TECHNICAL COLLABORATION, SALE AND SUPPLY AGREEMENT
This Agreement is entered into by and between Rayovac Corporation ("Rayovac"), a
Wisconsin corporation with its principal place of business at 000 Xxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxxx, U.S.A., Matsushita Battery Industrial Co., Ltd.
("Matsushita"), a Japanese corporation with its principal place of business in
Osaka, Japan, and, for the purposes of Articles III, IV and XV only, Matsushita
Electric Industrial Co., Ltd. ("MEI"), a Japanese corporation with its principal
place of business in Osaka, Japan.
Background
Rayovac and Matsushita are parties to the Technical Collaboration, Sale and
Supply Agreement of November 26, 1991 ("1991 Agreement"), with respect to LR20,
LR14 and LR6 primary alkaline manganese dry batteries and the LR03 Technical
Collaboration, Sale and Supply Agreement of March 16, 1994 ("1994 Agreement"),
with respect to LR03 primary alkaline manganese dry batteries.
It is mutually acknowledged and understood by Rayovac and Matsushita that any
cooperation between the parties, including entering into the 1991 Agreement, the
1994 Agreement and this Agreement, have been and will be based on a mutual trust
and good working relationship which are established so far and presently owned
by the parties.
Rayovac desires to manufacture primary alkaline manganese dry batteries in sizes
LR20, LR14, LR6 and LR03 and to continuously obtain further technical
information and assistance therefor specified herein from Matsushita.
Matsushita has developed such batteries having no mercury in their formulation
and having desirable electrical performance characteristics and has developed
machinery suitable for manufacturing such batteries.
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Matsushita is willing to furnish or make available to Rayovac such technical
information and assistance and to sell such machinery, and Rayovac desires to
obtain such technical information and assistance and to buy such machinery.
Now therefore, the parties agree:
Undertakings
ARTICLE I
Definitions
1. Equipment
New Equipment shall mean a new line of equipment for production of LR6
alkaline batteries. The New Equipment shall consist of the items set
forth on Schedule A attached hereto. Specifications for the LR6
batteries to be produced by the New Equipment are set forth on Exhibit A
attached hereto.
Retooling Equipment shall mean Rayovac's existing LR6 equipment supplied
before by Matsushita and retooled with parts for retooling, which will
make the existing LR6 equipment capable of producing LR6 batteries which
satisfy the specified conditions of "Retooling Equipment."
Retooling Parts shall mean the parts necessary to change Rayovac's
existing LR6 equipment to the Retooling Equipment and which are selected
from the items set forth on Schedule B attached hereto.
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Old Equipment shall mean the combination of the Equipment defined in a
1991 Technical Collaboration, Sale and Supply Agreement and the
Equipment defined in a 1994 Technical Collaboration, Sale and Supply
Agreement.
Total Equipment shall mean the combination of New Equipment, Retooling
Equipment, and Old Equipment.
2. Contract Batteries
"Contract Batteries" shall mean the 0 mercury formula, primary dry
batteries in sizes LR20, LR14, LR6 and LR03 embodying Matsushita's
design, Matsushita's Technical Know-How (as defined in Article I.3), and
MEI's Patents (as defined in Article I.4), with cylindrical zinc
manganese-dioxide elements, and with alkaline electrolyte in production
on the Date hereof at Matsushita's manufacturing facility in Osaka,
including any improvements to such batteries made during the first five
years of this Agreement.
3. Technical Know-How
"Technical Know-How" shall mean know-how in any form whatsoever other
than patents or patent applications or other know-how for which MEI
intends to file a patent application, which Matsushita possesses or will
possess during the first five years of this Agreement, and which
concerns or will concern the design, testing, manufacture and quality
control of Contract Batteries and the processes or equipment for
manufacturing Contract Batteries.
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4. Patents
"Patents" shall mean all patents and patent applications which MEI owns
or controls or which it will own or control during the first five years
of this agreement, in any country excluding Japan, and which are or will
be used or useful in the manufacture of the Contract Batteries or in the
processes and equipment for manufacture of the Contract Batteries in the
Manufacturing Territory.
5. Improvements
"Improvements" shall mean all improvements, modifications or variations,
other that those that are patented or for which a patent application has
been or will be filed (but only for the pendency of such an
application), in or to the manufacture of Contract Batteries, or
relating to the design, construction, or operation thereof, made or
acquired by Matsushita or Rayovac by using Technical Know-How or Patents
during the first five years of this Agreement.
6. Intellectual Property
"Intellectual Property" shall mean all of the Technical Know-How,
Patents and Improvements.
7. Manufacturing Territory
"Manufacturing Territory" shall mean the United States (including its
possessions and territories), Canada and Mexico.
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8. Sales Territory
"Sales Territory" shall mean all of the world excluding Japan.
9. Direct Variable Cost
The Direct Variable Cost of a product shall mean the entire production
cost of a product, excluding those elements of cost that do not vary
with the quantity of production. By way of example, costs such as
depreciation, rent, management costs, and property tax do not vary with
the quantity of production.
ARTICLE II
Purchase and Sale of Equipment
1. Rayovac will buy from Matsushita and Matsushita will manufacture and
sell the New Equipment and Retooling Parts to Rayovac, subject to the
other terms and conditions of this Agreement. Upon execution of this
Agreement, Rayovac will promptly deliver to Matsushita a purchase order
for the New Equipment. In the event of any conflict between such
purchase order and this Agreement, this Agreement shall govern.
