MANUFACTURING AGREEMENT
This Manufacturing Agreement ("AGREEMENT") is made and entered into as
of December 29, 2000 (the "EFFECTIVE Date") by and between, Telenetics
Corporation (the "BUYER"), a California corporation, having its place of
business at 00000 Xxxxxx Xxxxx, Xxxx Xxxxxx, XX 00000, and Comtel Electronics,
Inc. ("SELLER"), a Delaware corporation and a division of Comtel Holdings, Inc.,
having its place of business at 00000 Xxxxxx Xxxx, Xxxxxx XX 00000 ("SELLER'S
FACILITY"). Buyer and Seller are sometimes referred to herein individually as a
"PARTY" and collectively as the "PARTIES." References to "Buyer" and "Seller"
shall include their respective Affiliates (as that term is defined in SECTION
11.2 herein).
1. PREAMBLE.
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WHEREAS, the Buyer has entered into an agreement with Motorola, Inc.
known as the Manufacturing License and Distribution Agreement (the "MOTOROLA
AGREEMENT") to produce certain transmission products and desires to outsource
certain aspects of the manufacturing, assembly and testing (the "MANUFACTURING"
or "MANUFACTURE") of such transmission products and other products (the
"PRODUCTS") as set forth on EXHIBIT A;
WHEREAS, the Seller is a local contract manufacturer capable of meeting
Buyer's requirements for the outsourcing of those aspects of the Manufacturing
of the Products necessary for Buyer to meet its requirements as set forth in the
Motorola Agreement; and
WHEREAS, in order to facilitate the coordinated Manufacturing of the
Products, the Parties desire to establish manufacturing processes and
procedures, good engineering and workmanship practices and industry standards to
assure the consistent, high quality Manufacturing of Products.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
premises contained in this Agreement, the Parties agree as follows:
2. AGREEMENT TO MANUFACTURE.
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2.1 SCOPE OF WORK. Buyer hereby contracts with Seller to Manufacture
the Products in accordance with the terms and conditions of this Agreement.
Seller agrees to Manufacture the Products in accordance with the configurations,
descriptions and specifications provided to Seller by Buyer for the Products
(the "BUYER'S SPECIFICATIONS") which are set forth in and attached hereto as
EXHIBIT B. Buyer agrees to purchase from Seller all of the Products manufactured
by Seller pursuant to and in accordance with the Buyer's Specifications and the
terms and conditions of this Agreement at the prices set forth in and attached
hereto as EXHIBIT C.
3. MANUFACTURING EQUIPMENT AND START-UP INVENTORY.
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3.1 MANUFACTURING EQUIPMENT.
(a) PURCHASED EQUIPMENT. The Parties acknowledge that, in
order to Manufacture the Products pursuant to this Agreement, Seller
will need to acquire ownership and/or use of production equipment and
peripheral support equipment. The Seller agrees to purchase from Buyer
and Buyer agrees to sell to Seller the production equipment and
peripheral support equipment (the "PURCHASED EQUIPMENT") (a list of
which is set forth in and attached hereto as EXHIBIT D) for the total
purchase price of $400,000.00 due and payable upon delivery of the
Purchased Equipment to Seller's Facility and transfer of title to the
Purchased Equipment.
(b) TEST EQUIPMENT. The Parties further agree that the Buyer
shall deliver to Seller certain test equipment to be used exclusively
for the Manufacture of Products (the "TEST EQUIPMENT") (a list of which
is set forth in and attached hereto as EXHIBIT E). The Parties agree
and acknowledge that the Test Equipment shall at all times remain the
sole and separate property of Buyer. The Parties hereby agree and
acknowledge that Buyer shall be solely responsible for the normal
maintenance, repair and upkeep of the Test Equipment. Seller shall be
solely responsible for any damages to the Test Equipment or any costs
associated therewith caused or contributed by the negligent misuse of
the Test Equipment by any of Seller's employees, agents or contractors.
3.2 DELIVERY OF MANUFACTURING EQUIPMENT. The Parties hereby agree and
acknowledge that it shall be Buyer's sole responsibility to deliver the
Purchased Equipment and the Test Equipment to Seller's Facility in a timely
manner and that the Manufacturing Equipment shall be delivered by Buyer in good
working order and free and clear of all liens and attachments.
