MANUFACTURING AGREEMENT
EXHIBIT
10.17
THIS
MANUFACTURING AGREEMENT (this "Agreement")
is
dated as of the 1st day of August, 2005, (the "Effective
Date")
by and
between ClearOne Communications, Inc., a Utah corporation, having a principal
place of business at 0000 Xxxxxxxx Xxx, Xxxx Xxxx Xxxx, Xxxx 00000
("Buyer"),
and
Inovar, Inc., a Utah corporation, having a principal place of business at 0000
Xxxx 0000 Xxxxx, Xxxxx, Xxxx 00000 ("Manufacturer").
Recitals
WHEREAS,
Manufacturer is an electronics manufacturing services provider that furnishes
the necessary personnel, material, equipment, services and facilities to
manufacture products for original equipment manufacturers and other third
parties in accordance with detailed specifications provided by such OEMs and
third parties;
WHEREAS,
Buyer desires to engage Manufacturer to manufacture certain of Buyer's products
in accordance with orders to be issued from time to time by Buyer;
WHEREAS,
Manufacturer is willing to enter into a business agreement and to accept orders
to manufacture Buyer's products upon terms and conditions, which, among other
things, reimburse Manufacturer for certain costs that Manufacturer reasonably
incurs in reliance on Buyer's orders and forecasts but cannot recover because
Buyer's requirements change; and
WHEREAS,
the parties hereto desire to enter into a business agreement upon the terms
and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual agreements hereinafter set forth,
it
is hereby agreed between the parties hereto as follows:
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1.
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DEFINITIONS.
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(a) Defect.
"Defect" means any defect in a Product that results from Manufacturer's failure
to comply with the applicable IPC Workmanship Standard.
(b) Exclusive
Products.
"Exclusive Products" means all of Buyer's products as of the Effective Date
as
set forth on Exhibit
D
hereto,
together with any product that is added as an Exclusive Product in accordance
with Section 2(b).
(c) Inventory.
"Inventory" means the materials and components required to manufacture the
Products.
(d) IPC
Workmanship Standard.
"IPC
Workmanship Standard" means the Workmanship Standard promulgated by IPC
specified in the applicable Product Schedule.
(e) Long
Lead Inventory.
"Long
Lead Inventory" means Inventory that has a long lead time from a supplier and
must be purchased in advance of receipt of a Purchase Order in order for
Manufacturer to be able to meet the delivery schedule for Products as set forth
in the applicable Product Schedule.
(f) Master
Product Schedule.
"Master
Product Schedule" means a product schedule for each Product inclusive of
information on the sample product schedule attached as Exhibit
A.
(g) Minimum
Buy Inventory.
"Minimum Buy Inventory" means Inventory that may only be purchased in minimum
lot sizes.
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(h) Minimum
Order Size.
"Minimum Order Size" means the minimum dollar or quantity amount that Buyer
must
order per Product on each individual Purchase Order as specified in the
applicable Product Schedule.
(i) NCNR
Inventory.
"NCNR
Inventory" means all Inventory that is (i) on order and not cancelable, or
(ii)
in Manufacturer's possession and not returnable to the vendor/supplier or
usable, within a reasonable time not to exceed three (3) months
from purchase, for other accepted Purchase Orders or other buyers.
(j) Non-Exclusive
Products.
"Non-Exclusive Products" as set forth on Exhibit
E
hereto.
(k) Product
Schedule.
"Product Schedule" means a schedule in the form of Exhibit A hereto, as amended
from time to time by mutual agreement of the parties, that (i) references this
Agreement and is executed by the parties hereto, (ii) sets forth information
relating to a Product to be manufactured for Buyer pursuant to this Agreement
and applicable Purchase Orders, and (iii) is attached to this Agreement and
incorporated herein by reference.
(l)
Products.
"Products" means the Exclusive Products and the Non-Exclusive
Products.
(m) Purchase
Order.
"Purchase Order" means an order meeting the requirements of this Agreement
submitted by Buyer for acceptance by Manufacturer.
(n) Purchase
Price.
"Purchase Price" means the unit price for a Product as established by
Manufacturer in accordance with Section 8.
(o) Safety
Stock Inventory.
