1
EXHIBIT 10.10
MANUFACTURING AGREEMENT
BY AND BETWEEN
XXXXXX COMMUNICATIONS, INC.
AND
ELTECH ELECTRONICS, INC.
This Agreement is entered into this 3rd day of December, 1998, by and between
XXXXXX COMMUNICATIONS, INC., a corporation having a place of business at 00000
Xxxxxxx Xxxxx Xx. Xxxxx, Xxx Xxxxx,XX 00000, ("Buyer") and ELTECH ELECTRONICS,
INC., a California corporation, having a place of business at 000 Xxxxxxxxxx
Xxxxxx, Xxxxxx, XX 00000 acting in party with ELTECH ELECTRONICS TECHNOLOGY,
having a place of business at Plo 34, Fasa 11, Kawasan Perindustrian Senai,
81400 Senai, Johor, Malaysia("Seller").
1.0 TERM OF AGREEMENT
1.1 The term of this Agreement ("Term") shall commence on December 03, 1998
and expire on December 03, 1999 (twelve months after the commencement).
In the event that neither party to this Agreement gives written notice
to the other within three (3) months prior to an expiration date, this
Agreement shall automatically be renewed for successive twelve-month
periods, unless terminated in accordance with Section 13 or Section 17
hereof. All existing terms and conditions shall remain the same, unless
specifically modified by the parties in a written amendment to this
Agreement.
2.0 STATEMENT OF WORK
2.1 Buyer agrees that Seller shall be a manufacturer of certain Products for
the Term, as long as schedule, delivery and pricing requirements of this
Agreement are met.
2.2 Seller agrees to assemble, test, inspect, package for delivery and sell
the Products only to Buyer as described in this Agreement, and Buyer
agrees to purchase the Products in accordance with the terms and subject
to the conditions of this Agreement.
2.3 Buyer shall consign to Seller all applicable Product documentation,
including bills of material, for use in the manufacture of each Product.
Seller shall make available to Buyer all necessary manufacturing,
testing, inspection and other information required in the qualification
of the manufacturing process, as mutually agreed by the parties, as well
as a costed xxxx of materials for each Product, excluding certain
components which, by contractual obligation with suppliers, Seller
cannot divulge. Cost information provided will include material, labor
and overhead on a per product basis.
2.4 Seller shall purchase parts and material for Products only from Buyer's
Approved Vendor List ("AVL") as amended from time to time upon mutual
agreement of the parties hereto and approved in writing by Buyer.
3.0 ORDERS
3.1 Upon execution of this Agreement, and on a monthly basis thereafter,
Buyer shall supply Seller with a six-month rolling forecast of orders
for each Product.
3.2 Pursuant to this Section 3, Buyer shall issue written purchase orders
("Purchase Orders") signed by an authorized representative of Buyer.
Such Purchase Orders shall, at a minimum, indicate the quantity,
description, revision level(s), price, ship-to address, and delivery
schedule for each Product ordered. Buyer shall ensure that the delivery
schedule contained in each Purchase Order will allow for the appropriate
product lead time as specified on the quotation received from Seller.
3.3 Starting with the execution of this Agreement, and in accordance with
Sections 4 and 5 below, Buyer shall issue firm Purchase Orders for
Products to be delivered during the first 90-day period of each rolling
forecast.
3.4 Each Purchase Order shall become effective only upon the earlier to
occur of (i) written acceptance of the Seller, or (ii) the passage of
ten (10) days after Seller's receipt. The parties hereby agree that
where any term or provision in
1
2
any Purchase Order conflicts with or could be construed to alter a term
or provision of this Agreement, the term or provision herein shall
govern.
4.0 RESCHEDULES AND CANCELLATIONS
4.1 Seller shall use commercially reasonable efforts to accommodate any
reschedule request, subject in each case to material availability,
available capacity and other factors impacting the manufacturing
process, and subject to the following guidelines:
(a) Orders scheduled for delivery within ninety (90) days are not
cancelable.
(b) Orders scheduled for delivery within 90 days are reschedulable using
the following time frames as a guideline:
o The first two months of the quarter are fixed with the
third month of the quarter Open to reschedules at 100%
into the next month, which upon the new quarter, the
buyer will receive said rescheduled quantity.
(c) Orders scheduled for delivery beyond ninety (90) days may be
rescheduled two times. Orders scheduled within 60-90 days may be
rescheduled once.
(d) Buyer will be responsible for all non-cancelable, non-returnable or
custom parts pursuant to Section 3.1.
4.2 Reschedules must be in the form of written changes to existing Purchase
Orders and shall be effective only upon written acceptance by Seller.