3.3 START-UP INVENTORY. The Parties acknowledge that, in order for
Seller to Manufacture the Products, Seller will need to acquire certain raw
materials and component parts (the "COMPONENT PARTS"). Buyer will be acquiring a
substantial inventory of Component Parts ("BUYER'S INVENTORY"). Seller hereby
agrees to purchase all usable Component Parts (as needed to support Buyer's
master requirement schedule in a timely fashion) which exist in Buyer's
Inventory from Buyer until Buyer's Inventory is exhausted. Seller agrees that
Buyer may deliver to Seller's Facility any or all Buyer's Inventory for storage
prior to use in the Manufacturing of Products. However, the Parties agree that
title to and ownership of any portion of Buyer's Inventory shall pass from Buyer
to Seller only as Buyer's Inventory is sold to Seller for the Manufacture of
Products. Seller agrees that that portion of Buyer's Inventory delivered to
Seller's Facility shall be stored in a secure area of Seller's Facility and
shall not be commingled with any other Component Parts or other materials and
shall be kept in good working order and condition at Seller's sole expense.
Seller agrees that Buyer's Inventory shall only be used for the Manufacture of
Products.
3.4 INITIAL INVENTORY. Seller agrees to purchase an initial inventory
(the "INITIAL INVENTORY") of Component Parts from Buyer's Inventory necessary to
commence the Manufacture of Products pursuant to this Agreement. The purchase
price paid by Seller to Buyer for the Initial Inventory shall be $1,450,000.00.
The amount and description of Component Parts contained in the Initial Inventory
is set forth in and attached hereto as EXHIBIT F. Buyer hereby agrees to deliver
a sufficient portion of the Initial Inventory to Seller's Facility in a timely
fashion prior to the commencement of the Manufacture of the Products by Seller
and the Initial Inventory shall be delivered by Buyer in good working order and
free and clear of all liens and attachments. Buyer agrees to continue to deliver
the Initial Inventory to Seller as requested by Seller until the Initial
Inventory is exhausted.
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3.5 ADDITIONAL INVENTORY. After Buyer's Inventory is exhausted, it
shall be Seller's sole responsibility to locate and purchase Component Parts
from third parties in sufficient quantities and lead-time to enable Seller to
meet Buyer's ongoing demand for Products (as ordered pursuant to this
Agreement).
3.6 MINIMUM VOLUME REQUIREMENTS. Buyer acknowledges that Seller will
procure Manufacturing Equipment, Initial Inventory, and other Component Parts,
equipment, inventory, materials and resources in anticipation of the initial and
ongoing Manufacture of Products under the terms of this Agreement. As
consideration for Seller's capital investments in preparation for its
performance of Seller's duties and obligations under this Agreement, Buyer
agrees that it will schedule monthly shipments and purchase a minimum of One
Million Dollars ($1,000,000.00) of Products per month (based upon the prices set
forth in EXHIBIT C) from Seller (the "MINIMUM VOLUME REQUIREMENTS") beginning
the third (3rd) calendar month after the commencement of the Manufacture of
Products by Seller, and continue on a month to month basis for the life of this
agreement. If, in any month following the third (3rd) calendar month after the
commencement of the Manufacture of Products by Seller, Buyer fails to meet the
Minimum Volume Requirements, Buyer shall pay Seller a "SHORTFALL CHARGE." The
"SHORTFALL Charge" will be calculated by subtracting the sum of all invoices
billed to Buyer by Seller for Products shipped during any applicable month from
One Million Dollars ($1,000,000.00), then multiplying that figure by 25%. For
example, if in one month, the sum of the total invoices for Products shipped is
$900,000.00, then Buyer shall pay to Seller a Shortfall Charge of $25,000.00.
The Seller shall invoice Buyer and provide sufficient detail on how the
Shortfall Charge is calculated. Payment is due net thirty (30) days after the
invoice date. Should buyer fail to make payment within thirty (30) days after
the invoice date, Seller may, at its sole option, (i) cease shipments to the
Buyer or other destinations designated by Buyer, and/or (ii) make partial or all
future shipments on a C.O.D. basis until such delinquency has been paid.
Interest at the rate of one percent (1.0%) per month shall accrue and be charged
on all late payments. Non-payment of a monthly Shortfall Charge constitutes a
material breach under Paragraph 8.2(a) and Paragraph 8.2(b) and all rights and
remedies of the Seller to enforce the continued Minimum Volume Requirement
remain in effect for the life of the Agreement.
4. PURCHASING AND CANCELLATIONS.
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4.1 BASE PRODUCTS AND FINAL PRODUCTS. The Parties hereto specifically
agree and acknowledge that the basic Products Manufactured under the terms of
this Agreement are of a generic type and are identical (the "BASE Product") and,
when completed, will be delivered to Seller's in-house storage facility to await
the Final Configuration. Base Products may be specially configured or modified,
as required, to conform with Buyer's customers' other products or special
requirements prior to shipment to Buyer or Buyer's customers (the "FINAL
PRODUCT").
