EX-10.6 13 v06721_exhibit10-6.txt Exhibit 10.6 DISTRIBUTORSHIP AGREEMENT This Agreement is made and entered into this 24 day of May, 2002 by and between CinTel Co. Ltd., a corporation duly organized and existing under the laws of the Republic of Korea, having its principal office at 7th Floor, MSA Building, #891-43, Daechi-dong, Kangnam-ku, Seoul, Korea (hereinafter referred to as "the Principal") and Sumitomo Metal System Solutions Co., Ltd., a corporation duly organized and existing under the laws of Japan, having its principal office at 1-2-18, Ikenohata, Taitou-ku, Tokyo 110-0008, Japan, (hereinafter referred to as "the Distributor"). WHEREAS, the Principal desires to appoint the Distributor and the Distributor desires to be appointed, as the Principal's non-exclusive Distributor for the sale of the Products (as defined hereinafter) in the Territory (as defined hereinafter). NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto mutually agree as follows: ARTICLE 1. DEFINITIONS In this Agreement except where the context otherwise requires, the following terms and expressions shall be understood to have the precise meaning as follows: 1.1 "Products" shall mean the products specified in Appendix 1-1 and 1-2 which are manufactured by CinTel Co., Ltd. (hereinafter referred to as "Manufacturer") which shall not include products manufactured by the Manufacturer on the basis of the Original Equipment Manufacture (OEM) and/or Contract Manufacture (CM) requested by other parties and products not having the CinTel brand name. 1.2 "Retail Price" shall mean the price of Products being applied to the customers in the Territory. 1.3 "Spare parts" shall mean any or all parts and/or components assembled or incorporated in the Products. 1.4 "Territory" shall mean Japan, which may be extended to other countries subject to the mutual agreement in writing from time to time. 1.5 "Trademark" shall mean the trademark affixed and/or embodied to the Products. ARTICLE 2. APPOINTMENT AND ACCEPTANCE 2.1 [APPOINTMENT & ACCEPTANCE] During the term and subject to the conditions hereinafter set forth, the Principal hereby appoints the Distributor as the Principal's non-exclusive distributor for the Products in the Territory and the Distributor accepts such appointment. 1 2.2 [PROHIBITION ON COMPETITOR'S PRODUCT] The Distributor shall not, directly or indirectly, through another party, purchase, import, export, sell, distribute, or otherwise deal in products competitive with or similar to the Products in the Territory. 2.3 [PROHIBITION ON INDIRECT SALES] Without the prior written consent of the Principal, the Distributor, its subsidiary or affiliate shall not, directly or indirectly, sell the Products to any person or entity which may resell them outside the Territory. ARTICLE 3. CONDITIONS OF THE DISTRIBUTOR WITHOUT EXCLUSIVE RIGHT 3.1 [OBLIGATION OF THE DISTRIBUTOR] In order to obtain all the rights of this agreement, the Distributor simultaneously purchases 3 sets of iCache. And the conditions for the payment of the price are based on 7.3. in this agreement. ARTICLE 4. OBLIGATION OF THE DISTRIBUTOR 4.1 [SALES PROMOTION] The Distributor shall, at its own expenses, use its best efforts to promote the sale of the Products in the Territory and employee qualified salesman throughout the Territory to obtain the largest sales volume of the Products in the Territory. 4.2 [MAINTENANCE] The Distributor shall perform maintenance and after-sale service for the customers who bought the Products from the Distributor. For this purpose, the Distributor shall maintain adequate facilities and sufficient qualified technician to enable the Distributor to perform maintenance and after-sale service for the Products. 4.3 [STOCK] The Distributor shall maintain adequate stocks of the Products to meet its customer's demand in time. The Distributor shall maintain adequate stocks of replacement parts, facilities and qualified mechanics and shall provide reasonable after sales-service to its customers. 4.4 [REPORT ON CUSTOMER'S CLAIM] The Distributor shall make reasonable efforts to handle all matters necessary to satisfy the customers relating to the sale of the Products in the Territory and immediately report to the Principal any claims received by the Distributor from the customers relating to the Products. 