Wherify Wireless, Inc.
International Supply and Distribution Agreement
This International Supply and Distribution Agreement ("Agreement") is
entered into this 12th day of August, 2005 ("Effective Date") by and between
American Network Computadores, a Brazilian company, having its registered office
at Rua Xxxxxxxx Xxxxxxx, 777 - Tatuape - Sao Paulo - SP, ("Company") and Wherify
Wireless, Inc., a California corporation, having its place of business at 0000
Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx Xxxxxx, Xxxxxxxxxx 00000 ("Wherify").
Whereas, Wherify designs, manufactures and sells GPS enabled communication
devices for use with wireless telephone networks ("Products" as more fully
defined herein);
Whereas, Wherify desires to provide for the promotion, marketing,
distribution and sale of the Products in various territories throughout the
world;
Whereas, Company desires to engage in the promotion, marketing,
distribution and sale of the Products in the Territory (as defined below) and
represents that it has the expertise and other qualifications necessary to do so
within the Territory; and
Whereas, Wherify desires to appoint Company to undertake such activities
and Company desires to accept such appointment and to undertake such activities,
in each case in the Territory and in accordance with the terms and conditions of
this Agreement.
Now, therefore, in consideration of the mutual covenants, undertakings and
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties, the parties agree as follows.
1. DEFINITIONS
Except as defined elsewhere in this Agreement, all initially capitalized
terms shall have the meanings set forth in Exhibit 1 attached hereto.
2. APPOINTMENT; AUTHORITY AND OBLIGATIONS OF COMPANY
2.1 Appointment. Subject to the terms and conditions of this
Agreement, Wherify hereby appoints Company as Wherify's non-exclusive,
authorized distributor in the Territory to promote, market, distribute and sell
the Products in the Territory, and Company accepts such appointment. Products
distributed under this Agreement shall be distributed only by the Company
directly to end users or by Sub-Distributors appointed in accordance with
Section 2.4 below directly to end users.
2.2 Territory. For the purposes of this Agreement "Territory" shall
mean Brazil. Company shall aggressively market and promote the Products to
realize the maximum sales potential for the Products in the Territory. Company
shall not promote, market, distribute, sell or otherwise dispose of, directly or
indirectly, any of the Products outside the Territory or establish a repair or
maintenance facility outside the Territory without the prior written consent of
Wherify. Additionally, the Company shall not sell or otherwise distribute any
Product to any third party, including affiliates, if any Products sold to such
third party have been marketed, resold, or otherwise distributed outside the
Territory, whether through a repair or maintenance facility or otherwise.
2.3 Conflict of Interest. Company warrants to Wherify that the
Company does not currently represent, market, promote, or distribute any
Substantially Similar Products. During the Term, the Company shall notify
Wherify in writing at least 60 days in advance of Company doing so. Upon receipt
of such notice, or if Wherify otherwise becomes aware that Company is
representing, marketing, promoting, or distributing a Substantially Similar
Product, unless Wherify has provided its prior written consent for the
marketing, promotion and distribution of the Substantially Similar Product,
Wherify may, in its sole discretion and without any liability, terminate this
Agreement. Any Substantially Similar Products marketed, promoted or distributed
by a Sub-Distributor shall be considered under this Agreement to be
Substantially Similar Products marketed, promoted and distributed by the
Company; accordingly, the Company shall obtain Wherify's consent in accordance
with this Section 2.3 before appointing such a Sub-Distributor. If a
Sub-Distributor markets, promotes or distributes without the Company's knowledge
a Substantially Similar Product to which Wherify has not consented, Wherify
agrees that it will not terminate this Agreement as a result thereof if the
Company notifies Wherify in writing of such circumstance as soon as the Company
becomes aware of it and either: (i) the Sub-Distributor ceases all marketing,
promotion and distribution of Products and disclaims any and all rights with
respect to the Products, including any right to market, promote and distribute
the Products, within 30 days after the earlier of Wherify or the Company
becoming aware of the marketing, promotion or distribution of the Substantially
Similar Product by the Sub-Distributor; or (ii) Wherify consents in writing to
continued distribution through the Sub-Distributor.
2.4 Sub-Distributors. During the Term, Company may, only with the
prior written consent of Wherify, appoint one or more Sub-Distributors to
promote, market, distribute and sell the Products directly to end-user customers
in the Territory. Each Sub-Distributor approved by Wherify shall have entered
into a written agreement with Company which contains terms and conditions which
are no less protective of Wherify, and its Products and intellectual property,
than the terms and conditions in and required by this Agreement. Without
limiting the foregoing, if a Sub-Distributor is used, the Company shall require
the Sub-Distributor to perform the Company's responsibilities under this
Agreement for the benefit of Wherify in the same manner as is required of the
Company, including without limitation under Sections 2.2, 2.3, 2.5, 8, 9, 10 and
11. Company shall be responsible to Wherify under this Agreement for the actions
and inactions of each Sub-Distributor, however, as if performed by the Company,
including any failures to meet the indemnification obligations under Section
6.2, and shall be directly liable to Wherify for any breaches of this Agreement
resulting from any Sub-Distributor's acts or omissions. Company shall notify
Wherify in writing of each proposed Sub-Distributor, which notice shall include
the proposed Sub-Distributor's name, address and corporate overview and shall
identify all Substantially Similar Products marketed, promoted or distributed by
the Sub-Distributor, if any. Upon receipt of such notice Wherify shall use
reasonable efforts to respond to each such notice within 15 days of receipt
thereof, provided that Wherify's failure to respond shall be deemed Wherify's
rejection of such proposed Sub-Distributor.
2
2.5 Additional Obligations of Vendor.
(a) Localization. Company shall, at its own cost, be
responsible for all localization of the Documentation and Packaging, including
without limitation by (i) arranging for a complete and accurate translation of
such Packaging and Documentation in the local language(s) of the Territory
through a reputable translation company that is reasonably acceptable to
Wherify; (ii) ensuring that the Documentation and Packaging conform to all legal
and regulatory requirements, including without limitation by displaying any
notices or other terms and conditions, required in the Territory; and (iii)
taking such other actions as may be necessary or desirable for the localization
of the Packaging and Documentation. In addition, the Company shall provide
reasonable assistance upon request from Wherify with respect to the localization
of the Products. Without limiting the foregoing, the Packaging and Documentation
shall contain all intellectual property notices requested by Wherify and shall
otherwise be consistent with Wherify's reasonable requests. Company shall
deliver the proposed localized Documentation and Packaging to Wherify in
electronic format within 30 days after Wherify's initial request. Upon Wherify's
receipt thereof, Wherify shall have a period of 30 days to notify Company in
writing of its acceptance or rejection of the localized Documentation and
Packaging. In the event of a rejection, Wherify will specify in its notice of
rejection in reasonable detail Wherify's issues and concerns and any other
changes that Wherify wishes to suggest. Upon receipt thereof, Company shall have
a period of 10 days to revise and resubmit the localized Packaging and
Documentation to Wherify for review. The preceding process will be repeated
until Wherify accepts the localized Packaging and Documentation. In the event of
such acceptance by Wherify, Wherify will instruct its relevant third party
manufacturer to use such materials for the final packaging and shipping of the
Products to Company hereunder. During the Term, Wherify may deliver any
modifications to the Packaging or Documentation to Company for localization and
Wherify's acceptance in accordance with the process above. In connection with
the foregoing, Wherify hereby grants Company, under Wherify's copyright rights
embodied in the Packaging and Documentation provided by Wherify, a
non-exclusive, non-sublicensable, non-transferable (except as set forth in
Section 12.6) right and license to create the localized Packaging and
Documentation in accordance with this Section 2.5(a) and to use, copy and
distribute (which distribution may be done indirectly through Sub-Distributors)
such localized Documentation and Packaging in the exercise and performance of
Company's rights and obligations under Sections 2.1 and 2.2, in the promotion,
marketing, distribution and sale of the Products. Company hereby assigns and
shall assign to Wherify all right, title and interest in and to all copyright
and other intellectual property rights, and all goodwill associated therewith,
embodied in the localized Packaging and Documentation, provided that any "moral"
or similar artistic rights embodied within such localizations that the Company
is by law prohibited from assigning to Wherify are specifically excluded from
such assignment obligation. Company hereby irrevocably agrees that it will not
directly or indirectly assert or enforce such non-assignable rights in any
manner, whether before or after termination or expiration of this Agreement,
including against Wherify, or any third party who is provided a copy of any
localized Documentation or Packaging. Additionally, the Company shall ensure
that all authors of the localized Documentation and Packaging have agreed in
writing to provisions that ensure that the foregoing assignment of rights to
Wherify is effective and that prohibit such authors from enforcing or asserting
such non-assignable rights in any manner, whether before or after termination of
such agreements or this Agreement. Company shall make Wherify a third party
beneficiary of, with the power to enforce, such agreements with authors. No
Documentation or Packaging, or derivative of any Documentation or Packaging,
shall be reproduced, distributed, transmitted, publicly displayed, publicly
performed, or used, and no derivative (including translations) shall be created,
except in accordance with this Section 2.5(a).
