Exhibit 10(n)
MANUFACTURING AGREEMENT
This Agreement is made and entered into as of the 24th day of March,
2000, by and between RELM COMMUNICATIONS, INC., a Florida corporation ("RELM")
and XXXXXXX XXXXXXX ELECTRONIC ASSEMBLY SERVICES, INC., a Florida corporation
("JMEASI").
WITNESSETH:
WHEREAS, RELM and JMEASI have executed on even date herewith a
Transaction Agreement providing for various transactions by and between the
Parties, including the execution of this Manufacturing Agreement;
WHEREAS, RELM and JMEASI desire to work together in a cooperative
manner with open communication to attempt to improve the quality and quantity of
the Parties' businesses; and
WHEREAS, RELM desires JMEASI to manufacture certain products and
perform certain related services, and JMEASI desires to perform such
manufacturing and related services.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Manufacturing Services:
(a) JMEASI hereby agrees to manufacture for RELM the products
identified in Exhibit A (the "Products") throughout the term of this
Agreement. Unless otherwise
indicated, JMEASI's services shall include the procurement of raw
materials for the Products, and the assembly and testing of the
Products.
(b) From time to time during the term of this Agreement,
JMEASI shall provide reasonable amounts of new product development
support services to RELM. The scope of and price for such services
shall be agreed upon by the Parties on a case-by-case basis.
(c) During the term of this Agreement, JMEASI shall have a
right of first negotiation with respect to the provision of any other
manufacturing services to RELM, such as the manufacture of products
other than the Products. In furtherance thereof, the Parties shall meet
from time to time to negotiate in good faith the addition of products
to Exhibit A.
(d) In the event JMEASI has insufficient capacity to
manufacture such additional products or to meet requirements for
Products, RELM may solicit and use alternate suppliers for as long as
such insufficiency remains.
2. RELM Equipment:
(a) RELM shall allow the equipment described in Exhibit B (the
"RELM Equipment") to remain in JMEASI's manufacturing facility during
the term of this Agreement, and shall allow JMEASI to use the RELM
Equipment to manufacture Products. The RELM Equipment shall at all
times remain the property of RELM. RELM owns the RELM Equipment and it
is in good repair and good condition, except for ordinary wear and tear
and the need for normal maintenance.
(b) JMEASI shall be responsible for and bear the cost of
ordinary maintenance of the RELM Equipment. RELM shall be responsible
for and bear the cost of major repairs and refurbishment of the RELM
Equipment. If RELM fails to repair or refurbish,
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or replace RELM Equipment within two (2) days of notice of the need for
such repair, refurbishment or replacement, JMEASI may perform such
repair, refurbishment or replacement and can either invoice RELM or
offset against any payments due RELM the cost of such repair,
refurbishment or replacement.
(c) For new products added to Exhibit A, special tooling and
equipment required to make such products shall be priced and upon a
proposal accepted by RELM produced by JMEASI and paid for and owned by
RELM unless otherwise provided by RELM. Maintenance on such tooling and
equipment will be as per Section 2(b) above. General capital equipment
required to make such products shall be the responsibility of JMEASI.
3. Quantity; Forecasts:
(a) JMEASI shall have the exclusive right to manufacture all
of RELM's requirements for the Products during the term of this
Agreement.
(b) RELM's initial forecast of its requirements for each of
the Products for each of the first twelve(12) months of the term of
this Agreement is attached hereto as Exhibit C (the "Forecast") and
RELM hereby issues a purchase order for all of the quantities listed in
each of the first four (4) months of the Forecast. Within fifteen (15)
days of the beginning of each new calendar month, RELM shall submit to
JMEASI an updated Forecast. Within five (5) days of receipt, JMEASI
shall accept such Forecast in whole or in part, and RELM shall issue
purchase orders for all quantities listed in the Fourth Month of the
Forecast.
(c) To the extent accepted by JMEASI, a Forecast shall be
binding upon JMEASI and RELM, except that RELM can modify the
quantities listed in the Forecast by the following percentages:
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First Month 0%
Second Month 10%
Third Month 20%
Fourth Month 30%
As a particular calendar draws nearer through succeeding Forecasts the
above-noted percentages shall be applied restrictively to RELM, such
that the percentage corresponding to the calendar month from any
applicable Forecast that would allow RELM the least deviation shall be
applied, unless JMEASI otherwise consents in an acceptance of a
Forecast. For example, if (i) JMEASI accepts a Forecast that provides
that in the Fourth Month RELM will purchase 100 units of a product, and
(ii) two months later RELM submits and JMEASI accepts a Forecast that
provides that in the Second Month RELM will purchase 120 units of the
product, then one further month later RELM's Forecast for that calendar
month could not be, and JMEASI would not be obligated to accept a
Forecast of nor supply, more than 130 units (i.e., 100 + 30, which is
the maximum upper limit from the Fourth Month Forecast) nor less than
108 units (i.e., 120 - 12, which is the maximum lower limit from the
Second Month Forecast).
