LMI, INC.
PRODUCTION SERVICES AGREEMENT
This Production Services Agreement ("Agreement") is made and entered
into this 9th day of June, 2003 (the "Effective Date") by and between (i)
Linsang Manufacturing, Inc., a Delaware corporation with its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("LMI"), and
(ii) Voxtec, a Division of Marine Acoustics, a Rhode Island corporation with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Company"), who, intending to be legally bound, agree as follows:
1. INTRODUCTION
1.1. Company markets and sells one or more products that LMI has the
capacity to manufacture and in connection with which LMI can provide a suite of
related services.
1.2. The parties wish to enter into this Agreement to provide for certain
terms under which LMI will manufacture Company's product(s) in quantities
ordered by Company and in accordance with specifications and bills of materials
provided or approved by Company, and Company will pay for the products it orders
from Company.
2. SCOPE OF RESPONSIBILITIES
2.1. Specifications. The parties shall mutually agree upon a schedule for
delivery to LMI of (a) the drawings and all product, testing, and quality
specifications ("Specifications"), and (b) listing of materials designated by
manufacturer and part number ("▇▇▇▇ of Materials"), for each Company product
("Product") to be manufactured by LMI in accordance with this Agreement. LMI
expressly agrees that the Specifications and ▇▇▇▇(s) of Materials shall be
considered Confidential Information of Company for purposes of Section 8.
2.2. LMI Production Capability. Upon receipt and approval of the
Specifications and ▇▇▇▇ of Materials for a Product, LMI shall create production
processes for the manufacture of quantities of the Product ordered by Company in
accordance with Section 31 or forecasted in accordance with Section 3.6.
2.3. Verification of Production. In accordance with a mutually agreed upon
schedule, LMI shall deliver to Company a quantity of each Product, that is
sufficient to enable Company to verify that the Product meets the applicable
Specifications and ▇▇▇▇ of Materials. Company shall subject the delivered
quantity of the Product to the testing and analysis procedures that Company
deems appropriate to verify that the Product satisfies the Specifications and
▇▇▇▇ of Materials. If the Product as delivered fails to satisfy the
Specifications or the ▇▇▇▇ of Materials, Company shall so notify LMI, and LMI
shall adjust its manufacturing process and provide a replacement quantity of the
Product for testing and analysis. The process shall continue until Company
determines that the Product provided by LMI satisfies the Specifications and
▇▇▇▇ of Materials.
2.4. Specification Changes. The parties acknowledge and agree that the
Specifications and ▇▇▇▇ of Materials for each Product are subject to change at
any time and from time to time. Company shall request any changes to the
Specifications and/or the ▇▇▇▇ of Materials for any Product in writing as far in
advance as reasonably practicable, and LMI shall promptly advise Company of the
time within which an order for quantities of the Product meeting the modified
Specifications and/or ▇▇▇▇ of Materials could be filled and any change in price
for the Product. The parties shall mutually agree in writing, as promptly as
practicable, upon a schedule for implementation of the necessary adjustments to
LMI's production processes to enable LMI to manufacture the Product so as to
meet the changed Specifications and/or ▇▇▇▇ of Materials; provided, however,
that unless expressly set forth to the contrary in any such written agreement no
change in the Specifications or ▇▇▇▇ of Materials for any Product shall be
applicable to orders for the Product already accepted by LMI in accordance with
Section 32. LMI shall thereupon implement the necessary adjustments in
accordance with such schedule, and the parties shall follow the procedure set
forth in Section 2.3 for verifying that the Product produced by LMI satisfies
the changed Specifications and/or ▇▇▇▇ of Materials.
2.5. Manufacturing. LMI will manufacture and test the Products in
accordance with the Specifications, Bills of Materials, and Purchase Orders
accepted under Section 3.2, and will maintain manufacturing and test records in
accordance with reasonable industry standards. As set forth in Attachment A, all
components and other materials and equipment required in connection with such
manufacture and testing will be acquired or supplied by LMI pursuant to the
Specifications and Bills of Materials, except for such components, other
materials, or equipment that may be supplied by Company ("Consigned Materials").
LMI will use commercially reasonable efforts, based upon forecasts submitted to
LMI in accordance with Section 3.6, to manufacture units of the Products to
fulfill Company's orders for the Products in a timely manner. If at any time
after acceptance of any order in accordance with Section 3.2, LMI learns that
any components or other materials may not be procured or received in sufficient
time to permit LMI to fulfill the order within the time set forth in the order,
LMI will give Company prompt notice and will work diligently with Company to
minimize any resulting delay.