"Safety
Stock Inventory" means Inventory that, unless purchased in advance of Purchase
Orders, may not be available in sufficient quantities to manufacture Products
as
set forth in the applicable Product Schedule.
(p) Specifications.
"Specifications" means the xxxx of materials, Product documentation, schematics,
assembly drawings, designs, test specifications, current revision number,
approved vendor list and other manufacturing information for each Product as
set
forth in the applicable Product Schedules.
(q) Total
Cost of Ownership.
"Total
Cost of Ownership" means total Product cost to Buyer including price, quality,
logistic cost and terms and conditions of purchase.
(r)
Minimum
Revenue Requirements.
“Minimum Revenue Requirements” means by Buyer projected revenue to Manufacturer
for a period of 12 (twelve) months.
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2.
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STATEMENT
OF WORK.
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(a) Engagement.
Buyer
hereby engages Manufacturer, and Manufacturer hereby accepts Buyer's engagement,
to furnish the necessary personnel, material, equipment, services and facilities
to be the exclusive manufacturer of the Exclusive Products (Exhibit D, these
products are Exclusive as long as Manufacturer provides competitive Total Cost
of Ownership), and a non-exclusive manufacturer of the Non-Exclusive Products,
in accordance with the applicable Specifications as required by Purchase Orders
issued by Buyer and accepted by Manufacturer in accordance with Section
4(a)
herein.
Manufacturer shall also provide repair service and warranty support and
proto-type services for new product introduction as mutually agreed by
Manufacturer and Buyer. Manufacturer's electronic manufacturing services shall
be performed in accordance with the applicable IPC Workmanship Standard for
each
Product being manufactured. A Master Product Schedule will be developed for
each
Product.
(b) Additional
Products.
Manufacturer shall have a right of first refusal to manufacture any new product
that is developed and proposed for production by Buyer after the Effective
Date.
Buyer shall provide Manufacturer at least thirty (30) days notice of any
proposal to have a product manufactured by a bona fide third party manufacturer,
which notice shall set forth the Total Cost of Ownership of the proposed
manufacturing agreement provided that such disclosure is not limited or
prohibited by the third party manufacturer or prohibited by law Manufacturer
shall then have the right to designate such product as an Exclusive Product
hereunder at a Total Cost of Ownership equal to or better than that proposed
by
any bona fide third party manufacturer (to be verified in writing by Buyer),
and
Buyer and Manufacturer shall execute a Product Schedule for such Product, which
shall be attached hereto and incorporated herein by reference. If Manufacturer
does not exercise such right within thirty (30) days after receipt of Buyer's
notice, Buyer may have such product manufactured by the third party at. Upon
written request by Buyer, Manufacturer shall provide prototype manufacturing
and
engineering support services for Buyer's new product introductions at such
prices and upon such terms as are mutually agreed upon by the
parties.
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(c) Certifications.
Manufacturer shall maintain its ISO 9001:2000 certification and shall target
RoHS manufacturing capability by October 2005 with full compliance to occur
by
June 30, 2006.
(d) Transition;
Technical Support; Employees.
The
parties acknowledge and agree that in connection with the performance of
Manufacturer's obligations hereunder, Manufacturer will be assuming Buyer's
manufacturing operations, which will involve Manufacturer subleasing a portion
of Buyer's manufacturing facility, acquiring an option to purchase Buyer's
manufacturing equipment, leasing Buyer's manufacturing equipment and leasing
the
employees used by Buyer in its Manufacturing operations from a third party
employee leasing company. During any period in which the Sublease (as defined
in
Exhibit B below) is in effect, Buyer shall provide to Manufacturer, at the
premises covered by the Sublease, such technical assistance and manufacturing
support as may be reasonably necessary to ensure a smooth transition of
manufacturing operations from Buyer to Manufacturer. In connection with the
assumption of Buyer's manufacturing operations by Manufacturer, Buyer shall
make
all identified manufacturing employees available to a third party employee
leasing company, and Manufacturer shall have the right to lease such employees
from the third party employee leasing company.
(e) Buyer's
Inventory.
