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EXHIBIT 10.22
DISTRIBUTORSHIP AGREEMENT
BETWEEN
WARTSILA COMPRESSION SYSTEMS GmbH
AND
HANOVER COMPRESSOR COMPANY
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DISTRIBUTORSHIP AGREEMENT
THIS DISTRIBUTORSHIP AGREEMENT (hereinafter referred to as the "Agreement") is
made on the 16th day of January, 1997 between
WARTSILA COMPRESSION SYSTEMS GmbH, a company incorporated under the laws of
Germany with principal offices at ▇▇▇▇▇▇▇▇▇▇▇, Germany (hereinafter referred to
as the "Grantor") which expression shall include its successors and permitted
assignees of the first part;
And
HANOVER COMPRESSOR COMPANY, a company incorporated under the laws of Delaware,
with principal offices at Houston, Texas U.S.A (hereinafter referred to as the
"Distributor"), which expression shall include its successors and permitted
assignees of the second part;
Collectively referred to as the "Parties",
WHEREBY IT IS AGREED AS FOLLOWS:
ART. 1 SCOPE OF THE AGREEMENT
1.1. The Grantor hereby grants and the Distributor accepts (I) the
exclusive right to sell ▇▇▇▇▇, ▇▇▇▇▇ and W34SG lean burn gas
engines to compressor drive application customers, (ii) the
non-exclusive right to sell W220SG and W180SG to compressor
drive application customers, (iii) the non-exclusive right to
sell the Spare Parts to compressor drive application customers
and (iv) the non-exclusive right to maintain an authorized
service and maintenance station for compressor drive
applications for the Products in the Territory. The rights
herein are granted in respect of the territory provided in
Article 2.4 (hereinafter referred to as the "Territory").
ART. 2 DEFINITIONS
2.1. The following terms shall have the meanings specified in this
Article 2 when capitalized and used in this Agreement,
including any Appendix attached hereto.
2.2. "Products" shall mean the following gas diesel engines: ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇, W220SG and W180SG and their updated versions.
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2.3. "Spare Parts" shall mean WD OEM original spare parts, original
auxiliary and exchange parts for the Products, including any
updated versions thereof.
2.4. "Territory" shall mean North and South America excluding
Canada.
2.5. "Buyer" shall mean the customers of the Distributor who are
the purchasers of the Products and Spare Parts.
2.6. "Contract" shall mean the specific delivery contract between
the Grantor and the Distributor.
2.7. "Equipment" shall mean any materials, apparatus, machinery,
structures, tools, supplies and other goods provided and to be
provided by the Grantor pursuant to this Agreement and the
Contract.
2.8. Wartsila Diesel Group shall mean Wartsila Diesel International
Ltd Oy and its subsidiaries.
ART. 3 AGREEMENT DOCUMENTS
3.1. The supply and sale of the Products shall be made by the
Grantor to the Distributor or by the Grantor to the Buyer in
accordance with this Agreement and with the Appendices, which
are an integral part of the Agreement and which are hereby
incorporated herein.
3.2. In case of any discrepancy or inconsistency between the terms
herein and those specified in any Appendix hereof, the
Appendix shall overrule the Agreement text.
ART. 4 DUTIES OF THE DISTRIBUTOR
4.1. The Distributor buys and sells in his own name and for this
own account without having any power to bind the Grantor in
any manner without his explicit approval. The Distributor
shall solicit customers from the Territory and promote the
sale of the Products and Spare Parts in the Territory. When
performing its obligations under this Agreement the
Distributor shall further the interests of the Grantor.
Unless otherwise agreed, the Distributor shall not solicit
Buyers having the location of project site outside the
Territory without the approval of the Grantor. The
Distributor shall not export Products and Spare Parts outside
of the Territory other than to Buyers which it is permitted to
solicit hereunder. It is the responsibility of the
Distributor to transmit orders on projects located outside of
the
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Territory other than to Buyers which it is permitted to
solicit hereunder to the Grantor.