3
(b) Sales Force. The Company shall maintain, as necessary in
connection with its obligations hereunder, a sales force that is reasonably
trained and informed regarding the operation, functionality, and features of the
Products and of any associated services.
(c) Inventory. The Company shall purchase and maintain an
inventory of Products in quantity sufficient to efficiently and promptly meet
the needs of the market in the Territory.
(d) Customer Support.
(i) The Company agrees to cooperate fully with Wherify
in connection with customer support in the Territory, as reasonably requested by
Wherify, including without limitation in connection with warranty and other
services and providing Wherify with information concerning warranty returns and
other customer issues. Without the need for request by Wherify, the Company
shall inform Wherify promptly of all significant issues that arise with respect
to any Product or associated services. The Company shall be solely responsible
for all representations and warranties made with respect to any Product, or
associated services, that are beyond the representations and warranties
authorized by Wherify in writing.
(ii) The Company, and not Wherify, shall provide "Tier
1" support to end users in language(s) appropriate for the Territory. Such
support shall include: receipt of and response to calls, inquiries, and other
communications concerning Products; problem and question intake; activation and
use assistance; explaining operation and use of the Products to customers;
initial problem identification; reproducing hardware and software errors prior
to return of Product to Wherify; referring problems to Wherify for analysis
where appropriate or requested by Wherify; distributing corrections, bug fixes,
patches, updates, and upgrades; making updated and upgraded Documentation
available to end user customers; distributing repaired and replacement Products;
obtaining Products from customers in the event of a recall; otherwise
interfacing and dealing with customers; and taking any other actions reasonably
requested by Wherify that are appropriate to resolve end user or Product issues
and problems, or to enable Wherify to do so. The Company shall not repair, or
attempt to repair, any Product. Rather, all repairs shall be performed solely by
Wherify or Wherify's authorized service center.
(iii) No Product shall be returned to Wherify, other
than Product returned by the Company directly to Wherify in accordance with the
return procedures in this Agreement. The Company will provide to Wherify, with
each problem that it reports to Wherify, the customer's name and contact
information, a description of the problem in reasonable detail, and, as
requested by Wherify, any other information reasonably concerning the customer,
the problem or concern.
(e) Costs and Expenses. Except as otherwise expressly provided
herein, the Company shall solely bear all costs and expenses of performing its
obligations hereunder. Wherify shall not be liable for any costs or expenses
incurred without its prior written agreement to bear the applicable costs or
expenses.
4
(f) Records; Reporting; Audit. The Company shall keep Wherify
informed, as reasonably requested by Wherify, concerning the efforts and
activities of the Company in marketing, promoting and selling Products in the
Territory. Without limiting the foregoing, the Company shall maintain records of
warranty returns and other issues with the Products, and any associated
services, of which the Company is aware and provide Wherify with a copy of such
records upon request. The Company shall maintain a record of the parties to
which all Products have been shipped by Company. Wherify shall have the right,
at its own expense, to inspect and audit (or direct an independent certified
public accounting firm to inspect and audit) such books and records of the
Company; provided, however, that: (i) Wherify shall provide the Company with
reasonable notice prior to such audit; (ii) any such inspection and audit shall
be conducted during regular business hours in such a manner as not to interfere
with normal business activities; and (iii) in no event shall audits be made more
frequently than once every six months. The right to audit will extend for one
year following the termination of this Agreement. The Company and its personnel
will cooperate in good faith in connection with any audit pursuant to this
paragraph.
2.6 Product Changes. Wherify reserves the right from time to time in
its sole discretion, without incurring any liability to the Company with respect
to any previously placed or accepted purchase order, to discontinue or to limit
its production of any Product; to allocate, terminate or limit deliveries of any
Product in time of shortage; to alter the design and construction of any
Product; to add new and additional products to the Products; and upon reasonable
notice to the Company, to change its sales and distribution policies, not
inconsistent with the terms of this Agreement.
2.7 Reservation of Rights. Company's rights under this Agreement are
limited to the authorization to resell Products that have been purchased by the
Company directly from Wherify. The Company shall not make or have made any
Product. No title or ownership of any intellectual property rights is
transferred to the Company. ALL RIGHTS NOT EXPRESSLY GRANTED HEREUNDER ARE
RESERVED TO WHERIFY. Nothing shall prohibit Wherify from marketing, promoting,
selling, and distributing any products, components, and services in the
Territory and nothing shall prevent Wherify from authorizing others to perform
such activities.
3. FORECASTS; ORDERS; PRICE; PAYMENT
3.1 Terms and Conditions. All purchases of Products by Company from
Wherify shall be subject to the terms and conditions of this Agreement only.
Company's purchase orders submitted from time to time by Company under this
Agreement shall be governed exclusively by the terms and conditions of this
Agreement and no pre-printed or other terms appearing in any such purchase order
or other document issued by Company shall in any way, amend, modify or
supplement this Agreement. All additional and different terms in any such
purchase order or other document are hereby expressly rejected and excluded and
shall have no effect, notwithstanding anything to the contrary in such
additional and/or different terms and conditions and notwithstanding the
acceptance of any purchase order by Wherify. Purchase orders shall be issued
only by the Company and not any Sub-Distributor.
5
3.2 Purchase of Products and Software. The sale of each Product to
Company hereunder and the transfer of title for each purchased Product to
Company shall not be considered a sale of or transfer of title to any software,
firmware or other microcode (collectively "Software") included with or embedded
in the hardware comprising such Product, but instead shall be deemed to be only
a license for Company to distribute such Software to customers as part of the
Product, as such Software has been installed by Wherify on the Product. Wherify
and its suppliers shall retain exclusive title to the Software. Company and its
Sub-Distributors shall distribute Software only as installed by Wherify on
Products purchased from Wherify and only in accordance with this Agreement, and
the respective end user customers of Company and its Sub-Distributors may use
the Software only as so installed on the Products in the ordinary course of the
end user customer's use of such Products for their intended use in accordance
with the terms of use governing such Software as included in the Documentation,
other materials supplied with the Products, including the end user terms that
the customer executes in connection with any location or other services
purchased with the Products. Nothing in this Agreement shall be construed, by
implication, estoppel or otherwise, as granting any right to any source code of
the Software, and except to the extent such restrictions are prohibited by
applicable law or are authorized by Wherify as described in this Section 3.2
above, no Software, or any derivative of any Software, and no trade secrets
embodied therein, shall be reproduced, distributed, transmitted, publicly
displayed, publicly performed, altered, disassembled, de-compiled, interrogated,
translated, or used, and no derivative (including translations) shall be
created.
3.3 Forecast. Commencing on the Effective Date hereof and during the
Term, Company will provide Wherify, on a calendar weekly basis, with a rolling,
26 calendar week written forecast (the "Forecast") stating projected quantities
of, and requested delivery dates for, any Products, taking into account the
applicable Lead Time for each Product. The Products requested for delivery in
the first 12 weeks of each such Forecast shall be deemed Company's firm and
binding commitment to purchase the quantity of Products for such period, and no
Forecast changes shall be made with respect to any calendar week that is in the
first 12 weeks of any Forecast. Commencing on the Effective Date and every four
calendar weeks thereafter, Company shall accompany each Forecast with a written
purchase order requesting delivery in each calendar week of the first four weeks
of the then relevant Forecast of the quantities of Products, which shall in no
event be less than the quantities set forth for such calendar week when it was
the twelfth week of a Forecast. The period in each Forecast beyond the first 12
weeks shall be used by Wherify and its third party manufacturer to plan for
materials and capacity.
3.4 Purchase Order Acceptance. Purchase orders will normally be
accepted by Wherify, provided however that Wherify may reject any purchase
order: (a) that is an amended order in accordance with Section 4.2 below because
the purchase order is outside of the "flexibility table" in Section 4.2; or (b)
if the purchase order represents a significant deviation from the Forecast for
the same calendar week when the calendar week was the twelfth week of a Forecast
provided in accordance with Section 3.3, unless such deviation is within the
parameters of the "flexibility table" in Section 4.2. Wherify shall notify
Company of rejection of any purchase order within five business days of receipt
of such purchase order.
