Exhibit 10.11
MARKETING AND DISTRIBUTION AGREEMENT
This MARKETING AND DISTRIBUTION AGREEMENT is made and entered into as of
the date of last signature below, by and between XXXX CORPORATION, a Virginia
corporation, through its Heavy Vehicle Technology and Systems Group; and
SMARTIRE SYSTEMS INC., a Yukon corporation.
WHEREAS, XXXX is a leading Tier I supplier in the design and manufacture
of commercial vehicle drive train components for medium and heavy duty vehicles
for sale to original equipment manufacturers and associated original equipment
service and the independent aftermarket;
WHEREAS, SMARTIRE is a Tier I and Tier II supplier engaged in the design
and manufacture of wireless sensing systems and associated components for medium
and heavy duty vehicles;
WHEREAS, the Parties desire to enter into an agreement pursuant to which
XXXX would market, sell, and distribute SMARTIRE products for use in VEHICLES,
both independently and through ROAD RANGER (defined below); and
WHEREAS, SMARTIRE's tire monitoring system is based on a "wireless
gateway" concept that may be compatible with other sensing opportunities for
other products, and the PARTIES may wish to co-develop further products in the
future.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the PARTIES hereby agree as follows:
1. DEFINITIONS
"AGREEMENT" means this Marketing and Distribution Agreement.
"COMPONENTS" means components supplied by SMARTIRE as part of a SYSTEM,
whether now existing or developed during the term of this AGREEMENT. References
to COMPONENTS include, where appropriate, the entire SYSTEM.
"CONFIDENTIAL INFORMATION" means all nonpublic information disclosed by
either PARTY to the other, whether before or after the date of this AGREEMENT,
which relates to the design, production, marketing, distribution, or sale of
COMPONENTS.
"CUSTOMERS" means OEMs, fleets and INDEPENDENT DISTRIBUTORS.
"XXXX" means the Heavy Vehicle Technology and Systems Group of Xxxx
Corporation, a Virginia corporation.
"DISCOVERIES" means all ideas, concepts, creations, developments,
enhancements, modifications, know-how, techniques, business methods, other
methods, procedures, processes, notes, drawings, compositions, computer
programs, product formulations, source codes, layout designs, works of
authorship, copyrights (whether registered or unregistered), improvements,
processes, apparatuses, formulations, inventions and discoveries and physical
embodiments thereof, whether patentable or not, with respect to COMPONENTS or
SYSTEMS.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-1-
"INDEPENDENT DISTRIBUTOR" means aftermarket distributors not under the
direct or indirect control of an OEM.
"LOSS" is defined in Section 9.5
"NOTICE" means formal notice in accordance with Section 13.
"OEM" means an original equipment manufacturer, which manufactures POWER
UNITS and/or TRAILERS, including its dealers and distributors.
"PARTY" means XXXX or SMARTIRE. "PARTIES" means both XXXX and SMARTIRE.
"PERSON" means any individual or entity.
"POWER UNIT" means a Class 4 through Class 8 truck, bus, motorhome, or
tractor (excluding agricultural tractors).
"ROAD RANGER" means DANA's Road Ranger marketing alliance with Xxxxx
Corporation.
"SMARTIRE" means SmarTire Systems Inc., a Yukon corporation.
"SYSTEM" means any wireless sensor system developed by SMARTIRE, using a
wireless gateway, sensors, and other COMPONENTS for tire pressure monitoring and
other remote sensor tasks, whether now existing or developed during the term of
this AGREEMENT.
"TERRITORY" means the United States of America, Canada, Mexico, Australia,
and New Zealand.
"TRAILER" means a highway trailer, dolly and chassis designed for use with
a POWER UNIT.
"VEHICLE" means a POWER UNIT or TRAILER.
2. SCOPE OF RELATIONSHIP
2.1. SMARTIRE hereby grants to XXXX, directly or through ROAD RANGER, the
non-exclusive right to market, sell, and distribute COMPONENTS to
CUSTOMERS in the TERRITORY for use in POWER UNITS and TRAILERS.
2.2. As of the date of this AGREEMENT, SMARTIRE represents and XXXX
acknowledges SMARTIRE's representation that that SMARTIRE has previously
entered into agreements with third parties related to the marketing, sale
and distribution of COMPONENTS within the TERRITORY, which agreements may
be extended from time to time, which SMARTIRE may only generally describe,
as set for in Exhibit A, pursuant to SMARTIRE's confidentiality
obligations. Provided that XXXX shall be in compliance with this AGREEMENT
in all material respects specifically using reasonable commercial efforts
to meet the mutually agreed sales targets as set forth elsewhere herein,
SMARTIRE/XXXX CONFIDENTIAL September 2005
-2-
during the term of this AGREEMENT, SMARTIRE will not: (i) except as
permitted in current agreements described in Exhibit A, the term of which
may be extended, sell directly any COMPONENTS to any new CUSTOMERS in the
TERRITORY; or (ii) grant rights related to the marketing, sale and
distribution of COMPONENTS in the TERRITORY to any other third party.
SMARTIRE may request a waiver of DANA's right to market and sell to a
particular OEM in the TERRITORY by giving XXXX NOTICE. If XXXX does not
affirm by NOTICE to SMARTIRE, within ten business (10) days after receipt
of such NOTICE, DANA's intention to market and sell to such OEM, then XXXX
will be deemed to have waived its right to market and sell to such OEM.
2.3. Notwithstanding Section 2.1, SMARTIRE may continue to provide COMPONENTS
directly to CUSTOMERS in the TERRITORY under existing part numbers,
purchase orders and contracts. Subject to mutual agreement between Xxxx
and SmarTire, the parties may agree to transfer these contracts to Xxxx
providing that the customer is in agreement with this transfer, and that
mutual pricing terms between Xxxx and SmarTire can be established. These
agreements shall not be transferred to a third party.
2.4. SMARTIRE hereby grants to XXXX the nonexclusive right to market, sell, and
distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use other
than in POWER UNITS and TRAILERS; provided that XXXX shall give NOTICE to
SMARTIRE of its intention and if SMARTIRE does not advise XXXX of its
rejection of the request within ten business (10) days after receipt of
such NOTICE, XXXX xxx exercise its rights to the extent of the NOTICE and
of this AGREEMENT.
2.5. SMARTIRE shall negotiate in good faith with XXXX prior to granting to any
other PERSON nonexclusive or exclusive rights to market, sell, or
distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use in
vehicles other than POWER UNITS and TRAILERS.
2.6. At the request of either PARTY, SMARTIRE and XXXX shall negotiate in good
faith regarding the expansion of the TERRITORY and/or of the markets
within the TERRITORY.
2.7. Throughout the term of this AGREEMENT, XXXX shall not market, sell, or
distribute any system for wireless tire pressure monitoring other than the
SYSTEMS. This covenant shall not affect in any way DANA's tire pressure
control business.
2.8. Throughout the term of this AGREEMENT, SMARTIRE shall not design, develop,
manufacture, or sell, any tire pressure control system.
2.9. The PARTIES acknowledge and agree that money damages may be inadequate to
compensate a PARTY for any breach of Section 2.7 or 2.8. Therefore, in the
event of any actual or threatened breach of Section 2.7 or 2.8, in
addition to any other remedies that may be available at law or in equity,
the aggrieved PARTY shall be entitled to appropriate temporary and/or
permanent injunctive relief.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-3-
3. SMARTIRE'S AND DANA'S OBLIGATIONS
3.1. SMARTIRE shall design, develop, manufacture and sell to XXXX, and XXXX
shall purchase from SMARTIRE, one hundred percent (100%) of DANA's
requirements for COMPONENTS for CUSTOMERS in the TERRITORY during the
term of this AGREEMENT. The COMPONENTS shall be supplied by SMARTIRE to
XXXX in compliance with all specifications as agreed between the
PARTIES.
3.2. SMARTIRE shall make reasonable commercial efforts, on a timely basis,
to assure that all COMPONENTS are competitive with similar products,
and to assure its suppliers are competitive, taking into consideration
all relevant factors including, but not limited to, design, technology,
performance, features, quality, reliability, service, delivery, and
cost.
3.3. SMARTIRE shall use reasonable commercial efforts to assure that it has
(or its suppliers have) adequate production capacities to meet the
estimated annual requirements provided by XXXX. Any estimates are for
planning purposes only, and are not obligations to purchase COMPONENTS.
3.4. SMARTIRE shall provide technical and application support to XXXX and
the CUSTOMERS as agreed between SMARTIRE and XXXX from time to time.
Such support shall be at SMARTIRE's or CUSTOMER's expense as agreed.