4.5 [REPORT ON PERFORMANCE & MARKETING] The Distributor shall cooperate with the Principal's request on the sales of the Products, and the Distributor shall send to the Principal: a. a written report on its activities in the Territory at three monthly intervals, such reports to include sales by product including both the value and units, sales by state, recommended retail price lists, 2 advertising and promotion plans for the future and a commentary on the marketing, sales and distribution performance and plans, matters affecting pricing policies and achievements and proposals in respect of major customers; and b. a written report at three monthly intervals on the stocks of the Product and parts thereof held by the Distributor. 4.6 [ROLE AS SELLER WITH CUSTOMER] The Distributor will, in all correspondences and dealings relating directly or indirectly to the sale or other disposition of the Products, clearly indicate that it is acting as a principal and not as an agent and/or legal representative of the Principal. 4.7 [PROHIBITION ON BINDING THE PRINCIPAL] The Distributor will not give any guarantee or warranty in respect of the Products except the warranty provisions of Article 8 hereof and will not otherwise incur any liability on behalf of the Principal or in any way pledge the credit of the Principal or accept any order or make any contract binding upon the Principal without the Principal's prior approving the terms thereof. ARTICLE 5. OBLIGATION OF THE PRINCIPAL 5.1 [SUPPLY PRODUCTS] The Principal shall supply the Distributor with enough Products to satisfy the order placed with the Distributor by customers in the Territory. 5.2 [SUPPLY SPARE PARTS] The Principal shall supply the Spare parts to the Distributor with agreed price between the parties from time to time for one (1) year after the last shipment of the Products from the Principal to the Distributor, provided, however, that the Distributor may purchase the Spare parts from the vendor of the Principal. 5.3 [TECHNICAL ASSISTANCE] The Principal is obligated to supply the Distributor with technical assistance such as information and illustrated material, and to send advertising material suitable for the promotion and advertising of the Products, as in the opinion of the Principal may be necessary or useful to the Distributor. ARTICLE 6. ORDER AND SHIPMENT 6.1 [ORDER] In the Distributor's placing purchase orders for the Products with the Principal, the Distributor shall clearly describe the Products and quantity required, price, delivery time, packing, invoicing and shipping conditions, etc. 6.2 [ACCEPTANCE] Any purchase order placed by the Distributor shall not be binding any parties unless and until it is accepted by the Principal at its discretion. 3 6.3 [TIME TO ORDER & ACCEPTANCE] The Distributor shall place the order not less than three (3) months prior to the first shipment date written on such order and the Principal shall give the Distributor written notice of acceptance or refusal of such order placed by the Distributor within two (2) weeks from the date of receipt of such order. 6.4 [ORDER FORECAST] Before three (3) months prior to the end of the each calendar year during the term of this Agreement, the Distributor shall provide the Principal with an annual forecast covering coming twelve (12) months. 6.5 [ORDER CANCELLATION] In case the Distributor cancels the Individual Contract, the Distributor shall compensate the Principal's damages relating to the Products already made or in manufacturing process in accordance with such order including any and all costs and expenses and expected profits of the Principal. ARTICLE 7. PRICE AND PAYMENT 7.1 [PRICE] a. The prices of the Products shall be specified in Appendix 2-1 and 2-2 attached hereto and may be varied subject to the mutual agreement by both parties from time to time. Pricing term for the Products shall be F.O.B. Inchon Airport in Korea. b. If the parties cannot agree on prices, the Principal reserves the right to terminate forthwith this Agreement by giving a written notice to the Distributor with immediate effect. c. The increase of the prices for the Products shall not apply to the Distributor's order which was accepted by the Company before the price increases. 7.2 [RETAIL PRICE] The Distributor has a right to decide retail prices for the Products to be sold by the Distributor in the Territory during the term of this Agreement. The Distributor shall be in comply with the agreed retail prices by the Principal. 