4.2 PURCHASE ORDERS. Buyer shall order Products by issuing purchase
orders to Seller (the "PURCHASE Orders"). Purchase Orders shall be either a
"BASE CONFIGURATION PURCHASE ORDER" or a "FINAL CONFIGURATION PURCHASE ORDER." A
"BASE CONFIGURATION PURCHASE ORDER" shall set forth the amount of Base Products
Buyer requires Seller to Manufacture for eventual configuration to Final
Products. A "FINAL CONFIGURATION PURCHASE ORDER" shall set forth the amount of
Final Products required and the special configurations and/or modifications (the
"FINAL CONFIGURATION") necessary to convert the Base Products to Final Products.
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4.3 ACCEPTANCE OF PURCHASE ORDERS. Within two (2) working days of
receipt of a Base Configuration Purchase Order, the Seller shall either accept
or reject the same. If the Seller is unable to meet the delivery schedule set
forth in a Base Configuration Purchase Order or finds the same to be
unacceptable for some other reason, the Buyer and Seller shall negotiate in good
faith to resolve the disputed matter(s). Within one (1) working day of receipt
of a Final Configuration Purchase Order, the Seller shall either accept or
reject the same. If the Seller is unable to meet the delivery schedule set forth
in a Final Configuration Purchase Order or finds the same to be unacceptable for
some other reason, the Buyer and Seller shall negotiate in good faith to resolve
the disputed matter(s).
4.4 PURCHASE ORDER LEAD-TIME REQUIREMENTS. The Buyer shall issue Base
Configuration Purchase Orders to the Seller a minimum of twelve (12) weeks prior
to the required in-house delivery date. The Buyer shall also issue Final
Configuration Purchase Orders to the Seller a minimum of ten (10) working days
prior to the delivery date to Buyer or Buyer's customer. The Final Configuration
Purchase Order will instruct the Seller to complete the Final Configuration on a
number of Base Products. In addition, the Buyer shall provide the Seller with a
9-12 month rolling forecast of Products (the "ROLLING FORECASTS"), on a monthly
basis, to be used for material procurement planning and potential purchasing
purposes.
4.5 ADVERSE MATERIAL LEAD-TIMES. The Seller shall make purchase
commitments to suppliers based upon the Rolling Forecasts received from the
Buyer. If, due to current market conditions and component allocations, some
Component Parts are not be available within agreed upon lead-times, the Parties
will mutually negotiate procurement of long-lead material and safety stock as
necessary.
4.6 PURCHASE ORDER CONTENTS. The Buyer shall specify the Products to be
delivered by the Seller under the terms of this Agreement by issuing written
Purchase Orders as stated in SECTION 4.2 above. The Purchase Orders shall
contain the following information:
(a) The quantity and type of Product ordered.
(b) The Product unit price.
(c) The Product unit revision and configuration level.
(d) The delivery schedule.
(e) Destination.
(f) Required method of shipment.
(g) Reference to this Agreement.
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4.7 RESCHEDULING OF RELEASED ORDERS. The Buyer may reschedule delivery
of Base Products or Final Products by sending the Seller a written change order
(a "CHANGE ORDER"). Deliveries of Final Products may be rescheduled in
accordance with the following schedule:
NUMBER OF BUSINESS DAYS ADVANCE NOTICE % OF SHIPMENT RESCHEDULED - UP OR DOWN
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0 - 14 None
15 - 30 0 - 30%
31 - 90 31% - 50%
91 - 120 51% - 70%
121 - Beyond 71% - 100%
Deliveries of Base Products may be rescheduled in accordance with the following
schedule:
NUMBER OF BUSINESS DAYS ADVANCE NOTICE % OF SHIPMENT RESCHEDULED - UP OR DOWN
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0 - 60 None
61 - 90 0 - 30%
91 - 120 31% - 50%
91 - 150 51% - 70%
151 - Beyond 71% - 100%
The Buyer shall reimburse Seller for any increased costs incurred as a
result of any Change Order. Should one or more shipments be rescheduled with a
delay of greater than thirty (30) days, inventory carrying charges of 1.0% per
month will accrue and be invoiced by Seller.
4.8 ENGINEERING CHANGE ORDERS. If the Buyer requests that Seller change
the configuration of the Base Products, Buyer shall deliver to Seller an
engineering change order (the "ENGINEERING CHANGE ORDER") specifying the
required changes. The Buyer will pay Seller $350.00 to process a standard
Engineering Change Order and $1,000.00 for each expedited Engineering Change
Order requested to be implemented in less than a forty-eight (48) hour notice.