On the
Effective Date, Manufacturer shall purchase Buyer's parts and materials on
hand
and in transit that can be used in the manufacturing of any ordered Products
("Buyer's Inventory"), other than materials deemed obsolete or otherwise
unusable by Manufacturer, at Buyer's cost for such parts and materials. The
purchase price for Buyer's Inventory shall be Buyer's standard cost for such
Inventory as of July 31, 2005, which shall be payable as follows: Within five
(5) business days after each calendar month, Manufacturer shall send to Buyer
a
statement setting forth the portion of Buyer's Inventory used (including the
part number, description, quantity, unit cost and extended cost) in the
manufacturing of the Products during such calendar month and within thirty
(30)
days after such calendar month, Manufacturer shall pay Buyer for the portion
of
the Buyer's Inventory used. Buyer shall have the right to audit the monthly
inventory statement provided by Manufacturer. In the event any Buyer's Inventory
remains unused nine (9) months after the Effective Date, or in the event this
Agreement is terminated for any reason prior to the end of such 9-month period,
Manufacturer shall return such unused Buyer's Inventory to Buyer and any balance
remaining on the Purchase Price shall be canceled. Manufacturer agrees that
in
cases where Manufacturer may have common components, Manufacturer will consume
Buyer’s components before consuming any of Manufacturer’s
components.
(f) Other
Agreements.
This
Agreement shall be contingent upon the execution by Buyer and Manufacturer
of a
sublease for Buyer's manufacturing facilities in the form of Exhibit B hereto
(the "Sublease"),
and
the Equipment Purchase Option Agreement in the form of Exhibit C
hereto.
(g) Disaster
recovery plan.
Manufacture shall develop and provide a disaster recovery plan in writing to
secure product supply in the event of a catastrophic occurrence to the Buyer
within 60 days of the effective date of the Manufacturing Agreement.
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3.
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TERM
AND TERMINATION.
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(a) Term.
Unless
sooner terminated as set forth in this Section
3,
the
term of this Agreement shall commence on the Effective Date and continue for
an
initial term of three (3) years (the "Initial
Term")
unless
either party provides a written termination notice to the other party pursuant
to Section
3(c).
(b) Renewal.
Unless
terminated in accordance with Section
3(c)
below,
this Agreement shall be automatically renewed for successive one-year terms
(each a "Renewal
Term"
and,
together with the Initial Term, the "Term").
(c) Termination.
(i)
After the second anniversary of the Effective Date, either party may terminate
this Agreement for any reason, upon one hundred twenty (120) days
written notice to the other party, and (ii) either party may terminate this
Agreement sixty (60) days after written notification to the other party of
material breach of this Agreement, or immediately in the case of failure to
make
any payment hereunder or breach of confidentiality obligations, if such breach
is not cured within such period or, if such breach cannot reasonably be cured
within sixty (60) days, the defaulting party fails to commence a cure within
the
sixty (60) day period and thereafter pursue such cure to
completion.
(d) Effect
of Termination.
The
expiration or termination of this Agreement shall not affect any obligations
that exist as of the date of termination, including without limitation accepted
Purchase Orders under Section
4.
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4.
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ORDERING.
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(a) Purchase
Orders.
Performance under this Agreement shall be initiated by Purchase Orders issued
by
Buyer and accepted by Manufacturer in accordance with Section 4(b) below. Except
as set forth in Section 4(e) below, Buyer shall be under no obligation to
purchase, and Manufacturer shall be under no obligation to manufacture, Products
hereunder unless and until Buyer issues a Purchase Order and Manufacturer has
accepted Buyer's Purchase Order. Buyer's Purchase Orders shall set forth for
each ordered Product: (i) the quantity, which shall not be less than the
applicable Minimum Order Size, (ii) the applicable Purchase Price and total
price, (iii) the delivery and shipping instructions, and (iv) the requested
delivery schedule, which shall comply with the delivery schedule limitations
set
forth in the applicable Product Schedule. Notwithstanding the foregoing, if
Manufacturer's Long Lead Time Inventory is not compatible with Buyer's requested
delivery schedule, the parties may agree in writing or by Purchase Order that
Manufacturer may begin work in advance of having a definitive delivery schedule
and that the parties will, within ten (10) days, finalize the delivery schedule
based upon the information on the Long Lead Time Inventory. All Purchase Orders
shall be subject to and governed by the terms and conditions of this Agreement
and the applicable Product Schedules, which shall not be changed or supplemented
by an accepted Purchase Order unless such changed or supplemental terms and
conditions are set forth on the face of the Purchase Order and specifically
reference this Section
4(a).
