TKJ Inc.
This document contains information, which is confidential and proprietary to
TKJ lnc.
TKJ Inc. / Cyberlux Corporation
Supply Agreement
"Cyberlux Home Safety Light"
Version 1.01
August 28, 2001
/s/ Xxxxx Xxxxxxx 10/29/01
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Author of Current Version Date
/1/
TKJ Confidential Cyberlux Home Safety Light
1.Scope................................................... 4
2. Program Development Schedule........................... 4
3. Description............................................ 4
3.1. Major Components of the System.................. 4
3.2. Appearance...................................... 4
3.3. Operating Temperatures...........................4
3.4. Performance Validation.......................... 4
3.5. Tooling, Approvals.............................. 5
3.5.1. Tooling Defined.......................... 5
3.5.2. Tooling Costs............................ 5
3.6. Application Testing. ........................... 5
4. Prototype Tooling and Prototype Production Expenses.... 5
5. Manufacturing Supply................................... 6
5.1. Exclusivity..................................... 6
5.1.1. Failure to perform....................... 6
5.1.2. Ongoing Product Quality Problems......... 6
5.2. TKJ Inc. Contribution........................... 6
6. Features............................................... 6
6.1. Light Features.................................. 6
7. Warranty............................................... 7
7.1. Terms.......................................... 7
7.2. Remedy.......................................... 7
7.3. Standards....................................... 7
7.4. Disclaimer...................................... 7
8. Forecast............................................... 7
8.1. Increases....................................... 7
8.2. Obsolescence.................................... 7
8.3. Excess Inventory................................ 8
9. Unit Pricing........................................... 8
9.1. Good Faith Estimate............................. 8
9.2. Volume Price Tiers.............................. 8
10. Orders................................................ 8
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10.1. Blanket P0................................... 8
10.2. Freight....................................... 8
10.3. Payment Terms................................. 9
11. Force Majeure........................................ 9
12. Cancellation......................................... 9
13. Duration of the Agreement............................ 9
14. Agreement............................................ 9
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Scope
TKJ Inc. (632 Xxxxxxx Xxxxx, Xxxxxxxxxx, XX.) wishes to design and manufacture,
and Cyberlux Corporation (50 Orange Road, Pinehurst, N.C. 28370) wishes to
purchase from TKJ Inc., Electronic LED lighting products as described herein.
Separate documents, as agreed to by both parties, shall be incorporated into
this agreement and shall stand as the functional design, appearance, and
performance specifications for the System.
2. Program Development Schedule
The final Program Development phase shall commence upon execution of this
agreement with elapsed time until availability of systems for mass production
purposes within 8 weeks. Working Prototype Systems manufactured with production
capable tools to be available within 6 weeks of Program Funding by Cyberlux. TKJ
Inc has developed, tested, and revised multiple iterations of example designs
prior to execution of this agreement. Other project management and development
support activities have been funded by TKJ Inc and been supported by TKJ Inc
personnel up until the execution of this agreement. These activities include
coordination of fabrication of sample devices, material selection, vendor
negotiations, manufacturing coordination, system cost estimating, and production
launch planning.
3. Description
3.1. Major Components of the System
Primary components of the System include:
Electronic Assembly of PCB with control components and LED devices.
Battery Holder with wiring harness.
Unit Housing.
Reflector and Lens assembly.
Packaging and Batteries.
3.2. Appearance
Appearance requirements as agreed to between TKJ Inc, Cyberlux Corporation,
Robrady Design, Controls Inc, and SCCS. Preliminary appearance requirements
attached as Appendix "A". These requirements to be specifically related to the
appearance goals for the PCB and LED assembly (LED height, cleanliness,
alignment).
3.3. Operating Temperature
The Operating Temperature range for the completed product "home safety light" to
be between 0 degrees Celsius and 45 degrees Celsius.
3.4. Performance Validation
TKJ Inc. shall provide functional samples of the system hardware to Cyberlux
Corporation prior to final release of documents to production. Several
functional sample systems will be available for testing during the development
process. Cyberlux Corp. agrees to perform a system validation process to certify
that all features agreed to in the functional specification operate as desired
prior to final release by TKJ Inc.
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3.5. Tooling Approvals
TKJ Inc. shall provide electronic copies of design files / rapid prototype
models / or machined representative models of system components prior to tooling
release to Cyberlux Corp. Cyberlux agrees to review the electronic data or other
physical models for suitability for use prior to TKJ Inc. release of tooling to
the suppliers.
3.5.1. Tooling Defined
"Tooling" includes hard tools to fabricate component parts for any system
component and/or manufacturing & test fixtures. Specifically included in tooling
are the following: PCB substrate, multiple array tool to produce PCB, xxxxxx &
blank die for PCB fabrication, films required to produce PCB foil pattern image,
development tools, manufacturing fixtures for process flow and final assembly,
model specific factory test equipment, and software for test.