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3. ORDERS AND FORECASTS
3.1. Orders. Company will submit orders to LMI so that its requirements for
quantities of the Products are updated on a rolling basis as follows: Company's
initial order under this Agreement shall set forth the quantity of each Product
to be purchased by Company during 18 full calendar months following the date of
the order and shall specify delivery dates no earlier than 60 days after the
date of the order. Thereafter, between the first and tenth day of each month,
Company shall issue an order setting forth the quantity of the Products to be
delivered during the first month of the rolling three-month period. Each order
shall identify (a) the quantity of the Products required, (b) the proposed
delivery date, (c) the address to which the shipment shall be delivered, and (d)
any other applicable shipping or special instructions.
3.2. Acceptance. All orders for the Products submitted by Company in
accordance with Section 3.1 shall be subject to acceptance in writing by LMI at
its principal place of business and shall not be binding until the earlier of
such acceptance or shipment, and in the case of acceptance by shipment, only as
to the portion of the order actually shipped. All orders placed by Company in
accordance with Section 3.1 shall be accepted unless LMI notifies Company within
three (3) business days after receipt of an order that the delivery schedule
cannot be met. In such event, LMI will furnish Company with a revised delivery
schedule, and unless Company rejects the revised delivery schedule within one
(1) business day after receipt, such revised delivery schedule shall be deemed
accepted.
3.3. Controlling Terms. The terms and conditions of this Agreement will
apply to each order accepted or shipped by LMI hereunder. Legal terms and
conditions on Company's form of purchase order or other business forms will not
apply to any order notwithstanding LMI's acknowledgment or acceptance of such
order.
3.4. Fulfillment. Subject to Section 2.5, LMI shall fill each order in
accordance with its terms. All orders shall be shipped F.O.B. LMI's facility.
Title and risk of loss with respect to each shipment shall pass from LMI to
Company upon delivery of the shipment by LMI to a carrier for transport to the
location specified in the order. Issues relevant to order fulfillment, including
but not limited to methods for packaging and shipment of the Products, shall be
mutually agreed upon by the parties.
3.5. Cancellations and Change Orders. LMI reserves the right to cancel any
orders placed by Company and accepted by LMI as set forth above, or to refuse or
delay shipment thereof, if Company fails to make any payment as provided in this
Agreement or otherwise fails to comply with the terms and conditions of this
Agreement. Company shall be entitled to change or cancel orders accepted by LMI
only in accordance with the procedures set forth in Attachment B.
3.6. Forecasts. To assist LMI in organizing an adequate supply of the
Products to fill Company's orders, Company will submit rolling, non-binding,
three-month forecasts to LMI. Forecasts will be updated on a rolling basis as
follows: Company's initial nonbinding forecast under this Agreement shall set
forth the quantity of the Products to be purchased by Company during the first
two full calendar quarters following any period covered by Company's initial
order placed in accordance with Section 3.1. Thereafter, between the first and
tenth day of each subsequent month, Company shall submit revised nonbinding
forecasts for the last quarter covered by the preceding forecast and a new
nonbinding forecast for the next subsequent calendar quarter.
4. LIMITED WARRANTY AND DISCLAIMER
4.1. Compliance with Specifications. LMI warrants that all units of the
Products shall be manufactured and assembled in accordance with the applicable
Specifications and ▇▇▇▇ of Materials and shall be free from defects in materials
and workmanship for twelve (12) months after the date of delivery to Company.
4.2. Exclusions. The foregoing warranty does not apply to any nonconformity
or defect which is attributable to any component or material obtained by LMI
from a third-party or consigned to LMI by the Company, or which results from (a)
repair or modification of a unit of any Product by anyone other than LMI, or (b)
any damage to or misuse or incorrect use of a unit of any Product.
4.3. Notification and Replacement. If, during the applicable twelve (12)
month warranty period, any unit of a Product received by Company does not
conform to the applicable Specifications or ▇▇▇▇ of Materials or contains or
otherwise exhibits any defect in materials or workmanship, Company shall give
LMI prompt written notice of the nonconformity or defect. Likewise, if LMI
discovers or has reason to believe that any shipment of a Product fails to
conform to the applicable Specifications or ▇▇▇▇ of Materials or contains or
otherwise exhibits any defect in materials or workmanship, LMI shall promptly
notify Company. In each case, LMI's sole obligation, and Company's exclusive
remedy shall be (a) repair or replacement the nonconforming or defective units
of the Products, without charge, with a substitute shipment that satisfies the
warranty set forth herein, or (b) use by LMI of commercially reasonable efforts
to procure repair or replacement of procured components or materials in
accordance with manufacturers' warranties, or (c) at LMI's sole option,
acceptance of return of the nonconforming or defective units of the Product and
refund to Company of all amounts actually paid by Company to LMI for such
nonconforming or defective units. Any nonconforming or otherwise defective
unit(s) of any Product shall be returned to LMI at LMI's request and expense.
