EXHIBIT 10.2
MANUFACTURING SERVICES AGREEMENT
ELCOTEL, INC. & TECHNOLOGY SERVICE GROUP, INC.
THIS MANUFACTURING AGREEMENT (this "Agreement") is made as of the 26th day of
September, 1997 (the "Effective Date") by and between Elcotel, Inc. (hereinafter
referred to as "Elcotel") and Technology Service Group, Inc.
(hereinafter referred to as "TSG").
1 Consideration. The parties are entering into this Agreement for and in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
2 Background. Elcotel and TSG have entered into an Agreement and Plan of
Merger dated as of August 13, 1997 (the "Merger Agreement") providing for
the merger of a wholly-owned subsidiary of Elcotel into TSG (the "Merger").
As a result of the Merger Agreement, TSG has canceled plans to move into a
new facility in Alpharetta, GA that would provide additional manufacturing
capacity for TSG since Elcotel has adequate space to accommodate TSG's
manufacturing needs after the Merger. In entering into this Agreement, the
parties wish to provide for the possibility that the Merger may not be
consummated, with the result that TSG would be left with inadequate
manufacturing capacity until it could negotiate a lease on a new
manufacturing facility.
3 Compensation. In the event that the Merger is not consummated (other than
by reason of a breach of the Merger Agreement by TSG, because of the
failure of TSG's stockholders to approve the Merger, or by mutual agreement
by the parties), Elcotel shall pay to TSG as reimbursement for expenses
that TSG will incur in establishing a manufacturing facility to replace the
Alpharetta facility, the lesser of one hundred thousand dollars ($100,000)
or the sum of (i) TSG's actual costs incurred in locating a new facility;
(ii) the difference in annual rent between the Alpharetta facility and a
replacement facility for a five-year term; (iii) the actual costs of
leasehold improvements paid for by TSG and not covered by the rental rate;
and (iv) any losses actually incurred by TSG relating to the subleasing of
the Alpharetta facility (such as unreimbursed leasehold expenses paid for
by TSG). All such costs and losses shall be documented by TSG.
4 Elcotel's Responsibilities.
4.1 Elcotel will assemble and manufacture those TSG products and
components listed on Exhibit A at Elcotel's facility in Sarasota,
Florida according to TSG's specifications furnished to Elcotel for
such purpose. A mutually agreed upon implementation schedule will be
developed. Additional components will be added to Exhibit A as
required.
4.2 Elcotel warrants that TSG products manufactured and/or assembled by it
will be free from
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defects in materials and workmanship (other than materials furnished
by TSG) for a period of ninety (90) days after delivery thereof to
TSG. Any products that do not conform to the foregoing warranty may be
returned to Elcotel by TSG for credit. Elcotel shall repair and return
to TSG, at Elcotel's expense, products that fail to meet the foregoing
warranty.
4.3 In the event of the termination of this Agreement Elcotel shall at
TSG's expense and direction return and/or dispose of all
specifications, drawings, manuals, and other tangible items furnished
by TSG to Elcotel to assist it in manufacturing and/or assembling TSG
products and all unused TSG inventory then remaining at Elcotel's
facility.
5 TSG's Responsibilities.
5.1 TSG shall furnish to Elcotel such specifications, drawings, manuals
and the like as are reasonably required by Elcotel to manufacture
and/or assemble the TSG products.
5.2 TSG shall provide Elcotel on a timely basis with the parts and
components required to assemble TSG's products.
5.3 Any inventory of parts or components furnished by TSG to Elcotel shall
be on a consignment basis and shall at all times remain the property
of TSG.
5.4 TSG will supply the manufacturing equipment to Elcotel as listed on
Exhibit B which shall also at all times remain the property of TSG.
5.5 TSG shall pay the freight on shipments of inventory and equipment to
Elcotel and on shipment to TSG of products manufactured and/or
assembled by Elcotel.
6 Acceptance Testing. TSG shall perform incoming inspection of all products
shipped to it by Elcotel and shall retain the right reject products for
return and repair. This inspection will be performed on a lot by lot basis.
7 Pricing and Payment.
7.1 Elcotel shall charge TSG for labor and overhead at current costs as
documented on TSG's bills of materials.
7.2 TSG shall pay Elcotel for products net thirty (30) days after receipt
of an invoice therefor.
8 Risk of Loss.
8.1 The risk of loss of inventory and equipment furnished by TSG to
Elcotel shall pass to Elcotel upon delivery to Elcotel's Sarasota
manufacturing facility.
8.2 Risk of loss of TSG products manufactured and/or assembled by Elcotel
shall pass to TSG upon delivery to TSG F.O.B. Elcotel's place of
manufacture in Sarasota, Florida.
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9 Term & Termination.