7.3 [PAYMENT] a. Payment for the Products shall be made by an irrevocable and confirmed at sight letter of credit issued by a first class international bank. The confirmation charge of letter of credit shall be borne by the Distributor. b. For the payment of the value of the Individual Contract, the Distributor shall open the letter of credit in favor of the Principal or the Principal's nominee in the form satisfactory to the Principal in accordance with the instruction of the Principal at least thirty (30) days prior to the first shipment date written on the Individual Contract and the expiry date of such letter of credit shall be at least thirty (30) days from the last shipment date written on the Individual Contract. c. Currency of payment shall be in United States Dollars. d. The Distributor shall be liable for and shall pay any tax, duty, charge or any other impost of a similar nature imposed upon the Principal or the Distributor according to the laws of the Territory. 4 ARTICLE 8. TITLE AND RISK, DELIVERY 8.1 [DELIVERY TERM] Unless otherwise agreed, the delivery term of the Products shall be FOB Inchon Airport in accordance with the INCOTERMS 1990 as revised and the title and risk of Products shall be transferred to the Distributor when the Products shall pass the ship's rail of the vessel to be shipped. 8.2 [DELIVERY DATE] The date on the bill of lading shall be deemed to be the delivery date of the Products. ARTICLE 9. WARRANTY 9.1 [INSPECT] Promptly after the receipt of the Products, the Distributor may inspect the quantity and quality of the Products in Territory at the Distributor's cost. If, upon receipt of the Products after proper and thorough inspection, any of the Products is found not to be in compliance with the quantity and quality standards, the Distributor shall notify in writing the Principal of the shortage or defect of the Products in detail within one (1) month from the discharging date of the Products and the Principal shall repair or replace the Products not meeting the quantity and quality standards. 9.2 [WARRANTY PERIOD] The Principal warrants that the Products shall be free from defects in material and workmanship for a period of fifteen (15) months from the date of manufacture of the Products shipped. Any of the Products defective in workmanship shall be repaired or replaced with good Products free of charge at the Principal's choice, and defective Product(s) shall be returned to the Principal `Freight Collect' while repaired Product(s) or replacement Product(s) shall be sent to the Distributor `Freight Collect.' Namely, all expenses related to sending back and shipping shall be borne by the parties on a 50-50 basis. Specifically, the transportation cost from Japan to Korea shall be borne by the Distributor, while the transportation cost from Korea to Japan shall be borne by the Principal. 9.3 [EXCLUSION OF WARRANTY] a. This warranty does not extend to any of the said Products which have been: (1) subjected to misuse, neglect, accident or abuse, (2) improperly repaired, or altered or modified in any way unless such modification is approved in writing by the Principal, and (3) used in violation of instructions furnished by the Principal. b. THE PARTIES AGREE THAT THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER WARRANTIES AND/OR GUARANTEES NOT SPECIFIED IN THIS AGREEMENT ARE EXCLUDED FROM THIS TRANSACTION AND SHALL NOT APPLY FOR THE PRODUCTS. 9.4 [CLAIM NOTICE] Claims by the Distributor in regard to any defect in the Products shall be in writing and be dispatched by the Distributor with full particulars within thirty (30) days after the receipt of Products. 5 ARTICLE 10. TRADEMARK 10.1 [GRANT TRADEMARK LICENSE] During the term of this Agreement, the Principal hereby grants to the Distributor, a non-exclusive license to use the Trademark for the purpose of sales and promotion of the Products within the Territory to the extent that the Principal has been granted the right to use based on the Principal's exclusive distributorship. When the Distributor uses the trademark, it shall indicate clearly that the Principal or other entity is sole and exclusive proprietary of the Trademark. 10.2 [APPROVAL OF AD MATERIAL] When the Distributor intends to use the Trademark, prior to use, the Distributor shall inform the Principal of the manner of such use and submit a sample of any materials including but not limited to, catalogues, leaflets, posters, newspapers, bearing the Trademark for the Principal's prior inspection and approval thereto. When the Distributor wishes to change the approved use of the Trademark, prior to change, the Distributor shall inform the Principal of the desired change and submit a sample of the materials bearing the altered use of the Trademark for prior inspection and approval by the Principal in any event, the manner of use of the Trademark of any change thereof shall be subject to the Principal's prior written approval and the Distributor shall not use the Trademark in any other manner than that approved in advance by the Principal. 