3.5.2. Tooling Costs
The total project tooling cost is estimated at $8,800 to cover expenses for all
tooling defined in section 3.5.1. Some of these expenses are included in section
4 as non-recurring expenses ($4,300), though only capable of supporting limited
volume. The balance of the tooling expenses ($4,500) will be required to prepare
for full volume production. Completion of dedicated ICT (in circuit test)
equipment for 100% in-process testing could increase costs above those estimated
here, any expenses for ICT equipment above the cost specified here to be
negotiated and agreed upon between the parties.
3.6. Application Testing
TKJ Inc. has provided control samples for application testing purposes to
Cyberlux Corporation. TKJ Inc has also been conducting application testing at
our facilities in Northbrook for approximately 12 weeks. Information derived
from the combined test results and comments from both Cyberlux and TKJ Inc shall
be used to accomplish final design revisions prior to the release of the design
for production. Cyberlux Corporation agrees to due diligence in application
testing the products for suitability for intended use. This application testing
may include use in actual final environment by end users or "field test"
participants prior to any high volume production run.
4. Prototype Tooling and Prototype Production Expenses
Cyberlux Corporation agrees to pay TKJ Inc. the sum of $15,000 US Dollars to
offset the cost of model specific tooling, process fixtures, minimum purchase
quantities for components, line setup costs, and miscellaneous expenses in order
to produce 200 sample units of the PCB assembly for the described system. Any
comment inventory that remains after completion of said 200 piece prototype
build shall be held for use on the production launch of the product. The value
of these components shall be deducted from the cost of the production units
until the inventory is exhausted. Payment schedule is as follows:
$15,000 upon execution of this agreement
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Breakdown of the expenses is as follows:
$4,300 Non-recurring expenses - fixtures, tools
$3,000 Factory costs, setup, labor, OH
$3,700 Model Specific material
$4,000 Engineering Support - Project Mgmt
5. Manufacturing / Supply
5.1. Exclusivity
TKJ Inc. shall retain the exclusive right to manufacture and supply the
electronic subassemblies for the subject Cyberlux home safety light for the
life of the design. -his exclusive right to supply the electronic
subassemblies may only be waived under one or both of the following
conditions:
5.1.1. Failure to perform
TKJ Inc is unable to deliver product within 30 days of the scheduled
delivery date for three consecutive months. The conditions set forth
under section 8 of this agreement for forecast and increase
requirements must first be met by Cyberlux before it can be determined
that a delivery has been missed. Failure to perform does not apply as
a result of a Force Majeure event as defined under section 11 of this
agreement.
5.1.2. Ongoing Product Quality problems
TKJ Inc is unable to resolve ongoing product quality issues that are a
result of design, materials, or manufacturing processes as these
relate specifically to the electronic PCB subassembly. Ongoing shall
be defined as 3 consecutive months without measurable improvement
relative to the specific quality issue.
5.2. TKJ Inc. Contribution
TKJ Inc, in return for these exclusive manufacturing rights, has developed
these products to their present status, has contributed engineering
support, design Testing, material sourcing, and component part price
negotiating. Furthermore, TKJ Inc shall continue to provide ongoing
engineering support, material substitution support, DFM and DFT
coordination, and ongoing productivity idea generation and implementation
to help Cyberlux Corporation remain competitive in the marketplace.
Material sourcing, manufacturing, and test of the PCB assemblies shall take
place at the facilities of Controls Inc, headquartered at: Xxx Xxxxxxxxxx
Xxx, Xxxxxxxxxx XX, 00000.
6. Features
6.1. Light Features
Portable or fixed
LED lighting
3 lamp intensities
1 switch toggles through off/low/med/high/off
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8 AA battery operated
Estimated maximum continuous use time of 40 hours
Field (user) replaceable batteries
7. Warranty
7.1. Terms
TKJ Inc- warrants assemblies to be free from defects in materials or
workmanship for a period of 90 days in service or 130 days from the date of
manufacture, whichever comes first. This warranty applies when used in
compliance with the agreed to operating parameters. Damage due to misuse,
physical shock, over-voltage, tampering, or improper final assembly are not
covered.
7.2. Remedy
Cyberlux Corporation's remedy for non-conforming product shall be limited
to the repair or replacement (at TKJ's option) of the non-conforming
product. Reasonable charges for freight costs to transport non-conforming
product from Cyberlux Corp. facilities to TKJ Inc. for repair or
replacement shall be borne by TKJ Inc.
7.3. Standards
System components to be manufactured in compliance with industry accepted
standards. Workmanship on the devices shall meet ANSI l IPC A-610
Acceptability of Electronic Assemblies.
7.4. Disclaimer
Except as expressly stated above, TKJ Inc. disclaims all warranties,
whether express or implied, oral or written, with respect to the subject
devices. TKJ Inc. shall in no event be liable for any loss of sales or
profits, or for any other special, indirect, incidental, punitive,
exemplary, or consequential damages arising out of or in connection with
the manufacture or performance of the devices.