9.1 This Agreement shall commence on the date hereof and shall continue
until the earlier to occur of the consummation of the Merger or the
first anniversary of the date Elcotel first becomes obligated to
provide manufacturing services to TSG hereunder.
9.2 If either party shall breach any term, condition or provision of this
Agreement and if the breaching party shall fail to cure such breach
within thirty (30) days after receipt from the other party of a notice
of such breach, the non-breaching party may terminate this Agreement
by written notice to the other party and/or may pursue such other
remedies as are available to it under applicable law. However, if the
type of breach is one that cannot be cured within a thirty-day period,
then such breach shall be deemed to be cured if the breaching party
within the thirty-day period shall have in good faith commenced a cure
and shall continue thereafter with all due diligence to effect such
cure and in fact does so complete the cure with all due diligence.
10 Confidentiality. The confidentiality agreement between the parties dated as
of February 27, 1997 entered into in connection with negotiations for the
Merger shall continue in full force and effect for the duration of this
Agreement and for three (3) years thereafter.
11 Limitation of Liability
11.1 NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS
UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY,
SPECIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES EVEN IF IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11.2 EXCEPT AS EXPRESSLY STATED HEREIN, ELCOTEL DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW OR
OTHERWISE, WITH RESPECT TO TSG PRODUCTS MANUFACTURED AND/OR ASSEMBLED
BY ELCOTEL, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12 Arbitration.
12.1 Except as otherwise provided below, this Agreement and any
controversy, claim or dispute between the parties directly or
indirectly concerning this Agreement or the breach hereof or the
subject matter hereof, including questions concerning the scope and
applicability of this Section 12 shall be finally settled by
arbitration held in Atlanta, Georgia in accordance with the provisions
of this Section and the rules of commercial arbitration then followed
by the American Arbitration Association or any successor to the
functions thereof.
12.2 The arbitrators shall be chosen in accordance with such rules. A
majority of the arbitrators shall have the right and authority to
determine how their decision or determination as to each issue or
matter in dispute may be implemented or enforced. Any decision or
award of a majority of the arbitrators shall be final and conclusive
on the parties to this Agreement, and there shall be no appeal
therefrom other than for fraud or willful misconduct. Notwithstanding
anything herein to the contrary, no arbitrator in any such proceeding
shall
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have authority or power to (a) modify or alter any express condition
or provision hereof by an award or otherwise; (b) award punitive or
exemplary damages for or against any party to any such proceeding; or
(c) award any damages expressly excluded under this Agreement.
12.3 The parties hereto agree that an action to compel arbitration pursuant
to this Agreement may be brought in the appropriate court of the State
of Georgia. Application may also be made to such court for
confirmation of any decision or award of a majority of the
arbitrators, for an order of enforcement and for any other remedies
that may be necessary to effectuate such decision or award. Each of
the parties hereto hereby consents to the jurisdiction of the
arbitrators and of such court and waives any objection to the
jurisdiction of such arbitrators and court.
12.4 Notwithstanding anything contained herein to the contrary, the parties
hereby agree that this Section 12 shall not apply to any action
brought by a party seeking an injunction or other equitable relief.
12.5 In any controversy, claim or dispute subject to arbitration under the
terms of this Section 12, the parties shall pay the fees and expenses
of the arbitrators in accordance with any decision or award of a
majority of the arbitrators.
13 Force Majeure. Neither party shall be liable to the other party hereunder
for non-performance or delay in the performance of any of the terms and
conditions of this Agreement if such non-performance or delay is caused by
circumstances beyond its control, which circumstances, however, shall not
include lack of funds.
14 Notices. All notices required or permitted under this Agreement shall be in
writing and shall be deemed given to a party either (a) when hand delivered
to such party; (b) when deposited with a nationally-recognized delivery
service with instructions to provide next-business-day delivery and proof
of delivery to such party; or (c) when sent to such party by facsimile
transmission as follows:
If to Elcotel at: If to TSG at:
0000 Xxxxxxxx Xxxxx 00 Xxxxxxx Xxxxx Xxxx Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attention: President Attention: President
Fax #: (000) 000-0000 Fax #: (000) 000-0000
or to such other address of a party as such party may by notice hereunder
designate to the other party.
15 Instruments. All instruments such as purchase orders, order acceptances,
confirmations, invoices and the like used in connection with this Agreement
shall be for the sole purpose of describing, defining or identifying
Products, quantities, prices, amounts due, delivery dates and destinations,
and to this extent only are incorporated into this Agreement. All of the
printed or other terms on the front and reverse side of any such instrument
shall be void and of no force or effect.
