EXHIBIT 10.16
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT ("Agreement") is made and entered into this 13th day
of January, 2003, between TFS-DI, a Arizona corporation, and a wholly owned
subsidiary of Three-Five Systems, Inc., whose principal office is located in
Tempe, Arizona (hereafter referred to as "Buyer"), and DATA INTERNATIONAL LTD, a
Taiwanese corporation formed under the laws of Taiwan, having a place of
business at 5 Fl. Xx 00 Xxxx 000, Xxxx-Xxxx, Xxxxxx Xxxxx, Xxxxxx, XXX
(hereafter referred to as "Supplier"). The parties hereto hereby agree to the
following provisions regarding the purchase and sale of Liquid crystal display
("LCD") glass, modules, and other Products as defined under this Agreement.
This Agreement is entered for the purpose of establishing a long-term
relationship based on continuous improvement processes that will lead toward
world-class benchmarks in the following areas: quality, cost, delivery,
technology and service. Another primary purpose of this Agreement is to
characterize and expand the parties' mutually beneficial goals, trust, and
economic benefits.
WITNESSETH:
WHEREAS, Buyer is engaged in the manufacture of LCD glass and
modules for use in original equipment manufacturers ("OEM") products; and
WHEREAS, Buyer has obtained a license to market certain technology
and has purchased certain personal property from Supplier, as described
under EXHIBIT 1 to this Agreement; and
WHEREAS, Supplier is engaged in the manufacture of LCD glass and
modules for its customers; and
WHEREAS, Buyer desires to purchase from Supplier certain Products
for use in LCD products manufactured by Buyer; and
WHEREAS, Supplier desires to supply the Products to Buyer;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below.
1.1. "PRODUCT" shall mean the components and /or product furnished by
Supplier to Buyer specified under specific purchase orders issued by
Buyer to Supplier under the terms of this Agreement. A STANDARD
PRODUCT shall mean that Product developed by the Supplier, for which
the Supplier or Suppliers customer retains ownership of all design
specifications and tooling. A "CUSTOM PRODUCT" shall mean that
Product developed by the Supplier specifically for the Buyer, with
the Buyer retaining ownership of all design specifications and
tooling.
1.2. "SPECIFICATIONS" shall mean the specifications, which identify and
describe the Product to be manufactured by Supplier and purchased by
Buyer and which may be changed or modified from time to time in
accordance with the requirements of the Buyer as indicated in
specific purchase orders issued by Buyer.
1.3 "QUALITY" shall mean the level at which the Product, as manufactured
and delivered by the Supplier to the Buyer, meets the Buyer's
specifications as described in individual purchase orders issued by
Buyer to Supplier as defined by this Agreement.
2. AGREEMENT
2.1. PURPOSE OF AGREEMENT.
The purpose of this Agreement is for Buyer and Supplier to agree
upon certain standard terms and conditions when Supplier supplies
Product to Buyer.
2.2. REPRESENTATION AND WARRANTIES.
Each party represents and warrants that it possesses full authority
and legal person status to enter into this Agreement and perform its
obligations hereunder and that the representative whose signature is
affixed hereto has been fully authorized to sign this Agreement.
2.3 PURCHASE COMMITMENT. The Product furnished by Supplier under this
Agreement will be specified on the individual purchase orders issued
to the Supplier by the Buyer. Specific purchase commitments under
this Agreement shall be made through separate purchase orders or
releases issued by Buyer locations. No material shall be purchased
by Supplier, on behalf of Buyer, without an express written purchase
order.
2.4 TERM. This Agreement shall be effective from the date of this
Agreement and shall remain in existence for a term of sixty (60)
months. Buyer shall have the option to renew this Agreement for
additional (to be determined) time periods upon giving Supplier
thirty (30) days written notice of its intention to renew the term.
The prices during each renewal term shall be established by friendly
negotiations and mutual agreement, in writing, by the parties.
