Information for Dealers

March 7, 2008

Dear Dealer:

In October, 2005 our company, Dinli USA, LLC, entered into an exclusive United States distribution agreement with Dinli Metal Industrial Company, Ltd. for the products they manufacture.  Since that time we have encountered many difficulties with Dinli Metal, including obtaining units, parts and warranty reimbursement.   

Litigation ensued and a Federal Judge ruled in favor of our company, awarding $45.6 million in damages against Dinli Metal.  Dinli Metal failed to appeal the judgment.  We view the Court’s ruling as a moral victory.  Dinli Metal has not rectified the breaches nor paid the judgment.  We expect that collection in a foreign country will be difficult. 

The United States District Court for the Northern District of Texas ruled that Dinli Metal breached its Distribution Agreement, made false representations when negotiating the Distribution Agreement and Asset Purchase Agreement, committed fraud when negotiating the Distribution Agreement and was negligent in the performance of their duties.  The court specially found that Dinli Metal breached the distribution agreement by a) failing to obtain compliance certifications from the Environmental Protection Agency; b) failing to notify Dinli USA of its inability to deliver products as provided for in the contract; and c) failing to provide warranty parts and services under the contract.   The Court found that Dinli Metal’s refusal to satisfy dealer warranty claims for units sold before and after the closing of the transaction with Dinli USA adversely affected Dinli USA.  Dinli Metal made a number of all allegations against Dinli USA.  The court ruled in Dinli USA’s favor on all allegations lodged by Dinli Metal, finding that Dinli Metal did not present any genuine issue of material facts regarding its claims against Dinli USA. 

Please note that the court ruling does not cover any warranty claims or other disputes for units purchased through the previous distributor, Dinli LP, which was located in Dallas, Texas.  Dinli USA did not purchase Dinli LP and we have no authority to act on behalf of Dinli LP or Dinli Metal for those units.  As we had no contractual authority, we had no standing with court to seek payment of those claims.  If you have unresolved claims or disputes, you will need to address those directly with Dinli Metal or the owners of the former Dinli LP (the company no longer exists). 

Since our inception in October, 2005, Dinli USA has operated at a loss.  We have worked diligently to provided great service to the dealers, but Dinli Metal’s breaches have directed affected our ability to service the dealers.  Dinli Metal has not accepted a parts order from us since January, 2006.  Thankfully our business philosophy of providing outstanding service dictated that we had a large parts supply.  We continue to ship parts daily, although some parts are now out of stock.  We have been working hard to identify alternate manufacturers for parts and have been able to fulfill many orders that we would not have been able to otherwise (parts are noted as alternative source).  Unfortunately, Dinli Metal manufactures many of the parts used in the units, therefore there is not an alternative source available.  You should consult the dealer area of our website for stock status and current pricing.   

Dinli USA still holds exclusive distribution rights for any products made by Dinli Metal Industrial Co., Ltd. for the U.S. market.   Dinli Metal manufactures products for its own brand as well as other brand names.  Dealers should visit Dinli Metal’s website at www.dinliglobal.com to familiarize themselves with Dinli Metal’s products.  U.S. dealers and distributors are cautioned against obtaining Dinli Metal manufactured products from any source other than Dinli USA. 

The last two and a half years has been a very difficult time for our staff.  We entered into the distribution agreement with Dinli Metal with great expectations.  Unfortunately due to Dinli Metal’s breaches we are unable to provide the services to you that we had envisioned.  We hope you will understand that we have worked in good faith despite the difficult circumstances that are beyond our control.  

Sincerely, 

The Dinli USA Team