6
3.5 Purchase Price; Changes; Taxes.
(a) The initial purchase price for the Products ("Prices") are
set forth in Appendix B attached hereto. Wherify may revise the Price for any
Product upon 90 days written notice to the Company.
(b) The Prices do not include any foreign, federal, state or
local sales, use or other taxes, VAT, and similar transfer taxes, any duties, or
similar charges, however designated, levied, or based upon the sale, licensing,
delivery, transfer, importation, exportation, or use of the Products. Company
shall pay, or reimburse Wherify for, all such taxes and charges imposed on
Company or Wherify, provided, however, that Company shall not be liable for any
taxes based on Wherify's net income. When Wherify has the legal obligation to
collect such taxes and charges, the appropriate amount shall be added to
Company's invoice and paid by Company to Wherify unless Company provides Wherify
with a valid tax exemption certificate authorized by the appropriate taxing
authority. Company shall promptly notify Wherify of any amendment or revocation
of such certificate and will indemnify and hold Wherify harmless from and
against any and all taxes and other monies resulting from the failure to hold a
certificate recognized as valid by the appropriate tax authority or from the
failure to pay such taxes, duties, or charges.
3.6 Payment. All payments made hereunder shall be in U.S. Dollars,
and unless otherwise specified herein, shall be paid by Company by wire transfer
to an account designated by Wherify no later 30 days after the date of the
invoice. If Company makes a late payment, Company agrees to pay 1.5% monthly
interest on all payments after the due date, or the maximum rate permitted under
applicable law, whichever is less. Furthermore, if Company is late with
payments, or Wherify has reasonable cause to believe Company may not be able to
pay when due, or in Wherify's reasonable opinion, the financial condition of
Company, or other grounds for insecurity, warrant such action, Wherify may, in
addition to any other rights and remedies available under applicable law or this
Agreement, (a) suspend performance under this Agreement until assurances of
payment satisfactory to Wherify is received or payment is received; (b) demand
prepayment for purchase orders; (c) delay shipments of Products or (d) act
against Company's Letter of Credit (as defined below). Company agrees to provide
all financial information reasonably required by Wherify from time to time in
order to make a proper assessment of the creditworthiness of Company.
3.7 Letter of Credit. At least 120 days prior to the first date of
shipment of Products hereunder, Company shall have opened an irrevocable and
confirmed revolving letter of credit through a prime bank acceptable to Wherify,
in favor of Wherify ("Letter of Credit"). Such Letter of Credit shall be
maintained by Company in an amount that is no less than the total aggregate
amount of the purchase prices, taxes, and other associated charges for Products
set forth in the first 12 weeks of the most recent Forecast made in accordance
with this Agreement. The Letter of Credit set forth above shall provide that
payment shall be made, on terms acceptable to Wherify, upon presentation of the
following documents at least 40 days after the date of the applicable invoice
issued by Wherify: the bills of lading made out to the order of Company or
Wherify, a commercial invoice duly issued by Wherify, and a packing list issued
by Wherify for the Products against which Wherify seeks payment. The Letter of
Credit shall authorize presentation of such documents by Wherify, and payment to
Wherify, for at least 120 days after the date of the xxxx of lading with respect
to the Products.
7
3.8 Security Interest. To the extent enforceable under applicable
law, until full receipt of payment of the Price and all other charges payable in
connection with each shipment of each Product by Wherify to Company, Wherify
hereby retains title to such Product and Company hereby grants to Wherify a
purchase money security interest in such Product and the proceeds therefrom.
Company agrees to promptly execute all documents reasonably requested by Wherify
to evidence, record, perfect, maintain and protect such security interest and
retention of title. Company hereby irrevocably designates and appoints Wherify
and its duly authorized officers and agents as Company's attorneys-in-fact, for
the sole purpose of executing and filing such documents and to do all other
lawfully permitted acts for such purpose if Company fails to take such action
within a reasonable period. Such appointment shall be a power coupled with an
interest and shall be irrevocable.
4. SHIPMENTS, SCHEDULE CHANGE, MINIMUM VOLUMES
4.1 Shipments. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for shipment in accordance with Wherify's
standard packaging and marked for shipment to Company's destination specified in
the applicable purchase order. Shipments will be made EXW (Ex works, Incoterms
2000) Wherify's third party manufacturer's facility. Company shall be
responsible for designating a carrier. Upon making the Product available to the
designated carrier, risk of loss with respect to the Products shall pass to
Company. Company shall pay all freight, insurance, export, and other shipping
expenses, as well as any special expenses for packing provided to the carrier,
directly to its designated carrier or the applicable government or regulatory
authority, as applicable. In the event Company fails to designate a carrier with
respect to any shipment pursuant to an accepted purchase order, Wherify shall
deliver the relevant Products to its designated carrier of choice. All freight,
insurance, export and other shipping expenses, duties, and the like paid
Wherify, as well as any special packing expenses not included in the Price for
the Products, will be invoiced to and paid for by Company.
4.2 Quantity Increases and Shipment Schedule Changes.
(a) For any accepted purchase order, Company may (i) increase
the quantity of Products or (ii) reschedule the quantity of Products and their
shipment date as provided in the "flexibility table" below:
Maximum Allowable Variance From Accepted Purchase Order
Quantities/Shipment Dates
# of days before Allowable Maximum Maximum
Shipment Date Quantity Reschedule Reschedule
on purchase order Increases Quantity Period
0-14 0% 0% 0
15-30 0% 0% 0
31-60 0% 0% 0
61-90 20% 10% 30
91-120 30% 25% 60
000-000 000% 100% N/A
8
Decreases in quantity are permitted at the Company's discretion, with
respect to purchase orders that are more than 120 days from the shipment date.
Any increases or reschedules with respect to such purchase orders within 120
days of the delivery date requested in the order will be subject to the purchase
requirements set forth in the "flexibility table" subsection (a) above. Subject
to the terms above, Company shall be entitled to increase and/or reschedule
Products in each order only one time.
(b) Wherify will use reasonable commercial efforts to meet any
quantity increases, subject to availability of such Products. All reschedules or
quantity increases or decreases outside of the table in subsection (a) above
require Wherify's prior written consent ("Excess Orders"). To the extent Wherify
accepts any Excess Orders, Company shall, in addition to the amounts payable for
the Products, be invoiced for and shall pay any extra costs incurred by Wherify
in meeting such Excess Orders, in addition to the amounts invoiced in accordance
with Section 3.5.
4.3 Minimum Volume Commitments. Company agrees to purchase the
following minimum volume of Products during the calendar years set forth below.
For purposes of this Section 4.3, the time of purchase shall be considered to be
the time at which Wherify receives payment.
Month 1-12: 100,000 Product units
2006: 000,000 Product units (TBD)
2007: 000,000 Product units (TBD)
If Company does not purchase the minimum volumes set forth above, it shall
be deemed a material breach of this Agreement. Because the Products have been
priced using a manufacturing cost that assumes a minimum volume of Product
production, if Company fails to meet the annual projected volume of Product, any
materials discounts that are lost, and any additional amounts paid by Wherify,
as a result will be invoiced to the Company. Nothing in this Section 4.3 is
intended to limit Wherify's remedies.
4.4 Cancellation of Orders and Company Responsibility for Inventory.
(a) Other than as expressly set forth herein, Company may not
cancel all or any portion of an accepted purchase order, or any purchase order
that Company is required to place under Section 3.3, without Wherify's prior
written approval. Absent such approval, Company shall be invoiced for and pay to
Wherify the amount for any such order of Products in accordance with the terms
and conditions of this Agreement. In the event Wherify accepts any cancellation
of Products, Company shall be invoiced and pay a reasonable monthly carrying
charge for any Inventory or Special Inventory procured to support the original
delivery schedule, which carrying charge shall accrue on the first day of
Wherify's acceptance of the relevant purchase order cancellation. In addition,
if Wherify notifies Company that such Inventory and/or Special Inventory has
remained in storage for more than 60 days from such cancellation, then Company
agrees to purchase from such Inventory and/or Special Inventory by paying the
Affected Inventory Costs within 30 days of Wherify's invoice therefor. In
addition, Wherify will calculate the cost or gain of unwinding any currency
hedging contracts entered into by Wherify or its third party manufacturer to
support the cancelled purchase order(s). Should the unwinding result in a loss,
Company shall promptly pay, but in no event more than five business days after
receipt of Wherify's invoice therefor, the amount of any such loss to Wherify or
its third party manufacturer. Should the unwinding result in a gain to Wherify
or its third party manufacturer, such gain shall be creditable by Company
against amounts otherwise owed to Wherify under this Agreement.