4.3 Either party may at any time request delivery of a Product on an earlier
date. Both parties shall use commercially reasonable efforts to
accommodate such requests. Acceptance of Products delivered in advance
in accordance with Buyer's request constitute Buyer's agreement to pay
the corresponding invoice as well as any incremental overtime or
material expediting charges incurred by Seller. Such incremental
charges, if any, must be approved in advance by Buyer.
4.4 Any excess material, components and products that were purchased based
upon Buyer purchase order and/or based upon Buyer's forecast and held by
the Seller due to, and not limited to, reschedules, cancellations,
engineering change orders (ECOs), or mix changes and not used or
dispositioned as directed by Buyer, within three (3) months of expected
shipment or usage date ("Excess Material"), will be returned to Buyer.
Excess Material shall also include all other components and materials
purchased by Seller for the manufacture of Products pursuant to a
Purchase Order accepted by the Seller which Products have not been
completed at the time of a termination of this Agreement. Excess
material shall be billed at cost plus a 15% handling charge. In
addition, Buyer will be responsible for all excess material due to
minimum order quantities.
4.5 Buyer will be assessed a 2% per month carrying charge for all excess
material as defined in Paragraph 4.4 above and reschedules subject to
the provisions of Paragraph 4.1.
5.0 INVENTORY PLANNING EXPOSURE
5.1 The Seller agrees to maintain a minimum finished goods inventory of one
(1) month based on the rolling forecasts provided by the Buyer. Buyer
agrees to provide seller with monthly consumption information to aid in
the development of the stocking position.
5.2 In the event of an order cancellation and/or change in Buyer's forecast,
Buyer's maximum liability will be limited to one (1) month of finished
goods, 100% of work-in-process, 100% of raw stock, and 100% of Excess
Material. Seller agrees to use all reasonable efforts to return
components to it's manufacturer.
5.3 Sudden significant changes in the rolling forecast due to errors or
omissions on the part of the Buyer versus real demand changes by the
Buyer shall not be cause for issuance of late delivery notices affecting
Seller's delivery PPM.
2
3
6.0 PRICING
6.1 Buyer may incorporate engineering changes or other modifications to the
Products being manufactured. All such engineering changes shall be set
forth in written ECOs furnished by Buyer to Seller. Buyer shall be
advised of all price and schedule impacts incurred by Seller in
connection with such changes. Seller shall not commence implementation
of engineering changes until written approval has been received by Buyer
authorizing all price impacts. Buyer will advise Seller of date that ECO
will be implemented. Seller will set forth best efforts that the ECO
process will be implemented within one week of approval. Seller will
ensure that products impacted by ECO will be updated and marked
according to the specified ECO. ECOs are not to exceed two weeks
providing Eltech has received a full ECO documentation package. In the
event the ECO would take longer than two weeks, Buyer will be notified.
6.2 Seller shall charge a one-time, nonrecurring engineering ("NRE") fee for
each surface mount and thru-hole project to cover programming,
verification and debugging of surface mount equipment.
6.3 In addition to the selling price Buyer shall be responsible for all
freight, insurance, duty, tax and other handling costs incurred by
Seller in connection with the shipping of Products to Buyer or Buyer's
customers.
6.4 In the event Buyer obtains a lower price from sources other than from
Seller, Buyer will allow Seller the right of first refusal. Buyer will
provide Seller all necessary cost information to allow Seller to meet
Buyer's lowest price.
7.0 DELIVERY
7.1 The risk of loss and title to products shall pass to Buyer at point of
manufacture.
7.2 Seller shall package each product according to written specifications
supplied by the Buyer. Seller shall take reasonable steps needed to
insure maximum protection from damage due to handling and other hazards
which might occur during transit.
7.3 A packing list will accompany each shipment and include, at a minimum,
the purchase order number, Buyer's part number, quantity, quantity
back-ordered, date of shipment and country of origin.
7.4 Buyer shall designate method of all shipments.
8.0 PAYMENT TERMS
8.1 Payments shall be made in US dollars within thirty (30) days of
shipment.
8.2 All payments to be received from Buyer's customer(s) that relate to
product(s) produced by Seller shall be directly remitted from Buyer's
customer(s) to the following address:
Xxxxxx Communications, Inc.
P. O. Xxx 000000
Xxxxxx, XX 00000-0000
8.3 BankBoston will be facilitating the lockbox account outlined in section
8.2. It will be solely used with transactions specifically associated
between Buyer and Seller. All checks received at the lockbox will be
photocopied by BankBoston and sent to Buyer. In addition, BankBoston
will forward by fax a summary of all checks received into the lockbox to
both Buyer and Seller. Said funds will be identified by BankBoston prior
to check(s) clearing the US Banking System.