SMARTIRE shall keep XXXX informed of any environmental or vehicle
installation issues that may affect performance of the SYSTEM or
COMPONENTS of which SMARTIRE is, or should, through the exercise of
reasonable diligence, becomes aware.
3.5. SMARTIRE shall provide reasonable amounts of training to DANA's sales
and service technicians and to CUSTOMERS as agreed between SMARTIRE and
XXXX from time to time..
3.6. SMARTIRE shall provide prototypes and reasonable quantities of
production samples of COMPONENTS to XXXX free of charge as agreed on a
case by case basis to facilitate DANA's sale of the COMPONENTS.
3.7. XXXX shall use reasonable commercial efforts to actively market and
sell COMPONENTS to CUSTOMERS and INDEPENDENT DISTRIBUTORS in the
TERRITORY, and obtain the highest practical market penetration
throughout the TERRITORY.
3.8. The PARTIES will consult each other regularly, at least twice annually
or as mutually agreed, to review market developments, discuss proposed
amendments to this AGREEMENT, and to address new opportunities outside
the TERRITORY, CUSTOMER needs, competing products, production planning,
COMPONENT developments, COMPONENTS and SYSTEMS developments, COMPONENTS
and SYSTEMS costs, product performance, warranty, competitiveness,
sales targets, promotions, advertising campaigns, sales and service
actions. One of these meetings will be held annually in September.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-4-
3.9. XXXX and SMARTIRE shall mutually agree on monthly, quarterly and/or annual
sales targets to be achieved by XXXX. At any time, if XXXX fails to meet
the mutually agreed sales targets, the parties shall meet to discuss the
reasons for such failure and mutually develop a corrective action plan
which shall provide for no less than two (2) quarters for XXXX to achieve
the sales targets. During such a period, SmarTire shall be able to provide
increased sales support to the Customers to assist in the attainment of
the targets, and Xxxx shall provide SmarTire with any relevant customer
information required to assist in this process. Provided XXXX shall be
meeting its obligations set forth in Section 3.7, the failure of XXXX to
achieve such sales targets will not, by itself, be considered grounds for
termination of this AGREEMENT. XXXX shall provide SMARTIRE with timely
sales reports listing all current sales prospects and opportunities for
the COMPONENTS and participate in conference calls with SMARTIRE to
discuss goals and plans to achieve the highest sales reasonably possible.
XXXX shall, at SMARTIRE's reasonable request, provide any information
relating to the actual sale of COMPONENTS including e-mails, status
reports, sales plans, proposals, or related items
3.10. If XXXX fails to meet it sales targets despite having participated in a
corrective action plan and having met its obligations set forth in Section
3.7, following the second year of the AGREEMENT, XXXX xxx, on sixty (60)
days prior written notice in advance of any annual AGREEMENT anniversary
date, advise SMARTIRE of DANA's intention to terminate the AGREEMENT
without cause.
3.11. SMARTIRE will own, develop and provide technical and training materials
and, at CUSTOMERS' or INDEPENDENT DISTRIBUTORS' expense, provide marketing
and technical counsel to CUSTOMERS and INDEPENDENT DISTRIBUTORS to assist
with the application and installation of retrofit SYSTEMS.
3.12. XXXX will own, develop and provide reasonable and customary amounts of
marketing and sales materials for the SYSTEMS and COMPONENTS. At
SMARTIRE's option, SMARTIRE may develop or fund additional marketing and
sales materials.
3.13. In order to assure mutual success, SMARTIRE shall furnish to XXXX any
relevant technical and commercial information regarding COMPONENTS and
SYSTEMS, including market leads and competitive market knowledge, which
might come into SMARTIRE's possession, except through agreements or
relationships described in Exhibit A.
3.14. Each Party shall, in connection with its performance hereunder, comply
with all applicable, rules, and regulations.
4. BRANDING AND TRADEMARKS
4.1. XXXX has the right to market, sell, and distribute COMPONENTS under a
brand owned by XXXX; provided, however, that COMPONENT packaging will
identify SMARTIRE as the manufacturer of the COMPONENTS.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-5-
4.2. Subject to the provisions of this AGREEMENT, XXXX grants to SMARTIRE for
the term of this AGREEMENT a non-exclusive license to use the trade names,
trademarks, logo marks and other similar markings of XXXX as provided by
XXXX from time to time or other marks that XXXX xxx identify from time to
time in writing to SMARTIRE ("XXXX XXXXX") on COMPONENTS and packaging for
COMPONENTS that it sells to XXXX so long as COMPONENTS are manufactured
and distributed in accordance with the standards, specifications and
instructions established and approved by XXXX. SMARTIRE may not use the
XXXX XXXXX on COMPONENTS or packaging for COMPONENTS sold to third parties
outside of this AGREEMENT.
4.3. Upon expiration or termination of this AGREEMENT, SMARTIRE agrees to
discontinue the use of the XXXX XXXXX or any xxxx confusingly similar
thereto immediately, not to attempt to register or to use any trademark,
service xxxx, trade name, logo, trade dress, or other similar marking that
in the opinion of XXXX is confusingly similar to any XXXX XXXXX. SMARTIRE
agrees that it will destroy all materials bearing the XXXX XXXXX or remove
the XXXX XXXXX from web sites and other electronic media.
4.4. XXXX shall have the right, at reasonable times and upon reasonable prior
notice, to (a) inspect samples of SMARTIRE's finished COMPONENTS,
packaging, labels or advertising bearing the XXXX XXXXX at a mutually
agreeable location, or (b) receive, at SMARTIRE's expense, reasonable
quantities of samples of SMARTIRE's finished COMPONENTS, packaging, labels
or advertising bearing the XXXX XXXXX for the purpose of determining that
they are of the proper quality. SMARTIRE shall change all COMPONENTS,
packaging, labels or advertising bearing the XXXX XXXXX that are not
approved by XXXX.
4.5. Subject to the provisions of this AGREEMENT, SMARTIRE grants to XXXX for
the term of this AGREEMENT a non-exclusive license to use the trade names,
trademarks, logo marks and other similar markings of SMARTIRE as provided
by SMARTIRE or other marks that SMARTIRE may identify from time to time in
writing to XXXX ("SMARTIRE MARKS") on printed material, including but not
limited to technical materials, brochures, catalogs, instruction manuals,
advertising, and marketing materials related to COMPONENTS and SYSTEMS.
4.6. Upon expiration or termination of this AGREEMENT, XXXX agrees to
discontinue the use of the SMARTIRE MARKS or any xxxx confusingly similar
thereto immediately, not to attempt to register or to use any trademark,
service xxxx, trade name, logo, trade dress, or other similar marking that
in the opinion of SMARTIRE is confusingly similar to any SMARTIRE MARKS.
XXXX agrees that it will destroy all materials bearing the SMARTIRE MARKS
or remove the SMARTIRE MARKS from web sites and other electronic media,
except that XXXX xxx use printed materials until COMPONENTS in inventory
are sold or returned for credit.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-6-
4.7. SMARTIRE shall have the right, at reasonable times and upon reasonable
prior notice, to (a) inspect samples of DANA's packaging, labels or
advertising bearing the SMARTIRE MARKS at a mutually agreeable location,
or (b) receive, at DANA's expense, reasonable quantities of samples of
DANA's packaging, labels or advertising bearing the SMARTIRE MARKS for the
purpose of determining that they meet quality standards and proper use of
SMARTIRE MARKS previously defined by SMARTIRE. XXXX shall change all
packaging, labels or advertising bearing the SMARTIRE MARKS in a manner
not previously approved by SMARTIRE.
5. PURCHASE ORDERS AND FORECASTS
5.1. XXXX shall issue biweekly shipping releases by direct computer order
entry, specifying the quantities of COMPONENTS, delivery date and delivery
location. Each such release will indicate an twelve (12) week rolling
estimate of weekly volumes, the last ten (10) weeks of which are forecasts
for planning purposes and the first two (2) weeks' volume requirements
shall be a firm commitment. The firm orders submitted by XXXX shall be
effective after confirmation by SMARTIRE. SMARTIRE will use its best
efforts to provide such confirmation within one (1) business day after
receipt of the order. On specific long lead components (greater than six
months lead time), XXXX will develop a one year forecast. SMARTIRE shall
provide a list of long lead components for DANA's acknowledgement.
Requests for additions or changes to this list shall be submitted to XXXX
for approval in writing and include an estimate of the associated costs
and lead times by component.
5.2. At any time, XXXX xxx place an emergency order for COMPONENTS with
SMARTIRE. SMARTIRE shall make reasonable efforts to accept such orders and
notify XXXX within one (1) business day after receipt of the emergency
order if it accepts the order. Any incremental costs required to fulfill
such emergency order shall be borne by XXXX unless the need for the
emergency order is created by SMARTIRE.
