Distribution Agreement – Sonic Systems Inc. and Sumitomo Metal Systems Development Co. Ltd.
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential treatment has been requested.
Confidential portions omitted have been filed separately with the Commission.
THIS AGREEMENT is made on July 5,1998.
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BETWEEN: Sonic Systems, Inc. of 575 N. Pastoria Ave., Sunnyvale, CA, 94086 USA
('SONIC')
AND: Sumitomo Metal Systems Development Co., Ltd, SMISoft Products
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Division, 3-11-36 Mita, Minato-ku, Tokyo 108, Japan ('DISTRIBUTOR')
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WHEREAS:
A. SONIC owns or has the right to license and/or arrange the distribution of
certain complete computer hardware and related software programs known as
Products, more fully described in Schedule One.
B. DISTRIBUTOR has requested SONIC to permit it to distribute such computer
hardware and software Products in the countr(y/ies) listed in Schedule Two
and has submitted to SONIC a Business Plan specifying the manner in which
it proposes to distribute and support the same.
C. If so noted in Exhibit One, DISTRIBUTOR has agreed to translate the English
language version of the Product packaging, documentation and software
programs into the language used in the pertinent countr(y/ies) and to
assign copyright in that translation to SONIC on the condition that SONIC
provide DISTRIBUTOR with code suitably designed to support localization
into said local language.
D. SONIC has agreed to grant the DISTRIBUTOR the right to distribute such
Products upon and subject to the terms and conditions of this Agreement.
NOW THE PARTIES AGREE as follows:
1. Definitions
(a) 'Business Plan' means the business plan referred to in Recital B above,
which is annexed to this Agreement and marked Exhibit One, as amended or
added to pursuant to this Agreement, or any business plan substituted
therefor pursuant to this Agreement.
(b) Effective Date' means the date of execution of this Agreement by the final
party to execute this Agreement.
(c) 'Products' means:
(i) the before recited computer hardware and related software Products,
including upgrades and enhancements thereof from time to time, and any
other computer hardware and related software Products agreed between SONIC
and DISTRIBUTOR to be incorporated herein; and
(ii) all documentation including (without limitation all user manuals
pertaining to such Products;
(d) 'Sub-Distributor' means any person or corporation to whom the DISTRIBUTOR
grants distribution rights;
(e) 'Territory' means the countr(y/ies) listed in Schedule Two.
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2. Term
2.1 This Agreement shall commence on the Effective Date and shall continue for
the term set out in Schedule Two from the Effective Date, unless earlier
terminated in accordance with the terms hereof, and thereafter shall be
automatically renewed after the initial term for successive periods of 1
year each unless terminated by 3 months notice in writing by one party to
the other.
3. Distributor Rights and Duties
3.1 During the term of this Agreement and subject to its terms and conditions,
SONIC grants to the DISTRIBUTOR a non-exclusive, non-transferable right to
market and distribute the Products either directly or through its Sub-
Distributors, limited to the Territories set out in Schedule Two only and
only as expressly permitted by this Agreement. DISTRIBUTOR shall have no
right to reproduce the Products in whole or in part.
3.2 Should SONIC appoint a new distributor in the Territory or enter into an
OEM Agreement that will cover the territory, SONIC shall notify the
DISTRIBUTOR prior to or immediately after such an appointment or execution
of an OEM agreement. Upon such notification, both Parties shall negotiate
in good faith to determine the anticipated impact in the Territory of this
new SONIC partnership and to modify the level of commitment in this
Agreement.
3.3 The grant herein is subject to and conditional upon the DISTRIBUTOR
obtaining all the necessary Territory's governmental licenses or permits,
other than the obligation of the producer under the laws in the Territory,
necessary to enable it to effectively exercise all or any of the rights
herein granted in the Territory. The grant herein is subject to and
conditional upon the SONIC obtaining all necessary export license or
permits of the Products from the United States Government.
3.4 Distribution of Products
(a) The DISTRIBUTOR may within the Territory appoint non-exclusive Sub-
Distributors of the Products to assist in the marketing and distribution of
the Products in the Territory, and shall keep SONIC advised from time to
time of the names and addresses of the Sub-Distributors so appointed. Such
Sub-Distributors shall not be granted permission or any right by
DISTRIBUTOR to reproduce the Products, in whole or in part, for any purpose
whatsoever.
(b) The appointment by DISTRIBUTOR of any Sub-Distributor shall not
operate as an assignment of any or all of DISTRIBUTOR's obligations
hereunder. The DISTRIBUTOR shall remain responsible for the acts and
omissions of such Sub-Distributors and shall cause each Sub-Distributor to
covenant to comply with the obligations of the DISTRIBUTOR herein.
(c) DISTRIBUTOR shall not provide the Products to any person or
organization whom DISTRIBUTOR reasonably suspects will re supply the
Products outside the Territory. SONIC shall not provide the Products to
any person or organization whom SONIC reasonably suspects may export to
supply the Products in the Territory.