8.4 All funds received at the lockbox stated within section 8.2 shall be
temporarily in the custody of Seller.
8.5 Seller will apply funds obtained in connection with section 8.2 to
Buyers outstanding payables due to Seller on or about the date funds
clear the US Banking System.(in most cases 1 to 3 days after receipt of
fax summary from bank). Upon application of said funds, the remaining
funds will be wired transferred to Buyer.
3
4
8.6 The Seller may from time to time demand different terms of payment from
those specified herein whenever it reasonably appears that the Buyer's
financial condition requires such change, and may demand assurance of
the Buyer's ability to pay whenever it reasonably appears that such
ability is in doubt. Such demand shall be in writing.
8.7 If Buyer disputes the amount due pursuant to any invoice, the Buyer may
only withhold payment of the amount in dispute if the Seller is notified
in writing of the dispute in question within fifteen (15) days of
receipt of the subject invoice. Otherwise, payment shall be made in full
as required by this Section 8. Each party shall refund any disputed
amount already paid to the other party after receipt of satisfactory
supporting evidence. In no case shall any adjustment, refund, or credit
be issued for any items after six (6) months following the original date
of the subject invoice, unless such items are called to the attention of
the Seller in writing within six (6) months following the original date
of the subject invoice.
8.8 All invoices will be in writing and contain, at a minimum, the following
information: Buyer invoice and ship-to address, Buyer purchase order
number, product or service description, quantity of goods shipped, unit
and extended price, and method of shipment.
9.0 PRODUCT QUALITY STANDARDS; BUYER'S REMEDY FOR NON-CONFORMANCE
9.1 Buyer and Seller hereby agree to mutually establish the standards of
Product quality. Seller shall adopt commercially acceptable processes
and procedures for quality control, and Buyer shall adopt commercially
acceptable processes and procedures for incoming inspection of Products.
9.2 Prior to each shipment of Products to the Buyer or Buyer's customers, ,
Seller shall perform Quality Control Tests as specified by the Buyer.
Buyer may inspect Seller's manufacturing and quality control facilities
at any reasonable time upon advance notice. Upon request, Seller will
make reasonable efforts to provide Buyer with access to Seller's quality
control documentation applicable to Products in process and previously
shipped to Buyer. Buyer's personnel shall comply with Seller's security
and safety regulations while on Seller's premises.
9.3 All Products ordered by Buyer pursuant to this Agreement shall be
subject to an Incoming Inspection by Buyer at the Products' destination
or at the source of manufacture at the agreement of Buyer and Seller.
The Buyer shall accept all Products which pass such Incoming Inspection.
All Products not explicitly rejected within thirty (30) days pursuant to
this Section 9.3 shall be deemed to be accepted.
9.4 Upon receipt of notice of rejection, Seller shall, within two (2) days
of such notice of rejection, either (i) provide Buyer with a "Return
Product Authorization" authorizing the Buyer to return such rejected
products to Seller at Seller's expense and pursuant to which Seller may
designate a carrier and method of shipment, or (ii) replace such
rejected Products. In the event that Seller elects to provide Buyer with
a Return Product Authorization, Buyer, in order to obtain replacement or
repair of the rejected Products, shall arrange for shipment of the
rejected Products to the Seller, F.O.B. Buyer's dock, within five (5)
days of receipt of the Return Product Authorization. In the event that
Seller receives the rejected Products from Buyer and determines, by
means of performance of additional Quality Control Tests on the rejected
Products and/or other evidence, that the alleged defects in the Products
are not the result of failure to meet the applicable Quality Standards
on the part of the Seller, Seller shall present the Buyer with a
quotation for repair services outlining the price and delivery. Buyer
shall issue a purchase order to Seller prior to the commencement of
work.
9.5 In the event the Seller has tested and performed troubleshooting on
nonfunctional boards, and they have been determined not to have a
manufacturability problem that should have been identified according to
Seller's quality system, the boards will be identified, shipped, and
invoiced to the Buyer.
9.6 Buyer's remedies as set forth in Sections 9, 10, 11 and 13 shall be
Buyer's sole remedies with respect to the non-conformance of Products
with any requirements, terms or conditions of or pursuant to this
Agreement.
9.7 Buyer agrees to list and track serial numbers and date codes on a
product-by-product basis.
10.0 WARRANTY
10.1 Warranty by Seller
4
5
THE FOLLOWING WARRANTY FOR PRODUCTS IS IN LIEU OF ALL CONDITIONS OR WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED CONDITIONS OR
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ON THE PART OF
THE SELLER.
