EXHIBIT 10.3
EXECUTION COPY
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is entered into as of this 30th day
of April, 1999, by and between Pemstar Inc., a Minnesota corporation
("Pemstar"), Pemstar B.V., a corporation formed under the laws of the
Netherlands ("Supplier"), Fluke Corporation, a Washington corporation ("Fluke")
and Fluke Industrial B.V., a corporation formed under the laws of the
Netherlands ("Purchaser").
RECITALS
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WHEREAS, Pemstar, Supplier, Fluke and Purchaser are parties to that certain
Asset Purchase Agreement of even date herewith (the "Asset Purchase Agreement");
and
WHEREAS, pursuant to the Asset Purchase Agreement, Purchaser is selling,
assigning and transferring to Supplier certain assets (the "Acquired Assets")
previously used by Purchaser to manufacture certain products; and
WHEREAS, Purchaser desires to purchase from Supplier, and Supplier desires
to sell to Purchaser, on the terms and conditions set forth herein, certain
products previously manufactured by and certain engineering services previously
provided by Purchaser with the Acquired Assets.
NOW THEREFORE, in consideration of the representations, warranties,
covenants, obligations and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, upon the terms and subject to the conditions
contained herein, agree as follows:
ARTICLE l: CERTAIN DEFINITIONS
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1.1 "Affiliates" shall mean any Person that directly, or indirectly
through one or more Persons, controls or is controlled by, or is under
common control with, the Person specified. As used herein, "control",
"controls" and "controlled" means the ownership of 50% or more of the
voting interests of the Person in question.
1.2 "Derivatives" shall mean any product derived from an existing
Product which has the same basic technology and function as the existing
Product, meaning that it is intended to perform substantially the same
basic functions albeit with the same or altered capabilities or features.
1.3 "End of life inventory" shall mean those items identified on
Appendix F and any items added to such list throughout the term of this
Agreement upon the mutual agreement of the parties hereto.
1.4 "Engineering Services" shall mean the engineering and design
services set forth on Appendix B attached hereto.
1.5 "Facility" shall have the meaning set forth in the Asset Purchase
Agreement.
1.6 "Laws" shall mean all applicable foreign and domestic federal,
state and local statues, laws, common law, case law, rules and regulations.
1.7 "Minimum Annual Commitments" shall mean the commitments set forth
in Appendix C hereto.
1.8 "Nonconforming Engineering Services" shall mean Engineering
Services which do not comply with the Specifications or with applicable
Laws at the time of the performance of the Engineering Services.
1.9 "Nonconforming Products" shall mean Products which do not comply
with the Specifications at the time of shipment by the Supplier.
1.10 "Person" shall mean a corporation, limited liability company,
association, partnership, organization, trust, joint venture or other legal
entity, an individual or a governmental authority.
1.11 "Products" shall mean the products set forth on Appendix A
attached hereto and all revisions and upgrades to and Derivatives thereof.
1.12 "Specifications" shall mean (1) (x) the formulas and
specifications for the Products and their production, processing, packaging
and quality control and the administrative procedures relating thereto, as
set forth in Purchaser's archiving/product data management system (subject
to any modifications described in the next sentence), (y) the
specifications for Engineering Services and the administrative procedures
relating thereto, in each case as set forth in written instructions to be
delivered by Purchaser to Supplier in connection with each request for
Engineering Services, and (z) general and specific standards of quality and
workmanship normal and usual in the type of manufacturing contemplated by
this Agreement, including without limitation ISO 9000 certification and
calibration practices, and (2) to the extent not inconsistent with Section
1.12(l), the actual operating conditions and practices of Supplier, as
amended from time to time upon reasonable advance notice to Purchaser.
Purchaser reserves the right at any time to unilaterally modify, delete or
add to the Specifications provided that Purchaser allows Supplier
reasonable time in each instance to implement any changes necessitated by
such revisions in the Specifications so that the Products and Engineering
Services will remain in compliance with the Specifications. If any such
modifications result in additional costs to Supplier, Supplier shall be
entitled to a mutually agreed increase in the applicable purchase price
equal to the reasonable additional costs resulting therefrom. In case such
modification requires engineering effort, Purchaser shall provide Supplier
with a purchase order.
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ARTICLE 2: TERM AND TERMINATION
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2.1 Term. This Agreement shall commence immediately following the
Closing Date ("Closing Date") set forth in the Asset Purchase Agreement,
and (unless earlier terminated pursuant to Section 2.2) shall continue
until the third anniversary of the Closing Date (the "Term"); provided,
that the Term shall automatically be extended for successive one-year terms
thereafter unless (1) either party delivers written notice of termination
to the other party no less than one hundred and eighty (180) days prior to
the end of the then-current Term, or (2) Purchaser and Supplier fail to
agree on pricing and volume commitments for such renewal period not less
than sixty (60) days prior to the end of the then-current Term.
