Distribution Agreement

3.1  Marketing.  DISTRIBUTOR shall have the following obligations with respect to the marketing and distribution of SUPPLIER Products:

3.2        Advertising.  DISTRIBUTOR shall diligently undertake to advertise the Products in the Territory..

3.4        Customer Support.  DISTRIBUTOR agrees to cooperate with SUPPLIER in dealing with any customer complaints concerning the Products and to take any action requested by SUPPLIER to resolve such complaints.  DISTRIBUTOR also agrees to assist SUPPLIER in arranging for any customer warranty service. However, any and all expenses incurred hereby shall be borne by SUPPLIER.

3.5        Expenses.  Unless otherwise expressly provided herein, DISTRIBUTOR assumes full responsibility for all costs and expenses which it incurs in carrying out its obligations under this Agreement, including but not limited to all rentals, salaries, commissions, advertising, demonstration, travel and accommodation expenses without the right to reimbursement for any portion thereof from SUPPLIER.

4.1  Purchase Orders.  DISTRIBUTOR shall submit purchase orders for the Products to SUPPLIER in writing or by telex, telegram or cable which shall set forth, at a minimum:

4.2  Acceptance of Orders.  All purchase orders from DISTRIBUTOR are subject to acceptance in writing by SUPPLIER which acceptance shall be delivered by mail to a regularly established post office, or by telex, telegram or cable through a regularly established agency of a commercial telex, telegram or cable company.  Each purchase order shall be deemed to be an offer by DISTRIBUTOR to purchase the Products pursuant to the terms of this Agreement and, when accepted by SUPPLIER as hereinabove provided, shall give rise to a contract under the terms set forth herein to the exclusion of any additional or contrary terms set forth in the purchase order.

4.3  Delivery Terms. "Free Carrier" shall be construed in accordance with INCOTERMS 1980 of the International Chamber of Commerce.  SUPPLIER shall have no further responsibility for the Products, and all risk of damage to or loss or delay of the Products shall pass to DISTRIBUTOR upon their delivery at the Free Carrier delivery point to (a) a common carrier or (b) an agent or any other person specified by DISTRIBUTOR acting on behalf of DISTRIBUTOR.  DISTRIBUTOR shall insure each shipment of Products with a reputable insurer for the full invoice of such shipment.  Such insurance shall provide for full coverage from the time the Products are delivered at the Free Carrier point until DISTRIBUTOR shall have paid SUPPLIER for such Pr oducts in full.  SUPPLIER reserves all rights with respect to delivered Products permitted by law including, without limitation, the rights of rescission, repossession, resale, and stoppage in transit until the full amount due from DISTRIBUTOR in respect of all delivered Products has been paid.

4.4  Modification of Orders.  No accepted purchase order shall be modified or cancelled except upon the written agreement of both parties.  DISTRIBUTOR'S purchase orders or mutually agreed change orders shall be subject to all provisions of this Agreement, whether or not the purchase order or change order so states.

5.1  Prices.  The prices to be paid by for Products purchased pursuant to the Distribution Agreement shall be the same price as Supplier charges other non-affiliated third party distributors or other sales made on a wholesale basis as modified from time to time in Supplier’s discretion but only if the same modification is made for other non-affiliated third party distributors or wholesale purchasers.

5.2  Price Increases, Decreases.  SUPPLIER may, at any time during the term of this Agreement, increase its prices for the Products by providing DISTRIBUTOR with at least sixty (60) days prior written notice.  Increased prices for all Products shall not apply to purchase orders accepted prior to the effective date of the price increase unless such orders provide for delivery, and delivery is in fact made, more than one-hundred and twenty (120) days after the date of acceptance of the order.  Price decreases with respect to all Products shall be effective immediately upon written notice to the DISTRIBUTOR on all such Products not yet delivered.

5.3  Payment Terms.  Until such time as DISTRIBUTOR shall have established a credit history satisfactory to SUPPLIER, payments by DISTRIBUTOR hereunder shall be made by irrevocable, transferrable and divisible letter of credit opened at DISTRIBUTOR'S expense, issued or confirmed by a bank specified by, or acceptable to, SUPPLIER, cash in advance, or such other method of secured payment as SUPPLIER shall prescribe.  Thereafter, all payments hereunder shall be due net forty-five (45) days from the date of shipment of the Products, or from the date of invoice for such charges as taxes, duties, interest or like special charges, payable to the bank or banks specified by SUPPLIER in writing from time to time.  All payments hereunder sh all be made in U.S. dollars or such other currency as may be mutually agreed upon.