Buyer
and Manufacturer acknowledges that pre-printed terms and conditions on its
Purchase Order form, if any, shall not apply to the Purchase Order.
Manufacture
shall make reasonable effort to accommodate Buyers PO’s not limited to
expediting product and material.
(b) Purchase
Order Timing.
Purchase Orders shall be submitted on a weekly basis. Upon execution of this
Agreement, Buyer shall submit five (5) Purchase Orders to Manufacturer, with
each Purchase Order representing one (1) week of Buyer's requirements. Each
week
thereafter Buyer will submit a new one (1) week Purchase Order to maintain
a
five (5) week rolling requirement.
(c) Cancellation
of Purchase Orders.
Purchase Orders may only be modified or cancelled, and scheduled shipments
may
only be deferred, with Manufacturer's prior written consent or according to
the
terms of this Agreement. Both parties agree that written consent can be in
the
form of an e-mail. Modification, change, or cancellation is not deemed approved
until e-mail acknowledgement is received from the authorized person subject
to
section 5b.
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(d) Acceptance.
Manufacturer shall use reasonable commercial efforts to accept all Buyer
Purchase Orders. No Purchase Order shall be deemed accepted unless Manufacturer
provides Buyer written notice accepting the Purchase Order. Both parties agree
that written consent can be in the form of an e-mail. Acceptance is not approved
until e-mail acknowledgment is received from the authorized representative
of
Manufacturer.
(e) Minimum
Revenue Requirement (MRR).
Buyer
and Manufacturer agree to use MRR to set the transfer price for a 12 month
period. During the first year of the Term, the aggregate amount paid to
Manufacturer by Buyer shall not be less than 75% of the initial Long Range
Forecast (as defined below), which shall be approved by Manufacturer in writing.
Manufacturer and Buyer shall review and compare the Mid-Range forecast to the
MRR quarterly and mutually agree to price increases or decreases going forward.
The foregoing amounts are collectively referred to herein as the "Minimum
Revenue Requirement."
The
agreed upon MRR as of the date of execution based on the Long Range Forecast
is
$9.6 million dollars. In the event amounts paid to Manufacturer by Buyer fall
below 75% or exceed 125% of the Minimum Revenue Requirement, the parties agree
that the pricing of Products shall be adjusted in accordance with Section 8(b)
below.
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5.
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FORECASTS.
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(a) Manufacturer's
Reliance on Forecasts.
On or
before the last day of each calendar month, Buyer shall provide to Manufacturer
the estimated quantity of each Product that will be ordered during the six
(6)
month period following such date (the "Mid-Range
Forecast"),
and
the estimated quantity of each Product that will be ordered during the one
(1)
year period following such date (the "Long
Range Forecast").
The
Long Range Forecast shall be for planning purposes only. Buyer understands
and
acknowledges that Manufacturer will use the Mid-Range Forecast, among other
things, to determine the amount of Inventory to purchase in advance of Purchase
Orders. Such Inventory may include Long Lead, Minimum Buy, NCNR, and Safety
Stock Inventory. The parties will review monthly Mid-Range Forecasts and
mutually agree on the Long Lead, Minimum Buy, NCNR and Safety Stock Inventory
to
be acquired by Manufacturer pursuant to such Mid-Range Forecast. Buyer agrees
that if any such Inventory purchased in advance of the Purchase Orders is not
used for Buyer's Purchase Orders and cannot be returned or used on other orders
within three (3) months (or as the parties may otherwise mutually and expressly
agree), then Buyer shall purchase any such Inventory at Manufacturer's cost
provided that Manufacturer can show that such Inventory was purchased to meet
mutually agreed Long Lead, Minimum Buy, NCNR and/or Safety Stock Inventory
requirements. In addition, Manufacturer shall be compensated for otherwise
unrecoverable costs reasonably
incurred by Manufacturer in reliance on the Mid-Range Forecast, including but
not limited to, the cost of all NCNR Inventory or other unused Inventory
specifically ordered for Buyer in Manufacturer's possession (plus Manufacturer's
standard material handling fee not to exceed 8%), any vendor cancellation
charges (including restocking fees), and any nonrecurring engineering or
production costs provided that Manufacturer can show that such Inventory was
purchased to meet mutually agreed Long Lead, Minimum Buy, NCNR and/or Safety
Stock Inventory requirements. Manufacturer
shall use reasonable commercial efforts to return unused Inventory specifically
purchased for Buyer and to cancel pending orders with suppliers. Upon
Manufacturer's receipt of payment from Buyer for any Inventory, Buyer shall
have
the option to: (i) direct Manufacturer to ship to Buyer, at Buyer's cost, the
Inventory, or (ii) request Manufacturer store the Inventory in an ESD compliant
and temperature controlled environment at customary storage charges for use
on
future Purchase Orders for a period of up to three (3) months or as the parties
may otherwise mutually agree. Buyer agrees to notify Manufacturer promptly
in
writing if and when Buyer determines that it will not order at least the
estimated quantity set forth in the applicable Mid-Range Forecast for a
Product.