Seller warrants that upon delivery and for a period of twelve (12) months
following receipt of a product by Buyer or Buyer's customer(s), such Product
will be free from material and workmanship defects according to Sellers quality
system. If products delivered fail to meet the warranties contained herein, then
Seller, at Buyer's option, shall correct such failure by repair, replacement or
cancellation of the order, as determined in Buyer's sole discretion.
10.2 Warranty by Buyer
Buyer warrants that, at the time of delivery of consigned materials and tools
(as defined in Section 12 hereof), Buyer has free and clear title to the
consigned materials and tools. Buyer warrants the consigned materials and tools
against faulty workmanship and materials, that they meet applicable
specifications and that the tools perform the functions on which the Seller will
rely to manufacture the Products. Buyer warrants and represents that it is the
owner of any and all proprietary rights in the information provided to Seller in
order to manufacture the Products, and that the Buyer has the unqualified right
to make available to the Seller the consigned materials, tools, and other
information, including drawings, designs and specifications, for use by the
Seller hereunder, and to grant licenses, if required, under the terms of this
Agreement. Buyer shall indemnify Seller, its employees, agents, shareholders,
licensees, sublicensees, successors and assigns from any and all damages, costs
and liabilities incurred by any of them arising out of the breach of the
foregoing warranty by Buyer.
10.3 Seller agrees that any rights it may have against any supplier of
components or other materials used in products manufactured hereunder,
which rights arise out of a breach of any warranty of supplier with
respect to such materials or components be subrogated to Buyer.
11.0 LIMITATION OF LIABILITY
11.1 EXCEPT AS SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL SELLER BE
LIABLE IN CONNECTION WITH THE PERFORMANCE OR NONPERFORMANCE OF THIS
AGREEMENT FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF
PROFITS, LOSS OF USE OF DATA OR INTERRUPTION OF BUSINESS, WHETHER SUCH
ALLEGED DAMAGES ARE LABELED IN TORT, CONTRACT, WARRANTY OR INDEMNITY,
EVEN IF SELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; AND
IN NO EVENT SHALL SELLER'S LIABILITY ARISING OUT OF THE PERFORMANCE OR
NONPERFORMANCE OF THIS AGREEMENT, WHETHER ARISING OUT OF CONTRACT, TORT
(INCLUDING NEGLIGENCE AND STRICT LIABILITY) UNDER ANY WARRANTY,
INDEMNITY OR ANY OTHER LEGAL OR EQUITABLE FORM OF ACTION, EXCEED THE
GREATER OF (A) THE AGGREGATE PURCHASE PRICE PAID BY THE BUYER FOR SUCH
PRODUCTS AND/OR SERVICES UNDER THE AGREEMENT, OR (B) BUYER S ACTUAL
DAMAGES INCLUDING REASONABLE ATTORNEYS FEES AND OTHER COSTS INCURRED BY
BUYER. IN NO EVENT SHALL THESE COSTS EXCEED 120% OF PURCHASE PRICE PAID
BY THE BUYER.
11.2 SELLER IS PERFORMING WORK PURSUANT TO SPECIFICATIONS PROVIDED BY BUYER;
THEREFORE, SELLER SHALL NOT BE LIABLE FOR THE TECHNICAL ADEQUACY OR
DESIGN OF THE PRODUCTS, NOR SHALL SELLER BE LIABLE FOR THE SAFETY OR
REGULATORY COMPLIANCE OF THE PRODUCTS (UNLESS CAUSED BY SELLER'S
NEGLIGENCE), INCLUDING, BUT NOT LIMITED TO, ENSURING THE PRODUCT MEETS
APPLICABLE GOVERNMENT OR RESPONSIBLE AGENCY REGULATIONS. BUYER AGREES TO
INDEMNIFY AND SAVE SELLER HARMLESS FROM AND AGAINST ALL LOSSES, EXPENSES
OR DAMAGES ARISING OUT OF ANY CLAIM RESULTING FROM SELLER'S COMPLIANCE
WITH BUYER'S SPECIFICATIONS, AND SELLER AGREES TO INDEMNIFY AND SAVE
BUYER HARMLESS FROM AND AGAINST ALL LOSSES, EXPENSES OR DAMAGES ARISING
OUT OF ANY CLAIM RESULTING FROM SELLER'S NEGLIGENCE IN FAILING TO COMPLY
WITH BUYER'S SPECIFICATIONS.