2. If, at any time during the first five years following the date of this
Agreement, Rayovac wishes to purchase a new line of equipment equal to
the most advanced equipment for production of LR20, LR14, LR6 or LR03
alkaline batteries then in operation at Matsushita's manufacturing
facility in Osaka, Matsushita agrees to sell such a new line to Rayovac.
The price for each new line of equipment shall be the price charged for
the most recent purchase by Rayovac of equipment of the same battery
size, except that the price shall be adjusted for changes in the scope
of the project, changes in the equipment, and changes in general
economic conditions. Rayovac will send to Matsushita a written request
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specifying types of a new line of equipment requested and its requested
delivery date. Matsushita agrees, within thirty (30) days from receiving
such request, to begin to discuss with Rayovac in good faith the terms
and conditions of a separate sales and supply agreement, which shall be
comparable to those contained in this Agreement or in similar agreements
entered into in 1991 and 1994. Any such new lines of equipment must be
ordered within five years from the date of this Agreement. There shall
be no increase in royalty if Rayovac orders new lines of equipment.
ARTICLE III
Grant of License, Limitation on Equipment Resale and
Reproduction, Security Interest, and Change of Control of Rayovac
1. Grant of License
Subject to the terms and conditions set forth in this Agreement,
Matsushita hereby grants to Rayovac a non-exclusive license of the
Intellectual Property other than the Patents and MEI hereby grants to
Rayovac a non-exclusive license of the Patents in each case to make and
use Contract Batteries in the Manufacturing Territory from the effective
date of this Agreement until the end of the term of this Agreement.
Matsushita and MEI further grant a non-exclusive license under the
Intellectual Property to sell Contract Batteries throughout the Sales
Territory for the full term of this Agreement.
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The license and rights granted hereby are non-transferable and
non-assignable and Rayovac shall have no right to sublicense the rights
granted hereby except as provided in Article XXI. If Rayovac requests
MEI to grant Rayovac a non-exclusive license of the Patents to make,
have made for Rayovac's sole use, and use any component of the Contract
Batteries in Manufacturing Territory from the effective date of this
Agreement until the end of the term of this Agreement, MEI agrees to
discuss the matter.
2. Limitation on Equipment Resale and Reproduction; Security Interest
a. During the term of this Agreement, the Total Equipment shall be
for Rayovac's sole use for the manufacture of Contract Batteries
and Rayovac shall not resell or otherwise dispose of the Total
Equipment to any person except as part of the sale of all or
substantially all the assets of Rayovac; provided that for a
period of five years after acceptance of the Total Equipment,
Rayovac shall not resell or otherwise dispose of the Total
Equipment to any manufacturer of batteries whose U.S. market
share exceeded 15% in any of the five years prior to the proposed
sale (a "Major U.S. Manufacturer") even as part of the sale of
all or substantially all the assets of Rayovac.
b. Rayovac shall not copy or reproduce the Total Equipment;
provided, however, that Rayovac may reproduce any portion of the
Total Equipment, solely for its own use in the Manufacturing
Territory at any time after the fifth anniversary of the date of
final acceptance of such portion of the Total Equipment;
provided, further, that Rayovac shall first inform to Matsushita
the intention to reproduce the Total Equipment prior to
reproducing. It is understood that reproduction, if necessary,
will be basically carried out by Rayovac itself or, if agreed, by
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Matsushita. Matsushita shall have the right of first refusal to
supply parts and materials necessary for the reproduction. If
Rayovac wishes to use the third party for this reproduction,
Rayovac shall consult the same with Matsushita prior to using
such third party. If Rayovac actually uses the third party for
the reproduction, Rayovac shall require the third party to enter
into a contract in which the third party maintain information
about the equipment in strict confidence and agree to reproduce
the equipment for only Rayovac.
c. Notwithstanding any other portion of this Agreement, Rayovac may
grant a security interest in or otherwise pledge as collateral
the Total Equipment to secure any indebtedness for borrowed money
incurred by Rayovac at any time now or in the future and the
lender or lenders with respect to such indebtedness shall have
any and all rights available pursuant to the agreements governing
such pledge or security interest or pursuant to the provisions of
applicable law; provided that no such pledge or security interest
(other than a pledge of or security interest in Rayovac's
intangible rights pursuant to this Agreement in and to the Total
Equipment) may be perfected until Matsushita receives payment in
full for the Total Equipment and related services and Rayovac
gives prompt notice to Matsushita of the name of any lender with
a security interest in the Total Equipment. None of the aforesaid
restrictions on use, copying or reproduction shall preclude
Rayovac from repairing Total Equipment, manufacturing or
obtaining spare or replacement parts necessary for the continuing
operation of Total Equipment, or otherwise making engineering
improvements thereto to increase operating efficiency or
throughput.
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3. Change of Control
If a Change of Control becomes a significant possibility, and if the
Change of Control would result in Rayovac being controlled by a Major
Battery Manufacturer(a Major Battery Manufacturer being defined to be
any manufacturer of batteries whose market share of alkaline manganese
batteries either in U.S., Europe, Japan, Indonesia, Korea, or Hong Kong
exceed 15% in any of the five years prior to the proposed Change of
Control), or by Controlling Party (Controlling Party being defined to be
any one who owns or controls such "Major Battery Manufacturer" including
parent company of the "Major Battery Manufacturer"), then, before a
legally binding agreement intended to cause the Change of Control is
entered into, Rayovac shall notify Matsushita of the proposed
transaction. Within a period of thirty (30) days as from the receipt of
the notice, Matsushita and Rayovac will mutually discuss to find a
solution and if a solution can not be reached within such thirty (30)
days period and Change of Control to a Major Battery Manufacturer or to
Controlling Party has actually occurred, Matsushita shall have a right
to immediately terminate this Agreement. Change of Control shall mean
any transaction or series of transactions which would result in a party
(or group of related parties) either (i) contolling directly or
indirectly more than 50% of the stock entitled to vote for members of
the Rayovac Board of Directors following completion of the
transaction(s) or (ii) owning substantially all of Rayovac's assets. In
the event of a Change of Control to a Major Battery Manufacturer, or to
a Controlling Party, Matsushita's obligations under this Agreement to
provide 1) Improvements, 2) Patents license, 3) Total Equipment Meeting,
and 4) chance to purchase of new equipment shall cease.