4.2. As soon as the Distributor enters into a sales project with a
Buyer or his representatives he will discuss with the Grantor
and decide on the technical feasibility of the project, the
technical specifications and other data such as performance
guarantees, the price, the delivery time, contractual terms
and conditions.
4.3. As the Grantor's authorized service and maintenance station,
the Distributor is entitled to carry out service and
maintenance work on the Products. The Distributor shall, in
accordance with the provisions set out below, provide service
and maintenance of the Products and, on orders from the
Grantor, carry out guarantee work on the Products.
4.4. The Grantor shall upon reasonable notice have the right to
inspect the Distributor's service and maintenance facilities
as well as its stock during normal business hours for the
purpose of confirming the quality of work performed on or in
connection with the products as well as the status and quality
of the facilities. Such an inspection shall be conducted in a
manner so as not interfere unreasonably with the Distributor's
business.
4.5. The Distributor shall, in consultation with the Grantor,
appoint, train and maintain an efficient and professionally
qualified Products and Spare Parts sales organization
(including product application engineering). Also, the
Distributor shall provide and organize an effective and
technically qualified organization and service facilities
network for service and maintenance of the Products. The
Distributor shall be responsible for the activities of its
local service outlets and other representatives and
subcontractors.
4.6. Distributor may not assign the Agreement nor engage any third
party to sell the Products or the Spare Parts or to carry out
the service or maintenance of the Products without the prior
written consent of the Grantor. During the validity of this
Agreement the Grantor shall reserve the right to conclude
direct sales contracts or other sales agreements without the
assistance of the Distributor, however, only in cases where
the Buyer wants to deal directly with the Grantor. Grantor
will not solicit any such orders.
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4.7. Purchase orders shall be placed with the Grantor in writing
for all Products required by the Distributor. No contract
shall be deemed to have been entered into until the Grantor
has confirmed the Distributor's purchase order in writing.
4.8. The Distributor shall be liable for the costs and damages
directly resulting from his own proceedings and/or from his
acting.
4.9. The Distributor shall cooperate in each country with the local
network company of Wartsila Diesel Group.
ART. 5 SPARE PARTS
5.1. The Distributor shall buy exclusively from the Wartsila Diesel
Group all the Spare Parts for the Products.
5.2. Sale of Spare Parts to the Distributor shall be made in
accordance with the general terms and conditions for the sale
of spare parts issued by the Wartsila Diesel Group.
5.3. Grantor shall make and keep available sufficient Spare Parts
for the Products sold hereunder.
ART. 6 PERFORMANCE OF SERVICE AND MAINTENANCE WORK BY THE DISTRIBUTOR
6.1. When carrying out service and maintenance work the Distributor
shall use only original Spare Parts supplied by the Grantor,
unless the Grantor or the Wartsila Diesel Group fail to supply
them in a timely manner.
6.2. For the purpose of carrying out service and maintenance on the
Products the Distributor shall purchase from the Grantor the
necessary service tools as shall be separately agreed.
6.3. In carrying out all work the Distributor shall follow the
general written instructions of the Grantor. In specific
cases, it may be agreed that the Distributor shall follow the
specific instructions of the Grantor. A report of every
service and maintenance work carried out by the Distributor
shall be provided to the Grantor without delay.
6.4. The Distributor shall be responsible to its customers for its
service and maintenance work performed on the Products. When
carrying out service and maintenance work or selling the spare
parts, the Distributor shall closely
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cooperate with and use the services of the local network
companies of Wartsila Diesel Group.
6.5. Work to be carried out on the Products which falls under
warranty may be performed by the Distributor for the account
of the Grantor only on the Grantor's approval given separably
and on prices to be agreed upon. In the event of emergency,
the Distributor shall have the right to proceed with the work,
and the Grantor shall give his approval as soon as possible
provided that the work is in accordance with warranty
obligations. Such work shall be carried out strictly in
accordance with the prevailing warranty obligations. All
Product parts replaced under the warranty shall be retained by
the Distributor until the Grantor gives further instructions,
unless Grantor fails to give timely instructions. Upon the
Grantor's request the Distributor shall send such parts to the
Grantor at the Grantor's expense and in accordance with the
Grantor's instructions.