(d) DISTRIBUTOR shall pass to SONIC any leads it obtains as to persons or
organizations interested in obtaining copies of the Software outside the
Territory. SONIC shall pass to DISTRIBUTOR any leads it obtains as to
persons or organizations interested in obtaining copies of the Products
inside the Territory.
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(e) DISTRIBUTOR shall within thirty days of the end of each quarter
prepare a list of the names and addresses of any people (including
organizations) who have registered with DISTRIBUTOR or its Sub-Distributors
as a user of the Products.
(f) Sub-Distributors shall be free to set their own price for the
Products, however, DISTRIBUTOR will specify a recommended retail price of
the Products as set out in Schedule Two and shall vary this recommended
retail price, subject to prevailing market and exchange rate conditions, to
ensure that competitive price positioning of the Products is maintained.
DISTRIBUTOR shall notify SONIC in writing 14 days in advance of changes to
the recommended retail price which shall be subject to the consent of SONIC
and which consent shall not be unreasonably withheld.
(g) DISTRIBUTOR shall market and distribute the Products only in the
packaging supplied by SONIC, including without limiting the generality
foregoing, the SONIC standard license agreement. The License agreement may
be amended by the DISTRIBUTOR for localization purposes, which amendments
shall be subject to the consent of SONIC and which consent shall not be
unreasonably withheld.
(h) DISTRIBUTOR will participate in sales of the Products to Original
Equipment Manufacturers (OEM's) for inclusion with OEM's product(s). Such
transactions will be negotiated individually and at pricing not necessarily
relating to standard pricing for the Products. DISTRIBUTOR's participation
in such transactions will vary with the degree of involvement as set out in
Schedule Two.
3.5 Advertising of Products
(a) DISTRIBUTOR at its expense shall diligently seek to develop in the
Territory the market for and to exert its best efforts to advertise and
promote in the Territory distribution of the Products to the extent
practicable under the circumstances and shall make such provisions as it
deems adequate to supply Products in sufficient quantity to reasonably
satisfy such market.
(b) Such advertising and promotion shall at all times fairly and
accurately represent the Products in relation to other products of its type
and shall comply with any reasonable directions as to content or format
that SONIC may from time to time give to DISTRIBUTOR in that regard. Copies
of all advertising and promotional material shall be supplied to SONIC in
the form published within a reasonable time after publication provided,
however, that SONIC will not reproduce or republish any such advertising or
promotional material bearing the name of DISTRIBUTOR or any of its trade
marks at any time during or after termination of this Agreement without the
written consent of DISTRIBUTOR.
(c) In support of DISTRIBUTOR's best efforts in the marketing and
promotion of the Products, SONIC shall make available to DISTRIBUTOR
without charge examples of creative material, artwork, and editorial
already in its possession from other markets in which the Products are
distributed which may be of assistance to DISTRIBUTOR.
(d) Every six (6) months from the date of this Agreement, DISTRIBUTOR
shall provide a report to SONIC detailing methods and frequency of
advertising, marketing, and promotional activity by DISTRIBUTOR in relation
to the Products for the previous 6 month period.
3.6 Marketing
No later than thirty (30) days prior to the start of any calendar year
during the term hereof, DISTRIBUTOR shall prepare and deliver to SONIC for
SONIC's review and
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comment, a marketing plan for the Products including without limitation, a
description of:
(a) the market trends in the Territory
(b) the DISTRIBUTOR's channels of distribution
(c) promotional activities contemplated by the DISTRIBUTOR; and
(d) other marketing activities contemplated by the DISTRIBUTOR.
All such marketing information shall be confidential information in
accordance with Clause 9.4.
3.7 Title
The original and any copies or versions of the Products, in whole or in
part, whether or not incorporated in other Products, including without
limitation translations, partial copies, modifications and updates are and
shall be the property of SONIC or a third party which has licensed its
right in the Products to SONIC. This Agreement shall not convey title nor
grant any rights of ownership in the Products to the DISTRIBUTOR, nor
shall the DISTRIBUTOR grant or purport to grant any rights of ownership in
the Products to any third parties.
3.8 Compliance with Business Plan
In the exercise of its rights hereunder, and performance of its
obligations, DISTRIBUTOR shall use its best efforts to conduct business in
accordance with its representations and performance forecasts in the
Business Plan, unless and to the extent that the Business Plan is amended
by agreement between SONIC and DISTRIBUTOR. As a condition to its
agreement to any such amendment, each party may desire additions to the
Business Plan. DISTRIBUTOR shall be entitled to amend the Business Plan
according to the prevailing market conditions with the approval of SONIC,
which approval shall not be unreasonably withheld.
3.9 Copyright
The DISTRIBUTOR acknowledges that it has no interest in the copyright of
the Products.