5.3. In addition to the foregoing, XXXX shall, twice annually in the first
(1st) and third (3rd) quarter of each year give SMARTIRE a good faith
estimate of its COMPONENT purchases during the next applicable year. These
estimates are for planning purposes only, and are not obligations to
purchase COMPONENTS.
5.4. If any COMPONENTS are delivered in excess of volumes ordered or in advance
of schedule, XXXX xxx return them at SMARTIRE's expense or retain them and
invoice SMARTIRE for any resulting handling and storage costs. XXXX will
not process invoices for COMPONENTS shipped in advance of schedule until
the scheduled delivery date. XXXX xxx change scheduled deliveries at any
time by written notice to SMARTIRE and will reimburse SMARTIRE for
reasonable, documented, unavoidable incremental costs incurred by SMARTIRE
due to such changes. If SMARTIRE fails to deliver any shipment of
COMPONENTS in accordance with DANA's instructions, XXXX xxx, at its
option, cancel the shipment, accept partial or delayed delivery.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-7-
6. PRICES AND PAYMENT CONDITIONS
6.1. SMARTIRE shall give XXXX NOTICE of its price for each COMPONENT at the
time of execution of this AGREEMENT or, for new COMPONENTS, as soon as the
price is determined. SMARTIRE may change these prices upon ninety (90)
days NOTICE to XXXX; provided, however, that SMARTIRE shall honor the old
price with respect to any binding commitments XXXX has made to a CUSTOMER
prior to receiving NOTICE of the price change. All prices shall be stated
in United States dollars.
6.2. SMARTIRE warrants that its prices to XXXX for the COMPONENTS are and will
remain no less favorable than its prices to other customers for the same
or comparable goods in comparable quantities and in comparable terms of
sale.
6.3. XXXX shall xxxx up SMARTIRE prices (excluding any shipping, duties,
handling, packaging or dunnage charges) by an amount solely determined by
XXXX for resale to CUSTOMERS.
6.4. Where specific opportunities or pricing issues arise with existing or
potential CUSTOMERS, the PARTIES shall negotiate, on a case by case basis,
in good faith a suitable pricing structure between XXXX and SMARTIRE to
meet the CUSTOMERS' request.
6.5. SMARTIRE shall invoice XXXX in United States dollars on a regular basis
upon delivery of COMPONENTS. Payment terms from XXXX are net on the
sixty-second (62nd) day following the date of invoice. All PRODUCTS shall
be sold Delivery Duty Paid to the delivery point, which may be a CUSTOMER
location or XXXX facility. As such, SMARTIRE is liable for paying all
costs of transport, insurance, duties and brokerage fees to the delivery
point. Title and risk of loss shall pass at the delivery point.
6.6. Without limiting any other remedies available to XXXX, XXXX has the right
to offset, against amounts due to SMARTIRE, any amounts due and payable
from SMARTIRE to XXXX under this AGREEMENT.
6.7. All other terms and conditions of the sale of COMPONENTS to XXXX shall be
in accordance with the terms and conditions of DANA'S purchase order as
set forth in Exhibit C. To the extent that the terms and conditions of
such order are inconsistent with or contradictory to the express terms of
this AGREEMENT, the terms of this AGREEMENT shall govern without
modification by the provisions contained in such order or sales terms.
7. CONFIDENTIALITY
The following terms govern the confidentiality of information disclosed by
either PARTY ("DISCLOSING PARTY") to the other PARTY ("RECEIVING PARTY"):
7.1. RECEIVING PARTY shall restrict access to and disclosure of the
CONFIDENTIAL INFORMATION to its affiliates and suppliers and their
respective directors, officers, employees, and agents who have a need to
know the CONFIDENTIAL INFORMATION. RECEIVING PARTY shall not disclose
CONFIDENTIAL INFORMATION, directly or indirectly, to any other PERSON.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-8-
RECEIVING PARTY shall not use CONFIDENTIAL INFORMATION to reproduce,
redesign, reverse engineer, or manufacture products or equipment of
DISCLOSING PARTY, to perform services relating to the products or
equipment of DISCLOSING PARTY, or for its own benefit, except as expressly
provided in this AGREEMENT.
7.2. RECEIVING PARTY may only use DISCLOSING PARTY's CONFIDENTIAL INFORMATION
in accordance with the purpose of this AGREEMENT. No other rights or
licenses are granted to either PARTY in the CONFIDENTIAL INFORMATION.
7.3. RECEIVING PARTY shall use at least the same high degree of care, but no
less than a reasonable degree of care, to avoid inadvertent disclosure or
unpermitted use of DISCLOSING PARTY's CONFIDENTIAL INFORMATION which it
employs with respect to its own proprietary or CONFIDENTIAL INFORMATION
and that it does not wish to have disseminated, published or disclosed.
7.4. There shall be no restrictions under this AGREEMENT with respect to any
portion of the CONFIDENTIAL INFORMATION, which RECEIVING PARTY can
establish through documentary evidence:
a. was known to RECEIVING PARTY at the time of its disclosure to
RECEIVING PARTY;
b. was or becomes publicly known through no fault, wrongful act or
omission of RECEIVING PARTY;
c. was received by RECEIVING PARTY from a third party, without
solicitation, such third party having a bona fide right to do so,
and not having any confidential relationship or obligation to
DISCLOSING PARTY, and without breach of the restrictions contained
in this AGREEMENT;
d. was independently developed by RECEIVING PARTY without access to
DISCLOSING PARTY's CONFIDENTIAL INFORMATION or a breach of this
AGREEMENT;
e. was approved for release in writing by DISCLOSING PARTY; or
f. was required by law, court order or governmental agency to be
disclosed. In such cases, RECEIVING PARTY shall immediately notify
DISCLOSING PARTY that production or disclosure has been ordered, and
to take all reasonable steps and cooperate with DISCLOSING PARTY to
limit disclosure of the CONFIDENTIAL INFORMATION.
7.5. CONFIDENTIAL INFORMATION shall not be deemed to be in the public domain
merely because any part of such CONFIDENTIAL INFORMATION is embodied in
general disclosures or because individual features, components or
combinations thereof are now or become known to the public. All
CONFIDENTIAL INFORMATION delivered by DISCLOSING PARTY to RECEIVING PARTY
pursuant to this AGREEMENT shall be and remain the property of DISCLOSING
PARTY unless otherwise provided herein.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-9-
7.6. The PARTIES do not seek the confidential information or trade secrets of
any third party, and the PARTIES shall not use in the performance of this
AGREEMENT or disclose to the other PARTY such confidential information or
trade secrets.
7.7. In any judicial proceeding, it will be presumed that matters which are
designated as Confidential or Proprietary constitute CONFIDENTIAL
INFORMATION, and that RECEIVING PARTY will bear the burden of proving such
matters or information are unrestricted pursuant to Section 7.4.
7.8. RECEIVING PARTY is liable for any breach of this Section 7 by all PERSONS
to whom it has disclosed CONFIDENTIAL INFORMATION.
7.9. Upon the expiration or termination of this AGREEMENT, each PARTY shall
return or destroy and certify the destruction of the other PARTY's
CONFIDENTIAL INFORMATION within thirty (30) days of such request. Counsel
for each PARTY is entitled to keep one copy in a confidential file as
evidence of the disclosure.
8. QUALITY ASSURANCE, PRODUCT APPLICATIONS and PACKAGING
8.1. SMARTIRE or its suppliers shall manufacture or assemble COMPONENTS
according to its normal quality assurance procedures and TSI6949 standards
so as to ensure COMPONENTS' conformity with the applicable engineering
drawings and specifications. SMARTIRE shall submit to XXXX a written
summary of its quality assurance plan and, prior to initiating the supply
of COMPONENTS to XXXX, shall furnish inspection data to show adherence to
such plan.
8.2. Prior to making any subsequent modifications to its manufacturing process
or quality system, SMARTIRE shall furnish to XXXX a written summary of its
revised quality assurance plan, together with the applicable inspection
data.
8.3. Any changes to COMPONENTS or their specifications are subject to the prior
written agreement of the PARTIES and, if required, the CUSTOMER.
8.4. At DANA'S request, SMARTIRE shall provide ongoing evidence of conformance
to SMARTIRE'S quality assurance plan and TSI6949 standards in the form of
a certification from SMARTIRE'S quality department. SMARTIRE shall also
permit XXXX or its designee at reasonable times and on reasonable notice
to audit SMARTIRE'S quality assurance procedure and review pertinent
inspection records at the manufacturing and assembly locations of SMARTIRE
and its suppliers. The PARTIES agree to work toward the objective of
SMARTIRE becoming a qualified supplier pursuant to DANA'S supplier quality
requirements.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-10-
8.5. SMARTIRE shall develop approval guidelines for acceptable applications and
installations of COMPONENTS with regard to wheel installation and signal
integrity within 60 days after validation of any COMPONENTS and may revise
the same from time to time to reflect COMPONENT modifications, COMPONENT
packaging modification or additional COMPONENT configurations, upon
agreement by the PARTIES.