2.5 PRICE. Pricing for all Products shall be indicated on the specific
purchase orders issued by the Buyer to the Supplier. The price
listed in the individual purchase orders shall represent the entire
cost of the Product
2.5.1 MOST FAVORED CUSTOMER. The Supplier warrants the prices
charged for the Products ordered on purchase orders issued by the
Buyer are not higher than: (1) Supplier would charge its most
favored customers, either domestic or international, for similar
products, (2) prices charged by other suppliers for similar type
products, (3) TFS' internal cost for the manufacture of the product.
2.5.2 If Supplier is making a purchase price adjustment as a
result of alteration of the Specifications by Buyer, Supplier shall
submit a description of purchase price adjustment in writing to
Buyer with appropriate details. Such adjustment of purchase prices
shall be negotiated in good faith between the parties. The mutually
agreed upon
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new price shall apply from the first supply of Product to which such
alteration of the Specifications has been implemented.
2.6 QUANTITY. The quantities of Products ordered shall be listed on the
specific purchase order issued by Buyer to the Supplier under this
Agreement. Buyer's obligation to purchase quantities of Product from
Supplier is strictly limited to the amount specified on individual
purchase orders issued by Buyer to the Supplier.
2.7 CAPACITY. Supplier agrees to reserve for the Buyer manufacturing
capacity and tooling capability (as determined by the Buyer) to
supply the Product(s) during the term of this Agreement. This
availability shall include all Products(s) listed under all purchase
orders placed by Buyer, and all forecasts provided by Buyer pursuant
to this Agreement. Notwithstanding the above, Supplier will, at a
minimum, reserve 60% manufacturing capacity on an annual basis for
the Buyer. This capacity shall not be cancelled or diverted to
another customer without the express written approval of Buyer.
However, Buyer shall not be obligated in any way to utilize any
percentage of Suppliers manufacturing capacity.
2.8 QUALIFICATION. Supplier may be required to submit samples of certain
items for approval by Buyer locations prior to obtaining a
production purchase order. Such samples shall be submitted promptly
by Supplier upon request from any of the Buyer locations. Buyer
locations shall notify Supplier, in writing, when approval has been
granted. In addition, other means and methods may be employed by the
Buyer in qualification of the Supplier. These methods and means
shall include, but not be limited to, quality audits, supplier
questionnaires, and performance metrics. The Supplier shall assist
the Buyer in the completion of any of the qualification tasks.
2.9 QUALITY. Supplier shall furnish Product which meets specifications
as listed the individual purchase orders issued by the Buyer to the
Supplier under this Agreement. Specifications shall include, but not
be limited to, technical drawings, schematics, quality requirements,
manufacturing requirements, and Statement-of-Work. Supplier, insofar
as practicable, is responsible for reviewing all Product
manufacturing requirements (including, but not limited to, such
requirements as processing, testing, inspection, cleaning and
packaging) prior to commencement of any manufacturing by Supplier,
so that Supplier's questions, if any, regarding any of the
delineated requirements may be resolved at that time. When Buyer's
Product design specification numbers or drawings are used to define
specifications, the applicable revisions, if any, of such documents
currently in effect at the Buyer's locations and specified on
Buyer's purchase order shall prevail. Supplier may not deviate from
any Product quality requirements without the prior specific written
approval of the Buyer.
2.9.1 QUALITY DATA. Supplier will provide, upon written
request during the term of this Agreement, reliability and quality
data regarding Products produced for Buyer for the purpose of
maintaining consistent quality and reliability standards for such
Products.
2.9.2 TRACEABILITY. During the term of this Agreement,
Supplier shall maintain data and test lot trace-ability for Products
sold to Buyer.
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2.9.3 NOTIFICATION OF DEFECTS. Supplier will promptly after
discovery advise Buyer of defects and/or non-conformity in Products
already shipped to and/or in lots currently in manufacture for
Buyer.