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ARTICLE IV
Signing Fee, Purchase Price, Royalty and Terms of Payment
1. Signing Fee
In consideration for entering into this Agreement, Rayovac will pay
$2,000,000 to MEI within 30 days of the Date hereof.
2. Price
a. New Equipment. The price for New Equipment, technical documents,
spare parts, F.O.B., Osaka, Japan, and for related services shall
be:
New Equipment (Y) 974,453,000
Technical Documentation 13,000,000
Spare Parts none
Dispatch Trainers (Art. X) 21,600,000
Rayovac Trainee Fee (Art. VI) 9,000,000
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Total (Y)1,018,053,000
The price will be paid in installments within 30 days of the
Events listed below as follows:
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Anticipated % of Price Payable
Event Approx. Date
Date hereof 20%
Shipment of the New Equipment May 7, 1999 50%
New Equipment Performance
Verified (Art. XI.4.b.) 20%
Product Quality Verified;
New Equipment Accepted
(Art. XI.4.b. last sentence) 10%
----
Total 100%
Payments occasioned by shipment of New Equipment will be made
only against presentation of satisfactory transport documents,
such as clean, on board bills of lading.
Calendar dates listed above are for information only. The events
described in the first column will cause the obligation to make
payments.
Rayovac shall cause Bank of America, or another bank of Rayovac's
choice, to issue an irrevocable standby letter of credit to the
benefit of CITD (defined in Article IV.4 hereof) for the amounts
of no less than JP(Y)814,442,400 by no later than fifteen (15)
days prior to the Promised Ship Date, defined in Article IX
hereof, such letter of credit to be effective until the earlier
of (a) CITD's receipt in full of all amounts payable by Rayovac
for the total equipment price of JP(Y)1,018,053,000 as set forth
in this Article IV.2.a. hereof, or (b) the 31st day of December,
1999 (such irrevocable standby letter of credit, the "L.C."). The
cost of issuing the L.C. shall be borne by Rayovac.
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In the event CITD does not receive any amounts receivable from
Rayovac as they become due pursuant to Article IV.2.a. hereof,
CITD shall be entitled to immediately collect any such amounts in
full from the issuer of the L.C. upon CITD's request (which may
be made through a bank of CITD's choosing) in writing, and such
written request by CITD shall be sufficient evidence to effect
CITD's collection of amounts overdue from the L.C.
Notwithstanding any of the foregoing, CITD shall be entitled to
collect from the L.C. if and when (a) Rayovac fails to complete
performance verification tests on the New Equipment as set forth
in Article XI.4.b. within nine (9) weeks after CITD's delivery of
the New Equipment to Rayovac pursuant to Article IX hereof, in
which event CITD shall be entitled to collect from the L.C. an
amount equal to twenty percent (20%) of the total price of the
New Equipment, and (b) Rayovac fails to complete all tests
necessary for the final acceptance of the New Equipment as set
forth in Article XI.4.b., by October 31, 1999, in which event
CITD shall be entitled to collect from the L.C. an amount equal
to ten percent (10%) of the total price of the New Equipment.
These remedies are in addition to, not in lieu of, any remedies
available to CITD or Matsushita under law or this Agreement for
the non-payment or late-payment of any amounts payable by Rayovac
to CITD or Matsushita.
b. Retooling Parts. Rayovac shall issue its purchase order for
Retooling Parts to Matsushita by June 1, 1999. The purchase order
may be for any number of any of the items shown on Schedule B
attached hereto, and the unit prices for the items shall be those
shown on Schedule B. Matsushita shall ship the Retooling Parts no
later than December 31, 1999. Payment terms shall be separately
agreed between the parties hereto prior to Rayovac's issuing
purchase order therefor. Matsushita agrees to send trainers to
Rayovac facility at times to be mutually determined at a price
of(Y)60,000/ man day plus travel and living expenses. The
dispatching time, period and numbers of such trainers shall be
mutually agreed upon between Matsushita and Rayovac prior to the
dispatch. During that period, an acceptance test shall be carried
out with the installed Retooling Equipment, based on conditions
specified in Article XI.7 hereof.
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3. Royalty.
In consideration for the license to practice the Patents and use the
Technical Know-How, Rayovac will pay MEI a Royalty of:
Payment Date Payment Amount
July 1, 1998 $2,000,000
July 1, 1999 $2,000,000
July 1, 2000 $3,000,000
July 1, 2001 $3,000,000
July 1, 2002 $3,000,000
In addition, Rayovac will pay MEI a Royalty of $500,000 on July 1, 2003
and on each subsequent anniversary thereof until on July 1, 2022
(inclusive) for as long as Rayovac practices any Patent; provided,
however, that no such payment shall be required after July 1, 2022.