6.6. THE DISTRIBUTOR SHALL NOT PROMISE TO REPLACE PARTS AND OFFER
SERVICE UNDER GUARANTEE AND AT GRANTOR'S COST WITHOUT
GRANTOR'S APPROVAL.
ART. 7 DUTIES OF THE GRANTOR
7.1. The Grantor shall assist the Distributor in preparing
quotations and technical specifications and shall give him all
necessary prospectus(es) and price-lists, which remain the
property of the Grantor, and may be transmitted to customers
only upon the written consent of the Grantor.
7.2. The Grantor shall deliver the Products to the Distributor in
accordance with this Agreement and the applicable sales
contract.
7.3. The Grantor shall not appoint any other distributor in the
Territory for the compressor drive applications of the
Products without the approval of the Distributor and shall not
sell gas compressor packages in the Territory except as
provided in article 4.6.
7.4. The Grantor shall provide support to the Distributor in
creating the competencies needed to carry out objective of
this Agreement.
ART. 8 PRICES AND PAYMENT
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8.1. The Grantor shall sell and the Distributor shall purchase
Products at prices and payment terms to be agreed upon per
project.
8.2. The Grantor shall sell and the Distributor shall purchase all
Spare Parts at the Grantor's Global List Prices valid on the
date of the Distributor's firm, irrevocable order. Packing,
handling, transport, taxes and duties shall be calculated
separately. Additional costs shall be charged for orders via
the 24-hours-call-out system. Alternatively, the Distributor
may purchase Spare Parts from Wartsila Diesel Inc., or from
another Wartsila Diesel Company in the Territory.
ART. 9 MINIMUM PURCHASE REQUIREMENT
The Parties shall have the following obligations:
1997
The Parties shall do everything reasonably necessary to put
into operation the pilot projects for ▇▇▇▇▇, ▇▇▇▇▇, and W34SG.
1998
The Distributor shall use its reasonable best efforts to
purchase at least 22MW of Products.
1999
The Distributor shall use its reasonable best efforts to
purchase at least 40MW of Products.
2000
Distributor will be required to purchase a minimum of 50MW of
Products.
In the event the Distributor does not reach the minimum
purchase requirements for the year 2000, the Parties shall
discuss in good faith and agree on reasonable minimum purchase
requirements for the following five years. If no such
agreement is reached by March 30, 2001, WCS has the right to
terminate the exclusivity of the Agreement; however, the
balance of the Agreement shall remain in full force and
effect.
In the event the Distributor reaches the minimum purchase
requirement for the year 2000, the Distributor shall have
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the exclusive rights as provided in this Agreement in the Territory
until the end of the year 2005, whereupon the Parties shall discuss in
good faith and agree on reasonable minimum purchase requirements
for the following five years. If no such agreement is reached by March
30, 2006, WCS has the right to terminate the exclusivity of the
Agreement; however, the balance of the Agreement shall remain in full
force and effect.
A Product is deemed to be purchased in a calendar year if it has
been delivered during the said calendar year.
The Parties acknowledge that a non-fulfillment of the minimum
purchase requirement does not entitle the Grantor to claim damages.
ART. 10 DELIVERY
10.1. Except when otherwise agreed in writing, all Products ordered by the
Distributor and accepted by the Grantor shall be delivered as agreed
in each case (Incoterms 1990, or any valid revision thereof). Unless
otherwise agreed upon between the Parties the contract and terms and
conditions, as provided in Appendix 4 of the Cooperation Agreement,
shall apply to all sales and deliveries by the Grantor under this
Agreement.
ART. 11 COMMISSIONS IN CERTAIN CASES
11.1. In the event the Distributor finds a project outside the Territory and
provided the project is not known to the Grantor or to its affiliates
before the Distributor informs in writing about it, tho Distributor is
entitled to a commission of 0.5%. However, it is a precondition for
the commission that a binding contract has been signed for the project
at the latest twelve (12) months after the Distributor has informed
the Grantor of the project in writing.