The Seller will use its best efforts to advise the Buyer within two (2) business
days as to how soon, and at what cost, a Engineering Change Order requested by
the Buyer can be implemented by the Seller.
4.9 CANCELLATIONS OF PURCHASE ORDERS. In the event that the Buyer
wishes to cancel some quantity of the Products ordered pursuant to a Purchase
Order which become obsolete and unusable for any other purpose other than as
originally contemplated by such cancelled Purchase Order ("OBSOLETE PRODUCTS"),
the Buyer will provide Seller with written notice of cancellation (a "NOTICE OF
CANCELLATION") and, upon receipt of the Notice of Cancellation, the Seller shall
stop work to the extent specified therein. Notwithstanding Seller's receipt of a
Notice of Termination and the implementation thereof, Buyer shall remain
responsible for the following:
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(a) Payment for all Obsolete Products delivered to the Buyer
and in transit, plus finished Base Products (which are obsolete) in
inventory prior to, and including, the effective date of cancellation
the unit prices applicable to the order;
(b) Payment for all work-in-process ("WORK-IN-PROCESS") based
upon the percentage of completion, as determined by the Seller,
multiplied by the unit price of the Obsolete Product set forth in
EXHIBIT C, including Obsolete Products which were in process prior to
receipt of the Notice of Cancellation and that could not be completed
by the cancellation date. The total unit price for Work-In-Process
units will not exceed the total unit price for a completed assembly.
The Buyer may request the Seller to complete and deliver all Obsolete
Products included in Work-In-Process at the unit price referenced in
EXHIBIT C.
(c) Payment of the cost plus burden and benefit (not to exceed
actual costs plus 16%) in accordance with agreed to Component Parts
prices of inventory in-house and on orders which cannot be cancelled or
returned, provided that such inventory is in support of Buyer's
Purchase Orders and Forecasts.
(d) Payment of any restocking charges, xxxx-backs, and
cancellation charges received by the Seller from suppliers for
Component Parts ordered for the manufacture of Obsolete Products plus a
5% handling fee.
(e) If applicable, any Shortfall Charge pursuant to SECTION
3.6 herein.
The Seller shall use its best efforts to minimize cancellation charges
by returning inventory and material for credit, canceling material on order,
applying material to other Seller projects as applicable, and minimizing all
Work-In-Process and finished goods to support the final production schedule.
Upon payment of the cancellation charges, all Obsolete Products,
Work-In-Process, and non-returnable/non-cancelable components in house or on
order shall be delivered to (or held by Seller on a consignment basis), and
become the property of, the Buyer. F.O.B. is from the Seller's location.
5. PAYMENT AND SHIPPING TERMS.
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5.1 INVOICES AND PAYMENT. The Seller shall invoice Buyer upon shipment
of Products. Payment is due net thirty (30) days from the date of shipment and
invoice. Should Buyer fail to make payment within thirty (30) days after the
invoice date, the Seller may, at its sole option, (i) cease shipments to the
Buyer or other destination designated by Buyer; and/or (ii) make partial or all
future shipments on a C.O.D. basis until such delinquency has been paid.
Interest at the rate of 1.0% per month shall accrue and be charged on all late
payments. If a completed Base Product has not been converted into a Final
Product within 20 working days of its completion, the Seller will invoice the
Buyer at the rate of 95% of the Final Product price listed in EXHIBIT C (which
shall be credited against any subsequent Final Configuration of those Base
Products into Final Products).
5.2 BUYER INVOICES AND PAYMENT. The Buyer shall invoice Seller upon
shipment of Component Parts. Payment is due net thirty (30) days from the date
of shipment and invoice. Should Seller fail to make payment within thirty (30)
days after the invoice date, the Buyer may, at its sole option, (i) cease
shipments to the Seller, and/or (ii) make partial or all future shipments on a
C.O.D. basis until such delinquency has been paid. Interest at the rate of 1.0%
per month shall accrue and be charged on all late payments.
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5.3 PACKAGING AND SHIPPING. The Seller shall package each Product to
the Buyer's Specifications or, if not specified by the Buyer, to good commercial
standards. All shipments made by Seller to the Buyer or other destination
designated by Buyer shall be F.O.B. Comtel Electronics, Tustin, CA. Title, risk
of loss and damage shall pass from the Seller to the Buyer upon shipment or
physical possession of the shipment passing to a common carrier. Shipments will
be made in accordance with the Buyer's specific routing instructions, including
method of carrier to be used, and all special and incidental charges resulting
from the choice of freight carrier shall be borne by the Buyer. Within one (1)
business day of shipment, Seller will communicate all shipping data (e.g.,
product serial numbers, ship date, etc.) to Buyer.