8.6. XXXX shall approve COMPONENT applications and installations which are
within the limits of the guidelines referred to in Section 8.5. In those
cases where an application or installation does not conform to the
standard conditions, XXXX shall request SMARTIRE'S assistance and SMARTIRE
will respond to such request by approving or disapproving the proposed
application within ten (10) days.
8.7. The engineering departments of SMARTIRE and XXXX shall maintain
information on approved applications and installations of COMPONENTS. XXXX
shall be responsible for the communications of CUSTOMER and applications
and installation approval or disapproval to its CUSTOMERS. XXXX shall
promptly notify SMARTIRE regarding such communications.
8.8. The PARTIES will mutually agree upon COMPONENT packaging prior to initial
deliveries.
9. WARRANTY & LIABILITY
9.1. SMARTIRE shall provide XXXX with SMARTIRE's express warranty with respect
to the SYSTEMS and COMPONENTS, a copy of which is attached as Exhibit B
and made an integral part hereof. XXXX shall pass the aforesaid SMARTIRE
warranty on to its CUSTOMERS, and SMARTIRE shall fully honor this
warranty. SMARTIRE shall have no obligation to honor any warranty
obligations--with respect to the SYSTEMS and COMPONENTS--which are in
addition to those obligations set forth on Exhibit B, except to the extent
that XXXX and SMARTIRE shall previously have agreed otherwise..
9.2. Decisions on warranty claims made against XXXX for COMPONENTS shall be
made by XXXX in its reasonable discretion. XXXX shall use reasonable
commercial efforts to justify all such warranty claims. If SMARTIRE
disagrees with DANA'S decisions on these warranty claims, the PARTIES
shall negotiate an agreeable settlement within a reasonable period. XXXX
shall provide SMARTIRE with adequate written documentation in support of
all warranty claims for COMPONENTS that are submitted to SMARTIRE by XXXX.
XXXX will invoice SMARTIRE at quarterly intervals for all warranty
payments made by XXXX against COMPONENTS and payment will be made by
SMARTIRE within thirty (30) days of determination of settlement.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-11-
9.3. If a recall, service campaign or similar action is required by law or
regulation, or if any such action is ordered by any governmental agency
with respect to COMPONENTS, then to the extent permitted by law or
regulation, the PARTIES shall negotiate in good faith to determine the
corrective actions to be taken, the costs of which shall be borne by the
PARTIES in proportion to their respective responsibility for the alleged
defect.
9.4. SMARTIRE shall be liable to XXXX hereunder for: (a) the replacement of all
defective COMPONENTS; and (b) reimbursement for reasonable
removal/installation costs, as well as for all other reasonable costs
incurred by XXXX or its customers to perform the corrective action,
excluding internal handling and administrative costs and any xxxx-up
normally accruing to XXXX or its customer in the distribution of service
parts
9.5. Each PARTY shall defend (as provided in Section 9.6 below), indemnify and
save harmless the other PARTY, its directors, officers and employees and
agents, from any and all actual and alleged costs, expenses, claims,
suits, damages and liabilities (collectively "LOSS") based upon injury or
death to persons or damaged property, to the extent such LOSS is caused by
or arises out of or in connection with a claim, suit or proceeding brought
by a third party based on a) any negligent or wrongful act or omission of
the other PARTY, its supplier, or their respective employees, agents or
representatives in the performance of this AGREEMENT; and b) in the case
of SMARTIRE to XXXX, any defects in the design, material and/or
workmanship of COMPONENTS.
9.6. Where the cause of the LOSS is the negligence, fault or other breach of
duty of both XXXX and SMARTIRE or a third party's, the liability therefor
shall be allocated, reallocated or prorated, as the case may be, between
the PARTIES hereto and any other party bearing responsibility in
accordance with their percentage of negligence, fault or other breach of
duty in causing such LOSS and the liability of the indemnifying PARTY
proportionately reduced. Each PARTY shall notify the other within fifteen
(15) days after receipt of knowledge of any accident involving COMPONENTS
and shall fully cooperate with the other in the investigation and
determination of the cause of any such accident. The furnishing of
information and investigation by a PARTY shall in no manner constitute or
be construed as an assumption of liability by such party. The foregoing
indemnification obligations in Sections 9.5 and 9.6 are conditioned upon
the indemnified PARTY promptly notifying the indemnifying PARTY in writing
of the claim, suit or proceeding for which the indemnifying PARTY is
obligated under these Sections, the indemnified PARTY cooperating with,
assisting and providing information to, the indemnifying PARTY as
reasonably required and at the indemnifying PARTY's expense, and granting
the indemnifying PARTY the exclusive right to defend or settle such claim,
suit or proceeding.
9.7. SUBJECT TO THE INDEMNIFICATION OR WARRANTY OBLIGATIONS, IMPOSED UPON EACH
PARTY PURSUANT TO THIS AGREEMENT, IN NO EVENT SHALL THE LIABILITY OF
EITHER PARTY OR THEIR RESPECTIVE SUBSIDIARIES, EMPLOYEES, DIRECTORS OR
OFFICERS, TO THE OTHER PARTY PURSUANT TO THIS CONTRACT, WHETHER ARISING IN
-12-
CONTRACT OR IN TORT, OR ANY OTHER LEGAL THEORY (BUT EXCLUDING WILLFUL
MISCONDUCT) BE THE GREATER OF IN AGGREGATE (i) THE AMOUNT PAID BY XXXX TO
SMARTIRE IN THE TWELVE (12) MONTHS PRECEDING THE CLAIM OR CIRCUMSTANCES
FIRST GIVING RISE TO THE EVENT OR (ii) THREE MILLION DOLLARS ($3,000,000).
EACH PARTY HEREBY RELEASES THE OTHER PARTY AND ITS SUBSIDIARIES,
EMPLOYEES, DIRECTORS AND OFFICERS FROM ANY LIABILITY IN EXCESS OF SUCH
AMOUNT. THIS SECTION SHALL PREVAIL AND TAKE PRECEDENCE OVER ANY
CONFLICTING OR INCONSISTENT PROVISIONS IN THE CONTRACT. NOTHING IN THIS
AGREEMENT SHALL LIMIT EITHER PARTY'S LIABILITY TO THE OTHER PARTY FOR
BODILY INJURY OR DEATH CAUSED BY THE INDEMNIFYING PARTY'S NEGLIGENCE. THIS
LIMITATION OF LIABILITY IS CUMULATIVE AND NOT PER-INCIDENT (I. E., THE
EXISTENCE OF TWO OR MORE CLAIMS WILL NOT ENLARGE THIS LIMIT.)
NOTWITHSTANDING THE FOREGOING, IF EITHER PARTY IS SUED BY A THIRD PARTY IN
ANY COURT FOR DAMAGES FOR REASON OF THE ACTS OR OMISSIONS OF THE OTHER
PARTY INCLUDING BUT NOT LIMITED TO CLAIMS RELATED TO WARRANTY,
INTELLECTUAL PROPERTY INFRINGEMENT OR PRODUCTS LIABILITY, TO THE EXTENT
SUCH LAWSUIT RELATES TO THE ACTS OR OMISSIONS OF THE OTHER PARTY, SUCH
OTHER PARTY SHALL DEFEND SUCH ACTION (OR CAUSE THE SAME TO BE DEFENDED) AT
ITS OWN EXPENSE AND SHALL PAY AND DISCHARGE ANY JUDGMENT THAT MAY BE
RENDERED IN SUCH ACTION. IF SUCH OTHER PARTY FAILS OR NEGLECTS TO SO
DEFEND IN SAID ACTION, THE PARTY SUED MAY DEFEND THE SAME AND ANY
EXPENSES, INCLUDING REASONABLE ATTORNEYS' FEES, WHICH IT MAY PAY OR INCUR
IN DEFENDING SAID ACTION AND THE AMOUNT OF ANY JUDGMENT WHICH IT MAY BE
REQUIRED TO PAY SHALL BE REIMBURSABLE BY THE OTHER PARTY TO THE EXTENT
SUCH LAWSUIT RELATES TO THE ACTS OR OMISSIONS OF THE OTHER PARTY.
SMARTIRE shall maintain product liability insurance, with coverage amounts
no less than USD $25,000,000, with a reputable insurer, which policy shall
name XXXX as an additional insured.