9
(b) Except for variations that are permitted pursuant to
4.2(a), any change to the amount of Products in any subsequently delivered
Forecast for any of the first 12 weeks covered by a previous Forecast shall be
deemed a cancellation of such Products and Company will be responsible for any
Special Inventory purchased or ordered by Wherify's suppliers to support the
previously forecasted amount of Products.
(c) For purposes of calculating the amount of Inventory and
Special Inventory, the "Lead Time" shall be calculated as the Lead Time at the
time of (i) procurement of the Inventory and Special Inventory; or (ii)
cancellation of the purchase order, whichever is longer.
4.5 Inspection and Acceptance. Prior to delivery of the Products,
Wherify will perform its standard test procedures or programs that are
applicable to the Products. If Company desires to inspect the Products during
the final test procedures performed by Wherify in relation to any shipment,
Company shall request such inspection in writing and shall be responsible for
any charges that may be associated with such inspections. Notwithstanding the
inspection by Company during the final test procedures, Company reserves the
right to inspect the Products after the arrival thereof at Company's facility.
If any of the Products delivered fail to comply with the limited warranty in
Section 8.1, or the shipment is not in material conformity with the
corresponding order (other than with respect to the delivery date, but including
with respect to any deficiencies in the number of Product received), or any
charges are not correct, the Company shall give Wherify written notice thereof
within five business days of receipt of such Products by Company, specifying the
shipment, the purchase order number, and the exact nature of the discrepancy
between the order and the shipment, or the exact nature of the discrepancy in
the shipping or other charges, as applicable. All Products shall be deemed
accepted by Company, and all shipments, and all shipping and other charges,
shall be deemed correct, except to the extent that the Company so notifies
Wherify within such five business day period with respect to the shipment of
Products. Wherify will arrange for the repair or replacement of defective
Products and supplementation in the event of a deficiency in the quantity of
Products. Any and all the freight, duties, charges and other costs and expenses
incurred for such replacement and/or supplement shall be solely borne and paid
by Wherify; provided that in the event Products are returned to Wherify and
Wherify's analysis does not show that the Products did in fact fail to comply
with the limited warranty in Section 8.1, Wherify may, at its sole discretion
(i) deem Company's rejection as a cancellation under Section 4.4 or (ii) return
the relevant Products to Company; provided further that, in each case, Company
shall bear and/or reimburse Wherify for any and all the freight, duties, charges
and other costs and expenses incurred in connection with the shipments to and
from Wherify. Products shall be returned to Wherify solely in accordance with
Section 8.3 below. The Company's sole remedy, and Wherify's exclusive liability,
for any non-conformance shall be as set forth in Section 8. The Company's sole
remedy, and Wherify's exclusive liability, for any shortfall in or failure to
ship Product shall be that Wherify shall use reasonable commercial efforts to
ship the applicable Product and, if Wherify fails to do so, Wherify will provide
a refund of the purchase Price if the purchase Price has been paid by the
Company to Wherify.
10
5. CONFIDENTIALITY
5.1 Confidentiality. "Confidential Information" means any
information disclosed by either party to the other party during the Term, either
directly or indirectly, in writing, orally or by inspection of tangible objects,
which is designated as "Confidential," "Proprietary" or some similar
designation. All of the terms of this Agreement shall be deemed Confidential
Information. Information communicated orally will be considered Confidential
Information if such information is designated as being Confidential Information
at the time of disclosure and such information is summarize in a writing
designated as "Confidential," "Proprietary" or some similar designation within
30 days of its initial disclosure. Notwithstanding the foregoing, the terms of
this Section 5.1 shall also pertain to tangible manifestations of information
not so marked and to information disclosed in an intangible form if the
discloser informs the recipient of the confidential nature of such information
or if the recipient otherwise knows or should reasonably be expected to know of
its confidential nature. Confidential Information will not, however, include any
information which (a) was publicly known or made generally available in the
public domain prior to the time of disclosure by the disclosing party; (b)
becomes publicly known or made generally available after disclosure by the
disclosing party to the receiving party through no action or inaction of the
receiving party; (c) was in the possession of the receiving party at the time of
disclosure by the disclosing party, not in violation of any obligation of
confidentiality; (d) is independently developed by the receiving party without
use of or reference to the disclosing party's Confidential Information as
documented by the receiving party's files; or (e) is otherwise received by the
receiving party not in violation of an obligation of confidentiality from a
source other than directly or indirectly from the disclosing party.
5.2 Non-Use and Non-Disclosure. The receiving party agrees (i) not
to disclose any Confidential Information of the disclosing party to any third
parties (except to its employees or agents on a "need-to-know" basis and only if
such employees and agents are bound by confidentiality obligations no less
strict than those set forth in this Section 5, and except as otherwise permitted
below); (ii) not to use any such Confidential Information for any purposes
except to exercise its rights and carry out its responsibilities under this
Agreement, (iii) not to display, copy, disclose, transmit, reverse engineer,
disassemble, decompile, translate, modify, or create derivative works from all
or any part of Confidential Information except to exercise its rights and carry
out its responsibilities under this Agreement, and (iv) to keep the Confidential
Information of the disclosing party confidential using the same degree of care
the receiving party uses to protect its own Confidential Information, as long as
the receiving party uses at least reasonable care.
11
5.3 Exceptions.
(a) If either party receives a subpoena or other validly
issued judicial process requesting, or is otherwise required by a government
agency (such as the SEC) to disclose, Confidential Information of the other
party, then the receiving party shall, to the extent permitted, promptly notify
the disclosing party of such requirement and shall reasonably cooperate to seek
confidential treatment or to obtain an appropriate protective order to preserve
the confidentiality of the Confidential Information prior to disclosure. Each
party will use commercially reasonable efforts to give the other party at least
10 days' prior notice of its intent to file this Agreement with the SEC or other
similar regulatory agency and will use commercially reasonable efforts to
consult with the other party for the purpose of incorporating reasonably
proposed redactions (i.e., such proposed redactions to comply with laws, rules
and regulations interpreting securities and other applicable laws). All
obligations under this Section 5 shall survive for five years after the
expiration or earlier termination of this Agreement.
(b) Company and Wherify may disclose the terms and conditions
of this Agreement (i) in confidence, in connection with the requirements of an
initial public offering or securities filing or as otherwise required to comply
with disclosure requirements for publicly traded companies; (ii) in confidence,
to accountants, banks, investors (actual and potential), shareholders, business
partners (actual or potential, provided such partners are not actual, or
reasonably likely to become, potential competitors of Wherify, as the case may
be) and other financing sources and their advisors or in connection with any
merger or acquisition; and (iii) in confidence, in connection with the
enforcement of this Agreement or rights under this Agreement. Notwithstanding
anything herein to the contrary, Company and Wherify (and each employee,
representative, or other agent of such party) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the transaction and all materials of any kind (including opinions and other tax
analyses) that are provided by a party relating to such tax treatment and tax
structure.
5.4 Return of Information; Survival. Upon termination of this
Agreement, each party shall return or destroy and certify the destruction of,
any other party's Confidential Information (including all copies thereof) in its
possession or control retaining only sufficient material to fulfill remaining
orders and to service and support purchased Products. This Section 5.4 shall
survive for a period from the time of disclosure until the later to occur of the
date (i) five years after the date of the last purchase of Product under this
Agreement, or (ii) of the expiration or termination of this Agreement.
5.5 Equitable Relief. If a party breaches any of its obligations
with respect to confidentiality, or if such a breach is likely to occur, the
relevant disclosing party shall be entitled to equitable relief, including
specific performance or an injunction, in addition to any other rights or
remedies, including money damages, as provided by law, without the obligation of
posting any bond or other form of security or deposit against adverse judgment.