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(b) Manufacturing
Flexibility and Minimum Order Quantities.
Manufacturer agrees to allow up to (i) a 50% reduction/addition in the quantity
of a Product actually ordered from the quantity set forth in the Mid-Range
Forecast for the period 61 - 90 days following the date of the Mid-Range
Forecast; and (ii) a 25% reduction/addition in the quantity of a Product
actually ordered from the quantity set forth in the Mid-Range Forecast for
the
period 36 - 60 days following the date of the Mid-Range Forecast. If the
quantity actually ordered falls below the foregoing thresholds, then the
Purchase Price for that Product going forward may be equitably adjusted to
reflect the impact of Buyer's failure to purchase the estimated quantity as
mutually agreed by both parties. The parties agree to negotiate such request
in
good faith. The minimum order quantity (MOQ) for each Product shall be as set
forth on Exhibits D and E hereto.
(c) Product
End-of-Life.
Buyer
shall provide not less than ninety (90) days written notice to Manufacturer
of
any Product end-of-life.
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6.
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SHIPMENT
AND DELIVERY.
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Manufacturer
shall ship Products in accordance with each accepted Purchase Order, subject
to
the terms and conditions of this Agreement. Delivery of Products shall be made
F.O.B. at the loading dock of Buyer's facility on the dates specified in the
applicable Purchase Order. Title to, and risk of loss for, Products shall pass
to Buyer at the time of delivery of possession of the Products at Buyer's
facility.
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7.
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ACCEPTANCE.
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The
Product shall be deemed accepted when Buyer has tested and inspected the Product
in accordance with the contracted level of testing and inspections, and such
Products have passed the testing and inspections.
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8.
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PRICES;
OTHER COSTS; PRICE CHANGES;
INVOICING.
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(a) Prices;
Taxes.
Buyer
shall pay Manufacturer the Purchase Price as mutually agreed upon by
Manufacturer and Buyer, which Purchase Price may be adjusted from time to time
pursuant to the terms of this Agreement. The Purchase Price is inclusive
of the
costs
of packaging, shipping and insurance and any applicable federal, state and
local
taxes.
(b) Price
Changes.
In
addition to other provisions in this Agreement allowing for changes in the
Purchase Price, if fluctuations occur at any time in the costs of manufacturing
any Product, Manufacturer may request an adjustment in the Purchase Price to
account for such fluctuations, and the parties agree to negotiate any such
adjustment in good faith. Buyer has the right to request a review of cost
changes impacting the proposed increase or decrease of prices. Except as
otherwise set forth in this Agreement, the Purchase Prices for the Products
shall not be adjusted unless, during any calendar month MOQ or contract year,
Buyer fails to meet the Minimum Revenue Requirement, in which event Manufacturer
shall be entitled to an equitable adjustment going forward in the Purchase
Price. . Notwithstanding the foregoing, the Purchase Price as of the effective
date shall be reduced as follows:
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a.
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Manufacturer
shall use its commercially reasonable efforts to reduce it costs
of
manufacturing by 10% prior to April 15, 2006. Effective as of April
15,
2006, the Purchase price for each product shall be reduced by an
amount
equal to (A) 10% of the Manufacturer’s non-materials cost of manufacturing
such Product on the effective Date (B) the amount of any reduction
in
Manufacturer’s costs of materials for such Product between the effective
Date and April 15, 2006.