2.2 Termination for Breach. Notwithstanding the foregoing, either
party may terminate the Agreement at any time if the other party Breaches
this Agreement. The following actions shall each constitute a "Breach" of
this Agreement:
(a) The institution by Supplier or Purchaser of a voluntary, case
under any chapter of the Bankruptcy Code (Title 11, United States
Code), or any equivalent or similar action under any other Law in
effect at such time relating to bankruptcy or insolvency, or if a
petition is filed against Supplier or Purchaser under the Bankruptcy
Code, or if a petition is filed seeking any such equivalent or similar
relief against Supplier or Purchaser under any other Law in effect at
the time relating to bankruptcy;
(b) If Supplier or Purchaser makes a general assignment for the
benefit of creditors;
(c) If Supplier or Purchaser admits in writing an inability to
pay its debts generally as they become due;
(d) If Supplier or Purchaser has appointed (voluntarily or
involuntarily) a trustee, receiver, custodian or agent under
applicable Law or under contract to take charge of property of
Supplier or Purchaser for the purpose of general administration of
such property for the benefit of Supplier's or Purchaser's creditors,
respectively;
(e) If Supplier or Purchaser materially breaches or fails to
observe or perform any of its covenants, obligations, conditions or
agreements under this Agreement and such breach is not cured within
thirty (30) days after written notice to the breaching party advising
of such breach. Without limiting the foregoing, Supplier's continuing
failure to comply with the Performance Standards (as defined in
Section 6.1) shall be deemed a material breach of Supplier's
covenants, obligations, conditions and agreements hereunder;
2.3 Change of Control. Notwithstanding anything to the contrary
herein, Purchaser may in its sole discretion terminate this Agreement
immediately upon a Change of Control. For purposes of this Section 2.3, a
Change of Control shall include the sale, assignment, transfer or disposal
of all or substantially all of the assets of Supplier, or the acquisition
in any manner by any
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person or entity, or related group of persons or entities, of a controlling
interest in the voting stock of Supplier or in the voting stock of any
entity which owns or controls Supplier, in each case made without the prior
written consent of Purchaser (which consent may be withheld in Purchaser's
sole discretion).
2.4 Assistance by Supplier. If Supplier Breaches this Agreement and
Purchaser chooses to terminate this Agreement pursuant to Section 2.2 or if
this Agreement terminates pursuant to Section 2.1, Supplier will provide
Purchaser with all reasonable assistance in implementing Purchaser's
manufacturing and support system for production and distribution of the
Products; provided, however, that Purchaser shall pay Supplier reasonable
compensation for such assistance if the Agreement terminates pursuant to
Section 2.1.
2.5 Return of Retained Equipment. Within thirty (30) days after
termination of this Agreement, Supplier shall make available for delivery
at its dock all Retained Assets (as defined in the Asset Purchase
Agreement). Notwithstanding the foregoing, Purchaser shall have the right
at any time in its sole discretion to remove all or any portion of the
Retained Assets (as defined in the Asset Purchase Agreement) if and only to
the extent such Retained Assets are not necessary for Supplier to perform
its services hereunder, whether located at Supplier's premises or
elsewhere, and such removal shall have no effect on Purchaser's Minimum
Annual Commitments or on any other provision of this Agreement.
2.6 End-of-Life Inventory Purchases. Upon termination of this
Agreement, Purchaser will purchase from Supplier, and Supplier will sell to
Purchaser, all end-of-life inventory relating to the Products, for a
purchase price equal to the net amount actually paid by Supplier for such
end-of-life inventory plus 5%, less any discounts, returns or allowances
provided for such inventory at the time of Supplier's purchase thereof.
ARTICLE 3: PRODUCTS AND PRICING
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3.1 Description. During the Term, Supplier agrees to (1) manufacture
for and sell to Purchaser the products and spare parts described in
Appendix A (including all revisions and upgrades to and Derivatives
thereof, the "Products"), as ordered by Purchaser from time to time, and
(2) provide the engineering and design services described on Appendix B
(the "Engineering Services"), as requested by Purchaser from time to time.
During each year of the Term, Purchaser will purchase Products and
Engineering Services from Supplier in an aggregate purchase price to
Purchaser not less than the target amounts set forth for such year on
Appendix C attached hereto (with respect to each year, the "Minimum Annual
Commitment"); provided, that the amounts set forth on Appendix A, B and C
in United States Dollars shall be converted to Dutch Guilders at a rate of
2.0829 Dutch Guilders per United States Dollar. Each of the Products and
Engineering Services sold by Supplier to Purchaser pursuant to the terms
hereof shall conform to the Specifications. Supplier also agrees to
manufacture and sell to Purchaser, as ordered by Purchaser, spare parts
relating to newly developed products, which spare parts and the prices
therefor the parties shall reasonably agree to.
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3.2 Resale. Supplier will not manufacture for or grant to anyone else
the right to manufacture, sell or distribute the Products, including
without limitation any Derivative of the Products.
3.3 Product Changes. Supplier will make changes to the Products and
Engineering Services for Purchaser in accordance with Purchaser's written
instructions and pursuant to the terms of Section 1.12.
3.4 Pricing. The purchase prices for each of the Products and the
Engineering Services purchased by Purchaser hereunder shall be as set forth
on Appendices A and B attached hereto.
3.5 Equipment. Supplier shall provide all equipment, materials and
personnel necessary to manufacture, package and ship Products and perform
Engineering Services in accordance with the terms hereof without any
additional costs to Purchaser beyond those incorporated into the respective
purchase prices set forth on Appendices A and B attached hereto.