3.10 Minima
For the term of this Agreement DISTRIBUTOR shall obtain Products from
SONIC in the minimum quantities set out in Schedule Four. Upon the signing
of this Agreement, DISTRIBUTOR shall place an Initial Stocking Order with
Sonic for the minimum quantities set out in Schedule Four. After the first
6 months of this Agreement, failure by DISTRIBUTOR to achieve these
minimum quantities in any period, except if such failure is due to force
majeure or to any action or omission of SONIC, shall allow SONIC to
terminate this Agreement.
4. Trade Marks
4.1 SONIC grants to the DISTRIBUTOR for the duration of this Agreement the
non-exclusive, non-assignable right to use and display the trade marks and
the names set out in Schedule Three ('the Trade Marks') only in the
Territory and only in relation to the Products subject to the terms and
conditions herein contained. Such use shall at all times comply with
SONIC's corporate and/or product identity guidelines from time to time
notified to DISTRIBUTOR.
4.2 DISTRIBUTOR acknowledges, and SONIC warrants, that SONIC is the sole owner
of all rights including, but not limited to, patent, trademark and
copyright in the Product supplied pursuant to this Agreement. DISTRIBUTOR
agrees not to remove any Product identification or notices of such
proprietary restrictions from SONIC's Product and
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agrees to reproduce such identification or notices as reasonably necessary
to protect SONIC's proprietary rights.
4.3 DISTRIBUTOR will market the Products only in the packaging supplied or
approved by SONIC.
4.4 Agreement to Use
DISTRIBUTOR covenants and agrees to ensure that the said trade marks appear
in all catalogs and other promotional material relating to the Products.
DISTRIBUTOR shall not give undue prominence to its own names and marks in
such catalogs or other promotional material. In all such catalogs and
promotional material DISTRIBUTOR shall:
(a) acknowledge the proprietorship of SONIC's trade marks; and
(b) insert the following wording in the language or languages used in the
materials: '__________ is the trade mark and the product of Sonic Systems,
Inc. of the U.S.A.'. In the event that DISTRIBUTOR is requested to supply
information in relation to the Products for the preparation of promotional
materials, newspaper articles or trade journals, DISTRIBUTOR shall supply
accurate details as to the proprietorship of SONIC trade marks and
production of the Products.
5. Payment Terms
5.1 In consideration of the rights herein granted, DISTRIBUTOR shall pay to
SONIC for each unit of the Products ordered by DISTRIBUTOR from SONIC per
the current DISTRIBUTOR Price List (Exhibit Three to this Agreement). Such
amount shall be paid in accordance with the terms specified in Schedule
Five.
5.2 In consideration of the marketing and localization costs which will be
borne by the DISTRIBUTOR in establishing the Products in the Territory,
SONIC shall negotiate with the DISTRIBUTOR in good faith appropriate
pricing concessions to ensure amortization of these costs over the term of
this Agreement, subject to DISTRIBUTOR achieving performance goals of the
Agreement.
5.3 Interest at the rate of two percent (2%) per month on the amount of any
unpaid invoice may be added to any overdue amounts owed to SONIC. When the
DISTRIBUTOR will pay the amount within fifteen (15) days from issue date of
invoice, DISTRIBUTOR may receive two percent (2%) discount from the payment
obligations.
5.4 Ordering procedures for the Products shall be as set out in Schedule Five
to the Agreement. SONIC will use its best efforts to deliver orders within
20 days of receipt of such orders and SONIC will endeavor to do all that is
necessary to facilitate delivery of the Products PROVIDED HOWEVER that
SONIC shall not be liable for any delay in delivery or cancellation of any
order arising from the unavailability of any goods ordered or any other
circumstance beyond SONIC's control. SONIC shall be entitled to allocate
orders in such manner as it deems fit.
5.5 The DISTRIBUTOR shall be solely responsible for all costs and expenses
(including without limitation, all taxes, levies, duties and export or
import duties and similar charges of whatever nature, whether imposed by
local, state or federal governments or agencies) incurred by it in the
Territory in the marketing, sub-distributing and distribution of the
Products.
5.6 SONIC may declare all sums immediately due and payable in the event of a
material breach by DISTRIBUTOR of any of its obligations to SONIC contained
in this Agreement, including without limitation, the failure of DISTRIBUTOR
to comply with
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credit terms if not remedied within thirty (30) days after written notice
thereof has been given to DISTRIBUTOR. No property in or title to any of
the goods embodying the Products shall pass to DISTRIBUTOR until the full
price thereof has been duly paid to SONIC and SONIC shall have received in
cash the full amount thereof.
6. Purchase of goods from SONIC
6.1 Orders, Terms & Title
DISTRIBUTOR may purchase, whether for re supply or otherwise, any SONIC
products on its product price list from time to time at such discount as
may be agreed between SONIC and DISTRIBUTOR from time to time. In
addition, DISTRIBUTOR may purchase from SONIC in quantity any marketing
materials, such as point of sale materials, brochures and product
specifications, or packaging materials, produced by or for SONIC, at cost
plus reasonable handling and shipping charges, in order to assist it in the
carrying out of its obligations hereunder. All prices for any SONIC
products shall be FOB the offices of SONIC, exclusive of sales tax (if
any). Orders may be placed upon SONIC at its address first hereinbefore
appearing by facsimile transmission, first class mail or any other written
means, and shall be effective upon the execution by SONIC of an order
confirmation. Title shall not pass in any goods ordered by DISTRIBUTOR
until full payment has been received therefor. DISTRIBUTOR shall have the
right to nominate the freight forwarder and customs agents of its choice.