The royalty payments to MEI hereunder shall include payments for the
Intellectual Property, and Rayovac shall have no obligation to pay any
additional royalty to Matsushita for the Intellectual Property.
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4. Other.
The sale and delivery of the New Equipment, Retooling Parts and spare
parts related thereto under this Agreement shall be carried out by
Matsushita through the Corporate International Trade Division of
MATSUSHITA ELECTRIC INDUSTRIAL Co., LTD., located at Xxxxxxxxx Xxxxxxxx,
0-0 Xxxxxxxxxxx 0-xxxxx, Xxxx-xx, Xxxxx 540-8588 Japan ("CITD").
Rayovac's purchase orders for New Equipment, Retooling Parts and spare
parts related thereto, shall be issued to Matsushita through CITD.
All payments by Rayovac under this Agreement other than the signing fee
and the royalty payments shall be made in Japanese Yen to CITD's account
at the following bank by telegraphic transfer:
Sumitomo Bank Ltd.
Head Office, Osaka, Japan
Account #271905
Matsushita Electric Industrial Co., Ltd. -
Overseas Accounting Center
When remittances to CITD are made by Rayovac, Rayovac shall specify the
transaction that corresponds to such payment.
For the purposes of this Agreement, MEI and CITD shall be construed as
being independent parties.
The signing fee and all royalty payments by Rayovac under this Agreement
shall be made in U.S. Dollars to MEI's account at the following bank by
telegraphic transfer:
Sumitomo Bank Ltd.
Head Office, Osaka, Japan
Account #271891
Matsushita Electric Industrial Co., Ltd.
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ARTICLE V
Technical Information and Disclosure
Matsushita will supply to Rayovac in English texts the Technical Information and
documents enumerated on the List of Technical Documents (attached hereto) and
such information necessary for the commercial manufacture of LR6 Contract
Batteries and in content, form, and detail to be understood by a U.S. engineer
of average skill and training in the art of battery manufacturing.
Matsushita will air mail to Rayovac the following documents in English texts not
later than 30 days after receipt by Matsushita of the initial purchase price
installment pursuant to Article IV hereof:
Raw Material Specifications
Component Part Specifications
Process Flow Charts
Equipment Layout Detail
Storage Specifications
All other documents will be sent in English texts by airmail within 30 days
after the date of shipment of the New Equipment relating thereto from Japan.
ARTICLE VI
Training Assistance
Upon the request of Rayovac made from time to time during the term of this
Agreement, Matsushita will train a reasonable number of Rayovac engineers or
technicians at Matsushita's works, subject to the following conditions:
1. Number of engineers or technicians. Rayovac shall give Matsushita 30
days notice before dispatching engineers or technicians to Matsushita's
works stating the time of their arrival at such works, the period of
their stay at such works, their names and background experiences.
Matsushita shall promptly advise Rayovac whether the request is
convenient and acceptable and if not, shall propose alternative
arrangements. Such training shall be completed by shipping date of New
Equipment by Matsushita and the amount of such training shall be limited
to a total of 3 man-months of Rayovac engineering time, which time may
be allocated among several employees as Rayovac deems appropriate.
2. Scope of Training. Matsushita will train Rayovac's engineers or
technicians to acquire sufficient knowledge, experience, and skill in
manufacturing, inspecting, and testing techniques to produce
commercially acceptable Contract Batteries and to operate and maintain
the New Equipment efficiently. Such training will include the
opportunity to discuss the use and development history of the product.
3. Expenses. Rayovac shall pay to Matsushita the training fee set forth in
paragraph 2 of Article IV hereof. In addition, Rayovac shall pay all
traveling expenses for Rayovac's engineers or technicians, their living
expenses during the stay in Japan, and all other out of pocket expenses
to be incurred in connection with the above training except the salaries
of Matsushita's employees.
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ARTICLE VII
Pilot Line
Matsushita will sell to Rayovac the tools, dies, and equipment necessary for the
pilot manufacture of up to 500 cells per 8 hour shift. Rayovac shall designate
which items it wishes to purchase. Matsushita will deliver all items so
purchased within a reasonable time of notice from Rayovac and at prices equal to
Matsushita's cost, plus a reasonable handling charge.
ARTICLE VIII
Assistance in Qualifying Rayovac's Suppliers
In order to facilitate Rayovac's evaluation and qualification of U.S. sources of
other parts and materials, Matsushita will within 30 days of the Date hereof:
a. disclose names of its raw materials suppliers;
b. disclose names of its component suppliers;
c. supply parts drawings containing English texts to manufacture
components; and
d. disclose productivity, quality, and scrap data resulting from
previous 6 months of operation on Matsushita's line in Japan.
ARTICLE IX
Shipment
Matsushita will cause the New Equipment to be ready for shipment through CITD at
a Japanese port by May 7, 1999 (the Promised Ship Date) provided, however, that
if the embodiment of Improvements pursuant to paragraph 1 of Article XV hereof
shall have required a redesign of the New Equipment after the Date hereof, then
the date for delivery shall be deferred by the amount of time necessary to
embody such changes in the New Equipment.
The aforementioned delivery of the New Equipment, Retooling Parts and spare
parts related thereto to Rayovac shall be made on the delivery term F.O.B. Japan
as defined in Incoterms 1990. Risk of loss of the New Equipment shall pass to
Rayovac upon delivery to Rayovac, but title and ownership for the New Equipment
shall remain with Matsushita until Matsushita receives payment therefor in full.
CITD shall arrange for the transportation of the New Equipment to Rayovac's
manufacturing facilities in Fennimore, Wisconsin, such transportation to be
effected at Rayovac's cost and risk.