3.6 Non-Competition and Non-Solicitation.
(a) Supplier covenants and agrees that from the date hereof until
the second anniversary of the termination or expiration of this
Agreement, anywhere in the world, it shall not and shall cause each of
its Affiliates not to, for any reason whatsoever, directly or
indirectly:
(i) engage in the manufacture, production, design,
engineering, importation, purchase, marketing, sale,
distribution, research or development of any products which
directly or indirectly compete with, or are the same as, have a
similar purpose as, or are similar to the trade dress of, the
Products; or
(ii) call upon or solicit any employee of Purchaser or any
of Purchaser's affiliates for the purpose or with the intent of
enticing such employee away from or out of the employ of
Purchaser or Purchaser's affiliate, or solicit any then-current
or past representatives, distributors or customers of Purchaser
or of any affiliate of Purchaser for the purpose of carrying,
buying, selling, manufacturing, distributing or soliciting
customers for, any products that compete with the Products.
(b) Purchaser covenants and agrees that from the date hereof
until the second anniversary of the termination of expiration of this
Agreement, any where in the world, it shall not and shall cause each
of its Affiliates not to, for any reason whatsoever, directly call
upon or solicit any employee of Supplier or any of Supplier's
Affiliates for the purpose or with the intent of enticing such
employee away from or out of the employee of Supplier or Supplier's
Affiliate,
(c) Notwithstanding anything to the contrary herein and without
limiting Purchaser's right to terminate pursuant to any other
provision of this Agreement, Purchaser shall have the right to
immediately terminate this Agreement if (i) Supplier breaches any
provision of
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Section 3.6(a)(i), or (ii) Supplier enters into any agreement with any
competitor of Purchaser relating to, or consummates with any
competitor of Purchaser, a Change of Control of Supplier. "Change of
Control" is defined as (a) an acquisition of Supplier by means of a
stock purchase, merger, consolidation or other business combination in
which the shareholders of Supplier immediately prior to such stock
purchase, merger, consolidation or other business combination hold
less than 50% of the outstanding securities (either voting control or
economic interests) of the surviving business entity immediately
following such stock purchase, merger, consolidation or other business
combination, (b) a sale or license of all or substantially all of
Supplier's assets, or (c) a sale or other transfer of Supplier's
rights to manufacture any of the Products that Purchaser is continuing
to purchase.
ARTICLE 4: PURCHASE COMMITMENTS
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4.1 Purchaser Twelve Month Forecasts. For each Product, Purchaser will
provide to Supplier a twelve-month rolling forecast setting forth the
amount of Product Purchaser expects to purchase from Supplier during such
period, and will update each such forecast quarterly in advance. Purchaser
shall have no obligation to purchase the amounts specified in such
forecasts and such forecasts do not represent firm purchase orders and are
subject to change by Purchaser.
4.2 Purchaser Commitments. Purchaser will provide Supplier a rolling
3-month commitment which will be updated every month. Purchaser commits to
purchase the number of units of finished Product set forth in each 3-month
commitment, as updated. Delivery of products will take place only on
committed purchase orders.
4.3 Minimum Annual Commitments.
(a) Supplier shall notify Purchaser within thirty (30) days after
the end of any year during the Term if Purchaser is likely to fall
short of its Minimum Annual Commitment with respect to such year, and
within sixty (60) days after the end of such year shall specify the
amount by which Purchaser is then short of the applicable Minimum
Annual Commitment. If Purchaser fails to purchase at least the Minimum
Annual Commitment applicable to the Products, it may cure that breach
by sending to Supplier a prepaid purchase order for a sufficient
number of Products to meet the commitment. With respect to any year
during the Term during which Supplier has utilized the Facility at or
near single-shift capacity for such year, the parties hereto shall
negotiate in good faith with respect to enforcement of the Minimum
Annual Commitment for such year.
(b) If Purchaser fails to order at least the Minimum Annual
Commitment applicable to the Engineering Services, in either (i)
accepted open purchase orders for services during the term, (ii) paid
or prepaid invoices, or (iii) invoiced amounts (without double
counting such amounts from year to year), then it may cure that breach
by paying an invoice from Supplier for the difference between the sum
of such (1) open purchase orders, (2) paid or prepaid invoices, and
(3) invoiced amounts, and the amount of Minimum Annual Commitment.
Accepted purchase orders for Engineering Services shall be deemed to
include Engineering Services purchase orders
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rejected by Supplier, due to Supplier's inability to meet the normal
reasonable requirements of Purchaser.
4.4 Supplier will buy end-of-life inventory stock as mutually agreed
with Purchaser and at Purchaser's risk of buy back pursuant to Section 2.6.
ARTICLE 5: DELIVERY & SHIPMENT
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5.1 Delivery Terms. Orders for Products and requests for Engineering
Services submitted by Purchaser under this Agreement will be initiated by
written purchase orders to Supplier sent via mail, facsimile or electronic
transfer. Products will be delivered and Engineering Services supplied
against Purchaser purchase orders received by Supplier during the Term. To
the extent not inconsistent with this Agreement, the terms and conditions
set forth on Purchaser's current Standard Terms and Conditions of Sale,
attached hereto as Appendix D, shall govern each order of Products and
request for Engineering Services purchased by Purchaser pursuant to this
Agreement, notwithstanding anything to the contrary in Supplier's
then-current order form. Notwithstanding the foregoing, (i) the
Specifications shall control and override the provisions of Section 5.2 of
Appendix D, and (ii) Purchaser shall be responsible for all duties to be
paid on the Products. Product deliveries and provision of Engineering
Services may occur up to ninety days after the end of the Term.