12
6. INDEMNIFICATION
6.1 Indemnification by Wherify. Subject to the terms and conditions
of this Agreement, including Section 6.3 below, Wherify, at its expense, will
defend, or at its option settle, any third party claim brought against Company,
Sub-Distributors and their respective customers (other than by any affiliate of
Company, or Sub-Distributors, or their respective customers) alleging that the
Products, as supplied by Wherify to Company and when used as provided and
authorized by Wherify pursuant to this Agreement, infringe any United States
patent, copyright or trade secret of such third party. Wherify will pay any
final judgment awarded against Company, or settlement entered into by Wherify,
based on such claim. Notwithstanding the foregoing, Wherify shall have no
liability if the alleged claim is attributable to: (a) compliance by Wherify
with Company's specifications or instructions; (b) modification of the Product,
or any portion thereof, other than by Wherify or its authorized agents; (c) use
or operation of Product, or any portion thereof, other than in accordance with
the applicable Documentation; (d) the combination of the Products, or any
portion thereof with software, hardware (including any SIM card), services or
other items not supplied or performed by Wherify for use with the Products; (e)
any trade name, logo or trademark infringements involving any marking or
branding not applied by Wherify or involving any marking or branding applied at
the request of Company; or (f) any infringement occurring after Wherify has
notified Company of the infringement or potential infringement.
6.2 Indemnification by Company. Subject to the terms and conditions
of this Agreement, including Section 6.3, and except to the extent that Wherify
is obligated to indemnify Company under Section 6.1 above, Company, at its
expense, will defend, or at its option settle, any third party claim brought
against Wherify, its directors, officers, employees, affiliates and customers
that arises out of or in connection with the acts or omissions of Company,
Sub-Distributors, or their respective customers. Company will pay any final
judgment awarded against Wherify, or settlement entered into by Company, based
on such claim.
6.3 Procedure. Any party seeking indemnification ("Indemnified
Party") from the other party ("Indemnifying Party") under this Section 6 shall
provide the Indemnifying Party with: (a) prompt written notice of any claim for
which the Indemnified Party seeks indemnification under this Section 6; (b) sole
control of the defense and any settlement of any such claim; and (c) reasonable
cooperation and assistance in connection with the defense or settlement of any
such claim; provided that the Indemnifying Party pays for reasonable
out-of-pocket expenses incurred by the Indemnified Party in connection with such
cooperation and assistance.
6.4 Wherify's Options. In the event of an infringement action where
Wherify is the Indemnifying Party with respect to the Products, or any portion
thereof, or in the event Wherify believes such a claim is likely, Wherify shall
be entitled, at its option but without obligation, to (a) procure for Company
and customers the right under such patent, copyright, trademark, design or trade
secret to distribute, sell or use, as appropriate, the Product or such part
thereof that is the subject of the relevant claim; (b) require the return of
Product, and provide a replacement for the Product, or part thereof, with other
products or such part thereof that is the subject of the relevant claim or
provide a refund, less a reasonable use fee based upon straight line
depreciation over a [three (3) year] useful life; (c) modify the Product or such
part thereof that is the subject of the relevant claim; and/or (d) terminate
this Agreement.
6.5 SOLE REMEDY. THE FOREGOING PROVISIONS OF THIS SECTION 6 STATE
THE ENTIRE LIABILITY AND OBLIGATION OF WHERIFY AND THE EXCLUSIVE REMEDY OF
COMPANY, DISTRIBUTORS, AGENTS, EMPLOYEES, AND ITS CUSTOMERS WITH RESPECT TO ANY
ALLEGED INFRINGEMENT OF COPYRIGHTS, TRADEMARKS, DESIGNS, TRADE SECRETS, PATENTS
OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE WHERIFY PRODUCTS.
13
7. COMPLIANCE WITH LAW
7.1 Products. Wherify will be responsible for conformance by the
Products with all applicable laws, rules and regulations with respect to
wireless or communication Products in the Territory. All rights of the Company,
and obligations of Wherify, are subject to compliance with such laws, rules, and
regulations.
7.2 Export Controls. Company agrees to comply with all applicable
export control laws and regulations, including the Export Administration
Regulations ("EAR") maintained by the United States Department of Commerce.
Company covenants that it shall not, directly or indirectly, sell, export,
re-export, transfer, divert, or otherwise dispose of any Product, Software,
Documentation (including any Translation thereof) or other technology (including
products derived from or based on such technology) received from Wherify under
this Agreement to any country (or national thereof) subject to antiterrorism
controls or U.S. embargo, or to any other person, entity, or destination
prohibited by the laws or regulations of the United States, without obtaining
prior authorization from the competent government authorities as required by
those laws and regulations. Company agrees to indemnify Wherify from and against
any fines or penalties that may arise as a result of Company's breach of this
provision.
7.3 Foreign Corrupt Practices Act. In conformity with the United
States Foreign Corrupt Practices Act and with Wherify's established corporate
policies regarding foreign business practices, Company and its employees and
agents shall not directly or indirectly make and offer, payment, promise to pay,
or authorize payment, or offer a gift, promise to give, or authorize the giving
of anything of value for the purpose of influencing an act or decision of an
official of any government within the Territory or the United States Government
(including a decision not to act) or inducing such a person to use his influence
to affect any such governmental act or decision in order to assist in obtaining,
retaining or directing any such business.
7.4 Currency Control. Company represents and warrants that no
currency control laws applicable in the Territory prevent the payment to Wherify
of any sums due under this Agreement in United States dollars. In the event that
any such laws come into effect and the local government of the Territory does
not permit that payment be made in United States Dollars, Company will notify
Wherify immediately, and if so instructed by Wherify, deposit all monies due
Wherify to the account of Wherify in a local bank of Wherify's choice in the
Territory. Wherify has the right to suspend performance, and terminate this
Agreement, in the event any currency control law prevents payment to Wherify in
a manner that is acceptable to Wherify.
8. WARRANTY
8.1 Warranty. Subject to the terms and conditions hereof, Wherify
hereby warrants to Company that the Product, for a period of 90 days after the
date of shipment by Wherify to Company hereunder ("Warranty Period"), (a) will
be free from defects in materials and workmanship and (b) will substantially
conform to the applicable Specification for such Product.
14
8.2 Exclusions. The warranties set forth in Section 8.1 specifically
exclude and do not apply to damage or defects (a) caused through no fault of
Wherify during shipment to or from Company, (b) caused by the use or operation
of Products in an application or environment other than that specified by
Wherify, (c) caused by third party materials and components not supplied by
Wherify hereunder; (d) caused by modifications or alterations made to the
Product by anyone other than Wherify or its authorized agents; (e) caused by
maintenance performed on the Product by anyone other than Wherify or its
authorized agents, (f) that resulted from the Product, or any portion thereof,
being, improperly stored or subjected to unusual physical or electrical stress;
or (g) for which Company did not obtain a RMA number (defined below) and return
the Product in accordance with Section 8.3 during the Warranty Period.
8.3 Return Procedures. Company shall return Products with defects
covered by the warranties of Section 8.1, or properly rejected in accordance
with Section 4.5, to the address provided by Wherify from time to time, but in
each case only in accordance with this Section 8.3. Company shall request, in
writing or by facsimile, authorization from Wherify prior to such return. Upon
receipt of such request, Wherify shall provide Company with a RMA number to be
prominently displayed on the shipping container for the defective Product. Once
Wherify authorizes the return of any defective Product, Company shall ship such
Product to Wherify within 10 days after issuance of the RMA number, freight
prepaid and properly insured, pursuant to the shipping and other requirements
specified by Wherify in its RMA. Such shipment shall be DDP (Incoterms 2000)
Wherify's return address, and the Company shall bear risk of loss during
shipment. Wherify shall, at its sole option and expense, repair, replace, or
provide a credit for defective Product, employing at its option, new or used
parts to make such repair or replacement, and shall ship the repaired or
replaced Product to Company, freight prepaid Ex Works (Incoterms 2000) Wherify's
shipping location. Any repaired or replaced Product shall be warranted under
Section 8.1 for the greater of 30 days or the period remaining under the
original Warranty Period at the time the defective product was shipped to
Wherify. In the event that Wherify's analysis does not confirm the Product to be
defective or to have been properly rejected under Section 4.5, the Company shall
provide Wherify with written instructions regarding the desired disposition of
such Product within 10 days after Wherify's request, which disposition shall be
at the Company's sole cost. Payment of such costs shall be subject to the terms
applicable to other payments to Wherify under Section 3.6. Wherify shall be
entitled to dispose of such Products in any manner without liability to the
Company if the Company has not provided such instructions or, if required by
Wherify, has not pre-paid such costs, within such 10 day period.