10.3 [OWNERSHIP ON PROPRIETARY RIGHTS] The Distributor recognizes that any of the Trademark, trade names, designs, patent, copyrights, know-how and other proprietary rights, used on or embodied in the Products ("Proprietary Rights") shall remain the exclusive property of the Principal. The Distributor shall not have or acquire any right, title or interest in Proprietary Rights. 10.4 [PROHIBITION] a. The Distributor shall not, directly or indirectly, apply for the registration of Proprietary Rights including their translation into any language. b. During the term of this Agreement or even after termination, except otherwise consented by the Principal, the Distributor shall not: i) use the Proprietary Rights or similar trademark on any other companies products than the Principal's nor let other companies use the Trademark; and ii) directly or indirectly apply for the registration of the trademark or any other trademark similar thereto with respect to the Products or any other materials in any country of the world. c. The Distributor shall not alter, deface, remove, cover or mutilate in any manner the Proprietary Rights, serial or model numbers, brand, or Principal's name attached or affixed to any of the Products, without the prior written consent of the Principal. 10.5 [ANNOUNCEMENT] The Distributor may, with the prior written consent of the Principal, indicate that it is an authorized distributor of the Products. 10.6 [NOTICE OF INFRINGEMENT] When the Distributor finds that a third party infringes or impairs the Trademark or the Principal's goodwill involved therein, or when a third party brings a claim, suit or action against the Principal or the Distributor on the ground that the Distributor's use of the Proprietary Rights may infringe on the third party's rights, the Distributor shall promptly inform the Principal thereof and cooperate with the Principal to settle the problem. 6 10.7 [CEASE TO USE] Upon termination of this Agreement for any cause, the Distributor shall cease holding itself out as a distributor of the Products and cease using, in any way, Trademark, Principal's name, or its Proprietary Rights or any material similar thereto. ARTICLE 11. STATUS OF DISTRIBUTOR 11.1 [NO AGENCYSHIP] This Agreement does not in any way create the relationship of principal and agent between the Principal and the Distributor, and under no circumstances shall the Distributor be considered to be the agent of the Principal. The Distributor shall not act or attempt to act, or represent itself, directly or by implication, as an agent of the Principal or in any manner assume or create, or attempt to assume or create any obligation, liability, representation, warranty or guarantee on behalf of, or in the name of the Principal. The Distributor shall conduct its business in the purchase and resale of the Products as a principal for its own account and at its own expenses and risk. 11.2 [OBEYANCE OF LAWS] The Distributor shall, at all times, comply with all applicable laws, regulations, and orders of any government of the Territory or political subdivisions thereof, relating to or in any way affecting this Agreement and the Distributor's performance hereunder including the obtaining of any required licenses, permits or approvals. ARTICLE 12. NON-DISCLOSURE The Distributor shall not disclose to any third party, without the prior written consent of the Principal, or use for any purpose other than the performance of its obligations under this Agreement, any confidential information concerning the Products or business affairs of the Principal (including but not limited to, prices, discounts, terms and conditions of sale, customers, business affairs, Products or Product specification) which it acquires or develops in the course of its transaction with the Principal. ARTICLE 13. TERM 13.1 [TERM & EXTENSION] This Agreement shall become effective upon signing, and shall continue in full force and effect for a period of two (2) years from the date hereof, unless earlier terminated pursuant to Article 15. This Agreement shall be automatically extended for a successive two (2) years thereafter, unless and until either party shall give to the other party at least thirty (30) days prior written notice of its intention not to extend this Agreement. 