6.2 Price Changes
SONIC shall have the right to revise product prices by giving thirty(30)
days advance written notice to DISTRIBUTOR. Such revisions shall apply to
all orders received after the effective date of revision.
6.3 Stock Rotation
DISTRIBUTOR shall be allowed once every six months to return to SONIC any
slow moving products in its inventory for credit. If and when DISTRIBUTOR
intends to take this action, DISTRIBUTOR must first contact SONIC to make
this request and SONIC shall authorize this request and issue a RMA
('Return Merchandise Authorization') number for this return. In this
event, DISTRIBUTOR must place an offsetting order equal to or greater than
in value to the return; the offsetting order must be placed at the same
time as the request is made to return the slow moving products. SONIC
shall ship the offsetting order upon return of the slow moving products.
If the offsetting order is greater in value than the return, then the
excess shall be treated as a standard order with standard terms as outlined
in section 6. 1.
7. Product support
7.1 Product Enhancements
DISTRIBUTOR will maintain and support the Products in the Territory at no
charge to SONIC provided that SONIC shall provide DISTRIBUTOR promptly and
without charge such technical advice and assistance as DISTRIBUTOR may
reasonably require to enable it to provide such maintenance and support.
DISTRIBUTOR will promptly disclose to SONIC in writing any errors, bugs and
required corrections in the Products of which it becomes aware. SONIC will
promptly rectify or notify DISTRIBUTOR in writing of any errors, bugs and
required corrections in the Products of which it becomes aware and will
advise DISTRIBUTOR as to a recommended course of action in supporting
customers who may be affected by such defects and will advise DISTRIBUTOR
of SONIC's timetable for providing correction of said defects.
7.2 Enhancements and Upgrades
SONIC will use its best efforts to ensure that at all times the Products
are enhanced in accordance with the changes necessary to ensure the
Products continue to be up to date and competitive. DISTRIBUTOR will
advise SONIC of market conditions and reactions
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to the Products which indicate needs or opportunities to enhance the
Products. SONIC will consult with DISTRIBUTOR in relation to the provision
of enhancements or upgrades and shall give DISTRIBUTOR as much advance
notice as possible of its intention to provide an enhancement or upgrade,
such information shall be treated as confidential under clause 8.2 of this
Agreement. SONIC will provide upgrades and enhancements of the Products to
DISTRIBUTOR for re supply to registered end users on the following terms:
(a) Enhancements and upgrades shall be in one of two categories as
determined by SONIC:
(i) Error corrections ('error corrections' ), which shall be supplied
to DISTRIBUTOR by SONIC without accompanying manuals or packaging;
(ii) Upgrades in functionality ('upgrades' ) which shall be supplied
to DISTRIBUTOR by SONIC packaged in a manner which replaces the
packaging in which the Products was previously marketed.
(b) Error corrections shall be supplied to registered end users free of
charge.
(c) DISTRIBUTOR may render a reasonable charge for upgrades based on the
price paid by DISTRIBUTOR to SONIC for said upgrade.
(d) Prior to the formal announcement of an error correction or an upgrade
DISTRIBUTOR shall inform SONIC of the number of copies of the error
correction or minor upgrade it reasonably believes it will need to
satisfy the likely demand of registered end users. SONIC will supply
the nominated number of copies to DISTRIBUTOR.
(e) Error corrections will be provided to DISTRIBUTOR by SONIC at the
expense of SONIC and DISTRIBUTOR will, where necessary, at its expense
repackage them and provide them to end users in accordance with this
clause.
(f) Upgrades will be supplied by DISTRIBUTOR to end users from the normal
stock of the Products kept by DISTRIBUTOR and shall be priced to the
DISTRIBUTOR at the discretion of SONIC.
(g) SONIC will provide DISTRIBUTOR notice in writing at least 15 days in
advance of the release of an upgrade.
(h) SONIC will provide DISTRIBUTOR free of charge with a reasonable number
of copies of error corrections and upgrades for demonstration purposes
and for the purpose of exhibition thereof.
7.3 Outdated Stock
In the event of an upgrade or enhancement being released, the following
clauses shall apply:
(a) In the case of an error correction DISTRIBUTOR shall continue to
market such stock as it has on hand and will offer end users who register
with DISTRIBUTOR a free copy of the upgrade or enhancement.
(b) In the case of upgrades such stock of the Products as remains on the
premises of DISTRIBUTOR may be returned to SONIC or to such address as
SONIC may reasonably direct. The transportation costs of such returns
shall be shared equally by SONIC and DISTRIBUTOR. Upon receipt of such
returned packages SONIC shall send the same number of replacement major
upgrade packages to DISTRIBUTOR.