2.9.4 STOP SHIPMENTS. Upon receipt of Buyer's written
documentation indicating that a defect in the Product has been
discovered, Supplier will immediately stop shipment and
manufacturing of Products which are subject to a suspected failure
to meet the criteria specified in such Products' acceptance
criteria. If Supplier is responsible for such failure, and Supplier
is not able to correct the matter within thirty (30) days of receipt
of such stop notice, then (i) Buyer may reject non-conforming
Products, and, (ii) Buyer may, without penalty (including loss of
capacity), cancel any then-pending Purchase order(s) for such
Products as to which product has not been shipped by sending written
notice of cancellation to Supplier. Such a notice of cancellation
shall be effective on receipt by Supplier.
2.9.5 FAILURE ANALYSIS. Upon written request from Buyer,
Supplier will perform failure analysis of Products returned to
Supplier with a Supplier-issued return material authorization
number. If such analysis shows the existence of material defects in
breach of applicable Supplier warranties, Supplier will not be
entitled to payment for the cost of Supplier's failure analysis
concerning such defects for the specific Products which were subject
to them.
2.9.6 INSPECTION. During the term of this Agreement, Buyer
will have the right to maintain one or more source inspectors at the
Supplier's facility and any other personnel as agreed to by the
parties. Supplier will provide adequate office space for Buyer's
on-site inspectors and representatives.
2.10 PROCEDURE TO CONTRACT FOR PRODUCTS
The procedure to contract for the Products is that Buyer will issue
its order(s) to Supplier for Products in such amounts as are
required by Buyer. Supplier shall immediately begin manufacturing
the Products requested by such order(s) and deliver them to Buyer
within the agreed upon Product lead-time.
2.11 INCORPORATION OF THIS AGREEMENT INTO ORDERS FOR PRODUCTS.
The terms and conditions set forth in this Agreement shall be
incorporated as a part of each order for the Products. The parties
may include details to this Agreement as set forth in Section 2.14
and may modify the terms of this Agreement only by a written
agreement, signed by an authorized representative of each party. In
case of discrepancies between any particular order and this
Agreement, the order governs.
2.12 SPECIFICATIONS
2.12.1 Supplier shall manufacture all Products in accordance
with the Specifications specified in the individual purchase orders
issued to Buyer by Supplier under this Agreement. These
Specifications shall include at minimum the following:
(i) Drawings, specifications and/or other similar
documents prepared by Buyer and approved by Supplier
(hereinafter referred to as "Buyer Drawings");
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(ii) Drawings, specifications and/or other similar
documents prepared by Supplier and approved by Buyer;
and/or
(iii) Other particulars agreed upon, in writing, by the
parties hereto.
2.12.2 If requested by Buyer, Supplier shall prepare drawings,
specifications and/or any other similar documents in accordance with
Buyer Drawings, and shall furnish them to Buyer for approval by
Buyer. Upon request of Buyer, Supplier shall also supply to Buyer
detailed drawings and/or other similar documents.
2.12.3 Buyer may request that Supplier alter the
Specifications if and when Buyer deems it necessary. Supplier and
Buyer shall mutually agree upon any changes in Specifications. If
the Specifications are altered, such altered Specifications shall
not apply to Products for which shipping instructions have been
agreed to under Article 2.13, unless otherwise agreed by Supplier.
2.12.4 Supplier agrees to make no significant change in the
design or specifications of Products, unless such proposed changes
are communicated in writing to Buyer and Buyer agrees in advance to
such changes.
2.1.2.4 All documentation (including specifications and
drawings) provided to Supplier by Buyer shall remain the sole
property of the Buyer and shall only be used by Supplier with
Buyer's written approval. In addition, all documentation (including
specifications and drawings) developed by Supplier under this
Agreement is the sole property of the Buyer and shall not be used
for any other purpose without Buyer's written approval.