5.4  Resale Prices.  DISTRIBUTOR may resell Products at such prices as DISTRIBUTOR, in its sole discretion, shall determine.

5.5  Overdue Payments.  If and for so long as any payment from DISTRIBUTOR to SUPPLIER under this Agreement shall be overdue:

6.1  Acceptance of Products.  In the event of any shortage, damage or discrepancy in or to a shipment of Products, DISTRIBUTOR shall promptly report the same to SUPPLIER and furnish such written evidence or other documentation.  SUPPLIER shall not be liable for any such shortage, damage or discrepancy unless SUPPLIER has received notice and substantiating evidence thereof from DISTRIBUTOR within thirty (30) days of arrival of the Products at DISTRIBUTOR'S shipping address in the Territory.  If the substantiating evidence delivered by DISTRIBUTOR demonstrates to SUPPLIER'S satisfaction that SUPPLIER is responsible for such shortage, damage or discrepancy, SUPPLIER shall promptly deliver additional or substitute Products to DISTRIB UTOR in accordance with the delivery procedures set forth herein and SUPPLIER shall be responsible for all losses and expenses suffered or incurred by DISTRIBUTOR..

7.1  Delay.  Supplier shall be liable for any loss or damage caused by delay in furnishing products and services or any other performance under or pursuant to this agreement.

9.1  Use of Trademarks.  SUPPLIER hereby grants to DISTRIBUTOR a non-exclusive, non-transferable, and royalty-free right and license to use the SUPPLIER trademarks specified in Exhibit V attached hereto, as such Exhibit may be modified from time to time during the term of this Agreement, in connection with the sale or other distribution, promotion, advertising and maintenance of the Products for so long as such trademarks are used by DISTRIBUTOR in accordance with SUPPLIER'S standards, specifications and instructions, but in no event beyond the term of this Agreement.  DISTRIBUTOR shall afford SUPPLIER reasonable opportunities during the term hereof to inspect and monitor the activities of DISTRIBUTOR in order to ensure DISTRIBUTOR'S use o f the trademarks in accordance with SUPPLIER'S standards and instructions.  DISTRIBUTOR shall acquire no right, title or interest in such SUPPLIER trademarks other than the foregoing limited license, and DISTRIBUTOR shall not use any SUPPLIER trademarks as part of DISTRIBUTOR'S corporate or trade name or permit any third party to do so without the prior written consent of SUPPLIER.

9.2  Registration.  SUPPLIER shall use its best efforts to register the SUPPLIER trademarks specified in Exhibit V, as such Exhibit may be modified during the term of this Agreement, in such jurisdictions within the Territory in which SUPPLIER determines that registration is necessary or useful to the successful distribution of the Products.  In addition, in the event SUPPLIER believes that it is advisable to effect any filing or obtain any governmental approval or sanction for the use by DISTRIBUTOR of any of SUPPLIER'S trademarks pursuant to this Agreement, the parties shall fully cooperate in order to do so.  All expenses relating to the registration of SUPPLIER'S trademarks in the Territory as well as the making of any filing or obtaining any governmental approvals for the use by DISTRIBUTOR of SUPPLIER'S trademarks shall be borne by SUPPLIER.

9.3  Markings.  DISTRIBUTOR shall not, without the prior written consent of SUPPLIER, remove or alter any patent numbers, trade names, trademarks, notices, serial numbers, labels, tags or other identifying marks, symbols or legends affixed to any Products or containers or packages.

9.4  Infringements.  DISTRIBUTOR shall promptly notify SUPPLIER of any use by any third party of SUPPLIER'S trademarks or any use by such third parties of similar marks which may constitute an infringement or passing off of SUPPLIER'S trademarks.  SUPPLIER reserves the right in its sole discretion to institute any proceedings against such third party infringers and DISTRIBUTOR shall refrain from doing so.  DISTRIBUTOR agrees to cooperate fully with SUPPLIER in any action taken by SUPPLIER against such third parties, provided that all expenses of such action shall be borne by SUPPLIER and all damages which may be awarded or agreed upon in settlement of such action shall accrue to SUPPLIER.