9.8. Each PARTY represents and warrants that it has the right to enter into
this AGREEMENT, and that entry into this AGREEMENT will not result in the
breach or violation of or constitute default under any other AGREEMENT,
statute, court order, judgment, rule or regulation, court, regulatory
authority or government body to which the such PARTY is a party or bound.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-13-
9.9. Each PARTY represents and warrants that it will not make any agreements or
assignments with or in favor of any third party, which would conflict with
or render it unable to comply with its obligations hereunder.
9.10. Except for liability arising out of or in connection with death or bodily
injury, the tort of deceit or where it is not otherwise permissible under
applicable law to exclude liability, in no event shall either PARTY, its
respective affiliates, officers, directors, employees, agents or suppliers
be liable for any special, incidental, indirect or consequential damages,
or lost revenue, lost profits, or lost or damaged data, whether arising in
contract, tort (including negligence), or otherwise, even if such PARTY
has been informed of the possibility thereof. Notwithstanding the
foregoing, damages arising out of or in connection with amounts owing
under the express obligations under Section 9.5, Section 9.7, third
paragraph and Section 10.5, shall not be considered consequential in
nature regardless of their form or origin.
9.11. This Section 9 shall survive the expiration and/or termination of this
AGREEMENT.
10. INTELLECTUAL PROPERTY MATTERS
10.1. All DISCOVERIES authored, made, conceived or reduced to practice by XXXX
or for XXXX by a third party for DANA's benefit, prior to this AGREEMENT,
will remain the property of XXXX. All DISCOVERIES authored, made,
conceived or reduced to practice from time to time solely by XXXX or
solely for XXXX by a third party for DANA's benefit, during the term this
AGREEMENT and after its termination will remain the property of XXXX
10.2. All DISCOVERIES authored, made, conceived or reduced to practice by
SMARTIRE or for SMARTIRE by a third party for SMARTIRE'S benefit, prior
this AGREEMENT, will remain the property of SMARTIRE. All DISCOVERIES
authored, made, conceived or reduced to practice from time to time solely
by SMARTIRE or solely for SMARTIRE by a third party for SMARTIRE'S
benefit, during the term of this AGREEMENT and after its termination will
remain the property of SMARTIRE.
10.3. The PARTIES anticipate that they may engage in one or more joint product
development or co-development projects in the future involving the PARTIES
and potentially one or more CUSTOMERS. Prior to commencing any such
project, the PARTIES and any participating CUSTOMERS will negotiate in
good faith and enter into a comprehensive joint development agreement for
such project.
10.4. SMARTIRE represents and warrants that all COMPONENTS it furnishes
hereunder are free of encumbrances or claims, that SMARTIRE has the right
to convey ownership of COMPONENTS to XXXX.
10.5. Subject to the following provisions of this Section, SMARTIRE shall, at
its own expense, indemnify, hold harmless, defend or at its option settle
any claim, suit or proceeding brought against XXXX or CUSTOMER which is
based on an allegation that any COMPONENTS or any components thereof sold
and supplied to XXXX under this AGREEMENT constitute an infringement of a
SMARTIRE/XXXX CONFIDENTIAL September 2005
-14-
patent issued within the TERRITORY, design right, or copyright,
constitutes a misuse or misappropriation of proprietary information, or
violates another form of intellectual property ("CLAIM"). This obligation
shall be effective only if SMARTIRE is notified promptly in writing and
given authority, information and assistance (including, without
limitation, making available to SMARTIRE such documents and witnesses as
are within the control of XXXX, at DANA'S expense) for the defense of such
claim, suit or proceeding. SMARTIRE shall pay all damages (compensatory or
punitive), attorney fees, and costs awarded in such suit or proceeding so
defended or payable as a result of any settlement which SMARTIRE enters
into. If any COMPONENTS or any components thereof furnished hereunder
become the subject of any CLAIM and a settlement or an adjudication
establishes that such COMPONENTS or components thereof do in fact infringe
such a patent, design right, or copyright, constitutes a misuse or
misappropriation of proprietary information, or violates another form of
intellectual property or if the use or sale of such COMPONENTS or
components thereof is enjoined, SMARTIRE shall, at its own expense,
either:
a. procure for XXXX and CUSTOMERS the right to continue using such
COMPONENTS or components thereof;
b. replace such COMPONENTS or components thereof with non-infringing
COMPONENTS or components thereof reasonably acceptable to XXXX and
CUSTOMERS; or
c. modify such COMPONENTS or components thereof in a manner reasonably
acceptable to XXXX and CUSTOMERS so such COMPONENTS or components
thereof become non-infringing.
Notwithstanding the foregoing, SMARTIRE shall have no liability for a CLAIM
arising from:
a) the combination, operation, or use of a COMPONENT supplied under
this Agreement with any product, device, or software not supplied by
or through SMARTIRE to the extent the CLAIM is based on the
combination;
b) the alteration or modification of any COMPONENTS except as
authorized by SMARTIRE;
c) SMARTIRE's compliance with DANA's designs, specifications, or
instructions; and,
d) XXXX or CUSTOMER's use of the COMPONENT after SMARTIRE has informed
XXXX of modifications or changes in the COMPONENTS required to avoid
such a CLAIM if the alleged infringement would have been avoided by
implementation of SMARTIRE's recommended modifications or changes
where such modifications or changes have been provided to XXXX at no
additional charge.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-15-
This Section 10.5 states the entire liability of SMARTIRE to XXXX with respect
to infringement of design right or copyright that constitutes a misuse or
misappropriation of proprietary information, constitutes any competition, or
violates another form of intellectual property, by any COMPONENTS or any
components thereof. TO THE EXTENT PERMITTED BY LAW, THIS INDEMNITY OBLIGATION
AND REMEDY ARE GIVEN TO XXXX AND ITS CUSTOMERS SOLELY FOR THEIR RESPECTIVE
BENEFIT AND IN LIEU OF, AND SMARTIRE DISCLAIMS, ALL WARRANTIES, CONDITIONS AND
OTHER TERMS OF NON-INFRINGEMENT WITH RESPECT TO ANY COMPONENT.
11. TERM AND TERMINATION
11.1. This AGREEMENT shall remain in effect for a term of seven (7) years from
the effective date as of the date of last signature below, at which time
this AGREEMENT shall be continue indefinitely until terminated by either
PARTY, upon one (1) year's NOTICE to the other PARTY.
11.2. Either PARTY may terminate this AGREEMENT immediately upon NOTICE to the
other PARTY upon the occurrence of one of the following events:
a. the failure or refusal of the other PARTY for a period of ninety
(90) days after NOTICE to perform fully and promptly its obligations
under this AGREEMENT.
b. either PARTY defaults or breaches any material provision of this
AGREEMENT and does not remedy the default or breach within thirty
(30) days after NOTICE by the other PARTY.
c. the commencement of any proceeding by or against either PARTY or its
property under any law dealing with bankruptcy, insolvency,
receivership or other relief of debtors.
d. the insolvency or dissolution of either PARTY.
e. by the other PARTY, if the maximum amount payable by one PARTY to
the other PARTY, in the limitation of liability set forth in
paragraph 1 of Section 9.7, has been exhausted.
11.3. If XXXX has failed to make any payments, unless a reasonable dispute
exists and the PARTIES are negotiating a resolution with respect to such
invoice, when due, SMARTIRE may terminate this AGREEMENT upon thirty (30)
days written notice to XXXX.
11.4. If SMARTIRE is (i) in breach of this AGREEMENT, (ii) ceases to carry on
business as a going concern; (iii) becomes or may become the object of the
institution of voluntary or involuntary proceedings in bankruptcy or
liquidation; (iv) a receiver or similar officer is appointed with respect
to the whole or a substantial part of its assets; or (v) an event similar
to any of the foregoing occurs under applicable law, and fails or refuses
to supply COMPONENTS to XXXX as required under this AGREEMENT, provided
that XXXX shall not be in breach of this AGREEMENT, then XXXX shall have
SMARTIRE/XXXX CONFIDENTIAL September 2005
-16-
the right to manufacture, have manufactured, or acquire from SMARTIRE's
suppliers, substitutes for COMPONENTS for the sole purpose of XXXX
continuing to supply its then current CUSTOMERS with COMPONENTS. In such
case, XXXX shall have the right to utilize SMARTIRE's intellectual
property rights, DISCOVERIES and CONFIDENTIAL INFORMATION for such
purposes, subject to the terms of this Agreement, and XXXX shall pay
SMARTIRE a reasonable royalty to SMARTIRE for use of its intellectual
property rights. SMARTIRE shall not obstruct DANA's efforts or ability to
find and qualify alternate supplier(s) of substitute products. This
Section does not xxxxx XXXX the right to develop the SYSTEMS or COMPONENTS
including adding new or enhanced functionality. The rights of XXXX under
this Section shall survive the termination of this AGREEMENT for one (1)
year; provided, however, that if DANA's contractual commitment as at the
date of SMARTIRE's failure or refusal to supply COMPONENTS to XXXX to
supply COMPONENTS to any CUSTOMER is longer, the rights of XXXX under this
Section shall survive the termination of this AGREEMENT with respect to
such CUSTOMER only for the length of DANA's contractual commitment.