8. Forecast
Cyberlux Corporation agrees to supply TKJ Inc, with a rolling 16-week forecast
of expected unit volume for electronic assemblies.
8.1. Increases
Increases in quantities in excess of 15 percent ( 15%) above the forecasted
requirements must be made with12 weeks notice to allow for material pull-in
time and production planning.
8.2. Obsolescence
Costs for obsolescence of components purchased by TKJ Inc. on behalf of
Cyberlux Corporation, which are a result of TKJ Inc. ordering components in
compliance with 16 week lead times, and result in obsolescence because of a
change or cancellation on the part of Cyberlux Corporation shall be borne
by Cyberlux Corporation. (Take or pay)
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8.3. Excess Inventory
Excess inventory that results from cancellation of orders or design
revision by Cyberlux Corporation without sufficient notice given to TKJ
Inc. (16 weeks for commodity components - volume discount quantity orders
for specialized components) shall be reimbursed to TKJ Inc. by Cyberlux
Corporation at TKJ's purchase cost.
9. Unit Pricing
The unit pricing for the controls shall be per the following schedule. Any
adjustments to individual unit pricing based upon increase in annual
quantities shall be based upon the TKJ Inc. fiscal year (calendar year).
Adjustments to unit pricing will become effective upon the shipment
following the price change.
9.1. Good Faith Estimate
The following table represents the good faith estimate for minimum annual
purchase quantities of the home safety light.
Fiscal Year 2001 60,000 units
Fiscal Year 2002 1,000,000 units
Fiscal Year 2003 2,000,000 units
9.2. Volume Price Tiers
The following table specifies the unit pricing based upon annual usage.
This unit pricing is for the PCB assembly only; this assembly includes the
electronics, LED indicator lamps, and PCB substrate. Units are 100%
assembled, soldered, and tested. Units to be built, tested, packaged, and
shipped in a multiple-array configuration. Cyberlux or their assignee
shall separate the individual assembly from the array at the time of final
unit assembly.
Pricing: 60,000 units $8.30 each
500,000 units $8.01 each
1,000,000 units . . $7.78 each
2,000,000 units $7.38 each
The unit prices are contingent upon LED prices from Nichia and Yen/Dollar
valuation. Nichia has agreed in writing to LED prices of $0.66 each
declining to $0.52 each based upon the LED use volumes forecasted.
10. Orders
10:1. Blanket PO
Cyberlux Corporation or their assignee shall issue blanket Purchase Orders
on an annual basis that reflect the expected annual use of assemblies,
releases against these blanket PO instruments shall reflect a forecast for
16 weeks usage with 4 weeks firm.
10-2. Freight
Pricing for controls is FOB the TKJ selected manufacturing facility.
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10.3. Payment Terms
Invoice payment terms (for production) to be net 30 days.
11. Force Majeure
Neither party shall be deemed liable, or be deemed in breach of its obligations
under this agreement, for any delay in performance or failure to perform as the
result of an act of governmental authority, war, riot, fire, explosion,
hurricane, flood, strike, lockout, or injunction; inability to obtain fuel,
power, raw materials, labor, or transportation; accident, breakage of machinery
or apparatus; or any other cause beyond its reasonable control which prevents
the manufacture, delivery, or acceptance of the product, or any component
thereof (Force Majeure) provided that the affected party (a) promptly notifies
the other party of the Force Majeure event (b) uses reasonable diligence and
efforts to remedy the situation if reasonably able to be remedied by that party
(c) continues performance of its obligations to the extent that the Force
Majeure event permits, and (d) resumes performance of its obligations delayed by
the Force Majeure events as soon as possible. This requirement that any Force
Majeure be remedied with all reasonable dispatch will not require the settlement
of strikes or labor controversies by acceding the demands of the opposing
parties.
12. Cancellation
In the event of the cancellation of this project by Cyberlux Corporation, TKJ
Inc. shall be reimbursed by Cyberlux Corporation any reasonable expenses that
are in excess of the payments made as outlined in section 4 of this agreement.
Examples of possible unrecovered expenses include tooling expense,
administrative costs, development expenses, program management expenses,
prototype material, and sample devices. These expenses which are borne by TKJ
Inc and which are intended to be recovered over time manufacturing product
13. Duration of the Agreement
This agreement to remain in effect between TKJ Inc. and Cyberlux Corporation for
a period of four (4) years from the date of execution of the agreement by both
of the parties; or for a period of three (3) years of production at the good
faith estimate detailed in section 9.1.
14. Agreement
Agreed to between the parties this 29th day of October 2001.
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TKJ Inc. Cyberlux Corporation
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By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
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Name Xxxxxx X. Xxxxxxx Name Xxxxxx X. Xxxxx
Title President Title President
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