5.2 Timing of Delivery.
(a) Supplier shall use commercially reasonable efforts to fill
all orders submitted by Purchaser on the date stipulated on the
applicable purchase order, or if no such delivery date is stipulated,
within thirty (30) days after receipt of such purchase order. Products
received more than ten (10) days in advance of the stipulated delivery
date may be rejected at Supplier's risk and expense pursuant to
Section 8.1. Supplier will promptly notify Purchaser in the event
deliveries may be delayed three (3) days or more beyond the scheduled
delivery date.
(b) Supplier shall use commercially reasonable efforts to provide
all Engineering Services by the date stipulated on the applicable
purchase order. Supplier will promptly notify Purchaser in the event
provision of Engineering Services may be delayed three (3) days or
more beyond the scheduled delivery date.
5.3 Delivery Process. All Products delivered pursuant to this
Agreement shall be packed in accordance with the requirements described in
the Specifications and marked for shipment at such address as Purchaser
shall specify in writing in the purchase order (the "Shipping Address").
All deliveries under this Agreement will be delivered to Purchaser or its
carrier agent F.O.B. (as defined in the Uniform Commercial Code) the
shipping point (Supplier's dock). The risk of loss and title in all
deliveries made hereunder shall transfer to Purchaser upon Supplier's
delivery to the carrier.
5.4 Payment Terms. Supplier shall invoice Purchaser upon shipment of
the Product to
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Purchaser and/or provision of the Engineering Services to Purchaser, as
applicable, based on the pricing and terms set forth on Appendix A and/or
B, as applicable. Each invoice will include Purchaser's purchase order and
the aggregate purchase price therefor, plus freight, taxes, duties and
other costs prepaid by Supplier, if any. All payments made under this
Agreement shall be in Euros. Payment terms shall be thirty (30) days after
the later of (i) the date of invoice, or (ii) the date of shipment of
Products to the correct Shipping Address and/or completion of the
Engineering Services, as applicable.
5.5 Cancellation of Orders. Purchaser may cancel orders for Products
or Engineering Services, without further obligation, upon at least thirty
(30) days notice to Supplier; provided, however, that if Purchaser cancels
orders for any Products which are to be custom-manufactured pursuant to
Purchaser's instructions, Purchaser shall pay for raw materials, work in
process and finished Products relating to such custom-manufactured Products
plus 5%. The aggregate number of finished Products and Products in process
at any given time shall not exceed the number placed on confirmed purchased
orders received by Supplier. Purchaser shall not pay for raw materials and
work in process that may be used by Supplier for the manufacture of other
products or diverted for any other purpose; provided that Purchaser shall
pay for any manufacturing charges required to modify such raw materials or
work in process so that they may be so used or diverted.
ARTICLE 6: PERFORMANCE EVALUATION
---------------------------------
6.1 Purchaser and Supplier will meet as necessary to evaluate each
party's performance hereunder, including without limitation its on-time
delivery and quality ratings and volume commitments and forecasts. With
respect to the Products, Supplier shall, on a commercially reasonable
efforts basis, maintain at least a 90% on-time delivery rating (delivery
shall be deemed on-time if no more than three days early and no days late)
and a 98.5% quality rating (as measured by units rejected divided by total
units received) (collectively, the "Product Performance Standards"). With
respect to the Engineering Services, Supplier shall perform the Engineering
Services in accordance with commercially reasonable standards in the
applicable industry (the "Engineering Services Performance Standards" and
together with the Product Performance Standards, the "Performance
Standards"). Should Supplier fail to meet any of the Performance Standards,
Supplier will use commercially reasonable efforts to create or modify
applicable processes to remedy such failure; provided, however, that such
remedial action shall not release Supplier from liability to Purchaser for
damages and other losses incurred by Purchaser as a result of Supplier's
failure to meet the Performance Standards.
6.2 Supplier will use commercially reasonable efforts to achieve a
100% on-time delivery rating and a 100% quality rating, and will work
toward a zero-defect policy in connection with Products and Engineering
Services provided hereunder.
ARTICLE 7: INSPECTION
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7.1 Records. Supplier shall maintain true, accurate and complete
records in respect of
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Product production, packaging, storage, testing and shipment hereunder, and
the performance of the Engineering Services ("Records") in accordance with
Supplier's records retention policy, a copy of which has been provided to
Purchaser prior to or on the date hereof. Upon written notice from
Purchaser to Supplier, Supplier shall permit Purchaser to (1) inspect the
Records at reasonable times and locations, and (2) take inventory of the
Products, and the materials used to produce the Products, produced and
manufactured by Supplier for Purchaser.