9.5  Termination of Use.  DISTRIBUTOR acknowledges SUPPLIER'S proprietary rights in and to the SUPPLIER trademarks and any trade names regularly applied by SUPPLIER to the Products, and DISTRIBUTOR hereby waives in favor of SUPPLIER all rights to any trademarks, tradenames and logotypes now or hereafter originated by SUPPLIER.  DISTRIBUTOR shall not adopt, use or register any words, phrases or symbols which are identical to or confusingly similar to any of SUPPLIER'S trademarks.  Upon termination of this Agreement, DISTRIBUTOR shall cease and desist from use of the SUPPLIER trademarks in any manner.  In addition, DISTRIBUTOR hereby empowers SUPPLIER and agrees to assist SUPPLIER, if requested, to cancel, revoke or withd raw any governmental registration or authorization permitting DISTRIBUTOR to use SUPPLIER trademarks in the Territory.

10.1  DISTRIBUTOR shall be solely responsible for and shall pay, or reimburse SUPPLIER for, all taxes, duties, import deposits, assessments and other governmental charges, however designated, which are now or hereafter imposed under or by any governmental authority or agency, that are (a) associated with the performance by SUPPLIER of its obligations hereunder the payment of any amount by DISTRIBUTOR to SUPPLIER pursuant to this Agreement, (b) based on the Products or their use, or (c) relate to the import of the Products into the Territory in accordance with then prevailing law or regulations.

ARTICLE 11  

11.1  Import Documentation.  DISTRIBUTOR shall be responsible for obtaining all licenses and permits and for satisfying all formalities as may be required to import Products into the Territory in accordance with then prevailing law or regulations. SUPPLIER shall be responsible for furnishing DISTRIBUTOR with necessary documents or information for SUPPLIER to obtain all import licenses or permits.

11.2.  Export Regulations.  SUPPLIER shall be responsible for obtaining all licenses and permits and for satisfying all formalities as may be required to export Products out of the country it is located in accordance with the applicable laws and regulations.

12.1  Term.  This Agreement shall take effect with respect to the Territory as of the date first above written and shall continue in force for the initial period specified in Exhibit III.  Thereafter, this Agreement shall be renewed for additional periods of one (1) year each, commencing on January 1 of each year, if each of the parties shall have given the other written notice of its renewal of this Agreement no later than July 1 of the previous year.

12.2  Termination.  Notwithstanding the provisions of Section 13.1 below, this Agreement may be terminated in accordance with the following provisions:

       

 

12.3  Rights and Obligations on Termination.  In the event of termination of this Agreement for any reason, the parties shall have the following rights and obligations;

ARTICLE 13   

13.1  Definition.  Force Majeure shall mean any event or condition, not existing as of the date of signature of this Agreement, not reasonably foreseeable as of such date and not reasonably within the control of either party, which prevents in whole or in material part the performance by one of the parties of its obligations hereunder or which renders the performance of such obligations so difficult or costly as to make such performance commercially unreasonable.  Without limiting the foregoing, the following shall constitute events or conditions of Force Majeure:  acts of State or governmental action, riots, disturbance, war, strikes, lockouts, slowdowns, prolonged shortage of energy supplies, epidemics, fire, flood, hurricane, typhoon, earthquake, lightning and explosion.  It is in particular expressly agreed that any refusal or failure of any governmental authority to grant any export license legally required for the fulfillment by SUPPLIER of its obligations hereunder shall constitute an event of Force Majeure.

13.2  Notice.  Upon giving notice to the other party, a party affected by an event of Force Majeure shall be released without any liability on its part from the performance of its obligations under this Agreement, except for the obligation to pay any amounts due and owing hereunder, but only to the extent and only for the period that its performance of such obligations is prevented by the event of Force Majeure.  Such notice shall include a description of the nature of the event of Force Majeure, and its cause and possible consequences.  The party claiming Force Majeure shall promptly notify the other party of the termination of such event.