(d) RELM shall accept delivery within seven (7) months on all
purchase orders issued pursuant to the forecasting procedure contained
in this Section. To the extent that RELM does not accept delivery
within such seven (7) month time period, JMEASI may, at its sole
option, require RELM to pay as liquidated damages the costs of material
purchased by JMEASI to fill such purchase orders, plus freight and
handling charges of five percent (5%). If there is a drastic, continued
reduction in the forecasted quantities of a Product which result in the
aforementioned failure to accept delivery, such liquidated damages
amount shall be the cost of material purchased to fill such purchase
orders plus the cost of an additional four weeks of material purchased,
plus freight and handling charges of five percent (5%).
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(e) It is the intent of the Parties that RELM will purchase
and JMEASI will supply in any month at least the minimum forecasted
dollar-value of sales of Products pursuant to the forecasting procedure
contained in this Section (each individually a "Minimum Sale"). If RELM
becomes aware of information that would lead it to believe that a
Minimum Sale will not be made in any calendar month, it shall promptly
meet with JMEASI and attempt in good faith to add products to Exhibit A
to allow JMEASI to make such Minimum Sale.
(f) With all Product schedules, both parties will act
reasonably to enhance the overall business relationship and the mutual
success of both parties. Recognizing the possibility of sharp increases
in demand, JMEASI will act reasonably to attempt to satisfy such
demand.
4. Price: (a) The prices for the Products are set forth in Exhibit A.
(b) In the event of any change that would have a significant
negative effect on the profitability of this Agreement for either
Party, such as an increase in the price of parts or raw materials or a
significant downward trend in the market price for Products, the
parties shall renegotiate the prices of the Products in good faith.
(c) Both Parties agree to work cooperatively toward
engineering changes that enable profitable reductions in the cost of
the Products, to help to continue and enhance the competitiveness of
the Products in the marketplace and the profitability of the Parties.
As an example, RELM will help to qualify with its customers changed
Products that will further this stated goal. The Parties will meet
regularly, at least once every four months,
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to develop and discuss general cost reduction opportunities. Cost
reductions that are realized shall be shared equally between the
Parties.
(d) The parties will negotiate in good faith the price of new
products added to Exhibit A and of Products changed pursuant to an
engineering change notice.
(e) Raw material and parts that are owned by JMEASI to make
Product and that are obsoleted in any manner, such as by an engineering
change notice, a removal of a Product from Exhibit A or the failure of
RELM to continue to order a Product, shall be the responsibility of
RELM. Within forty-five (45) days of notice from JMEASI of the
obsolescence of a raw material or part, RELM shall make payment to
JMEASI in the amount of JMEASI's inventory of the material or part and
JMEASI shall ship such inventory to RELM. JMEASI will make reasonable
efforts to return, or otherwise receive credit or partial credit for
any obsoleted part.
5. RELM Parts:
(a) RELM owns certain parts and raw materials in the
quantities listed on Exhibit D (the "RELM Parts"). JMEASI hereby
purchases the RELM Parts at the prices listed in Exhibit D.
(b) RELM hereby warrants that the RELM Parts (i)are located at
and will be left by RELM at RELM's facility at 0000 Xxxxxxxxxx Xxxxx,
Xxxx Xxxxxxxxx, Xxxxxxx, (ii) are necessary for and fit for JMEASI's
intended use thereof in the manufacture of Products, (iii) are in good
and usable condition and are free of defects, and (iv) can reasonably
be anticipated to be used within 90 days after the date hereof to make
Products pursuant to the Forecast.
(c) JMEASI shall inform RELM by written notice within five (5)
business days of the time that JMEASI actually uses a RELM Part. Within
30 days
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after notification JMEASI will issue payment to RELM for the RELM Parts
so used. JMEASI shall have no obligation to pay for defective RELM
Parts, and shall be entitled to request reimbursement for or offset in
the amount of any defective RELM Parts for which JMEASI has already
paid. After 150 days after the date hereof, JMEASI shall be entitled to
return all unused RELM Parts and shall have no further obligation or
liability with respect thereto.