7.2 Plant Inspection. During the Term and upon reasonable prior
written notice, Purchaser may inspect, at Purchaser's cost, areas of the
plant or plants where Products are manufactured, handled, tested, packaged
or stored or Engineering Services are developed, performed or tested
hereunder for the purposes of inspecting such plants and its facilities,
the Products, the Engineering Services and the procedures followed by
Supplier; provided, however, that such inspection(s) shall not relieve
Supplier of any of its other obligations hereunder. Supplier shall, in good
faith, explore the possibility and feasibility of changing its procedure(s)
whenever such changes are determined by Purchaser as necessary or desirable
in order to correct and/or improve the Products and/or the Engineering
Services and the procedures followed hereunder.
7.3 Audit. Purchaser may use its internal personnel or retain an
independent auditor, bound by a standard confidentiality agreement, to
audit Supplier's books and records no more than once annually to determine
and review Supplier's costs and quality in connection with the Products and
Engineering Services provided hereunder. If such independent auditor finds
that Supplier has overcharged Purchaser for purchases of Products or
Engineering Services and Supplier does not dispute the findings, Supplier
shall pay to Purchaser the amount of overcharge by wire transfer of
immediately available funds within ten (10) days after receiving such
independent auditor's report itemizing such overcharges. If Supplier
disputes any of the findings of the independent auditor, Supplier and
Purchaser shall review the findings and attempt to resolve the dispute in
good faith for a period of 30 days. If the parties cannot resolve the
dispute within such 30 day period, the issue shall be submitted to an
independent auditor mutually agreeable to Purchaser and Seller, whose
finding shall be binding upon Purchaser and Seller.
7.4 Product Quality Information. In an effort to analyze and/or
improve Product quality and compare Supplier's information with that
obtained by Purchaser in the field, Purchaser may, no more than twice
annually, obtain Supplier's records pertaining to Product manufacturing
quality and defects. That information shall be for Purchaser's internal use
only and Purchaser shall treat it as Supplier's proprietary and
confidential information.
ARTICLE 8: PRODUCT REJECTION.
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8.1 Supplier shall not knowingly ship any Nonconforming Products or
knowingly provide any Nonconforming Engineering Services to Purchaser.
Nothing contained in this Agreement shall be deemed to obligate Purchaser
to inspect any Products produced hereunder. Without limiting any other
rights available to Purchaser with respect to Nonconforming
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Engineering Services which are in violation of any Laws, in the event
Supplier produces any Nonconforming Product or Nonconforming Engineering
Service and Purchaser returns such Nonconforming Product to Supplier or
rejects such Nonconforming Engineering Service (which return shall be at
Supplier's risk and expense), Supplier shall promptly (and in any event no
later than thirty (30) calendar days after receipt of such returned
Product) replace such Product or reperform such Engineering Service, as
applicable, at no cost to Purchaser (including any additional freight costs
incurred). Supplier shall pay the shipping charges back to Purchaser for
returned Products.
8.2 Within twenty-four (24) hours of receipt of Purchaser's notice of
receipt of any Nonconforming Products, Supplier will provide authorization
to Purchaser for return of such Nonconforming Products at Supplier's risk
and expense.
8.3 If Purchaser sends Supplier a Corrective Action Request (CAR),
Supplier will respond to Purchaser in writing within thirty (30) days after
receipt thereof
ARTICLE 9: REPRESENTATIONS AND WARRANTIES
-----------------------------------------
Supplier hereby represents and warrants to Purchaser as follows:
9.1 General. Supplier's performance hereunder shall be in accordance
with all terms and provisions of this Agreement, including the
Specifications. Without limiting the foregoing, (1) all Products supplied
to Purchaser hereunder will upon shipment (x) comply with all
Specifications and will be free from defects in materials (to the extent
the materials were not specified in the relevant Specifications) and
workmanship by Supplier, and (y) be packed and labeled according to the
Specifications, and (2) all Engineering Services provided to Purchaser
hereunder will upon provision to Purchaser comply with all Specifications.
9.2 Compliance with Laws. All Engineering Services provided to
Purchaser hereunder, and Supplier's performance hereunder (including
without limitation Supplier's processes and Supplier's maintenance of the
plant or plants used to manufacture the Products and perform the
Engineering Services), shall at all times comply with all applicable Laws.
ARTICLE 10: INDEMNIFICATION
---------------------------
10.1 Supplier hereby indemnifies Purchaser and forever holds
Purchaser, its Affiliates and their respective directors, officers,
employees and agents and customers (collectively, "Purchaser Indemnitees")
harmless from and against all claims, suits, actions, proceedings, damages,
losses, liabilities, costs or expenses (including reasonable attorneys'
fees, expenses and amounts paid in settlement) ("Claims") incurred by any
Purchaser Indemnitee arising out of, based
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upon, or in connection with any (i) material breach of any of Supplier's
warranties, representations or covenants under this Agreement, (ii)
injuries or damages to Persons or property arising from or in any way
related to the Engineering Services or to the use or consumption of any
Products produced by Supplier for Purchaser pursuant to this Agreement, to
the extent arising out of the condition of such Product(s) as of the date
of shipment to Purchaser and caused by a failure to comply with the
Specifications or a defect in materials (to the extent the materials were
not specified in the relevant Specifications) or workmanship by Supplier,
(iii) actual or alleged injury to Person or property or death occurring to
any of Supplier's employees, agents or any individual on Supplier's
premises, or (iv) fines and penalties for violations of Laws attributable
to Supplier in connection with Supplier's manufacture of Products and/or
performance of the Engineering Services.