8.4 SOLE REMEDY. THE FOREGOING STATES THE SOLE LIABILITY AND
OBLIGATION OF WHERIFY AND THE SOLE REMEDY OF COMPANY ARISING OUT OF A BREACH OF
THE WARRANTIES GIVEN IN THIS AGREEMENT. THE FOREGOING LIMITED WARRANTY IS MADE
BY WHERIFY TO COMPANY FOR COMPANY'S SOLE BENEFIT AND SHALL NOT BE DEEMED TO
APPLY TO ANY DISTRIBUTOR OR CUSTOMER OR OTHER THIRD PARTY WHO ACQUIRES ANY
PRODUCT, OR PORTION THEREOF, PURSUANT TO THIS AGREEMENT.
8.5 Warranty by Company. Company warrants that (a) it is not relying
on Wherify's guidance, assistance or business expertise to successfully perform
its obligations hereunder; (b) the signing and performance of this Agreement do
not violate or conflict with any agreement between Company or its affiliates and
any third party; (c) it will keep Wherify informed as to any problems
encountered with the Products; and (d) Company has the power and authority to
enter into this Agreement and perform its obligations under this Agreement.
15
8.6 WARRANTY DISCLAIMER. EXCEPT FOR THE LIMITED PRODUCT WARRANTIES
SET FORTH IN THIS SECTION, WHERIFY MAKES NO REPRESENTATIONS OR WARRANTIES TO ANY
PERSON OR ENTITY WITH RESPECT TO THIS AGREEMENT OR THE WHERIFY PRODUCTS,
HARDWARE, SOFTWARE, SERVICES AND ANY OTHER MATERIALS PROVIDED OR SERVICES
PERFORMED, AS THE CASE MAY BE, BY WHERIFY UNDER THIS AGREEMENT. WHERIFY HEREBY
EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, ACCURACY OR SATISFACTORY
QUALITY.
8.7 Company Warranty Limitations. Except to the extent required by
applicable law, Company shall not, and shall ensure that each of its
Distributors shall not, pass on to customers a warranty of greater scope or
protection than the warranty (including the limited remedy, exclusions, and
limitation of liability) set forth in this Section 8 and Section 9 below.
Company shall indemnify, defend and hold Wherify harmless from any claim or
liability arising out of or relating to breach of the foregoing provisions of
this Section 8.7 or representations or warranties which exceed Wherify's express
warranties set forth in this Section 8.
9. LIMITATION OF LIABILITY
9.1 NO CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANY OTHER PROVISION
HEREIN TO THE CONTRARY, WHERIFY SHALL IN NO EVENT BE LIABLE FOR ANY LOST PROFITS
OR REVENUE, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED, AND UNDER
WHATEVER CAUSE OF ACTION OR THEORY OF LIABILITY BROUGHT (INCLUDING, WITHOUT
LIMITATION, UNDER ANY CONTRACT, NEGLIGENCE OR OTHER TORT THEORY OF LIABILITY)
EVEN IF WHERIFY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9.2 TOTAL LIABILITY. WHERIFY'S TOTAL AGGREGATE LIABILITY UNDER THIS
AGREEMENT SHALL NOT EXCEED THE AVERAGE ANNUAL AMOUNTS PAID BY COMPANY TO WHERIFY
DURING THE TERM OF THIS AGREEMENT.
10. RIGHTS PROTECTION AND TRADEMARKS
10.1 Rights Protection. Company shall promptly notify Wherify of any
infringement or misappropriation of any patents, copyrights, trade secrets,
trademarks, or other intellectual property or proprietary rights of Wherify or
its suppliers of which the Company has actual knowledge. Company shall not use,
directly or indirectly, in whole or in part, Wherify's name or any other trade
name, trademark, or logo that is owned or used by Wherify, except as set forth
in this Section 10 below. The Company shall conduct business in a manner that
reflects favorably at all times on the products, goodwill, and reputation of
Wherify and shall not engage in any deceptive, misleading, illegal, unfair, or
unethical practices that are or may be detrimental to Wherify, the Products or
services of Wherify, or the Wherify Trademarks.
16
10.2 Trademark License. Subject to the terms and conditions of this
Agreement, Wherify hereby grants to Company, and Company hereby accepts, a
non-exclusive and non-transferable (except as otherwise provided in Section
12.6) right and license (with no right to grant or authorize sublicenses) to use
the Wherify Trademarks for the marketing and distribution of Products in the
Territory in accordance with this Agreement and Wherify's then current trademark
usage guidelines, as such guidelines are provided and updated by Wherify from
time to time. Notwithstanding the foregoing, the Wherify Trademarks shall not be
used except to the extent that the Company has obtained Wherify's prior written
consent to the particular use, including to the nature and content of the
materials on which they are being used, to the use of such materials, and to the
representations of the Wherify Trademarks being used. Accordingly, the Company
shall provide Wherify with copies of all materials on which the Wherify
Trademarks are proposed to be used for review and approval by Wherify prior to
use. Without limiting the foregoing, absent Wherify's prior written consent to
the contrary, if any Wherify Trademark is to be used in conjunction with another
trademark or logo, such as those of the Company, then the Wherify Trademark
shall be presented equally legibly and equally prominently, but nevertheless
separated from the other so that each appears to be a xxxx in its own right,
distinct from the other xxxx. All representations of the Wherify Trademarks
shall be identical to the representations used by Wherify, including in color
and detail, absent Wherify's prior written consent to a change. All use and
goodwill associated with the Wherify Trademark shall inure exclusively to the
benefit of Wherify. Upon notice from Wherify of its objection to any improper or
unauthorized use of a Wherify Trademark, Company shall correct or discontinue
such usage, as the case may be. Company shall indemnify and hold Wherify
harmless from and against any and all liability, charges and/or costs, including
attorneys' fees and costs, of defending against claims arising from improper or
unauthorized use.
10.3 Display. All packaging, labels, marketing and promotional
materials, ads, and the like of the Company for Products shall display the
Wherify Trademarks in a manner approved by Wherify in writing. No Product, or
such materials or labels, shall display the trademarks, trade names, or logos of
any other party, other than Company, except to the extent approved by Wherify in
writing. Additionally, the Company agrees that it will display on its web site,
for each jurisdiction in the Territory, a description and promotion of the
Products that is reasonably acceptable to Wherify.
10.4 Trademark Registration. Wherify shall retain the exclusive
right to apply for and obtain registration of the Wherify Trademarks, and
similar trademarks, trade names, and logos, in all jurisdictions of the world.
Company agrees not to obtain or attempt to obtain by any manner whatsoever any
right, title or interest in or to any of the Wherify Trademarks or any xxxx,
name, or logo confusingly similar thereto or to assist or authorize any third
party in doing the same. In consideration of doing business with Wherify under
this Agreement, Company shall, and hereby does, assign to Wherify any and all
proprietary interests it may obtain under the laws of any jurisdiction in the
Territory in the Wherify Trademarks, or any confusingly similar name, marks or
logos, or the Products, due to use of such names, marks or logos in the
Territory.
17
10.5 Recordation. In those countries where it is necessary or
desirable to record a trademark license or registered user agreement, the
Company will record a separate trademark license or agreement documenting the
license from Wherify to the Company for the Wherify Trademarks. The Company
shall cooperate in the preparation and execution of such documents. Upon
termination of the trademark license set forth in this Article 10, the Company
shall cooperate in the cancellation of any trademark licenses and agreements
recorded or entered into in applicable countries. The Company shall be
responsible for proper filing of documents with government authorities within
the Territory in accordance with the foregoing and shall pay the costs or fees
associated with such filings.
10.6 Proprietary Markings. The Company shall not remove or obscure
any trademark, trade name, copyright notice, patent marking or other proprietary
notice from any Product or materials provided to it in connection with this
Agreement without Wherify's prior written consent. Additionally, the Company
shall apply all copyright, patent, trade secret, confidentiality and other
intellectual property and proprietary rights notices requested by Wherify in a
manner sufficient to establish and preserve all of Wherify's rights and remedies
under applicable law.
10.7 Unsolicited Ideas. Wherify does not wish to receive
recommendations or suggestions regarding Wherify's services or the Products that
Wherify is not free to exploit. Accordingly, except to the extent otherwise
agreed by Wherify in advance in writing, the Company hereby grants to Wherify a
worldwide, fully paid, royalty free, perpetual, irrevocable, non-exclusive right
and license, with the right to grant and authorize sublicenses, to incorporate
any recommendations, ideas and improvements that the Company or any officer,
director, employee or other agent thereof suggests or provides to Wherify
concerning the Products or associated services into any products and services,
and to make, have made, use, sell, offer to sell, import, reproduce, transmit,
publicly display, publicly perform, distribute, and disclose such products and
services, and the disclosed subject matter, for any purpose whatsoever without
compensation or liability to the Company.