5.4 SECURITY INTEREST. The Seller reserves a purchase money security
interest in each of the Products produced pursuant to this Agreement as the sole
security for the payment of the applicable purchase price thereof. This security
interest will be satisfied and discharged by payment in full of the applicable
purchase price for the Products. A UCC-1 Financing Statement may be filed on the
Seller's behalf with appropriate state authorities at any time after signature
by the Buyer in order to perfect the Seller's security interest. The Buyer
agrees to execute any and all such documents necessary to perfect said purchase
money security interest.
6. WARRANTY AND TESTING.
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6.1 WARRANTY. The Seller warrants to the Buyer that the Products
Manufactured by Seller will conform to Buyer's Specifications and be free from
defects in process and workmanship. The Seller is responsible for repairing or
replacing any failed Products under normal use and service for a period of one
(1) year after shipment by the Seller. The Seller's responsibility with respect
to Component Parts shall be limited to procurement of materials, incoming
inspection, and safe handling of the Component Parts while in-house at the
Seller. The Buyer is responsible for the selection of all materials as well as
ensuring the quality of the vendors and the compatibility of the components. The
Buyer is also responsible for designing Products so that the Component Parts are
not unduly stressed. The Seller's obligation under this warranty is limited to
replacing, repairing, or issuing credit for any Products or Component Parts that
are defective. All defective Products shall be returned to the Seller's
manufacturing facility, F.O.B. Seller, with reference to a Seller supplied
Returned Materials Authorization number ("RMA"), which the Seller shall issue to
the Buyer or any third party assigned by the Buyer. Seller shall inspect all
returned Products within two (2) days of receipt to confirm that the returned
Products are defective. If the returned defective Products are repairable with
Component Parts on hand, Seller shall ship replacement Products to Buyer or
another destination designated by Buyer within ten (10) days of receipt thereof.
If, however, the returned defective Products are not repairable with Component
Parts on hand, Seller shall ship replacement Products to Buyer or another
destination designated by Buyer within thirty (30) days of receipt thereof. If
the needed Component Parts are not available within 30 days, the Buyer and
Seller will mutually agree to a return date. All shipping and handling charges
associated with replacement Products shall be borne exclusively by Seller. No
products inspected by the Seller shall be returned without prior written consent
of the Seller. A shipping and handling charge will be assessed for invalid
returns or those where no defect is found.
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THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES WHETHER STATUTORY,
EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR PARTICULAR PURPOSE.
The Seller neither assumes nor authorizes any other person to assume
for the Seller any other liability in connection with the sale of the Products.
This warranty shall not apply to any Products which have been repaired or
altered (except by the Seller) or which shall have been subject to misuse,
negligence, or accident (other than by Seller). A RMA must be obtained from the
Seller before any Products can be returned to the Seller pursuant to a warranty
claim. The Seller is not liable for incidental, consequential or special damage
of any kind or for personal injury resulting directly or indirectly from the
design, material, workmanship, operation or installation of the Products
Manufactured under the terms of this Agreement.
7. RESPONSIBILITY FOR ADDITIONAL COSTS AND EXCESS INVENTORY.
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7.1 EXCESS INVENTORY. In the event that the Seller purchases or orders
Component Parts in order to meet the Buyer's Forecast, the Buyer shall be
required to purchase the unused portion from the Seller upon request if (i)
Buyer fails to purchase Products in accordance with such Buyer's Forecast(s),
and (ii) Seller cannot reasonably return, cancel the order, or otherwise use
such Component Parts at no additional cost to itself. The cost of such purchase
of excess inventory by Buyer shall equal the total cost of the excess Component
Parts plus a seven and one-half percent (7.5%) handling fee (and will not, in
any case, be less than $100.00).
7.2 PRICE ADJUSTMENTS. Product unit pricing shall remain firm for
Products on the Purchase Orders which have been accepted by the Seller except as
follows:
(a) In the event there is an increase in the cost of Component
Parts which affects the Product(s) unit price, the Seller shall
document such increase in material cost to the Buyer so that both
Parties may mutually pursue alternative pricing in order to retain the
original cost. If such an alternative cannot be attained within a
reasonable period of time, the prices in EXHIBIT C shall be adjusted to
reflect the actual cost of the increase. The summary of costs of
Component Parts will be prepared and reviewed by Seller on a quarterly
basis to establish revised cost of material standards and capture
increases and decreases to the cost of the xxxx of materials and to
review market updates and how they will impact the Buyer;
(b) Buyer will be responsible for certain other increased
charges constituting costs and expenses not contained in the prices in
EXHIBIT C, WHERE THE INCREASE IS DUE TO THE BUYER'S ACTIONS including,
but not limited to, the following:
(i) overtime charges and actual expenses incurred by
Seller as a result of delays in the normal Manufacture of
Products or interruption in the work flow process where such
delays or interruption are caused by (a) a change in Buyer's
Specifications or Product test by Buyer which impacts
Works-In-Progress, or (b) failure by the Buyer to provide
within the agreed time frame sufficient quantities or a
reasonable quality level of Component Parts, if applicable
(and until Buyer's Inventory is exhausted), to sustain the
production schedule;
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(ii) expenses incurred due to additional packaging
requirements that the Buyer may specify; and
(iii) Engineering Change Orders as defined in SECTION
4.8.