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(c) Tooling/Non-Recurring
Expenses.
Buyer
shall pay for, or obtain and consign to Manufacturer, any Product specific
tooling and shall prepay other non-recurring expenses as set forth in the
applicable Product Schedule. Manufacture shall insure adequate maintenance
for
all consigned tooling. Upon request by Buyer, Manufacturer shall return all
items paid for by Buyer pursuant to this Section
8(c).
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(d) Invoicing
and Payment.
Manufacturer shall invoice Buyer with each shipment of Products. A proper
invoice shall include Manufacturer's name and invoice date, the Purchase Order
number, the total price and the name (if applicable), title, complete mailing
address where payment is to be sent and must be submitted to the appropriate
invoice address listed in the applicable Product Schedule or Purchase
Order.
Terms
will be 2% 10, net 30 days, Buyer to pay all invoices within thirty (30) days
of
the date of invoice. Payments shall be made in U.S. dollars. Any payment or
part
of a payment that is not paid after thirty (30) days past due shall bear
interest at the rate of one percent (1%) per month from its due date until
paid.
All payments are due at Manufacturer's place of business.
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9.
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ENGINEERING
CHANGES AND COST SAVINGS.
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Buyer
may
request in writing that Manufacturer incorporate an engineering change into
a
Product. Such request shall include a description of the proposed change
sufficient to permit Manufacturer to evaluate it. Manufacturer's evaluation
shall be in writing and shall state the impact of the requested change on
delivery schedule and expected cost. Manufacturer shall not proceed with the
requested engineering change until the parties have agreed in writing on the
changes to the Product, Specifications, delivery schedule and pricing, including
without limitation the cost to be paid by Buyer for re-assembly, retooling
and
Inventory on hand and on order that becomes obsolete. Pricing for obsolete
Inventory as a result of such change shall be based upon the cost of such
Inventory plus Manufacturer's standard material handling fee. Any cost reduction
programs may also have an affect on the Purchase Price.
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10.
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FORCE
MAJEURE.
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Neither
party shall be liable for its failure to perform hereunder due to any acts
of
God, including fires, floods, wars, terror, sabotage, accidents, labor disputes,
governmental laws, ordinances, rules and regulations, whether valid or invalid.
Additionally, neither party shall be liable for its failure to perform hereunder
to the extent operational occurrences are beyond its reasonably control,
including, without limitation, inability to obtain material, equipment or
transportation, shortages, accidents, priorities, requisitions, allocation
price
adjustment restrictions and any other similar occurrence; provided, however,
that obligations for payment for Products produced and shipped shall not be
relieved or suspended by any event of force majeure. The party whose performance
is prevented by any such occurrence shall notify the other party thereof in
writing as soon as is reasonably possible after the commencement of such
occurrence, and shall promptly give written notice to the other party of the
cessation of such occurrence. The party affected by such occurrence shall use
reasonable commercial efforts to remedy or remove such event of force majeure
as
expeditiously as possible.
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11.
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INTELLECTUAL
PROPERTY.
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(a) Ownership
of Intellectual Property; License.
Title
to and ownership of all of the technology, trade secrets, trademarks, know-how,
and information regarding the Products, and the manufacture of the Products,
supplied by Buyer to Manufacturer hereunder shall remain in Buyer. Buyer hereby
grants Manufacturer a limited, non-transferable, non-exclusive, revocable
license to use Buyer's software, technology, trade secrets, know-how, and other
proprietary information ("Buyer's
Proprietary Information")
for
the purposes of this Agreement, free of any claim or allegation by Buyer of
misappropriation of Buyer's Proprietary Information or infringement by
Manufacturer of any Buyer intellectual property rights covering Buyer's
Proprietary Information; provided, however, that Manufacturer's rights and
freedom of use in connection with the manufacture of Products for Buyer
hereunder shall endure only for the term of this Agreement. After the
termination or expiration of this Agreement, (i) such license shall expire
and
Manufacturer shall have no further rights to use Buyer's Proprietary
Information, and (ii) Manufacturer shall return to Buyer all written documents
and other materials relating to Buyer's Proprietary Information. Notwithstanding
the foregoing, title to and ownership of any software, technology, trade
secrets, know-how, and information of Manufacturer ("Manufacturer's
Proprietary Information")
used
by Manufacturer hereunder shall remain the property of
Manufacturer.