11. TERM AND TERMINATION; DISPUTE RESOLUTION
11.1 Term. Unless earlier terminated pursuant to Sections 11.2 or
12.5 below, this Agreement shall enter into full force and effect on the
Effective Date and continue for a period of [ ] years thereafter ("Initial
Term"). Upon the expiration of the Initial Term, this Agreement shall renew for
separate but successive one year terms (each a "Renewal Term", the Initial Term,
together with each Renewal Term referred to as the "Term") upon mutual agreement
of the parties.
11.2 Termination. This Agreement may be terminated by either party
(a) for any reason or no reason upon six months written notice to the other
party, (b) if the other party defaults in any payment to the terminating party
and such default continues without a cure for a period of 15 days after the
delivery of written notice thereof by the terminating party to the other party,
(c) if the other party material breaches this Agreement and such default
continues unremedied for a period of 30 days after the delivery of written
notice thereof by the terminating party to the other party, or (d) pursuant to
Section 12.5.
18
11.3 Effect of Expiration or Termination. Expiration or termination
of this Agreement under any of the foregoing provisions shall not affect the
amounts due under this Agreement by either party that exist as of the date of
expiration or termination. Neither Party shall be liable to the other because of
any termination or expiration of this Agreement, whether for compensation,
reimbursement, damages, on account of the loss of prospective profits or
revenues or anticipated sales or on account of expenditures, investments,
leases, inventory or commitments in connection with the business or goodwill of
either party, or otherwise. Termination of this Agreement shall not limit a
party's remedies for breach by the other party.
11.4 Purchase Orders; No Waiver. The Company shall be obligated to
accept deliveries of Products for which purchase orders were accepted by
Wherify, whether prior to or after the effective date of termination, and such
other Products as Company was required to purchase under this Agreement prior to
termination or expiration. After any notice of termination has been delivered by
either party hereunder, deliveries of Product from Wherify to the Company,
unless otherwise agreed by Wherify in its sole discretion, shall require
prepayment by wire transfer by the Company to Wherify or payment by letter of
credit pursuant to Section 3.7 above, as selected by Wherify. The acceptance of
any purchase order from or the sale or license of any Product to the Company
after the termination or expiration of this Agreement shall not be construed as
a renewal or extension of this Agreement nor as a waiver of termination of this
Agreement. Wherify shall not be required to ship any Product to the Company
after any termination of this Agreement. Additionally, the Company and its
Sub-Distributors shall not sell any Product more than six months after any
termination or expiration of this Agreement.
11.5 Surviving Provisions. Sections 1, 5, 8 (but only to the extent
of any warranty term), 9, 10.7, 11 and 12 shall survive the termination or
expiration of this Agreement.
11.6 Disputes Resolution; Waiver of Jury Trial.
(a) Except as otherwise provided in this Agreement, the
following binding dispute resolution procedures shall be the exclusive means
used by the parties to resolve all disputes, differences, controversies and
claims arising out of or relating to the Agreement or any other aspect of the
relationship between Wherify and Company or their respective affiliates and
subsidiaries (collectively, "Disputes"), excluding in Wherify's discretion those
concerning the patents or other intellectual property rights of Wherify. Either
party may, by written notice to the other party, refer any Disputes for
resolution in the manner set forth below.
(b) Any Disputes shall be referred to arbitration under the
Comprehensive Arbitration Rules & Procedures of JAMS (the "Arbitration
Administrator"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand"), except to the extent that such rules are
inconsistent with this Section 11.7, in which case this Section shall govern.
(c) The parties shall agree on a single arbitrator (the
"Arbitrator"). The Arbitrator shall be a retired judge selected by the parties
from a roster of arbitrators provided by the Arbitration Administrator. If the
parties cannot agree on an Arbitrator within seven days of delivery of the
Demand (or such other time period as the parties may agree), the Arbitration
Administrator shall select the Arbitrator.
19
(d) Unless otherwise mutually agreed to by the parties, the
place of arbitration shall be in San Mateo County, California or San Francisco,
California, although the Arbitrator may be selected from any roster in the San
Francisco Bay Area.
(e) The Federal Arbitration Act shall govern the arbitrability
of all Disputes. Only to the extent that the Federal Arbitration Act is
inapplicable, however, California law shall govern the procedures for
arbitration, and only then to the extent not inconsistent with the terms of this
Section 11.7. Disputes between the parties shall be subject to arbitration
notwithstanding that a party to this Agreement is also a party to a pending
court action or special proceeding with a third party, arising out of the same
transaction or series of related transactions and there is a possibility of
conflicting rulings on a common issue of law or fact.
(f) The Arbitrator shall determine what discovery will be
permitted and shall permit such discovery as he or she deems necessary to
achieve an equitable resolution of the dispute. The proceedings and all
pleadings, filings, written evidence, decisions and other relevant documents
shall be in English. Any written evidence in a language other than English shall
be submitted with an English translation.
(g) The award shall be accompanied by a written opinion
setting forth the findings of fact, conclusions of law and reasoning relied upon
by the Arbitrator in reaching his or her decision. The Arbitrator shall have
authority to award compensatory damages only, and shall not award any punitive,
exemplary, incidental, consequential, or multiple damages. The award (subject to
clarification or correction by the arbitrator as allowed by statute and/or the
applicable Rules of the Arbitration Administrator) and decision shall be final
and binding upon the parties, subject solely to the review procedures provided
in this Section 11.7.
(h) Either party may seek review of the award pursuant to the
following procedure. Either party may seek arbitral review of the award pursuant
to the JAMS Optional Arbitration Appeal Procedure then in force. Arbitral review
may be had as to any element of the award as allowed by such Procedures.
(i) This Agreement's arbitration provisions are to be
performed in San Mateo County, California or San Francisco, California. Any
judicial proceeding arising out of or relating to this Agreement or the
relationship of the parties, including without limitation any proceeding to
enforce this paragraph 11.7, to review or confirm the award in arbitration, or
for preliminary injunctive relief as to any Excluded Claim, shall be brought
exclusively in a court of competent jurisdiction in San Mateo County, California
or San Francisco, California (the "Enforcing Court"). Any judgment of the
Enforcing Court may be enforced by any sister court of competent jurisdiction.
By execution and delivery of this Agreement, each party (i) accepts, generally
and unconditionally, the exclusive jurisdiction of the Enforcing Court and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, their relationship, or any
arbitration relating thereto, (ii) irrevocably waives any objection it may now
or hereafter have as to the venue of any such suit, action or proceeding brought
in such a court or that such court is an inconvenient forum, and (iii) waives
personal service of process and consents to service of process upon it by
certified or registered mail, return receipt requested, at its address specified
or determined in accordance with Section 12.7 hereof, and service so made shall
be deemed completed on the third business day after such service is deposited in
the mail. Nothing in this Section 11.7 shall affect the right of any party
hereto to serve process in any other manner permitted by applicable law.
20
(j) Each party shall pay their own expenses in connection with
the resolution of Disputes pursuant to this Section 11.7, including attorneys'
fees. Notwithstanding the foregoing, the fees and expenses of the Arbitrator and
Arbitration Administrator shall be borne equally by Company and Wherify unless
the Arbitrator considers a different allocation would be fair, appropriate and
equitable under the circumstances.
(k) Nothing in this Section 11.7 shall prevent either party
from seeking preliminary injunctive relief or a temporary restraining order in
the Enforcing Court or in any Court of competent jurisdiction in the location in
which the breaching party conducts its business, without first pursuing such
relief in arbitration.
(l) Notwithstanding anything contained in this Section 11.7 to
the contrary, in the event of any Dispute, prior to referring such Dispute to
arbitration pursuant to Section 11.7(b) hereof, Company and Wherify shall
attempt in good faith to resolve any and all controversies or claims relating to
such Disputes promptly by negotiation commencing within 10 calendar days of the
written notice of such Disputes by either party, including referring such matter
to Company's then-current President and Wherify's then current executive in
charge of manufacturing operations in the region in which the primary activities
of this Agreement are performed by Wherify. The representatives of the parties
shall meet at a mutually acceptable time and place and thereafter as often as
they reasonably deem necessary to exchange relevant information and to attempt
to resolve the Dispute for a period of four weeks. In the event that the parties
are unable to resolve such Dispute pursuant to this Section 11.7(l), each party
shall have the right to submit the dispute to arbitration as otherwise described
in this Section 11.7.