8. TERM AND TERMINATION.
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8.1 TERM. The term of this Agreement (the "TERM") shall commence on the
Effective Date and, unless terminated earlier pursuant to SECTION 8.2, shall
remain in effect for a fixed term of three (3) years, and shall automatically
renew for additional one (1) year terms, unless either Party provides the other
with written notice of termination not later than one hundred eighty (180) days
prior to the expiration of the then-current Term. Those Sections of this
Agreement that by their terms logically ought to survive termination shall
survive termination of this Agreement.
8.2 TERMINATION.
(a) If either Party (the "DEFAULTING PARTY") is in breach of a
material term of this Agreement, the other Party may deliver to the
Defaulting Party a written notice specifying the default and stating
its intentions to exercise its rights pursuant to this SECTION 8.
(b) Either Party may terminate this Agreement if:
(i) The default referred to in SECTION 8.2(a) is not
capable of remedy;
(ii) The Defaulting Party fails to remedy such
default in a proper manner within thirty (30) days after the
notice referred to in SECTION 8.2(a) is received and the
Defaulting Party fails within the period of thirty (30) days
to provide adequate assurance that the default will be cured
within a specified time; or
(iii) The Defaulting Party gives such adequate
assurance referred to in SECTION 8.2(b)(ii), but the default
is not cured within such specified time.
(c) Either Party may terminate this Agreement at any time by
giving not less than thirty (30) days prior written notice of
termination to the other Party in the event such other Party takes any
action or any steps are taken or legal proceedings are started for:
(i) Such other Party's winding-up, dissolution,
liquidation, or reorganization other than on terms approved in
advance in writing by the other Party; or
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(ii) The filing by or against a Party of any
proceeding under federal bankruptcy laws now or hereafter
existing or any other similar laws now or hereafter in effect
or the appointment of a receiver, trustee, custodian or
conservator of all or any part of the assets of a Party.
(d) Buyer may terminate this Agreement, upon thirty (30) days
prior written notice to Seller, if for three consecutive months,
Buyer's Purchase Orders and Products are rejected or returned by Buyer
in connection with Buyer's Specifications or warranty provisions hereof
and are not replaced by Seller with Products compliant with Buyer's
Specifications in accordance with SECTION 6.1 herein.
8.3 EFFECT OF TERMINATION.
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(a) Termination, relinquishment or expiration of this
Agreement for any reason shall be without prejudice to any rights which
shall have accrued to the benefit of any Party prior to such
termination, relinquishment or expiration. Such termination,
relinquishment or expiration shall not relieve any Party from
obligations that survive termination or expiration of this Agreement
and shall not terminate any obligations to pay all amounts which shall
have accrued or are payable hereunder.
(b) Upon expiration or termination of this Agreement for any
reason, each Party agrees to return to the other, the other Party's
Confidential Information (as that term is defined in SECTION 11.8). It
is understood that confidentiality obligations shall survive expiration
or termination of this Agreement without regard to the basis of
expiration or termination.
(c) Upon termination, relinquishment or expiration of this
Agreement for any reason, Seller shall return all of the Test Equipment
to Buyer in good working order (normal wear and tear excepted) and free
and clear of all liens and attachments OR permit Buyer and any of its
employees or agents to enter Seller's Facility to take physical
possession of the Test Equipment which shall be in good working order
(normal wear and tear excepted) and free and clear of all liens and
attachments.