11.5. Except with respect to injunctive relief sought by either PARTY where
appropriate, in the event of a dispute between the PARTIES, the PARTIES
shall use the following procedure prior to either PARTY pursuing other
available remedies.
a. Meeting. A meeting shall be held promptly between the PARTIES,
attended by individuals with decision-making authority regarding the
dispute, to attempt in good faith to negotiate a resolution of the
dispute.
b. If the PARTIES have not succeeded in negotiating a resolution of the
dispute within sixty (60) days after the first meeting, they shall
submit the dispute to mediation in accordance with the Mediation of
Business Disputes Model Procedure of the Center for Public
Resources.
c. Mediation. The PARTIES will jointly appoint a mutually acceptable
mediator, seeking assistance in such regard from the CPR
International Institute for Conflict Prevention and Resolution if
they have been unable to agree upon such appointment within twenty
(20) days after one PARTY has given the other NOTICE of its intent
to invoke mediation.
d. Participation. The PARTIES shall participate in good faith in the
mediation and negotiations related thereto for a minimum period of
thirty (30) days after the initial meeting with the mediator. If the
PARTIES are not successful in resolving the dispute through the
mediation, then either PARTY may pursue other available remedies.
Sections 11.4 and 11.5 shall survive the expiration or other
termination of this AGREEMENT.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-17-
12. SEVERABILITY AND FORCE MAJEURE
12.1. All provisions of this AGREEMENT are intended to be in conformance with
applicable laws and regulations binding on the PARTIES and to which each
of them are subject, and each PARTY hereby undertakes to take all
necessary measures to comply with all such laws and regulations and to
ensure that this AGREEMENT remains valid at all times. Any provisions of
this AGREEMENT which may be in conflict with such laws and regulations
shall be so modified, in an amendment to this AGREEMENT to be agreed
between the PARTIES, so as to conform to such laws and regulations.Neither
PARTY shall be liable for damages for delay in or prevention of its
performance arising out of causes beyond its reasonable control,
including, but not limited to, acts of God or of the public enemy, acts of
any government in its sovereign capacity, fires, floods, epidemics, and
strikes or other labor disputes. If either PARTY's performance in meeting
an agreed shipping date is delayed due to continuing causes covered by
this Section, the shipping date shall be extended only for the period
during which they continue to exist. Delay in performance by either PARTY
shall be excused under this Section only if the PARTY whose performance is
delayed gives NOTICE of the delay to the other PARTY promptly and in no
event more than fifteen (15) days after the event causing the delay.
13. NOTICES, AMENDMENTS, ASSIGNMENT, NO AGENCY & GOVERNING LAW
13.1. All notices, requests, consents and other communications hereunder shall
be deemed to have been duly given hereunder if in writing and, upon
receipt when delivered by hand or sent by courier, facsimile transmission
or telex, or three (3) calendar days after being mailed by first class
mail, postage prepaid, in each case addressed as follows:
If given to DANA, to: Copy to:
Vice President, Marketing and Planning Xxxx Corporation
Commercial Vehicle Systems Group 0000 Xxxx Xxxxxx
Xxxx Corporation P.O. Box 1000
0000 Xxx Xxxxxx Xxxxx Xxxxxx, XX 00000-0000
Xxxxxxxxx, XX 00000 Attn: General Counsel
Fax: 000.000.0000 Fax: 000.000.0000
If given to SMARTIRE, to:
President and CEO
SMARTIRE SYSTEMS INC.
Xxxxx 000, 00000 Xxxxxx Xxxxx
Xxxxxxxx, XX Xxxxxx X0X 0X0
Fax: 000.000.0000
or such other persons or addresses as the addressee PARTY may have
previously designated in writing by NOTICE to the other PARTY, and such
notice or communication shall be deemed to have been given as of the date
so delivered or mailed.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-18-
13.2. This AGREEMENT, including the Exhibits hereto, sets forth the entire
understanding of XXXX and SMARTIRE with respect to the matters covered and
supersedes all prior agreements, representations and understandings,
whether oral or written, between them as to the subject matter herein. Any
amendments, waivers, or modifications of this AGREEMENT, or of any exhibit
hereto, shall be valid only when they have been reduced to writing and
duly signed by the PARTIES. The terms of this Section shall not be deemed
to have been waived by oral agreement, course of performance or by any
other means other than a written agreement expressly providing for such
waiver.
13.3. Neither PARTY may assign this AGREEMENT without the prior written consent
of the other PARTY.
13.4. No Agency. This AGREEMENT does not create any agency, partnership, joint
venture, or franchise relationship. No employee of either PARTY shall be
or become, or shall be deemed to be or become, an employee of the other
PARTY by virtue of the existence or implementation of this Agreement. Each
PARTY hereto is an independent contractor. Neither PARTY has the right or
authority to, and shall not, assume or create any obligation of any nature
whatsoever on behalf of the other PARTY or bind the other PARTY in any
respect whatsoever.
13.5. This AGREEMENT shall in all respects be interpreted, construed and
governed by and in accordance with the laws of the State of Ohio and the
United States of America, without regard to the conflict of laws
provisions thereof. The United Nations Convention on Contracts for the
International Sale of Goods shall not govern this AGREEMENT.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-19-
IN WITNESS WHEREOF, the PARTIES hereto have executed this AGREEMENT as of the
date of last signature below.
XXXX CORPORATION
By /s/ Xxxxx Xxxxxxx By /s/ Xxxxx Xxxxxxxx
----------------------------- -----------------------------
Xxxxx Xxxxxxx Xxxxx Xxxxxxxx
Vice President Sales, Marketing and
Planning Commercial Vehicle Systems
Group
Date: October 12, 2005 Date: October 12, 2005
-------------------------- --------------------------
SMARTIRE SYSTEMS INC.
By /s/ Xx Xxxxx
-----------------------------
Al KozakPresident and CEO
Date: October 12, 2005
--------------------------
SMARTIRE/XXXX CONFIDENTIAL September 2005
-20-
EXHIBIT A
SMARTIRE CONTRACTUAL RELATIONSHIPS
--------------------------------------------------------------------------------------------------------------------
Third Party Territory Market Segments Comments
--------------------------------------------------------------------------------------------------------------------
Company A United States o OEM and Aftermarket for Current market focus is RV and
recreational vehicles towed vehicles. In some cases
o OEM and Aftermarket for they may equip Class 1-3 trucks
passenger cars that tow other vehicles or small
o OEM and Aftermarket for towed trailers.
vehicles
o OEM and Aftermarket for
commercial vehicles
o OEM and Aftermarket for buses
--------------------------------------------------------------------------------------------------------------------
Company B North America o OEM Customer SmarTire direct account
o OEM Aftermarket service centers
--------------------------------------------------------------------------------------------------------------------
Company C North America o OEM Customer SmarTire direct account
o OEM and Aftermarket service
centers
--------------------------------------------------------------------------------------------------------------------
Company D North America o OEM and Aftermarket for Internet/on-line sales normally
passenger cars to individual customers or
o OEM and Aftermarket for vehicle users.
motorcycles
o OEM and Aftermarket for
recreational vehicles
o OEM and Aftermarket for trucks
--------------------------------------------------------------------------------------------------------------------
Company E North America o OEM and Aftermarket for Internet/on-line sales normally
passenger cars to individual customers or
o OEM and Aftermarket for vehicle users. Virtually all
motorcycles sales are to vehicle owners.
o OEM and Aftermarket for Truck systems are typically Class
recreational vehicles 1-3.
o OEM and Aftermarket for trucks
--------------------------------------------------------------------------------------------------------------------
Company F United States o OEM and Aftermarket for Sells to aftermarket and some
recreational vehicles select RV OEMs. Works closely
with RV manufacturer to retrofit
units in aftermarket.
--------------------------------------------------------------------------------------------------------------------
Company G United States o Light trucks and trucks Second stage company that
retrofits commercial vehicles for
military and specialty markets.
