
________________________________
Name and Title
SUPPLIER
AUTOMOTIVE ENERGY SYSTEMS, LLC
By: _____________________________
Patrick Dickson. Manager
________________________________
Patrick Dickson, Owner
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EXHIBIT "A"
PRODUCTS
The Products shall include the AES Emergency Jump Start battery charger product
line and any new or updated versions thereof.
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EXHIBIT "B"
TERRITORY
The Territory shall include:
1. North America (including United States, Canada and Mexico),
subject to pre-existing agreements with (i) Kia Motors of
Korea and subsidiaries; (ii) Jiffy Lube and (iii) AAA
Automobile Service Companies.
2. The European Union (including all 25 current member
countries).
3. All other territories in the world, except (i) Singapore; (ii)
Korea; (iii) Japan; (iv) Thailand, (v) China; (vi)
Malaysia/Indonesia and (vii) Taiwan.
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EXHIBIT "C"
PRICES
The estimated Prices for the Products are as follows:
i. For single use products: $7.00 USD
ii. For rechargeable products: $12.00 USD
Note: The above pricing is based on the initial purchase order from
Distributor being placed by December 13, 2005. If the initial purchase
order is not placed by that date, pricing for single use products will
be $7.20, and rechargeable products will be $12.20.
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