9. CONDITIONS OF CLOSING.
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9.1 CONDITIONS. The following conditions must be satisfied prior to
Seller's purchase of the Manufacturing Equipment and Initial Inventory
referenced in SECTION 3:
(a) Buyer shall visit Seller's Facility to complete its due
diligence;
(b) The Parties shall validate pricing and xxxx of material
costs as a ratio to the unit sell price. The Buyer and Seller commit to
work together to meet the Seller's investment objective of ensuring the
raw material and Component Part costs comprise no more than sixty (60%)
percent of the purchase price;
(c) The Parties shall schedule training and exchange data with
Buyer's Massachusetts manufacturing facility;
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(d) Buyer has completed its additional financing to support
this Agreement;
(e) The Parties have obtained their respective Board of
Director's approval to proceed with this Agreement; and
(f) Receipt by each Party of the other's Closing Certification
(in a form substantially similar to that attached hereto as EXHIBIT G).
10. INDEMNIFICATION.
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10.1 PRODUCT INDEMNIFICATION. The Buyer agrees that it will indemnify
and hold harmless Seller against any and all claims, liabilities, damages, or
causes of action ("CLAIMS") hereafter brought or asserted by any person or
entity arising out of the design, installation or use of any Product(s)
manufactured by the Seller under this Agreement and in accordance with Buyer's
Specifications except for any intentional or negligent acts of Seller or any of
Seller's employees, agents or contractors.
10.2 PATENTS, COPYRIGHT, TRADE SECRET AND OTHER PROPRIETARY RIGHTS. The
Buyer agrees to indemnify and hold harmless Seller against any Claims brought
against Seller alleging that the Products infringe on a patent, copyright, trade
secret and other proprietary right, foreign or domestic, and to pay the amount
of any settlement or the costs and damages finally awarded, provided that the
Seller promptly notifies the Buyer of any such Claims and provides the Buyer
with reasonable assistance in the defense of any such Claims.
11. MISCELLANEOUS.
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11.1 ENTIRE AGREEMENT. This Agreement (including all Exhibits attached
hereto) shall constitute the entire Agreement between the Parties with respect
to the transactions contemplated hereby and supersedes all prior agreements and
understandings between the Parties, whether written or oral, relating to such
transactions.
The Buyer and Seller shall comply with all terms and conditions stated
in this Agreement and with Buyer's Specifications contained in issued Purchase
Orders. In the event of inconsistency, the order of precedence shall be as
follows:
(a) This Agreement
(b) Exhibits to this Agreement
(c) Buyer's Specifications on the face of Buyer's Purchase
Order(s)
11.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns.
Neither Party hereto shall in any way sell, transfer, assign, or otherwise
dispose of any of the rights, privileges, duties and obligations granted or
imposed upon it under this Agreement; provided however, (i) each Party shall
have the right to assign its rights, duties and responsibilities under this
Agreement to any Affiliate that agrees in writing to be bound by the terms and
conditions of this Agreement and is found to be reasonably creditworthy by the
non-assigning Party in its sole discretion; and (ii) each Party may assign all
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of its rights, duties and obligations under this Agreement to any entity that
purchases substantially all of the assets of such Party or that acquires such
Party through merger or other acquisition transaction and is found to be
reasonably creditworthy by the non-assigning Party. In either case referenced in
(i) and (ii) above, if the assigning Party is reasonably creditworthy and elects
to remain primarily liable for the obligations of this Agreement, then the
condition of creditworthiness may be waived by the non-assigning Party in its
sole discretion.
An "AFFILIATE" of a Party shall mean any corporation, partnership or
other business entity or natural person which controls or is controlled by, or
is under common control with such Party.
11.3 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, except in those instances where removal or
elimination of such invalid, illegal, or unenforceable provision or provisions
would result in a failure of consideration under this Agreement, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
11.4 FORCE MAJEURE. The Parties shall not be liable to the other for
any delay in performance or failure to perform, in whole or in part when due to
labor dispute, strike, war or act of war (whether an actual declaration is made
or not), insurrection, riot, civil commotion, act of public enemy, accident,
fire, flood, or other act of God, or act of any governmental authority beyond
the reasonable control of the Parties. If an event of force majeure occurs, the
affected Party shall promptly notify the other Party and shall use its best
efforts to mitigate the effects thereof and minimize any such delay or failure
resulting therefrom.
11.5 INDEPENDENT CONTRACTOR. The Seller and the Buyer are and shall be
independent contractors to one another, and nothing herein shall be deemed to
cause this Agreement to create an employment, agency, partnership, or joint
venture relationship between the Parties.
11.6 DISPUTES. All disputes and controversies of every kind and nature
between the Parties arising out of or in connection with the existence,
construction, validity, interpretation, meaning, performance, non-performance,
enforcement, operation, breach, continuance or termination of this Agreement
shall be resolved solely by binding arbitration in accordance with the
Commercial Arbitration Rules (the "RULES") of the American Arbitration
Association ("AAA") at the offices of the AAA in Irvine, California, before a
single arbitrator.