10.2 Purchaser hereby indemnifies Supplier and forever holds Supplier
and its Affiliates and their respective directors, officers, employees and
agents (collectively, "Supplier Indemnitees") harmless from and against all
Claims incurred by Supplier arising out of, based upon, or in connection
with (i) any material breach of any of Purchaser's warranties,
representations or covenants under this Agreement, and (ii) the Products
(except to the extent such claims are caused by Supplier's failure to
comply with the Specifications or defects in workmanship by Supplier).
10.3 Indemnification Procedure.
(a) If any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this Article 10, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced by such delay.
(b) The Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as the
Indemnifying Party notifies the Indemnified Party in writing within 45
days after receipt of notice from the Indemnified Party regarding such
claim. So long as the Indemnifying Party is conducting the defense of
such claim as provided in the immediately preceding sentence, the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and may participate in defense of such claim. The Indemnifying
Party will not consent to the entry of any judgment or enter into any
settlement with respect to a Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only
the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
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(c) Unless and until the Indemnifying Party assumes the defense
of the Third Party Claim as provided above, the Indemnified Party may
defend against the Third Party Claim in any manner it reasonably may
deem appropriate with counsel reasonably acceptable to the
Indemnifying Party. In no event will the Indemnified Party consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party.
(d) In the event that any Indemnified Party has a claim against
any party obligated to provide indemnification pursuant to Article 10
hereof which does not involve a Third Party Claim, the Indemnified
Party shall with reasonable promptness notify the Indemnifying Party
of such claim, specifying the nature of such claim and the amount or
the estimated amount thereof to the extent then feasible (the "Claim
Notice"). If the Indemnifying Party does not notify the Indemnified
Party within 30 days after the date of delivery of the Claim Notice
that the Indemnifying Party disputes such claim, with a detailed
statement of the basis of such position, the amount of such claim
shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with
this Section 10.3(d), the Indemnified Party shall respond in a written
statement to the objection within 15 days and, for 60 days thereafter,
the parties shall attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims (and, if
the parties should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties). If the parties do not
so agree, then either party may pursue its remedies under law
following the aforesaid 60-day period.
10.4 The provisions of this Article 10 shall survive the termination
of this Agreement.
ARTICLE 11: PRODUCT RECALLS
---------------------------
11.1 If any Nonconforming Product, or any part thereof, is, or in the
reasonable opinion of Supplier or Purchaser may become, the subject of any
claim suit or proceeding arising out of personal injury or material damage
to real property due to the noncompliance with Specifications, the parties
shall work together to expeditiously recall the Products from Purchaser's
own inventory and from Purchaser's direct and indirect customers. Supplier
will reimburse Purchaser for all shipping and repair costs and other
commercially reasonable out-of-pocket costs directly related to such
recall. In the event of such a recall, Supplier shall use commercially
reasonable efforts to repair or replace the recalled Products to correct
any actual defects. The foregoing provisions of this Section 11.1 shall in
no way diminish or otherwise affect Purchaser's rights and remedies under
Section 10.1.
ARTICLE 12: INTELLECTUAL PROPERTY AND CONFIDENTIALITY
-----------------------------------------------------
12.1 Except to the extent set forth in Section 12.2, nothing in this
Agreement shall be
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construed to grant to Supplier any right, title or interest in, to or under
any Intellectual Property (as defined in the Asset Purchase Agreement). The
Products shall bear Purchaser's trademark, logo and/or trade dress and such
other information as Purchaser selects. Supplier will not use any
confusingly similar or colorable imitation of the Intellectual Property.
12.2 During the Term and solely as necessary in connection with
Supplier's performance hereunder, Supplier shall have the right to use such
patents, trademarks and tradenames of Purchaser as are necessary to
manufacture the Products and perform the Engineering Services purchased by
Purchaser hereunder in conformity with the Specifications. Except for the
rights described in the preceding sentence, nothing in this Section 12.2 or
elsewhere in this Agreement will grant Supplier any right, title or
interest in, to or under any Intellectual Property. At no time during or
after the Term will Supplier or any of its Affiliates directly or
indirectly challenge or assist any other Person or Persons in challenging
any of the Intellectual Property, Purchaser's right, title and interest
therein or the registration thereof, or register or attempt to register any
trademarks, marks or tradenames confusingly similar to any of the
Intellectual Property. Supplier's use of Purchaser's patents, trademarks
and tradenames pursuant to this paragraph shall be of sufficient standards
of quality to preserve the goodwill embodied therein.
12.3 Supplier acknowledges that Purchaser possesses trade identity
rights in the contrasting combination of a dark bodied portable electronic
test instrument and yellow-hued holster or border. In recognition of these
trade identity rights, Supplier agrees not to manufacture, sell, distribute
or promote portable electronic test instruments utilizing a dark body and
contrasting yellow-hued holster or border, unless the instruments are
manufactured, sold, distributed or promoted by Supplier for Purchaser. In
further recognition of Purchasers trade identity rights, Supplier agrees
that all portable electronic test equipment manufactured, sold, distributed
or promoted by Supplier after the date of this Agreement, shall have a
total visual image that is distinctly different from Purchaser's
dark-bodied instrument and contrasting yellow-hued holster/border
combination. Supplier agrees to the foregoing terms on a worldwide basis.