2.13 STANDARD PRODUCTS
Supplier agrees to offer to Buyer access to all its existing and
future Standard Products. In addition, the Supplier may be
authorized by the Buyer to offer Custom Products for sale through
specified sales and distribution channels. Buyer authorization must
be in writing, in advance of any sale, and specify Custom Products
and authorized sales and distribution channels.
Should the Supplier decide to discontinue any of its Standard
Products, the Supplier will provide Buyer (in writing) notice of
such proposed discontinuance at least one year in advance of such
discontinuance. At this time, the Buyer shall have the option to
either (i) initiate a last time buy (quantity to be determined
solely at the Buyer's discretion), or (ii) find an alternative
supplier to provide the discontinued Product to the Buyer. In the
event that the Buyer (at its sole discretion) decides to pursue
option (ii), above, then the Supplier will immediately transfer to
the Buyer title and ownership to all specifications, drawings,
bills-of material, documents, tooling and fixtures, intellectual
property, and other information and documents necessary, and
reasonably related to manufacturing the Product.
The parties agree (at the written direction by the Buyer) to attach
Buyer's trademark to the Product. If this occurs, Supplier will not
attach or affix its own, or any other third party trademark to the
Product.
2.14 PURCHASE PROCEDURES
Buyer shall place firm purchase orders with Supplier, and Supplier
may accept such firm purchase orders, by agreed upon means of
communication, at agreed upon times and by
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agreed upon format and content. If Supplier determines that it
cannot supply the Product requested by the purchase order, Supplier
shall promptly notify Buyer of the situation within two (2) business
days after receipt of Buyer's firm purchase order, and steps, if
any, which Supplier proposes to take to correct the deficiencies.
Buyer shall discuss with Supplier and the parties shall determine
the quantity which will be supplied to Buyer, the delivery schedule,
and the manner and means of delivery to Buyer, giving due
consideration to such situation.
Such a firm purchase order shall become binding and constitute an
individual purchase/sale agreement either (i) on the day Supplier
conveys to Buyer its acceptance of the original purchase order
submitted by Buyer or (ii) on the next business day after a lapse of
fourteen (14) business days from the date of posting of such a firm
purchase order by Buyer, whichever occurs first.
2.15 SHIPMENT AND DELIVERY
2.15.1 Shipments shall be based on term of delivery of goods
on board vehicle, freight collect unless otherwise agreed.
2.15.2 The ownership, legal title and right of possession and
control over the Product and risk of loss or damage to the Product
shall pass from Supplier to Buyer upon delivery to Buyer, unless
agreed upon otherwise by the parties.
2.15.3 Supplier shall properly xxxx, xxxx and ship all the
ordered Product in appropriate standard packing (with appropriate
internal packing materials) to ensure that the Product arrives
damage free. Such packing should be sufficient to handle rough
handling, salt spray, open storage, exposure to a salty atmosphere
and any other reasonably foreseeable shipping hazard.
2.15.4 Necessary shipping documents shall include but are not
limited to: (i) a clean xxxx of lading; (ii) commercial invoice;
(iii) insurance certificate; (iv) packing list; and (v) certificate
of quality, if requested by Buyer.
2.15.5 Supplier shall be responsible for obtaining adequate
insurance on all Buyer Products and equipment related to the
manufacture and delivery of Buyer's Products. Certificates
evidencing this insurance shall be provided to the Buyer upon
request.
2.16 WARRANTY
Supplier warrants that the Products will meet the specifications and
tolerances established by Buyer; that they shall be free of defect
in material and workmanship; and that they shall be suitable for the
purpose intended by Buyer. In the event that Supplier supplies any
Products which do not meet this warranty, Buyer shall be entitled to
such remedies as may be available by law. Notwithstanding the above,
at a minimum, the warranty provided by Supplier to Buyer on Products
manufactured by Supplier for Buyer, shall be 18 months from receipt
of Product by Buyer.