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4.4. Disclaimer. THE LIMITED WARRANTY SET FORTH HEREIN IS EXCLUSIVE AND IN
LIEU OF, AND LMI HEREBY DISCLAIMS, ALL OTHER WARRANTIES REGARDING THE PRODUCTS
MANUFACTURED FOR COMPANY HEREUNDER, EXPRESS AND IMPLIED, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS OF THE PRODUCTS
FOR A PARTICULAR PURPOSE. IN PARTICULAR, LMI DOES NOT WARRANT ANY COMPONENTS OR
OTHER MATERIALS THAT MAY BE USED OR INCLUDED IN THE MANUFACTURE OF THE PRODUCTS.
5. ADDITIONAL SERVICES
LMI has the capacity to provide a variety of services that are
complementary to the manufacturing services to which this Agreement relates.
Such services may include (a) non-recurring engineering services, including but
not limited to product design, creation and modification of bills of materials,
engineering drawing packages, work instructions, fabrication documents and
drawings, and survey documents; (b) prototyping services, including but not
limited to fabrication and testing of prototype products; (c) storage and
warehousing services; (d) maintenance, repair and replacement services, (e)
asset management, and (f) other related services tailored to meet Company needs.
Company may request additional services not otherwise provided for in this
Agreement at any time before or after the Effective Date, and such additional
services will be described in an Attachment to this Agreement that shall be
mutually agreed upon and signed by the parties.
6. PAYMENTS
6.1. Product Price. For each shipment of the Products ordered by Company
and shipped to the address(es) specified in Company's order, Company shall pay
to LMI the prices determined in accordance with Attachment C, which are
exclusive of charges for taxes, shipping and insurance. Prices on Attachment C,
which assume that LMI will be able to order components and other raw materials
and schedule production in the most efficient manner possible based upon
reasonably accurate forecasts, shall be effective and applicable to orders
placed and shipped within the twelve (12) month period immediately following the
Effective Date, subject to intermediate adjustments resulting from any of the
following: (a) mutually agreed upon changes to the Specifications, (b)
significant changes in quantities of the Products ordered from month to month,
(c) acceleration of delivery dates in accordance with Paragraph 2 on Attachment
B, and (d) any other significant unanticipated event, including but not limited
to shortages of and significant price increases for components and other
materials. Not less than ninety (90) days before the expiration of the twelve
(12) month period beginning on the Effective Date and each subsequent twelve
(12) month period, LMI shall meet and confer with Company regarding any
adjustments to the prices for the Products.
6.2. Additional Services. Company shall pay LMI mutually agreed upon prices
for all additional services requested by Company and performed by LMI in
accordance with the provisions of Section 5 and any related Attachment(s) to
this Agreement.
6.3. Taxes. All amounts payable in accordance with Section 6.1 and Section
6.2 are exclusive of all federal, state, municipal or other governmental excise,
sales, value-added, use, personal property and occupational taxes, excises,
withholding obligations and other levies now in force or enacted in the future
and, accordingly, the amount of all payments hereunder is subject to an increase
equal to the amount of any tax LMI may be required to collect or pay in
connection with this Agreement other than any tax on the net income of LMI.
6.4. Payment Terms. LMI shall invoice Company for (a) each order for
quantities of the Products no earlier than the date on which such order is
shipped, and (b) any additional services provided to Company by LMI in
accordance with the payment schedule set forth in the applicable Attachment to
this Agreement that is entered into by the parties in accordance with Section 5.
Company shall remit all payments due to LMI within thirty (30) days after the
date of LMI's invoice. LMI, in its sole discretion, may charge interest not
exceeding one and one half percent (1.5%) per month or fraction thereof for
failure to make any payment in a timely manner.
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7. PROPRIETARY RIGHTS
7.1. Company Materials. Company retains all patent, copyright, trade secret
and other proprietary rights in and to the Products and the related
Specifications and Bills of Materials, and subject to the provisions of Section
7.2, LMI hereby assigns to Company all proprietary rights of any nature that it
may obtain in any of the foregoing. LMI hereby agrees to execute any documents
or instruments reasonably necessary to enable Company to secure or perfect any
proprietary rights that are assigned to Company hereby. Company hereby grants to
LMI, during the term of this Agreement, a nonexclusive, paid up license under
Company's proprietary rights to perform LMI's obligations under this Agreement.
Company represents and warrants that the Products, the specifications and any
other materials provided to LMI by Company, and LMI's exercise of the rights
granted herein, will not infringe or misappropriate any patent, copyright, trade
secret or other proprietary right of any third party.