7 13.2 [REVISION OF MINIMUM PURCHASE AMOUNT] Upon the extension of this Agreement in accordance with Paragraph 14.1, the minimum purchase amount for each period shall be reviewed and a new minimum purchase shall be mutually agreed upon in writing by the parties within thirty (30) days before the commencement of each new period, provided, however, that the new minimum purchase amount shall be more that those of previous year. ARTICLE 14. TERMINATION 14.1 [TERMINATION RIGHT WITH IMMEDIATE EFFECTIVENESS] In each case of the following events, either party ("Terminating Party") may terminate this Agreement, with immediate effect, by giving the written notice of termination to the other party ("Defaulting Party"): a. if the Defaulting Party becomes bankrupt or insolvent, or have its business placed in the hand of a receiver, assignee or trustee, whether by voluntary act or otherwise; b. if the Defaulting Party assigns this Agreement or any rights hereunder to a third party without the non-defaulting party's prior written consent; c. if the Defaulting Party ceases to function as a going concern or to conduct its operations in the normal course of business; d. if the Distributor should be acquired by, or should itself acquire, in whole or in part, a manufacturer of products which in the reasonable judgment of Principal competes to a material extent with the Products; or e. if the Defaulting Party does not remedy the breach or failure to perform or observe any agreement or condition herein contained within thirty (30) days of a notice requiring remedy of such breach or failure to perform or observe 14.2 [PRINCIPAL'S ARBITRARY TERMINATION RIGHT] Notwithstanding anything to the contrary contained in this Agreement, the Principal may terminate this Agreement by ninety (90) days prior written notice served on the Distributor. 14.3 [BREACH OF MINIMUM ANNUAL PURCHASE OBLIGATION] In case the Distributor fails to achieve the minimum annual purchase for whatever reasons, unless solely and clearly attributable to the Principal, the Principal has the right to terminate this Agreement. 14.4 [DUE] All payments owed to the Principal upon termination of this Agreement shall become immediately due and no cancellation or termination of this Agreement shall serve to release the Distributor or its successors or assignees from any obligations under this Agreement. 14.5 [REPURCHASE OPTION] In cases of termination of this Agreement by either party for any reason, the Principal may at its sole option repurchase from the Distributor, at the net price paid by the Distributor to the Principal, any or all Products or parts thereof in the possession of the Distributor. 8 ARTICLE 15. INDEMNITY The Distributor hereby irrevocably indemnifies and holds the Principal harmless from and against all costs, claims, charges, damages, expenses, liabilities and losses howsoever arising out of or in connection with any breach by the Distributor of any of its obligations under this Agreement and in particular without limitation all and any claims and damages of whatsoever nature arising from the injury or death of any person or persons and for damage to or loss of property, arising out of or attributable whether directly or indirectly to the misuse, conduct, operations or performance of the Distributor in violation of the instruction provided by the Principal. ARTICLE 16. FORCE MAJEURE 16.1 [FACTORS] Neither party shall be liable to the other party for non-performance or delay in performance of any of its obligation under this Agreement due to causes reasonably beyond its control including but not limited to fire, flood, strikes, labor troubles or other industrial disturbances, unavoidable accidents, governmental regulations, riots and insurrections. 16.2 [NOTICE] Upon the occurrence of such a force majeure condition, the affected party shall immediately notify the other party with as much detail as possible and shall promptly inform the other party of any further developments. Immediately after the cause is removed, the affected party shall perform such obligations with all due speed. ARTICLE 17. GOVERNING LAW This Agreement shall be interpreted and governed by the laws of the Republic of Korea. ARTICLE 18. SETTLEMENT (ARBITRATION) 18.1 [ARBITRATION] All disputes, controversies or differences which may arise between the parties, out of, or in relation to, or in connection with this Agreement, or for the breach thereof, shall be finally settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board and under the laws of Korea. The award rendered by the arbitrators shall be final and binding upon both parties concerned. 