11.2. In the event a sales project needs substantial sales efforts from the
Grantor (or its affiliate) and the Distributor, the parties may agree
on a commission of 1.5%. The agreed commission is payable by the
Grantor to the Distributor in the event the project is outside the
Territory and by the Distributor to the Grantor in the event the
project is inside the Territory. This commission may be agreed upon
in deals where consultants are involved, or where the beneficial owner
conducting the sales negotiations is other than the formal owner,
giving due consideration to the actual location where,
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and the parties with whom, the relevant decisive business negotiation
is conducted and completed.
11.3. The commission shall be calculated on the sales contract value (Ex-
Works) of the sold Products. Under no circumstances shall commission
be paid on third party commissions and transport costs, if any.
11.4. The party which is entitled to commission shall acquire a right to a
pro rata commission on each payment made by the customer. The
commission payment shall be made no later than thirty (30) days after
payment has been made by the customer. If the customer fails to make
payment in full, the commission shall be limited to the pro rata
amount payable on the sums actually received.
ART. 12 WARRANTY
12.1. The applicable normal warranty provisions of the Grantor shall apply
to sale of Products and Spare Parts.
12.2. Where a Spare Part is used from the Distributor's stock in fulfillment
of the Grantor's warranty obligations the Distributor shall be
entitled to reimbursement for the actual cost of the transaction of
the Spare Part used.
ART. 13 ADVERTISING AND SALES PROMOTION
13.1. The Distributor shall cooperate in the Grantor's marketing plans and
carry out the publicity and sales promotion required to increase the
sales of the Products and the Spare Parts. The Distributor shall
prepare and distribute all its sales promotion materials in
cooperation and liaison with the Grantor's and Wartsila Diesel Group's
marketing and sales promotion unit.
13.2. Advertising material (brochures, leaflets, folders) shall be supplied
at no charge by the Grantor to the extent to which such material is
available and in quantities relative to the Distributor's sales of the
Products and the Spare Parts.
ART. 14 TECHNICAL ASSISTANCE AND TESTS
14.1. The Distributor shall arrange for the testing and/or registration by
the relevant institution in the Distributor's area of operation of
such Products as are agreed between the Parties. All such tests and
registrations shall be made in the name of the Grantor
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and the Distributor shall furnish the Grantor with all reports in
connection therewith.
ART. 15 BRAND NAMES, TRADE MARKS AND PATENTS
15.1. The Distributor shall market the Products and the Spare Parts under
the brand names, trade marks, patents and commercial designations as
indicated by the Grantor.
15.2. In no event shall the Distributor claim status as the registered user
of the said brand names, trademarks, patents or other rights, which
remain the property of the Grantor.
15.3. Should any infringement of the Grantor's patents, trademarks or other
rights come to the Distributor's notice, the Distributor shall
immediately inform the Grantor thereof and provide such reasonable
assistance to the Grantor as may be appropriate in any proceedings
that the Grantor shall see fit to take in protection of such rights,
in the Territory.
ART. 16 CONFIDENTIALITY AND TRADE SECRETS
16.1. The Distributor and Grantor each hereby undertakes to treat as
strictly confidential, even after the expire of this present Agreement
all terms and conditions agreed upon with the Grantor or Distributor
or information received from the Grantor or Distributor, which
information includes any technical or commercial information supplied
by the Grantor or Distributor which whether patented or not is clearly
not intended for wider distribution unless disclosure of such
information is expressly permitted by this Agreement or required by
applicable law.
16.2. Neither Distributor nor the Grantor shall not, even after the
expiration of this Agreement, use or communicate to third parties any
trade secrets which he may have in any way learned through his
activity for the Grantor, or the Distributor, as the case may be.
ART. 17 EXPIRATION AND TERMINATION OF THE AGREEMENT
17.1. This Agreement shall enter into force on the 16th day of January,
1997.