13.3  Confirmation.  The party invoking Force Majeure shall provide to the other party confirmation of the existence of the circumstances constituting Force Majeure.  Such evidence may consist of a statement or certificate of an appropriate governmental department or agency where available, or a statement describing in detail the facts claimed to constitute Force Majeure.

13.4  Suspension of Performance.  During the period that the performance by one of the parties of its obligations under this Agreement has been suspended by reason of an event of Force Majeure, the other party may likewise suspend the performance of all or part of its obligations hereunder to the extent that such suspension is commercially reasonable.

13.5  Termination.  Should the period of Force Majeure continue for more than six (6) consecutive months, either party may terminate this Agreement without liability to the other party, except for payments due to such date, upon giving written notice to the other party.

ARTICLE 14  

ARBITRATION  

14.1  Disputes.  Any dispute, controversy or claim arising out of or relating to this Agreement shall be submitted to China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.

14.2  Governing Law.  This Agreement shall be governed by, and interpreted and construed in accordance with, the laws of the People’s Republic of China.

ARTICLE 15  

MISCELLANEOUS  

15.1  Relationship.  This Agreement does not make either party the employee, agent or legal representative of the other for any purpose whatsoever.  Neither party is granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.  In fulfilling its obligations pursuant to this Agreement each party shall be acting as an independent contractor.

15.2  Assignment.  Neither party shall have the right to assign or otherwise transfer its rights and obligations under this Agreement except with the prior written consent of the other party; provided, however, SUPPLIER shall be entitled to assign any or all of its rights and obligations hereunder to any of its subsidiaries, provided that SUPPLIER shall remain fully liable for the performance of all its obligations hereunder; and further provided that a successor in interest by merger, by operation of law, assignment, purchase or otherwise of the entire business of either party shall acquire all rights and obligations of such party hereunder.  Any prohibited assignment shall be null and void.

15.3  Notices.  Notices permitted or required to be given hereunder shall be deemed sufficient if given by registered or certified air mail, postage prepaid, return receipt requested, addressed to the respective addresses of the parties as first above written or at such other addresses as the respective parties may designate by like notice from time to time.  Notices so given shall be effective upon (a) receipt by the party to which notice is given, or (b) on the fourteenth (l4th) day following the date such notice was posted, whichever occurs first.

15.4  Entire agreement.  This agreement, including exhibits I through vi attached hereto and incorporated as an integral part of this agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all previous distributorship agreements by and between supplier and distributor as well as all proposals, oral or written, and all negotiations, conversations or discussions heretofore had between the parties related to this agreement.  Distributor acknowledges that it has not been induced to enter into this agreement by any representations or statements, oral or written, not expressly contained herein.

15.5  Amendment.  This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by written amendment signed by the parties hereto.

15.6  Publicity.  This Agreement is confidential and no party shall issue press releases or engage in other types of publicity of any nature dealing with the commercial and legal details of this Agreement without the other party's prior written approval, which approval shall not be unreasonably withheld.  However, approval of such disclosure shall be deemed to be given to the extent such disclosure is required to comply with governmental rules, regulations or other governmental requirements.  In such event, the publishing party shall furnish a copy of such disclosure to the other party.

15.7  Severability.  In the event that any of the terms of this Agreement are in conflict with any rule of law or statutory provision or are otherwise unenforceable under the laws or regulations of any government or subdivision thereof, such terms shall be deemed stricken from this Agreement, but such invalidity or unenforceability shall not invalidate any of the other terms of this Agreement and this Agreement shall continue in force, unless the invalidity or unenforceability of any such provisions hereof does substantial violence to, or where the invalid or unenforceable provisions comprise an integral part of, or are otherwise inseparable from, the remainder of this Agreement.

15.8  Counterparts.  This Agreement shall be executed in two or more counterparts in the English language, and each such counterpart shall be deemed an original hereof.  In case of any conflict between the English version and any translated version of this Agreement, the English version shall govern.

15.9  Waiver.  No failure by either party to take any action or assert any right hereunder shall be deemed to be a waiver of such right in the event of the continuation or repetition of the circumstances giving rise to such right.

IN WITNESS WHEREOF, The parties have caused this Agreement to be executed on the date first above written.