12.4 Covenants Relating to Intellectual Property.
(a) Supplier hereby acknowledges and agrees that all Intellectual
Property and all records, in whatever media (including written works),
discoveries, documents, papers, notebooks, drawings, designs,
technical information, inventions, trade dress, trade names, source
code, object code, processes, methods or other copyrightable or
otherwise protected works Purchaser or any of its Affiliates
conceives, creates, makes, invents, or discovers and that result from
the Engineering Services performed by Supplier or any of its
Affiliates for Purchaser or any of its Affiliates (collectively, the
"Works"), whether conceived, created, discovered, made, or invented
individually or jointly with others, will be and remain the absolute
property of Purchaser or Purchaser's respective Affiliate, as
applicable, as will all the worldwide patent, copyright, trade secret,
or other intellectual property rights in all such Works. Supplier
irrevocably and unconditionally waives all rights that vest in
Supplier or any of its Affiliates (whether before, on,
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or after the date of this Agreement) in connection with Supplier's or
any of its Affiliate's authorship of any such copyrightable Works.
Without limitation, Supplier waives the right to be identified as the
author of any such Works and the right not to have any such Works
subjected to derogatory treatment. Supplier recognizes any such Works
are "works made for hire" pursuant to Section 101 and subsequent
sections of Title 17 of the United States Code (U.S. Copyright Laws)
of which Purchaser or Purchaser's respective Affiliate, as applicable,
is the author.
(b) Supplier will promptly disclose, grant, and assign ownership
to Purchaser for its sole use and benefit any and all Intellectual
Property (whether patentable or not). Supplier will promptly disclose
and hereby grants and assigns ownership to Purchaser of all patent
applications, letters patent, utility and design patents, copyrights,
and reissues thereof or any foreign equivalents thereof, that may at
any time be filed or granted for or upon any Intellectual Property.
(c) Supplier will, without charge but at Purchaser's expense,
promptly execute and deliver such applications, assignments,
descriptions, and other instruments as Purchaser may consider
reasonably necessary or proper to vest title to any Intellectual
Property (including without limitation all intellectual property of
Purchaser or any Affiliate of Purchaser as of the date hereof) in
Purchaser and to enable it to obtain and maintain the entire worldwide
right and title thereto.
(d) Supplier will provide to Purchaser or Purchaser's Affiliates,
at Purchaser's expense, all such assistance as Purchaser may
reasonably require in the prosecution of applications for patents,
copyrights, or reissues thereof relating to any Intellectual Property
(including without limitation all intellectual property owned by
Purchaser or any Affiliate of Purchaser as of the date hereof), in the
prosecution or defense of interferences that may be declared involving
any such applications, patents, or copyrights and in any litigation in
which Purchaser may be involved relating to any Intellectual Property.
(e) To the extent, if any, that Supplier owns rights to works,
inventions, discoveries, proprietary information, and copyrighted or
copyrightable works, or other forms of intellectual property that are
incorporated in the work product Supplier creates for Purchaser,
Supplier agrees that Purchaser will have an unrestricted,
non-exclusive, royalty-free, perpetual, transferable license to make,
use, sell, offer for sale, and sublicense such works and property in
whatever form and Supplier hereby grants such license to
Purchaser.(pound)
12.5 The parties hereto may during the Term disclose to each other
certain confidential and proprietary information which may include, but
will not be limited to, drawings, schematics, equipment, software, and
financial and other business records ("Proprietary Information"). Neither
party will use the Proprietary Information or disclose it to any third
party without the prior written consent of the other parties hereto, and
both parties will instruct their employees and agents about this
requirement. The term "Proprietary Information" includes the terms and
conditions of this Agreement. Proprietary Information shall not include (1)
any information in the
-14-
public domain on the date of this Agreement, (2) information that, after
the date of this Agreement, becomes part of the public domain (except by
breach of this Agreement), (3) information that was received by Supplier
from a third party with a right to disclose it, or (4) information that
Supplier is required to disclose pursuant to law. The recipient party's
obligation to protect Proprietary Information will survive this Agreement.
ARTICLE 13: PRODUCT LITERATURE
------------------------------
13.1 To assist Purchaser in marketing the Products, Supplier will
provide to Purchaser in hard copy and on electronic media all user and
technical information, documentation and literature related to the Products
developed by Supplier pursuant to the Engineering Services ("Product
Literature"). Such materials will be provided in sufficient time to allow
Purchaser to create its own materials. Supplier hereby grants Purchaser a
fully paid, perpetual license to use, reproduce and distribute the Product
Literature.
ARTICLE 14: GENERAL PROVISIONS
------------------------------
14.1 Independent Contractors. The relationship of Supplier and
Purchaser established by the Agreement is that of independent contractors,
and nothing contained in this Agreement will be construed to (i) give
either party the power to direct or control the day-to-day activities of
the other, (ii) constitute the parties as partners, joint venturers,
co-owners or otherwise as participants in a joint or common undertaking, or
(iii) allow either party to create or assume any obligation on behalf of
the other party for any purpose whatsoever. Personnel assigned by Supplier
to perform services under this Agreement will be employees of Supplier and
will not for any purpose be considered employees or agents of Purchaser.