17.2. This Agreement shall be valid for ten (10) years. After the
expiration of the term, the Agreement continues to be force until
terminated at any time by either party,
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subject to an advance notice of six (6) calendar months in writing;
provided, however, that termination shall not be permitted until the
expiration of Distributor's exclusivity as otherwise provided herein.
The aforesaid notwithstanding, this Agreement may be terminated by the
other Party without prior notice with immediate effect as a result of
any of the following events:
o in the event of acquisition of control or at least 50% of
voting stock of one Party by a direct competitor of the other
Party,
o in the event of the seeking into liquidation, bankruptcy or
winding up, whether voluntary or involuntary, of the other
Party and,
o in the event of any material breach by one Party of any of the
terms and conditions of this Agreement,
The Grantor may terminate the exclusivity portion of this Agreement
within three (3) months after March 30th, 2001, upon prior written
notice in the event the Distributor fails to fulfill the minimum
purchase requirements as defined in article 9. However, the existing
binding delivery contracts shall not be effected.
17.3. The termination of this Agreement in accordance with article 17.2
shall in no circumstances give rise to any indemnity, damages or
compensation. This Article shall not, however affect any rights,
claims or liabilities which may, prior to the termination, have arisen
between the Parties. Notice of the termination must be given by
registered mail.
17.4. Expire or termination of the Agreement shall not entitle the
Distributor to any compensation or indemnity, in respect of any
possible sales organization set up by the Distributor, investment
made, the relations established and goodwill acquired.
17.5. On the expire of the Agreement the Distributor shall, within fourteen
(14) days of the expire date, return to the Grantor all samples,
material and documents which have been supplied to the Distributor by
the Grantor and are in the Distributor's possession. Such samples,
material and documents shall be returned, at the Distributor's risk
and expense to the Grantor's factory or such other place as the
Grantor may specify. The Grantor shall have the option to, repurchase
any Spare Parts remaining in the Distributors stock on the expire
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of the Agreement at the price indicated in the Grantor's then
prevailing EX WORKS price list less 30% and any Products at Grantor's
original sales price. The Distributor shall, however, be entitled to
reimbursement of any out of pocket expenses incurred as a result of
any customs duty, freight and handling costs of the said Products and
Spare Parts. The Grantor may exercise the option by giving notice
thereof to the Distributor not later than forty (40) days from the
expire date of this Agreement.
17.6. Such notice shall constitute an agreement of purchase and sale as
herein provided, binding upon the Parties. Should the Grantor fail to
exercise such option, the Distributor may dispose of such inventory as
it deems appropriate.
17.7. In the event Distributor purchases Wartsila Diesel International Ltd.,
Oy's ("WD") interest in Grantor, WD agrees, by its execution hereof,
to continue to supply Grantor, for a period of two years thereafter,
Products on the same terms as WD has historically provided Products to
Grantor (and modified with the possible changes applicable to WD's
customers generally) and will negotiate with Grantor in good faith an
agreement to continue such supply of Products. Such two year
Agreement and the Agreement to negotiate in good faith is a condition
to the operation of the buy-out provisions of Article 4.8 of the
Shareholders Agreement between Distributor and WD regarding Grantor.
ART. 18 APPLICABLE LAW AND ARBITRATION
18.1. This Agreement and its interpretation and performance, shall be
governed by the laws of Germany.
18.2. If any dispute or disagreement arises out of, relating to, or in
connection with the implementation or performance of this Agreement,
which the parties hereto have been unable to settle or agree upon
within a period of thirty (30) days after the dispute or disagreement
arises, each party shall nominate a senior officer of its management
to meet at a mutually agreed time and place not later than forty five
(45) days after the dispute or disagreement has arisen to attempt in
good faith to resolve such dispute or disagreement.
18.3. Should a resolution of such dispute not be obtained within fifteen
(15) days after the meeting of such senior officers for such purpose,
any party to this Agreement
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may then by written notice to any other submit the dispute to
arbitration
18.4. The negotiations contemplated by this Article 9 are an absolute
conditions precedent to the commencement of arbitration proceedings.