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16 Severability. If any provision or part of a provision of this Agreement is
finally declared to be invalid by any tribunal of competent jurisdiction,
such part shall be deemed automatically adjusted, if possible, to conform
to the requirements for validity, but, if such adjustment is not possible,
it shall be deemed deleted from this Agreement as though it had never been
included herein. In either case, the balance of any such provision and of
this Agreement shall remain in full force and effect. Notwithstanding the
foregoing, however, no provision shall be severed if it is clearly apparent
under the circumstances that either or both of the parties would not have
entered into this Agreement without such provision.
17 Survival.
The expiration or earlier termination of this Agreement shall not relieve
(i) Elcotel of its warranty hereunder, (ii) TSG of the obligation to pay
for conforming products shipped prior to termination or (iii) either party
of its obligations of confidentiality as provided herein.
18 Relationship. The relationship between the parties shall be that of
independent contractors, and nothing contained in this Agreement shall be
construed to constitute either party as a partner, employee, joint venturer
or agent of the other. Neither party shall have the authority to bind the
other in any manner without the other's prior written consent and
authorization.
19 Miscellaneous.
19.1 This Agreement together with Exhibits A and B contains the entire
understanding of the parties on the subject matter hereof except as
otherwise expressly contemplated herein; shall not be amended except
by written agreement of the parties signed by each of them; shall be
binding upon and inure to the benefit of the parties and their
successors and permitted assigns; may be executed in one or more
counterparts each of which shall be deemed an original hereof, but all
of which shall constitute but one and the same agreement; and shall
not be assignable by a party without the prior written consent of the
other party.
19.2 The words "herein," "hereof," "hereunder," "hereby," "herewith" and
words of similar import when used in this Agreement shall be construed
to refer to this Agreement as a whole. The word "including" shall mean
including, but not limited to any one or more enumerated items.
19.3 "Best Efforts means that the obligated party is required to make a
diligent, reasonable good faith effort to accomplish the stated
objective. The obligated party is not, however, required to expend
funds or incur liabilities and is not required to act in a manner that
would be contrary to normal commercial practices in order to
accomplish the objective. The fact that the objective is not
accomplished is not by itself an indication that the obligated party
did not in fact use its Best Efforts.
19.4 "Business Day" means a day that is not a Saturday, Sunday or a
statutory or civic holiday in the state of Florida, or any other day
on which the principal office of either party is closed or becomes
closed prior to 2:00 p.m. local time, whether in accordance with
established company policy or as a result of unanticipated events,
including adverse weather conditions.
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19.5 Each provision of this Agreement shall be interpreted and enforced
without the aid of any canon, custom or rule of law requiring or
suggestion construction against the party drafting or causing the
drafting of such provision.
19.6 No representation, affirmation of fact, course of prior dealings,
promise or condition in connection herewith or usage of the trade not
expressly incorporated herein shall be binding on the parties.
19.7 The failure by a party to insist upon strict compliance with any term,
covenant or condition, or to exercise any right, contained herein
shall not be deemed a waiver of such term, covenant, condition or
right; and no waiver or relinquishment of any term, covenant,
condition or right at any one or more times shall be deemed a waiver
or relinquishment thereof at any other time or times.
19.8 The captions of the paragraphs herein are for convenience only and
shall not be used to construe or interpret this Agreement.
19.9 This Agreement shall not confer any rights or remedies upon any person
other than the parties and their respective successors and permitted
assigns.
20 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Georgia without giving
effect to any choice of law or conflict of law provision or rule (whether
of the State of Georgia or of any other jurisdiction) that would cause the
application hereto of the laws of any jurisdiction other than the State of
Georgia.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
Elcotel, Inc. Technology Service Group, Inc.
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------ ---------------------------------
Xxxxxx X. Xxxx Xxxxxxx X. Xxxxxxxxx
President & Chief Operating Officer President & Chief Executive Officer
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EXHIBIT A
LISTING OF TSG PRODUCTS AND COMPONENTS
TO BE MANUFACTURED AT
ELCOTEL
Item
UBX C Cash Box Switch
Hookswitch Assembly
GC Dial UCD Assembly
DC Dial UCD Assembly
Note: This listing may be increased to include additional products and
components
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EXHIBIT B
LISTING OF TSG MANUFACTURING EQUIPMENT
TO BE LOANED TO
ELCOTEL
Item
1. Xxxx Switch Forming Fixture Consisting of:
a. Sony Monitor
b. Camera
c. Lights
d. Pneumatic Switch Forming Fixture
e. Lead Straightener
2. Microscope and Base with Light Adapter - Bausch & Lomb
3. Two Xxxx Switch Assembly Stations with Vacuum Pumps
4. Gauss Meter and Fixture with Holding Tool
5. Manual Sleeve Press for Mounting Screws
6. UBX Final Test Station:
* a. Holding Block for UBX with Test Strip
b. Lower Phone Housing with Cash Box Test Fixture
* Have two more in Orange, will ship when we complete assembly.
Note: This list may be increased to include additional equipment
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