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ARTICLE X
Installation
By three (3) months after the Date hereof, Matsushita will deliver to Rayovac an
Installation Specification that describes in detail a reasonable manner in which
the site is to be prepared for installation and operation of the New Equipment.
Rayovac will prepare the site in Rayovac's Fennimore, Wisconsin, plant, for the
installation of the New Equipment with suitable electrical power, foundation,
lighting, heating, etc. materially in accordance with the Installation
Specification. Rayovac shall notify Matsushita when it has completed preparation
of the site. Matsushita shall inspect the site and shall give Rayovac a
certificate of completion when it determines that Rayovac has prepared the site
in accordance with the Installation Specification. Matsushita shall be
responsible for supervising the installation of the New Equipment. During
installation, Matsushita shall give Rayovac technical advice and guidance in
setting up the plant, in operating the New Equipment, and in training Rayovac's
engineers and technicians to manufacture, inspect, and test LR6 Contract
Batteries. Matsushita shall furnish sufficient parts, components, and materials
to operate the New Equipment for installation testing and for performing the
Acceptance Test provided in Article XI. Rayovac will reimburse Matsushita for
its cost of such parts, materials, and components to the extent that the
batteries produced are commercially salable or meet the product specifications
for acceptance set forth on Exhibit A.
ARTICLE XI
Acceptance Test
1. The Acceptance Test in Section 4 below for the New Equipment shall be
carried out at Rayovac's factory in the presence of Matsushita's
engineers at a mutually agreeable time after completion of installation
and settlement of mass-production conditions through a test-run of the
New Equipment.
2. The Acceptance Test shall be carried out by Rayovac and Matsushita under
the instruction of Matsushita's engineers.
3. All the materials and machine facilities to be used for the Acceptance
Test shall be those supplied or approved by Matsushita.
4. Rayovac shall be required to accept the New Equipment when the following has
been attained:
a. No defects in material or workmanship shall appear on sight
inspection of the batteries produced, provided that the tests
shall have been conducted in an atmosphere having a relative
humidity of less than 65%.
b. The line shall have demonstrated a capacity to produce at least
600 LR6 Contract Batteries per minute. The line shall have
produced 93,600 LR6 Contract Batteries in a period of 4
consecutive hours in at least 3 days out of any period of 5
consecutive days. Each cell and labeling line shall experience a
cumulative scrap rate of no more than 2.5%. (Electrical scrap
rate shall be measured after a 7 day aging period.) Matsushita
shall use its best efforts to help Rayovac lower the scrap rate
during the technical support period described in Article XII, and
thereafter shall cooperate to assist Rayovac in achieving scrap
rates similar to those achieved at Matsushita's Osaka plant. The
LR6 Contract Batteries produced shall meet the product quality
requirements in Exhibit A.
5. a. The parties will repeat acceptance testing until
both the New Equipment and batteries made on the New Equipment
have met the requirements for acceptance; provided, however, that
if the New Equipment has not been accepted within 10 months after
the arrival of the New Equipment at Rayovac factory, Matsushita
will sell Matsushita LR6 Contract Batteries meeting the quality
requirements (including Rayovac's labeling requirements) to
Rayovac at the following weekly volume:
LR6 2.0 million
provided that such volume shall be reduced by the number of LR6
Contract Batteries produced on the New Equipment that are
commercially salable or meet the product specifications for
acceptance set forth on Exhibit A. The price for such batteries
shall be Matsushita's Direct Variable Cost, at its factory. All
prices shall be delivered F.O.B. Matsushita, Osaka, Japan.
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b. If the New Equipment has not been accepted within 16 months after
the arrival of the New Equipment at Rayovac factory, then (1)
Rayovac may reject the New Equipment and (2) Matsushita may
terminate this Agreement, by written notice to the other party.
In the event of such rejection by Rayovac or termination by
Matsushita, Matsushita shall continue to supply LR6 Contract
Batteries as provided in Article XI.5.a. above for an additional
2 years, but in no event for more than 30 months in total.
c. All time periods provided in this Section 5 shall be deferred for
the time period during which performance is made impracticable
either by a force majeure or by the acts or omissions of Rayovac.
d. If the New Equipment is not accepted, at the earlier of (1)
Rayovac's obtaining another source of batteries at comparable
quality and cost or (2) two years after Rayovac's notice of
rejection of New Equipment or Matsushita's notice of termination,
Matsushita shall take delivery of the rejected New Equipment and
refund to Rayovac an amount equal to its then depreciated book
value (which shall be calculated using straight line depreciation
over a 10 year expected life), plus the cost of relevant
technical documents, spare parts, trainer fee, and $250,000.
e. The remedies provided in this Section 5 shall be Rayovac's
exclusive remedies for Matsushita's failure to deliver New
Equipment on time or failure to deliver New Equipment that meets
the Acceptance Test provided in this Article XI.
6. Upon satisfactory completion of the Acceptance Test, the parties will
execute a certificate stating that the line has passed the test and that
it has been accepted. If Rayovac shall reject the line or Matsushita
shall terminate this Agreement, the acting party shall execute a
certificate to that effect and deliver it to the other party.
7. If Rayovac and Matsushita agree to dispatch trainers from Matsushita to
Rayovac pursuant to Article IV.1.b. hereof, the acceptance test for the
Retooling Equipment shall be carried out at Rayovac's factory in the
presence of Matsushita's engineers at a mutually agreeable time after
completion of retooling procedure using Retooling Parts and
mass-production conditions established through a test run of the
Retooling Equipment.