7.2. LMI Tools and Know-How. Company acknowledges that LMI has developed or
may develop in the course of performing this Agreement, and may use for
Company's benefit in performance of its obligations under this Agreement,
manufacturing processes, procedures, software applications, scripts, design
elements, equipment, products and know-how that are proprietary to LMI and/or
third parties ("Manufacturing Know-How"). LMI, on behalf if itself and its
licensors, retains all patent, copyright, trade secret and other proprietary
rights in and to such Manufacturing Know-How, and nothing in Section 7.1 or
elsewhere in this Agreement shall be construed to transfer to Company any
patent, copyright, trade secret or other proprietary right therein; provided,
however, that LMI hereby grants to Company a perpetual, nonexclusive, worldwide,
paid up license under LMI's proprietary rights, with rights to sublicense, to
make, use, sell, offer for sale, export and otherwise exploit the Products. LMI
represents and warrants that the manufacturing processes, procedures, software
applications, scripts, design elements, equipment, products and know-how that
are proprietary to LMI, and Company's exercise of the rights granted herein,
will not infringe or misappropriate any patent, copyright, trade secret or other
proprietary right of any third party.
7.2.1 Escrow. LMI Shall hold in escrow trade secret information in the
case LMI ceases operation. Upon this ceasing of operation, company shall acquire
trade secret information which shall include but not limited to assembly
procedures and vendor information.
7.3. Indemnification. Each party (an "indemnifying party") shall indemnify
and defend the other party (an "indemnified party") against, and otherwise hold
it harmless from, any and all costs, liabilities, damages, losses and expenses
arising out of any claim that the exercise by the indemnified party of any
rights granted by the indemnifying party in Section 7.1 or Section 7.2 infringes
any patent, copyright, trade secret or other proprietary right of any third
party. Each party's obligations under this Section 7.3 are conditioned upon (a)
receipt by the indemnifying party of prompt written notification from the party
claiming indemnification of any claim to which this indemnification may apply,
and (b) cooperation by the indemnified party, at the indemnifying party's
request and expense, with efforts to defend or settle the claim. An indemnifying
party shall have sole control of the defense and settlement efforts subject to
the indemnified party's right to participate therein at its own expense.
8. CONFIDENTIAL INFORMATION
The parties acknowledge and agree that each party will be disclosing
confidential information to the other party, including but not limited to,
disclosure of the Specifications and ▇▇▇▇(s) of Materials, manufacturing
processes, know-how, business strategies, ideas, concepts and financial
information (the "Confidential Information"). Each party agrees that it shall
hold the Confidential Information of the other party in strict confidence, shall
not disclose it to others or use it in any way, commercially or otherwise,
except for purposes of performing its obligations under this Agreement. Each
party further agrees to take commercially reasonable steps to protect the
confidentiality of the other party's Confidential Information. Notwithstanding
this Section 8, the term "Confidential Information" shall not include any
information which (a) is or becomes part of the public domain through no fault
of the receiving party, (b) is obtained by the receiving party from any third
party which is under no obligation to protect the confidentiality thereof, or
(c) can be established by the receiving party with reasonable documentary
evidence to have been independently developed by the receiving party without
reliance on the other party's Confidential Information.
9. TERM AND TERMINATION
9.1. Term. The term of this Agreement shall commence upon the Effective
Date and shall remain in effect until terminated in accordance with Section 9.2
or Section 9.3.
9.2. Termination for Cause. This Agreement may be terminated by either
party in the event that the other party has not performed any material
obligation or has otherwise breached any material term of this Agreement (a)
immediately upon receipt of written notice thereof if the breach or
nonperformance is incapable of cure, or (b) upon the expiration of thirty (30)
days (or any longer cure period authorized by the nonbreaching party with
respect to any individual breach) after receipt of written notice thereof if the
breach or nonperformance is capable of cure and has not then been cured. Company
shall be responsible for purchase at the full unit value of all quantities of
Product(s) that are finished or in process as of the date of the notice of
termination.
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9.3. Termination Without Cause. This Agreement may be terminated by either
party, without cause, upon six (6) months prior written notice to the other
party; provided, however, that this Agreement shall remain in effect with
respect to any orders accepted by LMI prior to the expiration of such six (6)
month period until all units of the Products subject to such orders have been
accepted by Company in accordance with Section 3.2.
9.4. Disposition of Inventory Upon Termination. Upon termination of this
Agreement for any reason, Company and LMI agree to cooperate to dispose of
existing inventory of and orders for components and other materials in an
economical and efficient manner. Disposition of materials upon termination of
this Agreement shall be as set forth in Attachment A.
10. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOSS OF
PROFITS OR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES
INCURRED BY THE OTHER PARTY AND ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT FOR ANY CAUSE OF ACTION OF ANY KIND, WHETHER BASED UPON BREACH OF
CONTRACT OR TORT (INCLUDING NEGLIGENCE), EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL LMI'S TOTAL
LIABILITY TO COMPANY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT FOR ANY
CAUSE OF ACTION OF ANY KIND, WHETHER BASED UPON BREACH OF CONTRACT OR TORT
(INCLUDING NEGLIGENCE) EXCEED THE TOTAL AMOUNTS PAID BY COMPANY TO LMI IN
CONNECTION WITH THE PARTICULAR UNIT(S) OF THE PRODUCTS OR THE PARTICULAR LMI
SERVICE(S) IN CONNECTION WITH WHICH THE LIABILITY AROSE.
11. GENERAL PROVISIONS
11.1. Assignment. Neither this Agreement nor any rights granted hereby may
be assigned by either party without the prior written consent of the other
party. Any attempt by either party to assign any rights, duties or obligations
without the requisite consent of the other party shall be void and without force
or effect.
11.2. Modification. This Agreement can only be modified by a written
agreement duly signed by persons authorized to sign agreements on behalf of
Company and of LMI, and variance from the terms and conditions of this Agreement
in any written notification given by either party shall have no force or effect.
11.3. Severability. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.4. Relationship of the Parties. For purposes of this Agreement, LMI and
Company will be and shall act as independent contractors, and neither party is
authorized to act as an agent or partner of, or joint venturer with, the other
party for any purpose. Neither party by virtue of this Agreement shall have any
right, power, or authority to act or create any obligation, express or implied,
on behalf of the other party.
11.5. Export. Each party and its employees and agents shall comply fully
with all applicable laws, rules and regulations, including, but not limited to,
the United States Export Administration Act, any regulations promulgated
thereunder by the United States Department of Commerce's Bureau of Export
Administration, and any regulations of the United States Department of
Treasury's Office of Foreign Assets Control, relating to the export and reexport
of units of the Products and any related technical data.
11.6. Notices. All notices shall be in writing and shall be deemed to be
delivered when deposited with a recognized international express courier
service, or when sent by facsimile transmission promptly confirmed by return
transmission. All notices shall be directed to LMI or Company at the respective
addresses first set forth above or to such other address as either party may,
from time to time, designate by notice to the other party.
11.7. Governing Law. This Agreement, and any and all tort claims that may
arise out of or in connection with this Agreement, the Products and any related
services will be governed by the laws of the State of Maryland. The parties
hereby expressly exclude the applicability of the Convention on Contracts for
the International Sale of Goods and that body of law known as conflicts of laws.
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11.8. Dispute Resolution. Any controversy or claim between the parties
arising out of or relating in any way to this Agreement will be resolved by
arbitration in either ▇▇▇▇▇▇▇▇▇▇ or Prince Georges County, Maryland, under the
administration of the American Arbitration Association and subject to its
Commercial Arbitration Rules. The award of the arbitrators will be final and
binding upon the parties. Judgment upon the award may be entered in any court
having jurisdiction.
11.9. Force Majeure. Neither party shall be liable for any damages or
penalty for any delay in performance of, or failure to perform, any obligation
hereunder or for failure to give the other party prior notice thereof when such
delay or failure is due to the elements, acts of God, delays in transportation,
delays in delivery by vendors or other causes beyond that party's reasonable
control.
11.10. No Waivers. No express or implied waiver by either party of any
event of default hereunder shall in any way be, or be construed as, a waiver of
any future or subsequent event of default.
11.11. Survival. The respective rights and obligations of the parties under
Sections 6, 7, 8, 10, 11.7, 11.8, and 11.11 shall survive the termination of
this Agreement.