9 18.2 [EXPENSES] If any action or arbitration or other proceeding shall be commenced to enforce this Agreement, the prevailing party in such action or proceeding shall be entitled to recover from the other party reasonable attorney's fees, arbitration costs and out-of-pocket expenses incurred by such prevailing party in connection with such action or proceeding. ARTICLE 19. MISCELLANEOUS PROVISIONS 19.1 [NOTICES] Any notice required or permitted to be given hereunder shall be in writing, and may be given by personal service, registered airmail, if confirmed on the same day in writing by registered airmail, with postage prepaid to the following addressed: To the Principal Tel No.: 82-2-544-6700 Fax No.: 82-2-508-2341 Addr.: 7th Floor, MSA Building, #891-43, Daechi-dong, Kangnam-ku, Seoul, Korea Attn.: Yong Seok, Lee (lyskay@cintel.co.kr) To the Distributor Tel No.: 81-3-5815-7275 Fax No.: 81-3-5815-7277 Addr.: 1-2-18, Ikenohata, Taitou-ku, Tokyo, 110-0008, Japan 19.2 [ENTIRE AGREEMENT & AMENDMENTS] This Agreement constitutes the entire understanding of the Principal and the Distributor with respect to the subject matter hereof. No amendment, modification or alteration of any terms of this Agreement shall be binding on either party unless the same shall be made in writing, dated subsequent to the date hereof and executed by or on behalf of the parties hereto. 19.3 [ASSIGNMENT & SUCCESSION] This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors. No assignment of this Agreement shall be valid without the prior written consent of the other party hereto. 19.4 [WAIVER] All waivers hereunder shall be in writing, and the failure of any party at any time to require the other party's performance of any obligations under this Agreement shall not affect the right subsequently to require performance of the obligation. Any waiver of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision or a waiver or modification of the provision. 19.5 [SEVERABILITY] If any one or more of the provisions contained in this Agreement shall be declared invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and in such case the parties hereto oblige themselves to reach the purpose of the invalid provision by a new, valid and legal stipulation. 10 19.6 [HEADINGS] The headings herein are included for purposes of convenience only and shall not affect the construction or interpretation of any of the provision of this Agreement. 19.7 [LANGUAGE] For the purposes of communication, this Agreement may be translated into another language, but this Agreement, which is executed in the English language, shall be the only binding version. 19.8 [TIME] All time referred in this Agreement and any Individual Contract made under this Agreement shall be of the essence and material provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have authorized this Agreement to be executed by their respective duly authorized officers. CINTEL CO., LTD. SUMITOMO METAL SYSTEM SOLUTIONS CO., LTD. By : By : ------------------------ ------------------------------ Name: Name: Title : President/CEO Title : 11 APPENDIX 1-1. ICACHE SPECIFICATIONS APPENDIX 1-2. ICACHE SPECIFICATIONS APPENDIX 2-1. ICACHE PRICES
(Unit: US$, Exclude VAT) -------------------------- --------------------- --------------------- --------------------- ---------------------- ICACHE 400 ICACHE 800 ICACHE 1500 ICACHE 2000 -------------------------- --------------------- --------------------- --------------------- ---------------------- -------------------------- --------------------- --------------------- --------------------- ---------------------- 10,500 13,500 51,000 118,000 LIST PRICE -------------------------- --------------------- --------------------- --------------------- ---------------------- -------------------------- --------------------- --------------------- --------------------- ---------------------- 60% 60% 60% 60% D/C RATE -------------------------- --------------------- --------------------- --------------------- ----------------------
APPENDIX 2-2. * SPECIFICATIONS IN APPENDIX 1-1, 1-2 AND PRICES IN APPENDIX 2-1, 2-2 CAN BE CHANGED ACCORDING TO THE CONDITIONS OF THE MARKET BY JUDGMENT OF THE PRINCIPAL (CINTEL).