ISSUES AFTER SERVICE OF NOTICE OF TERMINATION TO

ISSUES AFTER SERVICE OF NOTICE OF TERMINATION TO DEALER/DISTRIBUTOR Osvaldo J. Marzorati

2 A. MULTIPLE SCENARIOS (Notice covering a term of 3 months or more) 1. Termination for non renewal (contracts for a definitive period of time) 2. Termination for cause (term of the contract indefinite or definite) 3. Termination for unilateral decision of each party under a clause of the Dealer Agreement 4. Termination by any party in distribution contract contemplating indefinite term (unilateral as well) © Allende & Brea, 2007

3 B. MOTIVATION OF THE PARTIES - PRINCIPAL 1. Failure of dealer after being called his attention to increase sales targets or poor performance in many areas 2. Interest to switch distributorship to an apparent more friendly dealer or a friend of the house 3. Personal dislike of distributor by overseas manufacturer representative © Allende & Brea, 2007

4 C. MOTIVATION OF PARTIES - DEALER 1. Lack of faith in product evolution or manufacturer future 2. Interest to move to distribute a more aggressive competitive product or a new one 3. Serious clashes with overseas representative of manufacturer © Allende & Brea, 2007

5 D. PARTICULAR ISSUES FOR PRINCIPAL 1. 2. 3. 4. 5. 6. Continuance of supply of products Non supply of new products Disputes on warranty on defective products Terms of sale of supply of spares parts, if applicable Cut of quality campaigns Search and contacts with prospective replacement of dealer 7. Advertising 8. Disclosure in media of termination notice © Allende & Brea, 2007

6 E. SPECIAL ISSUES FOR DEALERDURING TERM OF TERMINATION 1. Consideration of sales of stock 2. Consideration on sale of new products 3. Resizing of business 4. Search for a new business 5. Reduction of personnel 6. Early termination of leases 7. Attempt to reduce operative costs 8. Analysis of possible settlement terms or litigation © Allende & Brea, 2007

7 F. CONFLICTING ISSUES FOR DEALER AND PRINCIPAL 1. Supply of products with non-delivery or acceptance of old lines, non-salable colors and the like 2. Cuts on advertising and restrictions in delivery of spares or its permanent terms 3. How to address disposal of special tooling or machinery 4. Appearance of prospective new dealer who announces date of opening with new products 5. Attempt to block through court action appointment of new distributor © Allende & Brea, 2007

8 G. ON TERMINATION OF PERIOD PROVIDED BY NOTICE 1. Disclosure of media termination unilateral or bilateral (settlement) 2. Announcement of new distributor to take over area or territory 3. Issue of disposal of stock 4. Dismissal of personnel 5. Hiring experts to evaluate damages originated in termination 6. Decision to sue principal for value of loss and damages caused by termination © Allende & Brea, 2007

9 MIAMI OFFICE Representative Office BUENOS AIRES OFFICE Maipú 1300, Piso 10 (C 1006 ACT) Buenos Aires Argentina Tel: (54 -11) 4318 -9900 Fax: (54 -11) 4318 -9999 lex@allendebrea. com. ar Four Seasons Tower, 1441 Brickell Avenue, Suite 1008 Miami, Florida 33131 Tel: (305) 374 -8830 / 858 -1516 Fax: (305) 374 -8892 dk@allendebreamiami. com © Allende & Brea, 2007