7.4 Customer Support
DISTRIBUTOR shall train and maintain a sufficient number of capable sales
and technical personnel sufficient to market and support the Products so as
to assure customer satisfaction, and otherwise to carry out its obligations
and responsibilities under this Agreement. Where requested by any
organization which is authorized by DISTRIBUTOR (whether directly or
indirectly) to market directly to end users and which provides the Products
to end users, DISTRIBUTOR shall conduct such sales training of its
personnel as may be necessary to impart such knowledge.
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8. Translations
8.1 SONIC has made and will make translation of the manuals and user interface
of the software of the Products into the local language of the Territory.
8.2 The DISTRIBUTOR shall consult with SONIC as to the appropriate wording for
the packaging of the Products in the Territory.
8.3 The DISTRIBUTOR hereby assigns to SONIC the copyright and all other rights
of a like nature which do now, or will, subsist in the Territory or in any
other part of the world, in the translation of the Products including all
plans, notes, memoranda and documentation related to the said translation
and future amendments and versions of the translation as specified in
Section 8. 1.
9. Representations warranties and covenants
9.1 Warranty Claims
SONIC agrees to replace at no charge any and all Products supplied by
DISTRIBUTOR to users as replacement of goods returned under terms of the
Limited Warranty set out on the Products License Agreement as attached
hereto.
9.2 Right to Distribute
SONIC represents and warrants that it has a right and will have a right to
distribute the Products in accordance with the terms of this Agreement, and
has a right and will have a right to grant to DISTRIBUTOR the non-exclusive
right to market and distribute the Products in the Territory.
9.3 Confidentiality of Source Codes
DISTRIBUTOR acknowledges that the source codes of the Products and all
corrections, amendments, variations, extensions or additions to such source
codes is confidential information of SONIC.
Nothing in this Agreement shall entitle DISTRIBUTOR access to the whole or
any part of the source code of any of the Products unless otherwise
authorized by SONIC in writing in which case source code shall be held in
confidence in accordance with the terms of Clause 9.4.
9.4 Both parties acknowledge that any confidential information which is marked
as such and which is disclosed by a party to the other is confidential to
that party and shall not be disclosed to any third party and DISTRIBUTOR
agrees that confidential information or material provided to DISTRIBUTOR in
relation to the Products shall not be disclosed to any third person or used
for any purpose by DISTRIBUTOR other than for the purpose of performing its
obligations under this Agreement unless such information or material or use
thereof has been disclosed or has otherwise come into the public domain
without fault or neglect on the part of DISTRIBUTOR, its servants or
agents, or has been disclosed by the party which has the right to the
information to a third party without restrictions of confidentiality, or
has been independently developed by the receiving party, or can be shown to
have been known to the receiving party prior to receipt or has been
received from a third party as a matter of right.
9.5 If notified promptly in writing of any action (and all prior claims
relating to such action) against DISTRIBUTOR, based upon any claim that the
sale or use of the Products by DISTRIBUTOR or its customers under this
Agreement infringes a patent, trade mark, trade secret or copyright
enforceable in the Territory, SONIC shall at its own expense undertake the
defense of such action and shall pay all costs (including but not limited
to, legal, and traveling expenses and communication expenses) and damages
(if any)
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awarded in any such action. SONIC will not have any liability to
DISTRIBUTOR under this clause if the alleged infringement is based upon
the use of the Products in combination with any other application software
not supplied by SONIC.
SONIC may, on the advice of its counsel remove any infringing product from
the possession of DISTRIBUTOR, refund any amounts paid by DISTRIBUTOR for
that product, and cease to supply such product to DISTRIBUTOR. SONIC shall
indemnify and hold DISTRIBUTOR harmless from and against all and any
damage, liability, costs or expenses including legal and traveling
expenses incurred by DISTRIBUTOR as a result of a finding by a court, or a
decision reached through settlement.
9.6 Prohibition of Reverse Engineering, Modification
(a) The DISTRIBUTOR covenants that the DISTRIBUTOR will not disassemble
or reverse engineer the Products, in whole or in part, however the
DISTRIBUTOR may open the case of the Product for maintenance provided that
SONIC has made an instruction to do so.
(b) In addition, DISTRIBUTOR shall not knowingly permit any contractor or
third party to have access or gain access to, or work on or do any work on
the Products (or effect any part thereof) or make any correction,
amendment, variation, extension or addition thereto.
9.7 Other than as set out in this clause 9, SONIC makes no warranties
whatsoever to DISTRIBUTOR as to the merchantability or fitness for purpose
of the Products and to the full extent permitted by United States law
SONIC excludes any implied warranties or conditions including any
warranties of merchantability or fitness for a particular purpose.
DISTRIBUTOR acknowledges that it has exercised its own skill and judgment
in deciding to distribute the Products. In no event will SONIC be liable
to DISTRIBUTOR for any loss of profits, or loss of business resulting from
warranty claims made by end users against DISTRIBUTOR. In no event will
either party be liable to the other for any indirect or consequential
damages of any kind.