Rayovac shall be required to accept the Retooling Equipment when the
following has been attained:
a. Before retooling the existing equipment, representatives from
Rayovac and Matsushita shall agree upon the acceptance conditions
of the Retooling Equipment based on the efficiency rate and scrap
rate of the existing equipment.
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For example:
Efficiency Rate = average machine efficiency X 0.8
rate 3 months before
retooling
Scrap Rate = average scrap rate 3 months [Graphic] 0.8
before retooling
b. No defects in material or workmanship shall appear on sight
inspection of the batteries produced, provided that the tests
shall have been conducted in an atmosphere having a relative
humidity of less than 65%.
c. The line shall have demonstrated a capacity to produce at least
600 LR6 Contract Batteries per minute. The line shall have
produced the amount of LR6 Contract Batteries (calculated based
on the Efficiency Rate agreed upon in the Section 7a.), in a
period of 4 consecutive hours in at least 3 days out of any
period of 5 consecutive days. The line shall experience a
cumulative scrap rate of no more than the amount agreed upon in
Section 7a. (electrical scrap rate shall be measured after a 7
day aging period.)
ARTICLE XII
Technical Support after Acceptance
Subsequent to acceptance of the New Equipment, upon Rayovac's request,
Matsushita will dispatch its engineers to Rayovac's factory for up to 120 man
days to give Rayovac technical guidance and advice for manufacturing batteries.
The terms and conditions of dispatch of Matsushita's engineers in this Agreement
will be subject to a Service Agreement, which has been executed on this date.
ARTICLE XIII
Supply of Components, Materials and Parts
Matsushita will introduce Rayovac to Matsushita's non-Japanese suppliers of
materials, parts, components and supplies ("Supplies") needed to manufacture LR6
Contract Batteries. Matsushita will sell to Rayovac any or all of Rayovac's
requirements of Supplies that Matsushita normally purchases from Japanese
suppliers; the price for such Supplies shall be Matsushita's cost, plus the cost
of handling and processing orders.
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ARTICLE XIV
Warranty
1. Matsushita warrants that the New Equipment will be merchantable and free
from defects in design, material, and workmanship and that under normal
use the New Equipment will meet the New Equipment Specifications stated
in Exhibit B.
2. The New Equipment shall be warranted for normal use for a period of 12
months after the date of its Acceptance stated in Article XI of this
Agreement or 24 months after the xxxx of lading date of the New
Equipment at a Japanese port, whichever comes earlier.
3. Matsushita shall have no liability for any Contract Batteries
manufactured by Rayovac, and Rayovac shall indemnify and hold Matsushita
harmless from and against any and all cost, liability or expense
(including reasonable attorneys' fees) arising out of any action related
to Contract Batteries manufactured by Rayovac other than actions (i)
which are subject to the indemnity set forth in paragraph 4 of this
Article or (ii) arising out of a breach of this Agreement by Matsushita.
4. a. Matsushita or MEI warrants that the practice of the
patents(excluding patent applications) owned by it and licensed
to Rayovac hereunder shall not infringe the patent rights of any
third party. Nothing contained in this Agreement shall be
construed as the making by Matsushita of any warranty or
representation that the Intellectual Property (other than the
patents) or any process or method for manufacturing Contract
Batteries supplied by Matsushita hereunder do not infringe the
intellectual property rights of any third party.
Neither Matsushita nor MEI is currently aware and neither has any
reason to believe that the use of the Total Equipment or the
manufacture, use, or sale of Contract Batteries will infringe the
patent rights (other than the rights of Varta under the Varta
Patent) or other intellectual property rights of any person.
Matsushita shall indemnify and hold Rayovac harmless from and
against any and all cost, liability and expense (including
reasonable attorneys' fees for counsel of Rayovac's choosing)
arising out of any action alleging that Rayovac's enjoyment of
the rights and privileges to practice the patents (excluding
patent applications) licensed herein by MEI infringes any patent
of another party.
b. Matsushita shall at its expense defend any suits that may be
instituted against Rayovac alleging that the practice of the
patents (other than the patent applications licensed by
Matsushita or MEI to Rayovac hereunder) infringes any existing
United States patent except patent #4,774,155 and its
corresponding patents (the "Varta Patent"), relating to the New
Equipment, provided that (a) Rayovac shall have given Matsushita
immediate notice in writing of any such suit and transmitted to
Matsushita immediately upon receipt all processes and papers
served upon Rayovac, (b) Rayovac shall permit Matsushita through
its counsel, either in the name of Rayovac or in the name of
Matsushita, to defend the same, and (c) Rayovac shall give all
reasonable information, assistance and authority to enable
Matsushita to do so. If the practice of the patents is in such
suit held in and of itself to infringe any existing, valid United
States patent, then Matsushita will pay any final award of
damages in such suit attributable to such infringement.
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c. Notwithstanding the foregoing, Matsushita shall not be
responsible for any compromise or settlement made without its
written consent, or for infringements of combination or process
patents covering the use of the Total Equipment in combination
with products or things not sold hereunder, or for infringement
directly or indirectly caused by or based on the manufacture, use
or sale of any part of the Equipment if such part is not
specified, designed and manufactured by Matsushita.
d. Rayovac shall be responsible for obtaining a license to practice
the Varta Patent including, without limitation, any and all costs
associated with obtaining such license. Notwithstanding anything
to the contrary contained herein, Matsushita shall not be
responsible for the manufacture or sale of Contract Batteries by
Rayovac without obtaining a license to practice the Varta Patent.