(m) The parties agree that the existence, conduct and content
of any arbitration pursuant to this Section 11.7 shall be kept confidential and
no party shall disclose to any person any information about such arbitration,
except as may be required by law or by any governmental authority or for
financial reporting purposes in each party's financial statements, except the
existence, progress, and results may be disclosed to the same extent as the
Agreement may be disclosed under Section 5.3(b).
(n) IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, WHETHER
IT RESULTS IN PROCEEDINGS IN ANY COURT IN ANY JURISDICTION OR IN ARBITRATION,
THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY, AND HAVING HAD AN OPPORTUNITY TO
CONSULT WITH COUNSEL, WAIVE ALL RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY AND
ALL MATTERS SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE
FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW.
21
12. MISCELLANEOUS
12.1 Entire Agreement; Severability. This Agreement, and all
Exhibits and other attachments hereto and thereto, constitutes the entire
agreement between the Parties with respect to the transactions contemplated
hereby and supersedes all prior and contemporaneous agreements and
understandings between the parties relating to such transactions. If the scope
of any of the provisions of this Agreement is too broad in any respect
whatsoever to permit enforcement to its full extent, then such provisions shall
be enforced to the maximum extent permitted by law, and the parties hereto
consent and agree that such scope may be judicially modified accordingly and
that the whole of such provisions of this Agreement shall not thereby fail, but
that the scope of such provisions shall be curtailed only to the extent
necessary to conform to law and only to the extent such revision is not contrary
to the original intent of the parties.
12.2 Amendments; Waiver. This Agreement may be amended only by
written consent of both parties. The failure by either party to enforce any
provision of this Agreement will not constitute a waiver of future enforcement
of that or any other provision. Neither party will be deemed to have waived any
rights or remedies hereunder unless such waiver is in writing and signed by a
duly authorized representative of the party against which such waiver is
asserted.
12.3 Independent Contractor. Neither party shall, for any purpose,
be deemed to be an agent of the other party and the relationship between the
parties shall only be that of independent contractors. Neither party shall have
any right or authority to assume or create any obligations or to make any
representations or warranties on behalf of any other party, whether express or
implied, or to bind the other party in any respect whatsoever.
12.4 Expenses. In the event a dispute between the parties hereunder
with respect to this Agreement must be resolved by litigation or a party must
engage an attorney to enforce its right hereunder, the prevailing party shall be
entitled to receive reimbursement for all associated reasonable costs and
expenses (including, without limitation, reasonable attorneys fees) from the
other party.
12.5 Force Majeure. In the event that either party is prevented from
performing or is unable to perform any of its obligations under this Agreement
due to any act of God, fire, casualty, flood, earthquake, war, strike, lockout,
epidemic, destruction of production facilities, riot, insurrection, Materials
unavailability, failure of supply, power disruption, or any other cause beyond
the reasonable control of the party invoking this section (collectively, a
"Force Majeure"), such party shall give prompt written notice to the other
party. If the non-performing party has used and continues to use its
commercially reasonable efforts to mitigate the effects of the Force Majeure,
the non-performing party's performance shall be excused, and the time for the
performance shall be extended for the period of delay or inability to perform b
to such occurrences. Regardless of the excuse of Force Majeure, if such party is
not able to perform within 180 days after such event, the other party may
terminate the Agreement.
12.6 Successors, Assignment. Neither party shall have the right to
assign or otherwise transfer its rights or obligations under this Agreement
(whether by reorganization, reverse triangular merger, by operation of law or
otherwise) except with the prior written consent of the other party, not to be
unreasonably withheld or delayed, provided that Wherify shall be entitled to
assign this Agreement to any successor in interest of all of substantially all
of Wherify's assets or stock or similar ownership interest entitled to elect its
board of directors or other governing body. Any attempted assignment in
violation of the foregoing shall be null and void and of no effect. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns and legal
representatives.
22
12.7 Notices. All notices required or permitted under this Agreement
will be in writing and will be deemed received (a) when delivered personally;
(b) when sent by confirmed facsimile; (c) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (d)
one day after deposit with a commercial overnight carrier. All communications
will be sent to the addresses set forth above or to such other address as may be
designated by a party by giving written notice to the other party pursuant to
this section.
12.8 Even-Handed Construction. The terms and conditions as set forth
in this Agreement have been arrived at after mutual negotiation, and it is the
intention of the parties that its terms and conditions not be construed against
any party merely because it was prepared by one of the parties.
12.9 Controlling Language. This Agreement is in English only, which
language shall be controlling in all respects. All documents exchanged under
this Agreement shall be in English.
12.10 Controlling Law. This Agreement shall be governed and
construed in all respects in accordance with the laws of the State of
California, without regard to its conflicts of laws provision. Each party hereby
expressly waives the application of the United Nations Convention on the
International Sale of Goods to this Agreement and the transactions contemplated
hereunder.
12.11 Counterparts; Facsimile Signatures. This Agreement may be
executed in counterparts, each of which, when taken together shall one and the
same instrument. Signature pages exchanged via facsimile shall be deemed to be
originals for purposes of execution of this Agreement.
23
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the Effective Date.
AMERICAN NETWORK COMPUTADORES WHERIFY WIRELESS, INC.
By: By:
------------------------------ -----------------------------------
Name: Name:
------------------------------ ----------------------------------
Title: Title:
----------------------------- ---------------------------------
Date: Date:
------------------------------ ----------------------------------
24
EXHIBIT 1
Definitions
"Affected Inventory Costs" shall mean: (i) 110% of the Cost of all
affected Inventory and Special Inventory in
Wherify's possession and not returnable to
the vendor or reasonably usable for other
customers, whether in raw form or work in
process, less the salvage value thereof, (ii)
105% of the Cost of all affected Inventory
and Special Inventory on order and not
cancelable, (iii) any vendor cancellation
charges incurred with respect to the affected
Inventory and Special Inventory accepted for
cancellation or return by the vendor, and
(iv) expenses incurred by Wherify related to
labor and equipment specifically put in place
to support the purchase orders and forecasts
that are affected by such reschedule or
cancellation (as applicable).
"Cost" shall mean the cost represented on the xxxx
of materials supporting the most Prices for
Products at the time of cancellation,
expiration or termination, as applicable.
"Documentation" shall mean all user guides, quick start
guides, data sheets, warranty cards,
brochures, promotional materials,
publications, photographs, other marketing
and technical documents, and any other
documents that Wherify makes available to the
Company.
"Economic Order Inventory" shall mean Materials purchased in quantities,
above the required amount for purchase
orders, in order to achieve price targets for
such Materials.
"Force Majeure" shall have the meaning set forth in Section
12.5.
"Inventory" shall mean any Materials that are used to
manufacture Products that are ordered
pursuant to a purchase order from Company.
"Lead Time(s)" shall mean the Materials Procurement Lead
Time plus the manufacturing cycle time
required from the delivery of the Materials
at Wherify's facility to the completion of
the manufacture, assembly and test processes.
"Long Lead Time Materials" shall mean Materials with Lead Times
exceeding the period covered by the accepted
purchase orders for the Products.
"Materials" shall mean labor, components, materials and
supplies that are used in the manufacturing,
testing, packaging, and distribution of
Products.
"Materials Procurement Lead Time" shall mean with respect to any particular
item of Materials, the longer of (a) lead
time to obtain such Materials as recorded on
Wherify's MRP system or (b) the actual lead
time, if a supplier has increased the lead
time but Wherify has not yet updated its MRP
system.
"Minimum Order Inventory" shall mean Materials purchased in excess of
requirements for purchase orders because of
minimum lot sizes available from the
supplier.
"Packaging" shall mean those portions of the external and
internal packaging which include text, logos
or expressions which are required to be
translated into the local language(s) of the
Territory, or otherwise localized, to market,
promote, and distribute the Products in the
Territory.
"Products" shall have the meaning set forth in the
preamble hereto.
"Special Inventory" shall mean any Long Lead Time Materials
and/or Minimum Order Inventory and/or
Economic Order Inventory.
"Specifications" shall mean the Product specifications set
forth in Appendix A.
"Sub-Distributor" shall mean a third party sub-distributor
appointed by Company in accordance with
Section 2.4 to distribute and sell Products
directly to customers in the Territory.
"Substantially Similar Products" shall mean (i) goods of a third party that
compete with, or otherwise provide substitute
functionality for, the Products, including
without limitation other cellular phones and
locating devices that are used with any
location service, other than the location
services provided by Wherify; and (ii) all
services that provide substitute
functionality for, or otherwise compete with,
location services made available by Wherify.
"Wherify Trademarks" shall mean the trademarks, trade names, and
logos of Wherify set forth in Appendix C.