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2.17 CONFIDENTIALITY
From time to time, either party may have access to information that
relates to the other party's research, development, business
activities, products, services and mechanical knowledge (hereinafter
referred to as "Confidential Information").
With regard to this Confidential Information, each party agrees not
to reveal this Confidential Information to any third party and
further agrees not to use the Confidential Information, except as is
necessary to provide the Product pursuant to the terms of this
Agreement. Neither party shall disclose or permit access to any
Confidential Information to any of its employees who are not
participating directly in supplying the Product, and the party shall
inform its employees who are permitted access to any Confidential
Information of the restrictions that are contained in this
Agreement. In the event that either party is discovered using the
Confidential Information for an improper purpose, such party shall
cease such unauthorized use immediately.
Upon termination of this Agreement, such Confidential Information
shall be returned to the party to which it belongs or destroyed (and
such destruction certified), and no copies or other reproductions
shall be retained. Neither party shall be permitted to continue
using Confidential Information after the termination of this
Agreement.
2.18 AGENCY, ASSIGNMENT AND SUBCONTRACTING
2.18.1 AGENCY. The relationship of the parties under this
Agreement shall be, and at all times remain, one between independent
contractors. Neither party shall have the authority to pledge the
credit of or assume or create obligations on behalf of the other
party and shall not take any action which has, or might have, the
effect of creating the appearance of its having such authority
2.18.2 ASSIGNMENT AND SUBCONTRACTING. Buyer may assign this
Agreement, in whole or in part, without notice or consent of the
Supplier. Supplier may not assign this Agreement without the consent
of Buyer. Supplier shall not subcontract the supply of any of the
Product without the prior written permission of Buyer, such
permission not to be unreasonably withheld.
2.19 WARRANTY AND PRODUCT LIABILITY CLAIMS. In the event that either
party receives notice of a claim from a third party that such third
party is making a warranty claim or requesting repair or replacement
of a finished Product due to the fault of the parts, or that a
faulty part allegedly caused physical injury (including death) or
property damage to a third party, the party who received such notice
shall promptly notify the other party in writing.
2.20 COOPERATION.
Each party shall cooperate with the other party in good faith and on
a reasonable basis to review and respond to such claims and to
participate in problem solving, and curing any performance
deficiencies, which might give rise to such claims.
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2.21 ALLOCATION OF LIABILITY.
In the event that it is discovered that Supplier is responsible for
supplying faulty Product, Supplier agrees to pay all costs and
expenses incurred as a result of the warranty or product liability
claim.
2.22 INDEMNIFICATION.
Supplier further agrees to indemnify and hold harmless Buyer and its
directors, officers, agents, and employees from and against all
actions, claims, causes of action (whether based upon Agreement,
tort, express or implied warranty, negligence or strict liability),
damages or expenses of whatever kind and nature (including
reasonable attorneys' fees) (hereinafter collectively referred to as
"Claims") asserted by any person or persons for or on account of
personal injury (including death) or property damage (including loss
of use thereof) suffered or incurred by any person or persons
whomsoever, arising out of or in any manner connection with this
Agreement unless such Claim arose due to or was caused by the
willful misconduct and gross negligence of Buyer. In the event a
Claim arises as a result of the joint negligence of the parties,
each party agrees to be responsible for the proportion of the Claim
which corresponds to its percentage of negligence.
2.23 TERMINATION. This Agreement may be brought to an early termination
upon the occurrence of any of the following reasons:
2.23.1 If either party commits a material breach of this
Agreement and such party fails to remedy same within ninety (90)
days after delivery of notice by the other party of the occurrence
or existence of such breach or such longer period as may be agreed
by the non-defaulting party; or
2.23.2 If either party becomes insolvent or subject to a
petition in bankruptcy filed by or against it or is placed under the
control of a receiver, liquidator or committee of creditors, or
ceases to function as a going concern for any reason; or
2.23.3 If either party's assets or property has been, or is
threatened to be, nationalized, expropriated or otherwise taken over
by any governmental authority; or
2.23.4 If any sovereign entity or authorized political
subdivision enacts legislation relating to or adversely affecting
the relationship created by this Agreement, in which case the
parties shall mutually determine whether or not to continue the
Agreement or terminate it.