5. EXCEPT AS EXPRESSLY SET FORTH HEREIN, MATSUSHITA MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE
TOTAL EQUIPMENT OR THE INTELLECTUAL PROPERTY, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT SHALL MATSUSHITA BE LIABLE TO RAYOVAC OR
ANY THIRD PARTY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, COSTS OR
EXPENSES OR ANY LOST PROFIT ARISING OUT OF ANY SUCH BREACH OF THE
PROVISIONS OF THIS AGREEMENT.
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ARTICLE XV
Improvements, Information Exchange
1. Improvements by Matsushita.
To the extent it has the right to do so, Matsushita will inform Rayovac
promptly of Improvements which Matsushita conceives and reduces to
practice, or acquires subsequent to execution of this Agreement and
prior to the fifth anniversary of the Date hereof, and further agrees to
furnish Rayovac, upon its written request and without additional charge,
with technical information concerning such Improvements. With respect to
any Improvements prior to the Promised Shipment Date that require a
change in the design of the New Equipment, Matsushita shall inform
Rayovac of the cost of such change and any delay to the Promised
Shipment Date which may be incurred thereby. If Rayovac desires such
Improvement it shall promptly notify Matsushita and agree to bear the
cost of such Improvement and the Promised Shipment Date shall be delayed
as indicated to incorporate such change. With respect to all other
Improvements, the cost of implementing any such Improvements, including
the cost of parts, supplies, and alteration of the Total Equipment will
be borne by Rayovac.
2. Improvements by Rayovac.
To the extent it has the right to do so, Rayovac will inform Matsushita
promptly of Improvements which Rayovac conceives and reduces to
practice, or acquires subsequent to execution of this Agreement and
prior to the fifth anniversary of the Date hereof, and further agrees to
furnish Matsushita, upon its written request and without additional
charge, with technical information concerning such Improvements. The
cost of implementing any such Improvements, including the cost of parts,
supplies, and alteration of the Total Equipment will be borne by
Matsushita. If during the term of this Agreement, Rayovac shall apply
for or obtain a patent on relevant technology, at the request of
Matsushita that patent shall be subject to negotiation of a license for
its use for a royalty to be mutually agreed upon.
3. Total Equipment Meetings.
For the five year period beginning with the execution of this Agreement,
Matsushita and Rayovac will conduct one meeting per year (the "Total
Equipment Meetings") for a free and open discussion among technical
personnel concerning Improvements and the operation of the Total
Equipment. If Matsushita and Rayovac agree to have another meeting per
year, it is permitted for the parties hereto to have one more meeting
(but not more than two) per year. The sites of the meetings shall
alternate from Rayovac's offices to Matsushita's offices. In addition to
such meetings, Matsushita shall be entitled to one tour per year of
Rayovac's Fennimore plant, and Rayovac shall be entitled to one tour per
year of Matsushita's Osaka Plant. Prior to each such meeting, the
parties will test the Contract Batteries and will compare their
performance to that of major competitive batteries. Matsushita and
Rayovac shall work together and cooperate to assure that the design of
Contract Batteries, including any design embodying Improvements, shall
be of comparable quality to the best readily available no mercury added
alkaline batteries generally on sale in the United States.
4. If at any time during the term of this Agreement, either party shall
become aware of a significant quality problem or latent defect in the
Total Equipment, Contract Batteries, or similar equipment or batteries
owned, used or licensed by Matsushita, that party immediately shall
notify the other of such problem or defect. Thereafter, both parties
shall share information concerning any solutions or treatments they
shall learn concerning such problem or defect.
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ARTICLE XVI
Force Majeure
If the performance in whole or part by either party of any obligation under this
Agreement shall be prevented or delayed by war, riot, fires, floods, acts of God
or any similar event beyond the control of such party, then the date that
performance is due shall be extended for a period equal to the time lost because
of the delay; provided that such suspension or annulment shall not prejudice or
affect rights that may have accrued prior thereto; and provided further that if
such suspension or annulment shall continue for more than 12 months, the party
not receiving performance may terminate this Agreement by written notice to the
other party.
ARTICLE XVII
Secrecy
The parties have executed a Confidential Disclosure Agreement dated 1 August
1991 (the "Confidentiality Agreement"), which is hereby incorporated and made a
part of this Agreement, provided that nothing contained herein shall prohibit
Rayovac from showing the Total Equipment to its attorneys, customers (who are
not battery manufacturers), or lenders, who have a need to view the Total
Equipment and who are aware of these confidentiality obligations and have agreed
to abide by them, or to any permitted assignee under Article XXI. The term of
the Confidentiality Agreement is hereby extended such that the obligations
thereunder shall expire on the date which is three years after the expiration of
this Agreement.
ARTICLE XVIII
Terms and Conditions
1. This Agreement shall remain effective for the duration of the longest
lived U.S. Patent but in no event more than 25 years, after which time
Rayovac shall have a fully paid, non-exclusive perpetual license to
manufacture, use, and sell Contract Batteries.
2. This Agreement may be terminated by a party hereto if the other party
has committed a material breach of any or all of its obligations
hereunder which breach shall not have been remedied by the defaulting
party within thirty (30) days after receipt of written notice of such
breach. In the event of any such termination, Rayovac may, at its
option, in addition to any other remedy it may have, continue to use the
Patents licensed hereunder for the remainder of the term in accordance
with this Agreement if, and only if, it continues to pay the royalties
for such use as provided in Article IV hereof. In the event Rayovac
elects not to make such payments, it shall immediately upon termination
of this Agreement cease the use of all Patents licensed hereunder,
return all written information in respect of the Patents and Know-How,
and destroy all copies of information derived from the Know-How except
that Rayovac has the right to retain one archival copy, which shall be
kept by an independent law firm and shall not be made available to
Rayovac's operating personnel.