--------------------------------------------------------------------------------------------------------------------
SMARTIRE/XXXX CONFIDENTIAL September 2005
-21-
--------------------------------------------------------------------------------------------------------------------
Company H Mexico o Bus aftermarket
--------------------------------------------------------------------------------------------------------------------
Company I Australia o OEM and aftermarket Passcar May possibly sell to Class 1-3
o Aftermarket Motorcycle trucks.
--------------------------------------------------------------------------------------------------------------------
Various small United States o Varied market segments These organizations do not have
companies formal agreements with SmarTire
and all have sales less than $15K
per year.
--------------------------------------------------------------------------------------------------------------------
SMARTIRE/XXXX CONFIDENTIAL September 2005
-22-
EXHIBIT B
SMARTIRE WARRANTY
SMARTIRE [LOGO]
Original Equipment Commercial Vehicles
North America (Canada and USA)
Warranty Statement
Subject to the conditions stated herein, SmarTire Systems Ltd. ("SmarTire")
warrants to Original Equipment Manufacturer ("OEM") that the parts, components
and assemblies sold as original equipment or service parts, ("Product") will,
when properly installed on commercial vehicles approved for such purpose,
conform to Product specifications and will be free from defects in design,
material and workmanship under normal use and service for the applicable
warranty period as described in the Warranty Period section of this statement.
SmarTire assumes no responsibility, in the absence of its written approval, for
the selection of Product for specific applications that have not been approved.
Commercial vehicles include Class 3 to 8 Trucks (Rigid Truck and Tractor),
Commercial Trailers, Bus and Recreational Vehicles.
Warranty Period
The term of SmarTire's warranty to OEM shall be for three years or 300,000 miles
of vehicle use, whichever comes first, for original equipment parts and one year
unlimited miles for service parts
(a) Warranty coverage for Product furnished as original equipment
commences on the vehicle in-service date.
(b) Warranty coverage for Product furnished as service parts commences
on the date of retail sale.
Remedy
For Products sold as Original Equipment production parts, SmarTire shall
reimburse (a) the cost of parts and labor (subject to pre-established dealer
retail prices and posted labor rates subject to attached labor hour guidelines)
to replace the Product.
For Products sold as Original Equipment service parts, SmarTire shall reimburse
(a) the cost of parts only (subject to pre-established dealer retail prices) to
replace the Product.
SmarTire's obligation to satisfy a warranty claim is subject to the following
conditions:
SMARTIRE/XXXX CONFIDENTIAL September 2005
-23-
(a) all such claims must be submitted to SmarTire no later than ninety
(90) days from the date of the failure occurrence and shall be
supported by satisfactory evidence in respect of the conditions
stated herein;
(b) if requested by SmarTire, the Product involved shall be returned,
freight collect, to SmarTire Systems Inc. for examination; and
(c) SmarTire's examination of the Product must disclose to its
satisfaction that none of the Warranty Exclusions described herein
apply. In all cases, SmarTire shall make the final determination as
to the warrantability of the Product.
Products replaced under warranty are covered hereunder by the remaining portion
of the original warranty period or 12 months whichever is longer.
General Limits and Exclusions
SmarTire must provide documented and signed off installation approval for the
specified OEM application for this warranty to be in effect.
Coverage is not provided for the following failures or expenses:
(a) Towing.
(b) Downtime, lodging, meals, and travel time or transportation.
(c) Troubleshooting / Diagnostics - except where allowed as indicated in
the OEM and SmarTire approved guidelines
(d) Freight for expedited or rush parts shipments. Parts will be shipped
by the most economical means possible.
(e) Non-genuine replacement parts void the component warranty when used
to make a repair.
(f) Component damage due to failure of other chassis components.
(g) Parts and labor markup in excess of OEM and SmarTire approved
guidelines.
(h) Undefined or unidentifiable miscellaneous changes.
(i) Failures due to product mis-application or SmarTire unapproved
application.
(j) Failures due to unapproved alterations or modifications to the
vehicle or the SmarTire component.
(k) Failures caused by improper installation or improper prior repair
including damage to Product by tire removal or installation.
(l) Miscellaneous shop supplies and/or fees.
(m) Corrosion and rust.
(n) Tires
(o) Failures due to dirt, snow, or ice build-up.
(p) Accident, damage, negligence, abuse or misuse
Claims Procedure
Warranty claims may be made to the OEM through an authorized dealer, per your
OEM warranty procedures. Please refer to stated warranty coverage for your
specific OEM.
Claims submitted must
(a) be for verifiable defects in material or workmanship.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-24-
(b) be submitted within ninety (90) days from the date on which the
failure occurred.
(c) provide the following information on or with the OEM claim:
1. Complete Vehicle Identification Number, model and vehicle
type, tire and rim description
2. Date in service
3. Model and serial number of failed component(s)
4. Itemized SmarTire part numbers and dealer parts prices
5. Description of complaint, failure, fault code(s), dealer test
results, cause, correction (repair)
6. Date of failure and mileage at time of failure
7. Hourly labor rate and number of labor hours requested
8. OEM published labor code and hours
In the event the OEM rejects Product or makes a claim under this warranty,
SmarTire may request the return of the Product and SmarTire will issue the OEM a
return material authorization (RMA) number.
If requested by SmarTire, the Product shall be returned, freight collect, to
Attention: Customer Service
SmarTire Systems Inc.
Xxxxx 000, 00000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx, X0X 0X0
for examination. All returned Products shall become SmarTire's property.
SmarTire's determination of warranty coverage shall be final in all cases.
SmarTire reserves the right to reject a warranty claim for any or all of the
following reasons:
a. Original claim was filed after ninety (90) days from the date of
failure
b. Failure occurred beyond applicable warranty period
c. Claim information is insufficient
d. Product was not returned for inspection as requested
e. Product inspection does not substantiate claim or indicate a failure
Policy / Goodwill:
If OEM agrees to reimburse customer from Product failure due to non-conforming
material or workmanship beyond the standard warranty period in order to maintain
good will and customer satisfaction, SmarTire agrees to negotiate in good faith
with OEM regarding the reimbursement of OEM for these expenses on a case-by-case
basis. All Policy / Goodwill must be approved by SmarTire Systems Inc.
Warranty Disclaimer
SMARTIRE'S EXPRESS WARRANTY AND PURCHASER'S REMEDIES THEREUNDER ARE EXCLUSIVE
AND GIVEN IN PLACE OF (a) ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
WHETHER WRITTEN OR ORAL, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR IMPLIED WARRANTY ARISING
FROM PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, AND (b) ALL OTHER
OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS OR REMEDIES, INCLUDING ANY RIGHT IN
CONTRACT, TORT, EXTRA-CONTRACTUALLY, STRICT LIABILITY OR ANY RIGHT ARISING FROM
SMARTIRE'S NEGLIGENCE, ACTUAL OR IMPUTED.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-25-
Limitation of Liability
SMARTIRE'S OBLIGATIONS AND PURCHASER'S REMEDIES UNDER SMARTIRE'S EXPRESS
WARRANTY ARE LIMITED TO SMARTIRE'S CHOICE OF REPAIR OR REPLACEMENT AND EXCLUDE
LIABILITY FOR INCIDENTAL, SPECIAL, CONSEQUENTIAL OR ANY OTHER DAMAGES,
INCLUDING, WITHOUT LIMITATION, REPLACEMENT COSTS, ECONOMIC LOSS, LOST REVENUE,
LOST PROFITS, OR LOSS OF USE OR DAMAGE TO OTHER PROPERTY.
PRODUCTS ARE CONSIDERED TO BE MONITORING DEVICES, AND ARE NOT TO BE CONSIDERED
AS SAFETY DEVICES.
Effective Date
This warranty shall become effective October 1, 2005, and applies only to
Product sold in the United States and Canada. This warranty supersedes all past
warranties expressed by SmarTire and may not be changed, altered or modified in
any way except in writing by SmarTire.
Part Return Requirements
Be sure the parts are properly identified.
a. Clearly print the RMA number on the xxxx of lading and shipping
container.
b. If parts for more than one claim are shipped all together, list all
claim numbers on the xxxx of lading or provide a detailed packing
list. This will ensure proof of shipment for a specific claim if the
parts are lost.
c. When shipping parts for several different claims together, do not
mix the parts in the same container, box, etc. This could cause
confusion in performing a failure analysis, a delay in claim
processing, and possible rejection of the claim.
d. Package the parts carefully to avoid shipping damage which could
distort or mask the true cause of the failure.
e. Return all parts collect, per SmarTire approved carrier and to the
correct designated location. Failure to return requested parts to
designated SmarTire location may result in rejection of the claim.
f. Parts lost from broken boxes, damaged shipping containers,
negligence in packaging, or returned without proper claim
identification, may result in no reimbursement for the parts not
received and shall be the responsibility of the dealer.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-26-
g. Corrosion or rust that prevents proper inspection, or prevents
identification of the primary failure, may result in a rejected
claim.
h. Rejected / Non-SmarTire Parts will be returned to dealer at dealer's
expense.