11.12. Titles and Captions. Titles and captions contained in this Agreement
are inserted for convenience or reference only, shall not be deemed to be a part
of this Agreement for any other purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
11.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
11.14. Entire Agreement. The parties acknowledge that this Agreement,
together with each Attachment hereto that is executed by both parties, sets
forth the complete, exclusive and integrated understanding of the parties which
supersedes all proposals or prior agreements, oral or written, and all other
prior communications between the parties relating to the subject matter of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LINSANG MANUFACTURING, INC. (LMI) COMPANY - VOXTEC, A DIVISION OF MARINE
ACOUSTICS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ Ace ▇▇▇▇▇▇
--------------------- ---------------------
Title: President & COO Title: Vice President
------------------ -----------------
Date: June 13, 2003 Date: 9 June 2003
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ATTACHMENT A
MATERIALS MANAGEMENT AND PROCUREMENT
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The supply of components and other materials and equipment necessary to
manufacture and test Products under this Agreement shall be as set forth below:
1. Materials Supply. Unless specifically agreed otherwise, LMI shall supply or
acquire all components and other materials and equipment ("Materials")
necessary to manufacture and test Products under this Agreement. LMI will
supply or acquire only those Materials from only those vendors as are set
forth in the Specifications and Bills of Materials or are otherwise
approved in writing by the Company. Subject to Paragraph 2 below, LMI will
use commercially reasonable efforts to procure specified Materials so as to
be able to deliver Products as specified by the Company in accordance with
delivery schedules set forth in orders accepted under Section 3.2.
2. Exceptional Materials Requirements. LMI will place orders for Materials
only as necessary to fulfill requirements of purchase orders accepted under
Section 3.2, except as follows:
a. Safety Stock. To minimize the risk of shortages and create an
available stock for spares, LMI shall upon request by Company maintain
a stock of Materials or Products, or both ("Safety Stock") in
quantities mutually agreed in writing, which shall be reviewed no less
than quarterly. Safety Stock will be designated and used exclusively
for fulfillment of Company orders. LMI shall charge, and Company shall
pay, a monthly carrying charge on the on-hand Safety Stock equal to
one percent (1%) of LMI's cost for the Safety Stock.
b. Long-Lead Materials. LMI and Company shall agree upon and maintain a
list of Long-Lead Materials, which shall be reviewed upon the receipt
of each Company forecast and updated as necessary. Upon receipt of
forecasts, LMI shall promptly notify Company of the quantities and
cost of Long-Lead Materials and the schedule by which they must be
ordered in order to meet forecasted requirements ("Long-Lead Notice").
Unless specifically instructed in writing otherwise within five
business days, LMI shall order Long-Lead Materials in accordance with
the Long-Lead Notice.
c. Minimum Quantity Materials. LMI and Company shall agree upon and
maintain a list of Minimum Quantity Materials, which shall be reviewed
no less than monthly and modified as necessary. Unless specifically
agreed otherwise in writing, in order to promote efficiency, LMI will
purchase sufficient quantities of components (this should not exceed
100% unless noted to Company) to enable standard packaging or kitting
for automated placement (e.g., LMI will purchase full reels of
taped-and-reeled components).
3. Disposition of LMI-Supplied Materials. Upon termination of this Agreement,
LMI will make reasonable efforts to return, stop shipment of, or allocate
to existing purchase orders any Materials supplied by LMI. Company shall
pay LMI for all shipping and insurance, return, restocking, cancellation,
minimum quantity, or other fees or charges imposed by vendors, plus an
administrative charge not to exceed twenty percent (20%) of all returned or
reallocated Material (unless LMI ceases operation, then it is 0%). Company
shall purchase all unused portions of minimum quantity purchases, including
but not limited to unused portions of full reels, and all Materials
supplied by LMI that cannot be returned or allocated to other existing
purchase orders. Materials shall be purchased at a price equal to LMI's
documented cost plus twenty percent (20%), except that Safety Stock shall
be purchased at a price equal to LMI's documented cost plus ten percent
(10%).
4. Consigned Materials. Company may consign Materials to LMI. Materials to be
consigned shall be set forth in Annex 1 to this Attachment, or as may
otherwise be agreed in writing from time to time. Company agrees that all
Consigned Materials shall be delivered to LMI in sufficient time and in
sufficient quantities, and in such condition and packaging, as to enable
LMI to readily use the materials and to fulfill orders for the applicable
Products in accordance with Specifications and delivery dates. Inventory of
Consigned Materials shall not exceed maximum levels agreed between LMI and
Company. Delivery of non-conforming Consigned Materials may result in
delayed delivery dates and additional charges for loss of available
capacity.
5. Handling Charges. Consigned Materials shall be subject to a handling fee
equal to Three Percent (3%) of the cost to purchase the Consigned
Materials, plus One Percent per month in excess of two that any Consigned
Materials remain in LMI's possession. In accordance with Section 4, premium
charges shall apply in the event of late delivery, delivery in such
condition that the Material is defective or not readily usable, or excess
inventory levels.
6. Letter of Authorization. At Company's option, to facilitate efficient flow
of Consigned Materials, Company shall provide a letter of authorization, in
a form mutually agreed upon by the parties, to each vendor of Consigned
Materials, advising vendor that LMI is authorized to request and receive
technical information, and information about shipments and deliveries, for
Consigned Materials. Unless otherwise mutually agreed upon in writing, LMI
shall not be authorized to negotiate pricing for, place or change orders or
schedules for, or initiate or agree to any engineering changes in,
Consigned Materials, and each letter of authorization shall expressly set
forth these limitations on LMI's authority.