9.8 SONIC warrants that the hardware of the Products and all related parts
shall be free from defects in design, materials and workmanship for a
period of one (1) year from the date of purchase by any end user of the
Products. SONIC shall be liable for the proven claim and arising from the
defects of the Products hereof and shall reimburse the cost of DISTRIBUTOR
related to such a claim, provided that such claim is related to the
material safety of the Products.
9.9 Other than as set out in this clause 9, under no circumstances shall SONIC
be liable for any loss of profit, indirect or consequential loss, damage
or injury arising from the supply or use of the Products PROVIDED THAT
DISTRIBUTOR shall be entitled to recover direct compensatory damages from
SONIC arising from the material breach by SONIC of any of its obligations
under this agreement. Such compensatory damages shall be limited to the
value of the Products purchased by DISTRIBUTOR which caused the loss.
10. Termination
10.1 Either party hereto may terminate this Agreement forthwith upon the
happening of any of the following events:
(a) the other party fails to observe or perform any material provision of
this Agreement and fails to remedy such breach within thirty (30) days
after written notice thereof has been given to the party in breach;
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(b) the other commits any act of bankruptcy or insolvency or a petition
is presented for the bankruptcy or winding up of the other or a resolution
is passed for the winding up of the other otherwise than for the purposes
of amalgamation or reconstruction;
(c) the other enters a compromise or arrangement with creditors or a
receiver or official manager of the other or of any of its assets is
appointed.
Either party may terminate this Agreement if the corporate entity of
either is substantially changed or modified through acquisition or merger.
10.2 In the event that this Agreement is terminated pursuant to clause 2.1
then:
(a) neither party shall have any liability to the other by virtue of such
termination;
(b) where such survival is not inconsistent with the termination of this
Agreement, the obligations of each party to the other with respect to
names of registered users, copyright, payment of monies owed - including
applicable interest, payments pursuant to Clause 5.5, confidentiality of
source codes and financial information, rights of inspection, rights in
relation to trade marks, and prohibition of reverse engineering shall
survive termination.
(c) each party shall within seven (7) days of the effective date of
termination deliver to the other all documents and other things (including
microfiche, magnetic tape, disks, or other storage media) embodying any
confidential information obtained from the other during the term hereof or
before this Agreement and relating thereto, or, in the event that any such
information is embodied in valuable property belonging to the receiving
party thereof, the receiving party shall certify its obliteration by
erasure or other appropriate means.
(d) DISTRIBUTOR will forthwith deliver to SONIC copies of all customer
lists, prospect lists, copies of license agreements, lists of distributors
and all other material relating to the distribution of the Products.
(e) DISTRIBUTOR may sell the Products in its stock at the termination
day.
10.3 In the event that this Agreement is terminated by either party upon the
happening of any of the events set forth in Clause 10.1 then the
provisions of Clauses 10.2 (b), (c), and (d) shall apply mutatis mutandis
to such termination, provided however, that Clause 10.2 (d) and (e) shall
not apply to such termination in the event that DISTRIBUTOR is the party
terminating the Agreement.
11. Relationship of the Parties
DISTRIBUTOR is an independent contractor and neither has nor shall have
any power, right or authority, nor will DISTRIBUTOR represent that
DISTRIBUTOR has any power, right or authority, to bind SONIC, or to assume
or to create any obligation or responsibility, express or implied, on
behalf of SONIC or in SONIC's name. Nothing stated in this Agreement shall
be construed as constituting DISTRIBUTOR and SONIC as partners, or as
creating the relationships of employer and employee, master and servant,
or principal and agent between the parties hereto.
12. Waiver
No waiver by either party whether express or implied of any provisions of
this Agreement or of any breach or default of either party shall
constitute a continuing waiver or a waiver of any other provision of this
Agreement unless made in writing and signed by the party against whom the
waiver would otherwise be enforced.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
regarding the subject matter hereof, and supersedes and replaces all
agreements, arrangements and understandings relating to the subject matter
hereof, whether reduced to writing or not, that may have preceded this
Agreement.
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14. Force Majeure
Notwithstanding any other provision in this Agreement, no default, delay or
failure to perform on the part of either party shall be considered a breach
of this Agreement if such default, delay or failure to perform is shown to
be due entirely to causes beyond the reasonable control of the party
charged with such default including, but not limited to causes such as
strikes, lock-outs or other labor disputes, riots, civil disturbance,
actions or inaction of governmental authorities or suppliers, epidemics,
wars, embargoes, storms, floods, fires, earthquakes, acts of God or the
public enemy, nuclear disasters or default of a common carrier.
15. Assignment
Neither party may assign its rights and obligations under this Agreement
without obtaining the prior written consent of the other party to this
Agreement PROVIDED HOWEVER, that such consent shall not be unreasonably
withheld in the event that assignment is to be made to an affiliate, or
necessitated due to a transfer of business.