18.5. No arbitration may be commenced in connection with this Agreement
unless the negotiations contemplated by this Article 9 have been
undertaken in a good faith attempt to settle the claim, dispute or
controversy.
18.6. All claims, dispute and/or controversies arising out of, relating to,
or in connection with this Cooperation Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (the "ICC") then in effect.
18.6.1 There shall be three arbitrators, with each parties selecting one; the
third arbitrator, who shall be the chairman of the panel, shall be
selected by the two party-appointed arbitrators. The ICC shall be
empowered to appoint any arbitrator not named in accordance with the
procedure herein.
18.6.2 The award rendered by the arbitrators shall be final.
18.6.3 The costs and expenses of the arbitration (including reasonable
attorney's fees) will be borne by the loosing party, unless the
arbitrators determine that it would be manifestly unfair to honor this
Agreement of the parties and determine a different allocation of
costs.
18.6.4 The arbitration shall be conducted in the English language.
18.6.5 The place of arbitration shall be London United Kingdom.
ART. 19 FINAL PROVISIONS
19.1. This Agreement represents the entire agreement between the Parties
hereto relating to the subject matter hereof and supersedes any prior
agreements and communication. This Agreement shall be binding upon
the respective successors and assignees of the Parties, provided
always that the Agreement shall not be assigned by the Distributor
without the prior written consent of the Grantor.
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19.2. During the validity of the Agreement the Distributor shall at his own
cost and expense, carry and maintain a comprehensive insurance
coverage against the loss or damage to the stock items as well as
against product liability, bodily injury and damage to property
arising out of service and maintenance activities.
19.3. All expenses incurred by the Distributor in fulfilling its obligations
under this Agreement shall be deemed to be covered by the resale
margins and/or sales commissions earned by the Distributor under the
Agreement. Any current or future duties, taxes, such as franchise,
property or turnover taxes, payable in the Distributor's country on
any activity under this Agreement or on the above mentioned commission
granted to the Distributor shall be borne by the Distributor.
19.4. The Agreement may be amended only by a written instrument signed by
duly authorized representatives of both parties and any amendment will
not result in the nullification of this Agreement in its entirety.
19.5. The temporary, limited or specific waiver of any term, provision or
condition hereof shall not be considered a waiver or any other term,
condition or provision hereof, nor of any subsequent breach of the
same term, condition or provision.
19.6. The section headings in the Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of the
Agreement.
19.7. Should any provision of this Agreement be declared void or
ineffective, such declaration shall not affect the validity of any
other provision of this Agreement.
19.8. No action or claim for commission, breach of the Agreement or
otherwise hereunder may be brought by either Party more than twelve
(12) months after the cause of such action or claim occurred, and
under no circumstances more than six (6) months after the date of
expire of this Agreement.
19.9. In the event of Force Majeure the effected or encumbered Party is
obliged to give to the other Party within seven (7) Days from the
beginning thereof a written notice stating the cause of the delay.
Upon the cessation of the Force Majeure the effected Party (or
Parties) shall immediately inform the other Party and shall make all
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efforts within his (their) power to mitigate the effects of such Force
Majeure.
ART. 20 NOTICES
20.1. All notices and other communication under this Agreement shall be in
the English language and must be given by either registered express
mail, courier, telegram, telefax or telex to the addresses provided
below.
A) Wartsila Compression Systems GmbH
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇-▇▇
▇-▇▇▇▇▇ ▇▇▇▇▇▇
B) Hanover Compressor Company
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Fax + ▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Tel: + ▇ ▇▇▇ ▇▇▇ ▇▇▇▇
ART. 21 SIGNATURES TO THE AGREEMENT
IN WITNESS WHEREOF, the Parties hereto, Distributor and Grantor, have cause
their duly authorized representatives to execute this Agreement on the day and
year first written above.
On behalf of the Distributor On Behalf of the Grantor
Signature Signature
Wartsila Diesel International Ltd. Oy accepts and agrees to be bound by Article
17.7 of this Agreement.
Signature