7. Documentation. Immediately upon receiving confirmation of any order for
Consigned Materials, Company shall provide LMI with such documentation as
LMI may reasonably require to enable it to plan for and receive delivery of
Consigned Materials. Documentation provided to LMI for each order shall
include, at a minimum (a) vendor name, (b) vendor part numbers and
descriptions, (c) a vendor contact person, (d) Company contact person, (e)
delivery schedule, and (f) any updates as they become available. LMI shall
notify Company of any additional documentation that may be required in
connection with any order, and Company shall promptly furnish such
documentation to LMI.
8. Receipt. LMI shall receive all deliveries from vendors of Company Consigned
Components and shall follow all product inspection and delivery
confirmation procedures provided to LMI by Company in writing.
9. Title. Title to the Consigned Materials shall transfer from the vendor to
Company as set forth in the applicable procurement agreement, and LMI shall
acquire no title or interest in or to the Consigned Materials and no
liability to the Company for unused quantities thereof. Upon termination of
this Agreement, LMI shall ship promptly at Company's expense and risk, and
Company shall accept, all unused Consigned Materials.
10. Storage and Handling. LMI will exercise reasonable care in storage and
handling of the Consigned Materials and will use them solely for purposes
of performing its obligations to Company under the Services Agreement.
ACCEPTED AND AGREED TO:
LINSANG MANUFACTURING, INC. (LMI) COMPANY - VOXTEC, A DIVISION OF MARINE
ACOUSTICS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ Ace ▇▇▇▇▇▇
--------------------- ---------------------
Title: President & COO Title: Vice President
------------------ -----------------
Date: June 13, 2003 Date: 9 June 2003
------------------- ------------------
ANNEX 1
COMPANY CONSIGNED COMPONENTS
----------------------------
ATTACHMENT B
ORDER CHANGE AND CANCELLATION
-----------------------------
Orders may be changed or cancelled only in a writing signed by both parties (a
"Change Order"), and each Company request to change or cancel an order shall
identify the particular order to which the change relates.
1. Increases in Ordered Quantities of the Products. LMI shall use commercially
reasonable efforts to accept requests by Company for increases in the
quantities ordered by Company; however, LMI shall not be in violation of
this Agreement in connection with its inability to supply quantities of a
Product during any month that (a) materially exceed the most recent
forecast for such month submitted to LMI in accordance with Section 3.6, or
(b) are otherwise inconsistent with Company's ordering history under this
Agreement. A premium charge shall be added to the contract price for all
quantities of the Products that are ordered and delivered in any month in
excess of the quantities initially ordered for such month.
2. Acceleration of Scheduled Delivery Date(s). LMI recognizes the business
necessity and reality of accelerated delivery dates, and shall use
commercially reasonable efforts to accept requests by Company for
acceleration of the delivery date(s) for Products ordered by Company;
however, LMI shall not be in violation of this Agreement in connection with
its inability to supply quantities of a Product during any month that (a)
materially exceed the most recent forecast for such month submitted to LMI
in accordance with Section 3.6 or (b) are otherwise inconsistent with
Company's ordering history under this Agreement. A premium charge may be
added to such contract price for all quantities of the Products delivered
on a mutually agreed upon accelerated delivery date.
3. Postponement of Scheduled Delivery Date. LMI recognizes the business
reality and necessity of postponing delivery dates, and shall take
commercially reasonable steps to accommodate requests for postponement of
delivery dates, subject to the following conditions: (a) All work that is
completed, is in process, or is scheduled for completion no more than 30
days after receipt of a request for postponement shall be delivered
according to schedule, but may be shipped to LMI's warehouse facility ("LMI
Warehouse") or to an alternative site as instructed by Company. All
shipments shall be F.O.B. LMI's shipping dock and shall be by common
carrier or by LMI vehicles. All title and risk of loss shall pass to
Company at the F.O.B. point. Company shall be responsible for payment of
the contract price for such quantity of the Products in accordance with the
scheduled delivery date and shall, in addition, pay all applicable
warehouse charges. (b) Company may postpone for up to 60 days any
quantities that have not been completed or are not in progress and are
scheduled for delivery between 31 and 120 days after LMI's receipt of the
rescheduling request, and may postpone as requested any quantities
scheduled for delivery more than 90 days after LMI's receipt of the
rescheduling request. LMI shall take commercially reasonable steps to
postpone orders it has placed for components and other materials related to
such quantities. Company will be responsible for paying all carrying costs
of existing inventory of materials and components relating to the postponed
quantities and of such materials and components shipped to LMI despite its
postponement efforts, as well as any other fees, charges, or materials
costs incurred by LMI in connection with its efforts to postpone shipments
of materials and components relating to the postponed quantities.