Labor Hour Guidelines
This section contains a recently revised schedule of various labor hours allowed
for performing warrantable repairs. The hours listed are the maximum amounts
which will be paid on a warranty claim. To insure a better understanding of its
content, please have all personnel involved in warranty, read the section
thoroughly.
These guidelines reflect replacement times only. Components for this product are
not serviceable or rebuildable.
Allowed Time (Hours)
Diagnostics 0.5
Replacement of Sensor and Strap in Tire 0.5
Replacement of Receiver 0.5
Replacement of Strap Only 0.5
Replacement of Display 0.75
Replacement of Antenna 1
Replacement of Display Cable 0.5
Reprogramming of System 0.5
SMARTIRE/XXXX CONFIDENTIAL September 2005
-27-
EXHIBIT C
ORDER TERMS AND CONDITIONS
1. CONTRACT. Notwithstanding the terms and conditions on any purchase order
("Order") issued by XXXX pursuant to this AGREEMENT, the terms of this AGREEMENT
including this Exhibit B shall govern with respect to DANA's purchase of
COMPONENTS from SMARTIRE. No additional or different terms proposed by XXXX on
any Order or by SMARTIRE in its acknowledgement shall be binding upon the
parties. The terms of this AGREEMENT shall apply, regardless of any additional
or conflicting terms on any Order, acknowledgement or otherwise submitted by
either party, and any such additional or conflicting terms are deemed rejected
by the other party. Captions in these Terms are for convenience only. For the
purposes of this Exhibit, Seller shall mean SMARTIRE; Goods shall mean
COMPONENTS
2. ASSIGNMENT. Seller may not assign or subcontract this Order or any of its
rights or obligations hereunder, other than the right to assign any amount due
which shall be freely assignable, without Dana's prior written consent and any
purported assignment in violation of this provision will be void.
3. PACKING AND SHIPMENT. Seller will pack and ship the Goods in accordance with
Dana's instructions, furnish all shipping documents required by Xxxx, and
plainly xxxx Xxxx'x name and the Order number on all packages and documents.
4. INSPECTIONS. Xxxx xxx inspect and/or test the Goods at any time, at its own
expense, and Seller will make its premises available for this purpose and
provide any necessary assistance at no charge. However, no inspections or tests
by Xxxx will relieve Seller of any of its obligations hereunder relating to the
Goods. If Xxxx finds any Goods to be defective or not in conformity with its
specifications or requirements, it may return them for a refund of the purchase
price, or require Seller to repair or replace them.
5. HAZARDOUS MATERIALS. Seller warrants that it will properly classify,
describe, package, xxxx, label and provide any necessary Material Safety Data
Sheets for the Goods and will pack and ship them in compliance with all
applicable hazardous materials laws, regulations, ordinances and orders.
6. SPECIAL TOOLING. All dies, jigs, fixtures, drawings, molds, patterns,
templates, gages and the like that Xxxx provides to Seller or pays Seller to
make or buy for use in performing this Order (collectively, "Tooling") are at
all times the personal property of Xxxx or Dana's customer, as the case may be.
Xxxx will not be obligated to pay for such Tooling, if applicable, until Seller
has provided Xxxx with an itemized list and adequate cost records for the same
and Xxxx has accepted the Tooling or the first run of Goods manufactured or
assembled therewith. If Seller fails to provide adequate cost records, Xxxx will
be not be obligated to pay more than the fair market value of the Tooling,
regardless of the Tooling purchase price set out in the Order. While the Tooling
is in its possession or custody, Seller will be responsible for any loss or
damage to the Tooling and for all taxes, assessments, and similar charges levied
with respect to or on it. Seller will label the Tooling in accordance with
Dana's instructions to permit accurate identification and will segregate it from
other tooling in Seller's possession to the extent practicable. At its own
expense, Seller will repair and maintain the Tooling, keep it in good working
condition, and replace it when necessary for any reason, including normal wear
and tear. Seller will use the Tooling exclusively to produce Goods for Xxxx
-28-
hereunder and for no other purpose. Upon expiration, cancellation, or
termination of this Order, Seller will hold the Tooling and any operation
sheets, process data, or other information necessary to show its use, at no
charge, pending receipt of Dana's instructions about its removal or disposition,
which will be at Dana's expense. Seller acknowledges that Xxxx or Dana's
customer, as the case may be, has title to and all rights in the Tooling, all
accessories and attachments thereto, all substitutes and replacements therefor
and all proceeds therefrom. Seller authorizes Xxxx or Dana's customer, as
applicable, or their agents, on Seller's behalf and as its attorney-in-fact, to
prepare, sign and file such Uniform Commercial Code financing statements and
amendments thereto and similar documents as they deem necessary to evidence
their ownership of the Tooling.
7. TRADE CREDITS, COUNTRY OF ORIGIN. All trade credits, export credits, customs
drawbacks, tax and fee rebates and the like relating to this Order will belong
to Xxxx. Seller will cooperate with Xxxx in obtaining these benefits and
credits. Seller will xxxxxxx Xxxx and its designees with such documentation
establishing the country of origin and value of the Goods as Xxxx xxx request,
including, as applicable, affidavits of manufacture and NAFTA certificates of
origin.
8. INSURANCE. Seller will maintain, at its own expense, the following minimum
insurance coverages with insurers satisfactory to Xxxx: (i) statutory workers'
compensation; (ii) employer's liability in the amount of U.S. $5 million; (iii)
commercial general liability (including products/completed operations and
contractual liability coverage) in the amount of $5 million bodily injury or
property damage per occurrence; and (iv) automotive liability (covering owned,
non-owned, and hired vehicles) in the amount of $5 million bodily injury or
property damage per accident. Such coverages can be provided under primary
and/or excess policies. In addition, where applicable, Seller will maintain all
risk property coverage (including transit) and theft coverage for Goods, whether
or not owned by Xxxx, which have been ordered hereunder and which are in the
care, custody, or control of Seller, its agents, or contractors, and any other
insurance coverages that Xxxx xxxxx appropriate. On the acceptance of this Order
and each subsequent renewal of its insurance coverages, Seller will xxxxxxx Xxxx
with certificates of insurance evidencing such coverages, naming Xxxx as an
additional insured where deemed appropriate by Xxxx, and requiring written
notice to Xxxx at least 15 days prior to the cancellation, reduction or
non-renewal of coverage. Compliance with these provisions will not relieve
Seller of its defense and indemnity obligations under Paragraph 19. These
obligations will survive the expiration or cancellation of this Order to the
extent necessary to cover acts or events arising in connection with the
performance of the Order.
9. ALLOCATION. If Seller is unable, at any time, to supply the entire quantity
of Goods ordered by Xxxx, Seller will meet all of Dana's requirements before
making any allocation among its other customers under Section 2-615 of the
Uniform Commercial Code or the equivalent.
10. TERMINATION. Xxxx xxx terminate this Order for convenience at any time by
fifteen (15) business days written notice to Seller. On termination, Xxxx will
be liable to Seller solely for unpaid invoices for conforming Goods previously
shipped and for Seller's reasonable, documented costs of raw materials,
work-in-process and finished Goods that cannot be canceled without penalty or
sold in the general trade, not to exceed the volumes specified in this Order (if
a spot Order) or in any open releases hereunder (if a blanket Order) and payable
only after Dana's receipt of the same.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-29-
11. CANCELLATION. Xxxx xxx cancel this Order without liability or further
obligation hereunder by 15 business days' written notice to Seller if Seller
breaches any provision, term or condition of the Order (or Xxxx anticipates such
breach); provided, that the cancellation will be void if Seller cures the breach
(or provides assurances of performance acceptable to Xxxx) within the 15-day
notice period. Xxxx xxx cancel this Order immediately by written notice to
Seller without liability or further obligation hereunder (i) if Seller fails or
refuses to xxxxxxx Xxxx promptly with such information and assurances as Xxxx
xxx request, from time to time, about Seller's financial and operating
conditions and ability to supply Goods under this Order, and (ii) to the extent
permitted by law, in the event of Seller's insolvency, the filing of a voluntary
or involuntary petition in bankruptcy by or against Seller, the appointment of a
receiver or trustee for Seller, Seller's execution of an assignment for the
benefit of creditors, or a comparable event.
12. BINDING EFFECT. This Order will be binding on the parties and their
respective agents, subcontractors, successors and permitted assigns.
SMARTIRE/XXXX CONFIDENTIAL September 2005
-30-