12.0 TOOLING AND TEST EQUIPMENT
5
6
The tooling and test equipment supplied by the Buyer will remain the property of
Buyer. The parties agree to the following provisions with respect to the Tools:
12.1 Seller expressly agrees that all Tools are the property and assets of
Buyer. Seller shall not assign, lease, license, pledge, loan, mortgage
or otherwise part with possession or the right to possess the tools.
Seller shall allow no claims, encumbrances or liens with respect to the
Tools and shall not state or imply to any third party that Seller is the
owner of the Tools.
12.2 Seller agrees that all Tools will be used only to manufacture Buyer's
Products, unless otherwise approved by the Buyer.
12.3 The Seller agrees that it will follow normal industrial practice in the
identification and maintenance of the property control records on all
such tooling, and will make such records available for inspection by the
Buyer at all reasonable times. After the termination or completion of
such order(s) and upon the request of the Buyer, the Seller shall
furnish a list of such tooling in the form requested and shall make such
tooling available for disposition by the Buyer.
13.0 DEFAULT - DUE ON DEMAND
13.1 Should either party become insolvent or be a party to any bankruptcy or
receivership proceedings, either party may, with or without previous
written notification to the other, declare this Agreement terminated.
13.2 If either party shall be in default with respect to any of its
obligations herein, the other party may notify the defaulting party in
writing specifying the nature of the default; and if such default is not
cured within thirty (30) days after the receipt of such notice, the
notifying party may terminate this Agreement as of the effective date of
notice of termination provided to the defaulting party.
13.3 In the event that Seller terminates this Agreement pursuant to this
Section 13, Buyer shall forthwith pay to Seller (i) all outstanding
invoices, (ii) the per unit price for all completed but unshipped
Products as of the termination, plus freight and other charges
hereunder, and (iii) the cost of all Excess Materials, plus a 15%
handling charge. Seller's rights pursuant to this Section 13 are its
sole and exclusive remedy at law or equity.
14.0 TERMINATION
This Agreement may be terminated by either party upon 120 days prior written
notice. In the event of such termination, Seller shall continue shipment of all
orders accepted prior to the date of such notice, and Buyer shall remain
obligated to accept and pay for such deliveries at the agreed-upon price, and to
be liable for payment for all Excess Material pursuant to Section 4 & 5 hereof,
but in any event no later than the date of termination of this Agreement.
15.0 GENERAL PROVISIONS
15.1 Entire Agreement; Amendment
This document and its Exhibits contain the entire Agreement between the parties
relating to the subject matter hereof. All prior or contemporaneous agreements,
written or oral, between the parties regarding the Products and services are
superseded by this Agreement. This Agreement may not be modified except by
written document signed by an authorized representative of each party. Buyer and
Seller are to adhere to the Mutual Confidentiality Agreement entered on July
24th, 1997.
15.2 Force Majeure
Neither party shall be liable for delay or defaults due to fire, weather, riot,
strikes, acts of God, acts of the public enemy, or other similar unforeseeable
events or causes beyond the reasonable control and without the fault or
negligence of the party incurring such delay.
15.3 Waiver
6
7
No term of this Agreement shall be considered waived and no breach excused by
either party unless made in writing by the other party. No consent, waiver, or
excuse by either party, express or implied, shall constitute a subsequent
consent, waiver or excuse.
15.4 Nonassignment
Neither party shall assign this Agreement without the consent of the other party
provided, however, that either party may assign this Agreement and its rights
hereunder, without the consent of the other, to its parent corporation or any
subsidiary or corporate affiliate of it.
15.5 Controlling Law
This Agreement and all transactions under it shall be governed by the laws
(excluding choice of law rules) of and within the state of New York.
15.6 Arbitration
Any controversy or claim arising out of or relating to this contract, or the
breach thereof, shall be resolved by arbitration in Boston, Massachusetts, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
enforced in any court having jurisdiction thereof.
15.7 Severability
If any provision of this Agreement is held invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired.
15.8 Headings
All headings and captions included in this Agreement are for convenience of
reference only and are not intended to affect the interpretation of any
provision hereof.
16.0 CONTINGENCY PLANNING
In case of an act of God or unplanned events impacting Buyer's supply line of
product, Eltech Malaysia will supply Eltech East (Lowell, Massachusetts) with a
complete documentation packages of all boards being built for Buyer and required
technical support to build product. Eltech will make best efforts to commence
production of boards in a thirty (30) day period.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, in one
or more counterparts, on the dates set forth below:
ELTECH ELECTRONICS, INC.
(Seller)
By /s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
(Typed Name)
Title: President, Eltech Electronics, Inc.
Date: 12/7/98
(Buyer)
/s/ XXXX XXXX
Xxxx Xxxx
(Typed Name)
Title: President and CEO
Date: 12-8-98
7