Supplier assumes full responsibility for the actions of such personnel
while performing services hereunder and shall be solely responsible for
their supervision, direction and control, payment of salary (including
withholding of income taxes and Social Security), workers' compensation,
disability benefits and similar benefits.
14.2 Applicable Laws. This Agreement shall be governed by and
construed in accordance with the Laws of the state of New York.
14.3 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been
duly given (a) upon receipt if personally delivered or by overnight
courier, (b) on the date sent if made by facsimile transmission to the
party to whom such notice or communication is directed to the facsimile
number of such Person stated below (or as otherwise provided to or obtained
by the sending party) and if followed by a telephone call to such Person at
the same time to the telephone number stated below (or otherwise provided
to or obtained by the sending party) advising such Person (or leaving a
voice mail for such Person) that the facsimile transmission has been sent,
or (c) on the fifth business day after being sent by registered or
certified mail, return receipt requested, postage prepaid, to the parties
at their respective addresses set forth below.
-15-
To Purchaser: Fluke Corporation
0000 Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxx, Vice President, Finance
(000) 000-0000 (phone)
(000) 000-0000 (telefax)
and a required copy to:
Xxxxxx Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esquire
(000) 000-0000 (phone)
(000) 000-0000 (telefax)
To Supplier: Pemstar, Inc.
0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
(000) 000-0000 (phone)
(000) 000-0000 (telefax)
and a required copy to:
Xxxxxx & Whitney LLP
000 Xxxxx Xxxxxx X.X., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
(000) 000-0000 (phone)
(000) 000-0000 ( telefax)
Any party by written notice to the other may change the address or the
Persons to whom notices or copies thereof shall be directed.
14.4 Force Majeure. Nonperformance of either party will be excused to
the extent that performance is rendered impossible by strike, fire, flood,
earthquake, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond the
reasonable control of and not caused by the negligence of the
non-performing party.
14.5 Binding Effect. This Agreement will be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
14.6 Partial Invalidity. If any provision of this Agreement is held to
be invalid by a court of competent jurisdiction, then the remaining
provisions will nevertheless remain in full
-16-
force and effect. The parties agree to renegotiate in good faith any term
held invalid and be bound by the mutually agreed substitute provision.
14.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which
together will constitute one instrument.
14.8 No Waiver. No waiver of any term or condition of this Agreement
will be valid or binding on either party unless the same will have been
mutually assented to in writing by both parties. The failure of either
party to enforce at any time any of the provisions of the Agreement, or the
failure to require at any time performance by the other party of any of the
provisions of this Agreement, will in no way be construed to be a present
or future waiver of such provisions, nor in any way affect the validity of
either party to enforce each and every such provision thereafter.
14.9 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter herein and
supersedes all prior discussions between them. No modification of or
amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless in writing signed by an authorized
representative of both parties.
14.10. Survival of Certain Terms. Any termination of this Agreement
shall be without prejudice to any right of action that either party has
against the other at the date of termination. The provisions of the
following Sections and Articles of this Agreement will survive its
termination for any reason: Section 2.4 (Assistance by Supplier), Article 8
(Product Rejection), Article 9 (Representations and Warranties), Article 10
(Indemnification), Article 11 (Product Recalls), Article 12 (Intellectual
Property and Confidentiality), and Article 14 (General Provisions). All
other rights and obligations of the parties will cease upon termination of
this Agreement.
14.11 Public Statements. Public statements, press releases and
announcements by either party pertaining to this Agreement will be in a
form and made in a manner to be agreed upon by both parties and such
agreement will not be withheld unreasonably.
-17-
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
FLUKE INDUSTRIAL B.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
PEMSTAR B.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
Fluke Corporation joins in this Agreement for the sole purpose of
guaranteeing, and agreeing to take any and all actions necessary to guarantee,
Purchaser's performance in accordance with the terms and conditions of this
Agreement.
FLUKE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
-------------------------------
Title: Vice President
------------------------------
Pemstar, Inc. joins in this Agreement for the sole purpose of guaranteeing,
and agreeing to take any and all actions necessary to guarantee, Supplier's
performance in accordance with the terms and conditions of this Agreement.
PEMSTAR INC.
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
[Supply Agreement Signature Page]
18
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
FLUKE INDUSTRIAL B.V.
By: /s/ Xxxx xxx Xxxxxxxx
-------------------------------------
Name: Xxxx xxx Xxxxxxxx
Title: Managing Director
PEMSTAR B.V.
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
-------------------------------
Title: Managing Director
------------------------------
Fluke Corporation joins in this Agreement for the sole purpose of
guaranteeing, and agreeing to take any and all actions necessary to guarantee,
Purchaser's performance in accordance with the terms and conditions of this
Agreement.
FLUKE CORPORATION
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
Pemstar, Inc. joins in this Agreement for the sole purpose of
guaranteeing, and agreeing to take any and all actions necessary to guarantee,
Supplier's performance in accordance with the terms and conditions of this
Agreement .
PEMSTAR INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------
Title: Managing Director
----------------------------------
[Supply Agreement Signature Page]