16. Severability
If any clause or section of this Agreement is now or should become in
contravention of any local, state or federal law, such clause or section
shall be null and void and the terms of said prevailing local, state or
federal law shall govern the transaction. The clauses or sections of this
Agreement are independent and severable and the nullification of any
particular clause or section shall in no way impair the validity of this
Agreement nor the intent of the parties to remain bound by its terms and
conditions.
17. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
instrument.
18. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of California in the United States of America. Any
dispute, resolution, or proceeding regarding this Agreement shall be
resolved through Binding Arbitration, with the loser of arbitration held
responsible for payment of the winner's attorney fees.
page 12
In witness of the above the parties have executed this Agreement on the day and
date first set out above.
Executed for and on behalf of )
Sonic Systems, Inc. by )
its duly authorized officer and )
in the presence of:
/s/ Sreekanth Ravi
--------------------------------
Signatory
/s/ Steven Perricone
--------------------------------
Witness
Executed for and on behalf of )
________________________ )
its duly authorized officer )
and in the presence of: )
/s/ Masao Tatsuwaki
--------------------------------
Signatory
/s/ Hidekazu Yasuda
--------------------------------
Witness
page 13
SCHEDULE ONE
Description of Products:
-----------------------
The Products known as Interpol, SonicWALL, and others listed in the SONIC
Distributor Price List (Exhibit Three) and future additions and enhancements
thereof.
SCHEDULE TWO
Term: Provided the minimum quantities set out in Schedule Four hereof are met,
this agreement shall commence on the 'Effective Date' and shall continue for a
period of one (1) year from the 'Effective Date', unless earlier terminated in
accordance with the terms hereof.
Territory: Japan
Translation Language: Japanese
SONIC will provide localized materials for the Products as listed below:
Interpol: localized Web management interface and localized QuickStart
User's Guide.
SonicWALL: localized Web management interface and localized QuickStart
User's Guide.
Price per unit:
1. The Recommended Retail Price (R.R.P.) shall be the local currency
equivalent of the U.S. dollar prices set out in the SONIC Distributor Price List
(Exhibit Three) except as specifically amended by agreement between SONIC and
DISTRIBUTOR.
Initially established local currency prices will be based on the U.S. dollar
exchange rate in effect in the territory at the time of introduction. Subsequent
variation in exchange rate of greater than (plus minus) 10% will cause the local
currency price to be adjusted subject to negotiation in good faith between
DISTRIBUTOR and SONIC.
The R.R.P. and the line up of the PRODUCTS shall be equal to the R.R.P and the
line up for the other distributors in the Territory.
2. The Distributor Cost for each Product shall be as set out in the Sonic
Distributor Price List and will be based on U.S. dollar prices.
OEM pricing:
page 14
1. SONIC and DISTRIBUTOR shall negotiate in good faith appropriate pricing and
margin allocation for all OEM sales in the territory in which DISTRIBUTOR
actively participates either before, during, or after conclusion of the sale.
page 15
SCHEDULE THREE
Trade Marks and names referred to in 4.1
Sonic Systems, Inc. Sonic SonicWALL
Interpol
SonicWALL Plus DMZ
SCHEDULE FOUR
Minimum purchase volume as per section 3.9 hereof shall be as follows:
Total Minimum Purchase Volume for Initial Term of Agreement:
[*]
Minimum initial Stocking Order:
Interpol - [*] Units (to be purchased on or before July 31, 1998 as Interpol
will not be available after that date)
SonicWALL - [*] Units (any mix of models, to be purchased on or before August
31, 1998, as long as the Japanese version of the product is available. If it
is not available prior to that date the product is to be purchased as soon as
it is.)
Minimum Quarterly Purchases (after first Quarter after signing Agreement):
Accumulative from signing to the end of second quarter from signing US$[*]
Accumulative from signing to the end of third quarter from signing US$[*]
It is agreed that purchases against the Minimum Quarterly Purchase
requirements shall not roll over from one term of the Agreement to the next.
SCHEDULE FIVE
Ordering Procedures and Payments:
1. Upon receipt of a numbered purchase order from DISTRIBUTOR, SONIC will
process order promptly and dispatch via the carrier nominated by
DISTRIBUTOR. All invoices will include the following data. SONIC shall fax
a copy of the original invoice to DISTRIBUTOR the day of each shipment and
the original itself by regular mail within 5 days from issuance.
a) description of goods
page 16
b) number of units shipped
c) date of invoice
d) invoice number
e) name of intended forwarder nominated by DISTRIBUTOR
f) purchase order number of DISTRIBUTOR
g) _______________ DISTRIBUTOR to SONIC
h) payment terms of Net 30 days unless otherwise arranged will apply.