3. The termination of this Agreement pursuant to this Article shall not
affect any amounts payable by either party, accrued prior to such
termination.
4. In the event of dissolution, judicial liquidation, or bankruptcy of a
party to this Agreement, the other party shall have the right to
immediately terminate this Agreement by giving a written notice of
termination to such party.
5. If either party wish to have continuously receive technical assistance
even after the period of five years as from the date of this Agreement
and wish to renew the technical assistance, both parties will discuss
the specific terms for the renewal including the scope of technical
assistance and royalty payment to be made therefor.
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ARTICLE XIX
Applicable Law
This Agreement shall be governed and construed in accordance with the laws of
Wisconsin.
ARTICLE XX
Arbitration
The parties shall attempt to resolve amicably any and all disputes arising in
connection with this Agreement.
If an amicable settlement is not reached, all disputes, controversies, or
differences that may arise between the parties, out of or in relation to or in
connection with this Agreement, or the breach thereof, shall be finally settled
by arbitration conducted in either London, England, or Sydney, Australia, as
designated by the requesting party, in the English language, pursuant to the
rules of the International Chamber of Commerce.
ARTICLE XXI
Assignment
This Agreement shall be binding upon and inure to the benefit of all successors
and assigns provided that this Agreement shall not be assigned to any third
party other than a subsidiary in which the party owns at least 50% of the voting
stock or to a purchaser of substantially all of the party's business and shall
not inure to the benefit of the referee, receiver, or trustee in bankruptcy of
either party under any circumstance. Provided, however, even in case of a
purchase of substantially all of the party's business, this Agreement shall not
in any event be assigned to a Major Battery Manufacturer defined in Article
III.3. herein nor to the Controlling Party.
ARTICLE XXII
Entire Agreement and Amendments
This Agreement, the Exhibits hereto, the Service Agreement of this date, and the
Confidential Disclosure Agreement of August 1, 1991 as amended, constitute the
entire and only agreements between the parties hereto relating to the subject
matter hereof and supersede and cancel all previous agreements, commitments and
representations in respect thereto and may not be released, discharged,
abandoned, changed or modified in any manner except by an instrument in writing
or subsequent date signed by duly authorized officers or representatives of each
of the parties hereto. No standard or preprinted term or provision of any sales
order, purchase order, acknowledgment, or other form of either party, whether
exchanged before or after execution of this Agreement, shall overrule or take
precedence over any term of this Agreement.
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ARTICLE XXIII
Notice
1. Any notice or request under this Agreement shall be made by air mail and
shall be directed by one party to the other at its respective address as
follows:
Matsushita Battery Industrial Co., Ltd.
0-0, Xxxxxxxxxx-xxx, Xxxxxxxxx
Xxxxx 0000000 Xxxxx
Attention: Xxxxxx Xxx
Managing Director of Primary Batteries and Director
of Dry Battery Division
Rayovac Corporation
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000-0000 X.X.X.
Attention: Xxxxxx Xxxxxxxxx
2. Either party may, by written notice to the other party, change the
address to which notice or request shall be directed.
3. Any notice or request shall be deemed to have been made on the date on
which it is telefaxed or 7 days after it has been sent by courier
messenger delivery.
ARTICLE XXIV
Export Administration
1. The parties of the Agreement shall observe all applicable export
control, laws or regulations of a relevant government and/or a
governmental agency.
2. In the event that a Japanese governmental authorization is required for
the shipment of the Equipment and/or the Technical Documentation under
the Agreement, Matsushita will not disclose such Equipment and/or
Technical Documentation until Matsushita obtains such authorization.
3. In the event that a United States governmental authorization is required
for the disclosure of the Confidential Information under the Agreement,
Rayovac will not disclose such Confidential Information until Rayovac
obtains such authorizations.
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ARTICLE XXV
Conformity to Standards and Regulations
1. In the event that New Equipment is in conformity to the specifications
attached hereto as Exhibit B, it is final and the New Equipment shall be
considered to be duly accepted by Rayovac.
2. The parties hereto agree that Rayovac shall at its own costs and
responsibilities secure the adaptability for the standards and/or
regulations of Federal and/or States of the United States, including
those on safety with respect to manufacturing Contract Batteries and the
Total Equipment.
3. The parties hereto agree that Matsushita shall at its own risk and
responsibility secure the adaptability for the standards and/or
regulations of Japan with respect to manufacturing Contract Batteries
and the Total Equipment.
ARTICLE XXVI
Relation to the Agreements
If any conflicts occur in the interpretation between this Agreement and any
previous agreements including the 1991 Agreement and the 1994 Agreement, this
Agreement shall prevail.
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In witness whereof, each party has caused this Agreement to be executed in
English and in duplicate by its duly authorized officer or representative on the
dates specified below.
Matsushita Battery Industrial Co., Ltd.
By: /s/ X. Xxxxxx
----------------------------------------
Title: President
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Date: March 5th, 1998
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Rayovac Corporation
By: /s/ Xxxxx X. Xxxxx
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Title: President & CEO
----------------------------------------
Date: March 5th, 1998
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Matsushita Electric Industrial Co., Ltd.
By: /s/ (illegible)
----------------------------------------
Title: Executive Vice President
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Date: March 5th, 1998
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