2.25 RIGHT OF FIRST REFUSAL.
Notwithstanding anything herein to the contrary, Supplier may freely
compete with other suppliers and shall be afforded a written right
of first refusal to sell Products to Buyer within seven (7) days of
written notice of a competitor's offer regarding (i) existing
Products currently manufactured by the Supplier for the Buyer or
(ii) new monochrome Product designs on Products currently
manufactured by the Supplier for the Buyer. Notwithstanding the
above, this Right of First Refusal is subject will not apply if the
following occur: (a) the price charged by Supplier for the Products
is greater than 5% of the price charged by other suppliers for the
same Product, (b) the Supplier does not meet
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the Buyer's reliability, delivery, and quality requirements. In
addition, Buyer must have received written notice of Suppliers
intention to exercise such right of first refusal within three (3)
days of Buyer's notification to Supplier regarding the above
described right of first refusal, otherwise, Buyer may freely deal
with whatever competitor it chooses.
2.26 DISPUTE RESOLUTION.
Any dispute arising from this Agreement shall be resolved through
discussions and consultations between the parties based on the
principle of "friendly negotiations". If no settlement has been
reached within forty-five (45) days, the dispute shall be subject to
legal adjudication in the courts of Maricopa County, Arizona USA.
2.27 RESORT TO ADMINISTRATIVE PROCEEDING AND INJUNCTIVE RELIEF.
Nothing in the previous section shall affect any party's right in
seeking administrative remedies or injunctive relief if harm to the
party becomes imminent.
2.28 ACCESS.
Supplier shall allow Buyer personnel and Buyer authorized
representatives and customers access to the Supplier facility at any
time a upon reasonable advance notice.
2.29 ISO CERTIFICATION.
At all times during the term of this Agreement, Supplier shall
maintain ISO 9000 registration and certification.
2.30 WAIVER.
Waiver by either party of any breach by the other party of any of
the terms or provisions hereof shall be deemed not to be a waiver or
breach on any other occasion of the same terms or provisions or a
waiver or breach of any other term or provision hereof.
2.319 FORCE MAJEURE
Neither party shall be held liable to the other party to perform its
obligations under this Agreement whether such performance is
prevented or interfered with, wholly or in part, differences with
workmen, war or hostilities between any nations, Acts of God, fire,
storm, flood, earthquake, accidents, materials or fuel, shortage or
delay or carriers, governmental regulations, orders or
proclamations, laws, acts of public enemies, and other similar
events or contingencies beyond the reasonable control of the party
whose performance is prevented or interfered with. Either party
shall promptly notify the other party of an inability to perform any
obligation required under this Agreement as a result of any of the
foregoing.
2.32 ENTIRE AGREEMENT
This Agreement, together with any appendices attached to this
Agreement, constitutes the entire Agreement between the parties with
respect to the subject matter hereof.
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2.33 SEVERABILITY.
If any term or provision of this Agreement shall be held invalid or
unenforceable, the remainder of the Agreement shall not be affected
thereby and each term and provision hereof shall be valid and
enforced to the fullest extent permitted by law.
2.34 SURVIVAL.
The rights and obligations of sections 2.2, 2.9, 2.15, 2.16, 2.17,
2.19, and 2.22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties executed this Agreement by their
respective duly authorized officials on the date set forth below.
BUYER (Seal) SUPPLIER (Seal)
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By: /s/ Xxxxxx Xxxxxxx By: /s/ X.X. Xxxxx
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Title: Secretary Title: President
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Date: Jan 13, 2003 Date: Jan/10/2003
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By: /s/ Xxxxx Xxxx
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Title: Vice President
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Date: Jan/10/2003
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