4. Cancellations. The parties agree to cooperate to minimize the occurrence of
and the costs associated with order cancellations. Company acknowledges and
agrees that each order becomes non-cancellable thirty (30) days before the
EARLIEST Scheduled delivery date of the CANCELLED qUANTITY and that it
shall be responsible for the full unit value of such cancelled order.
COMPANY ALSO ACKNOWLEDGES AND AGREES THAT IT SHALL BE RESPONSIBLE FOR THE
FULL UNIT VALUE OF ALL WORK THAT IS IN PROCESS OR COMPLETED AS OF LMI'S
RECEIPT OF NOTICE OF CANCELLATION. In the event of any cancellation, LMI
shall use commercially reasonable efforts to (a) cancel orders it has
placed for components and other materials required to manufacture the
quantities of any Product subject to cancellation, (b) reallocate
applicable components and materials to the manufacture of other products so
as to minimize cancellation charges, and (c) return any applicable
components or other materials that cannot be so reallocated. In connection
with any order cancellation, Company shall be responsible for all
cancellation charges, as follows:
i. Payment to LMI of fees for storage of, and/or of monies to purchase at
LMI's documented cost plus a fifteen percent (15%) handling charge,
all applicable components and other materials designated by the vendor
as non-cancelable or non-returnable; (3) paying LMI for storage of, or
for purchasing from LMI at LMI's documented cost plus a fifteen
percent (15%) handling charge, all applicable components or other
materials that have been designated by the vendors as non-cancelable
or non-returnable;
ii. Payment to LMI of costs incurred by LMI for return or cancellation of
applicable components and materials, including but not limited to
shipping and insurance charges, cancellation charges, restocking fees,
minimum quantity charges, or other fees, charges, or price changes
imposed by vendors; and
iii. Payment to LMI of a fee equal to (i) fifteen percent (15%) of the
non-material portion of the contract price applicable to the cancelled
quantities if notice of cancellation is received by LMI more than
sixty (60) days before the earliest scheduled delivery date of the
cancelled quantity, and (ii) thirty percent (30%) of the of the
non-material portion of the contract price applicable to the cancelled
quantities if notice of cancellation is received by LMI between thirty
(30) and sixty (60) days before the earliest scheduled delivery date
of the cancelled quantity, and (iii) 0% if more than 90 days.
ACCEPTED AND AGREED TO:
LINSANG MANUFACTURING, INC. (LMI) COMPANY - VOXTEC, A DIVISION OF MARINE
ACOUSTICS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ Ace ▇▇▇▇▇▇
--------------------- ---------------------
Title: President & COO Title: Vice President
------------------ -----------------
Date: June 13, 2003 Date: 9 June 2003
------------------- ------------------
ATTACHMENT C
PRICING
-------
ACCEPTED AND AGREED TO:
LMI, INC. (LMI) COMPANY
By:______________________________ By:___________________________
Title:___________________________ Title:________________________
Date:____________________________ Date:_________________________
ADDENDUM TO THE PRODUCTION SERVICE AGREEMENT
FULFILLMENT / ▇▇▇▇ AND HOLD TRANSACTIONS
This addendum is made and entered into this 19th day of November, 2003 by and
between (i) LMIC, Inc., a Delaware corporation with its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("LMIC"), and
(ii) Marine Acoustics Inc., a Massachusetts Company with its principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Company"), who,
intending to be legally bound, agree as follows:
Marine Acoustics, Inc. hereby acknowledges that from time to time there may be
the need for a ▇▇▇▇ and Hold transaction, determined on a case-by-case basis. In
these occasions, upon completion of the products, the LMIC will invoice Marine
Acoustics, Inc. and store the completed units in a segregated location at LMIC
facility. Title and risk of loss with respect to ▇▇▇▇ and hold transaction shall
pass from LMIC to Company upon completion and transfer of the products to a
segregated location at LMIC facility. LMIC agrees to provide the storage for the
completed units in a segregated location separate from LMIC inventory for a
reasonable period of time. LMIC will ship the units based on the delivery
instructions to be provided by the Company. Charges for the fulfillment services
will be billed separately upon shipment of the units to the end user.
Accepted and agreed to:
LMIC, Inc. (LMIC) Marine Acoustics, Inc. (Company)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------- ------------------------
Title: President & Chief Operating Officer Title: Vice President
----------------------------------- ---------------