6. Efficiency; Quality: JMEASI shall maintain a quality control system
and shall make all quality control inspection and test data related to the
Products available to RELM at RELM's request. If JMEASI discovers any serious
quality issue related to the Products, it shall notify RELM of the issue within
five (5) days. JMEASI will use reasonable efforts to maintain six sigma
principles and world class quality.
7. Delivery Terms: The terms shall be FCA JMEASI's facility in West
Melbourne, Florida, or, when agreed between the Parties, in Juarez, Mexico.
Packaging will be best commercial practices unless otherwise noted by contract.
8. Management Review Meetings: In order to xxxxxx a close working
relationship between the Parties and enable the frequent identification of
further opportunities for the Parties to increase their business relationship,
the management of the Parties shall meet on at least a monthly basis to discuss
their performance under this Agreement, potential opportunities to increase the
value of this Agreement to the Parties, and such other opportunities as may
arise.
9. Term; Termination:
(a) The term of this Agreement shall commence on the date
first hereinabove written and shall have an initial term of five (5)
years. Thereafter, this Agreement shall automatically renew for
subsequent one (1) year periods, unless either party notifies the
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other party within one hundred twenty (120) days before the end of the
initial term or any subsequent term of its intent not to renew this
Agreement, or unless this Agreement is earlier terminated pursuant to
this Section.
(b) Either party may terminate this Agreement upon the filing
of a petition in bankruptcy or commencement of any insolvency
proceeding in respect of the other party hereto.
(c) Either party at its option may terminate this Agreement
upon the occurrence of any material breach by the other party,
provided, however, (i) that the non-breaching party shall have
delivered to the breaching party a written notice specifying the breach
in reasonable detail, and (ii) that the breaching party shall not have
cured the breach within thirty (30) days after receipt of the notice.
In the event of a breach of this Agreement, the right of termination
provided in this Section shall not be exclusive of any remedies to
which either party may be entitled at law or in equity (as limited by
the express terms of this Agreement).
10. Invoices; Payment: JMEASI shall submit to RELM an invoice for
Products when shipped by JMEASI to RELM. All invoices issued pursuant to this
Agreement, including JMEASI invoices for Product and RELM invoices for raw
material and parts, shall be paid within thirty (30) days of their mailing date.
11. Liability:
(a) Except as provided in this Section, neither Party shall be
liable for special, incidental, punitive or consequential damages
related to or arising out of this Agreement whether any such damages
are based upon a claim of negligence, strict liability, breach of
warranty or otherwise.
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(b) RELM hereby indemnifies JMEASI against any and all costs,
damages, expenses and liabilities related to or arising out of any
claim of infringement of a third party's intellectual property rights
or any claim of personal injury with respect to Products manufactured
by JMEASI's according to a design or specification provided by RELM.
12. Miscellaneous:
(a) In the event of any inconsistency between any term or
condition of the Transaction Agreement and any term or condition of
this Agreement, the term or condition of the Transaction Agreement
shall prevail. The parties acknowledge that by their terms Articles 5,
8 and 9 and Sections 7.2 - 7.5 of the Transaction Agreement are
specifically applicable to this Agreement and are incorporated in this
Agreement by this reference.
(b) Purchase orders and invoices issued pursuant to this
Agreement, and any other notices, directions or instructions issued by
either JMEASI or RELM, shall be consistent with this Agreement, and any
additional terms or conditions stated in any such purchase orders,
invoices or other notices directions or instructions shall not be
binding upon JMEASI or RELM unless separately agreed to in writing by
the receiving party, and in the event of any inconsistency between any
such purchase orders, invoices or other notices, directions or
instructions and the terms and conditions of this Agreement, the terms
and conditions of this Agreement shall prevail.
(c) All exhibits are an integral part of this Agreement and
are incorporated in this Agreement by this reference.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
RELM COMMUNICATIONS, INC. Xxxxxxx Xxxxxxx Electronic
Assembly Services, Inc.
By:_______________________________ By:__________________________________
Title:____________________________ Title:_______________________________
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Index to Exhibits
A Products and Prices
B RELM Equipment
C Initial Forecast
D RELM Parts
Exhibit A
PRODUCTS AND PRICES
Exhibit B
RELM EQUIPMENT
Exhibit C
INITIAL FORECAST
Exhibit D
RELM PARTS
[Exhibit 27 TO COME]