2. DISTRIBUTOR will make payment for the full invoice amount within thirty
(30) days by wire transfer of funds to:
Bank information: ComericA Bank California
1299 Oakmead Parkway
Sunnyvale, CA 94086
SWIFT address: MNBD US33CAL
***Please advise your bank to use the SWIFT address when transferring
funds ***
Federal Routing Number: 1211-37522
ABA number: 1211-37522
Beneficiary Address: Sonic Systems, Inc.
575 N. Pastoria Avenue
Sunnyvale, CA 94086
Beneficiary account name: Sonic Systems, Inc.
Sonic bank account number: [*]
All payments made to SONIC pursuant to this Agreement shall be made in
United States currency.
page 17
EXHIBIT ONE
The 'Business Plan' referred to in Section 1 (a) hereof is outlined below:
[OUTLINE OF SALES AND MARKETING TASKS TO BE UNDERTAKEN BY DISTRIBUTOR]
EXHIBIT TWO
LICENSE AGREEMENT
Copyright Notice
(C) 1998 Sonic Systems, Inc. All rights reserved.
Under the copyright laws, this manual or the software described within, may not
be copied, in whole or part, without the written consent of the manufacturer,
except in the normal use of the software to make a backup copy. The same
proprietary and copyright notices must be affixed to any permitted copies were
affixed to the original. This exception does not allow copies to be made for
others, whether or not sold, but all of the material purchased (with all backup
copies) may be sold, given, or loaned to another person. Under the law, copying
includes translating into another language or format. SonicWALL, SonicWALL Plus,
and SonicWALL Plus DMZ are trademarks of Sonic Systems, Inc.
All other trademarks and trade names belong to their respective holders.
Specifications in this manual are subject to change without notice.
Limited Warranty
Sonic Systems, Inc. warrants SonicWALL (the Product) for one (1) year from the
date of purchase against defects in materials and workmanship. If there is a
defect in the hardware, Sonic Systems will replace the product at no charge to
you, provided you return it to Sonic Systems with transportation charges
prepaid. A Return Materials Authorization (RMA) number must be displayed on the
outside of the package for product(s) being returned for replacement or the
product(s) will be refused. This may be obtained by calling Sonic Systems
Customer Service between the hours of 7:00 AM and 5:00 PM Pacific Standard Time,
Monday through Friday.
Phone: (408) 736-1900
Fax: (408) 736-7228
E-mail: support@sonicsys.com
--------------------
This warranty does not apply if the Product has been damaged by accident, abuse,
misuse, or misapplication or has been modified without the written permission of
Sonic Systems.
page 18
In no event shall Sonic Systems, Inc. or its suppliers be liable for any damages
whatsoever (including, without limitation, damages for loss of profits, business
interruption, loss of information, or other pecuniary loss) arising out of the
use of or inability to use the Product.
Some states do not allow the exclusion or limitation of implied warranties or
liability for incidental or consequential damages, so the above limitation or
exclusion may not apply to you. Where liability may not be limited under
applicable law, Sonic's liability shall be limited to the amount you paid for
the Product. This warranty gives you specific legal rights, and you may have
other rights which vary from state to state. By using this Product, you agree to
these limitations of liability.
THIS WARRANTY AND THE REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OFALL
OTHER WARRANTIES, ORAL OR WRITTEN, EXPRESS OR IMPLIED. No dealer, agent, or
employee of Sonic Systems is authorized to make any extension or addition to
this warranty.
page 19
EXHIBIT THREE
JAPANESE DISTRIBUTOR PRICE LIST
Note: It is agreed that the following price list shall be used by all SONIC
Distributors in the Territory and that only the Internet products listed shall
be available in the Territory (excluding Macintosh LAN Products which do not
pertain to this Agreement):
Internet Solutions Price List
Japanese SRP
Sonic # Lbs Kgs Description Retail JSRP Cost
QuickStream
PPP Remote Access Hardware
Server
01-SSC- 3.5 1.5 QuickStream Pro (110v) 3-port w/Web-based [*] [*] [*]
2110 Management & IPX
SonicWALL
Internet Filter & Firewall Hardware
01-SSC- 3 1.3 SonicWALL 50 User (110v) [*] [*] [*]
2552
01-SSC- 3 1.3 SonicWALL 50 User w/1 Year Filter [*] [*] [*]
2590 Subscription (110v)
01-SSC- 3 1.3 SonicWALL Unlimited Plus (110v) [*] [*] [*]
2554
01-SSC- 3 1.3 SonicWALL Unlimited Plus w/1 Year Filter [*] [*] [*]
2591 Subscription (110v)
01-SSC- 3 1.3 SonicWALL Plus DMZ (110v) [*] [*] [*]
2556
01-SSC- 3 1.3 SonicWALL Plus DMZ w/1 Year Filter [*] [*] [*]
2592 Subscription (110v)
01-SSC- 1 Year Filter Subscription for SonicWALL [*] [*] [*]
2566
Bandit
Bandwidth Aggregation Internet Router
01-SSC- 3 1.3 Bandit (110v) [*] [*] [*]
2200
01-SSC 0 0 Bandit Dial-In Upgrade [*] [*] [*]
2200
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