11.7 JURISPRUDENCE. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without regard to its rules
as to conflicts of laws.
11.8 CONFIDENTIALITY AND PUBLICITY. During the course of this
Agreement, either Party may have or may be provided access to the other's
confidential information and materials ("CONFIDENTIAL INFORMATION"). Each Party
agrees to maintain the other Party's Confidential Information in accordance with
the terms of this Agreement or any applicable separate nondisclosure agreement
between the Buyer and the Seller. In the absence of another written agreement,
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AT A MINIMUM, each Party agrees to maintain such information in confidence and
limit disclosure within its organization on a need to know basis, to take all
reasonable precautions to prevent unauthorized disclosure, and to treat such
information as it treats its own information of a similar nature, until such
time, if ever, as the information becomes rightfully available to the public
through no fault of the non-disclosing Party. The Parties agree that neither
will disclose the existence of this Agreement, nor any of its details or the
existence of the relationship created by this Agreement, to any third party
without the specific and express written consent of the other. If disclosure of
this Agreement or any of the terms hereof is required by applicable law, rule or
regulation, or is compelled by a court or governmental agency, authority or
body: (i) the Parties shall use all legitimate and legal means available to
minimize the disclosure to third parties of the content of this Agreement,
including, without limitation, seeking a confidential treatment request or
protective order; (ii) the disclosing Party shall inform the other Party at
least ten (10) business days (i.e., not including Saturdays, Sundays or days on
which banks are not open for business in the geographic area in which the
non-disclosing Party's principal office is located) in advance of the
disclosure; and (iii) the disclosing Party shall give the other Party a
reasonable opportunity to review and comment upon disclosure, and any request
for confidential treatment or protective order pertaining thereto, prior to
making such disclosure. The Parties may disclose this Agreement in confidence to
their respective legal counsel, accountants and financing sources as necessary
in connection with obtaining services from such third parties.
Upon the termination or expiration of this Agreement for any reason,
each Party shall deliver to the disclosing Party its Confidential Information
within three (3) weeks therefrom or, if the disclosing Party so requests,
destroy such Confidential Information and certify such destruction in writing to
the disclosing Party within three (3) weeks therefrom.
The Parties acknowledge and agree that any breach or threatened breach
of this SECTION 11.8 will result in irreparable harm to the Party whose
Confidential Information is subject to such breach or threatened breach, for
which remedies at law will not be adequate. Each Party, as a disclosing Party,
shall therefore be entitled to obtain injunctive relief in any court of
competent jurisdiction in addition to any other remedy at law or in equity in
the event of a breach or threatened breach of this SECTION 11.8.
11.9 COMPLIANCE WITH LAWS. The Parties shall comply with all national,
state, and local laws and regulations governing the manufacture, transportation,
and/or sale of Products and/or the performance of any of the Parties respective
rights, duties and obligations under the terms of the Agreement.
11.10 OWNERSHIP. Any specifications, drawings, schematics, technical
information and other materials furnished by the Buyer, and all intellectual
property rights therein ("BUYER'S INTELLECTUAL PROPERTY"), are owned exclusively
by the Buyer, and the Seller has no ownership interest or other right or license
therein other than use for the sole purpose of Manufacturing the Products or
otherwise performing its obligations under this Agreement. Any modification,
deviations, improvements or other changes to Buyer's Intellectual Property, from
whatever source, shall vest in and remain the sole property of Buyer.
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11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective on the Effective Date.
11.12 WAIVER. No delay or omission by any Party to exercise any right
or power hereunder shall impair any such right or power or be construed to be a
waiver thereof. A waiver by any Party of any of the covenants, conditions or
contracts to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or contract herein contained. No change, waiver or discharge
hereof shall be valid unless in writing and signed by an authorized
representative of the Party against which such change, waiver, or discharge is
sought to be enforced.
11.13 CUMULATIVE REMEDIES. The rights and remedies provided in this
Agreement or otherwise under applicable laws shall be cumulative and the
exercise of any particular right or remedy shall not preclude the exercise of
any other rights or remedies in addition to, or as an alternative of, such right
or remedy, except as expressly provided otherwise in this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the Effective Date set forth above.
Comtel Electronics, Inc. ("Seller") Telenetics Corporation ("Buyer")
By: /S/ XXXX XXXXXX By: /S/ XXXX X. XXXXXX
--------------------------------- --------------------------------
Name: XXXX XXXXXX Name: XXXX X. XXXXXX
------------------------------- ------------------------------
(print or type) (print or type)
Title: CHIEF EXECUTIVE OFFICER Title: CHIEF OPERATING OFFICER
------------------------------ -----------------------------
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