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(b) Confidentiality.
Both
parties agree that either party may acquire information that is confidential
and
proprietary to the other party including, but not limited to, business plans,
finances, financial results, strategies, customers, suppliers, product
specifications, and the Proprietary Information set forth in Section
11(a).
Both
parties agree that each party's information is the sole and exclusive property
of that respective party. Each party agrees that it will maintain and protect
the confidentiality of the other party's Proprietary Information using the
same
standard of care that such party uses to protect its own Proprietary
Information, which in no event shall be less than reasonable care. The
obligation to keep each party's Proprietary Information confidential shall
survive the termination or expiration of this Agreement. Terms and conditions
of
NDA apply. NDA is attached by reference as Exhibit F.
(c) Warranty.
Buyer
warrants that it has the right to manufacture and market the Products, and
that
the Products and all Specifications provided to Manufacturer do not infringe
upon any patent, trademark or copyright of any third party. Manufacturer
warrants that any manufacturing services provided will be of a professional
quality, conforming to IPC workmanship standards and practices.
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12.
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MANUFACTURER
RESTRICTIONS AS TO USE OF
PRODUCTS.
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Buyer
acknowledges and agrees that the Products are not designed for and, absent
Manufacturer's express written authorization, are not to be used in IPC Class
3
product (equipment where continued performance or performance on demand is
critical such as life support systems or critical weapons systems).
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13.
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PRODUCT
WARRANTY AND DISCLAIMER.
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(a) Product
Warranty.
Manufacturer warrants that Products manufactured hereunder will conform to
the
Specifications and will be free from Defects in material and workmanship for
a
period of one (1) year from the date of delivery of the Products to Buyer.
Buyer
shall promptly notify Manufacturer in writing of any malfunction in the
Products, which notification shall describe the malfunction in sufficient detail
to permit Manufacturer to isolate the malfunction. Upon notification from Buyer,
Manufacturer will provide Buyer with instructions on returning the Product
under
a warranty claim. Upon receipt of any Products returned by Buyer pursuant to
this Section
13,
Manufacturer shall test the Products in accordance with the contracted level
of
testing as set forth in the applicable Product Schedule in order to isolate
any
malfunctions in the Product. If Manufacturer determines that the malfunction
is
not due to nonconformity with the Specifications or Defect, then Manufacturer
will seek instructions from the Buyer regarding whether Manufacturer should
return the Product to Buyer or dispose of it. If Manufacturer is unable to
isolate any malfunctions in the Product using the contracted level of testing
as
set forth in the applicable Product Schedule, then Buyer is solely responsible
for isolation of the malfunction and Manufacturer will seek instructions from
the Buyer regarding whether Buyer will authorize additional testing on the
returned Product or whether Manufacturer should return the Product to Buyer
or
dispose of it. If
any
returned Product contains malfunctions due to nonconformity with the
Specifications or Defects in material or workmanship, then Buyer's
exclusive remedy and Manufacturer's sole liability under this warranty will
be
for Manufacturer, at its sole option and expense, to correct or replace the
nonconforming or defective Product. This
warranty does not apply to: (i) any first articles, prototypes, pre-production
units, or test units of a Product; (ii) any Products that have been repaired
by
Buyer or a third party; (iii) any Products that have been altered or modified
in
any way by Buyer or a third party; or (iv) any Products that have been subject
to misuse, abnormal use or neglect.
(b) Disclaimer. THE
WARRANTY STATED ABOVE IS IN LIEU OF ALL OTHER WARRANTIES, CONDITIONS OR OTHER
TERMS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTIES OF TERMS AS TO QUALITY, FITNESS FOR PARTICULAR PURPOSE,
MERCHANTABILITY OR OTHERWISE, WHETHER IMPLIED BY CUSTOM OR LAW. Component
manufacturer’s warranty will pass thru to Buyer where applicable.
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14.
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LIMITATIONS
OF LIABILITY.
|
EXCEPT
AS
EXPRESSLY PROVIDED IN SECTION
15
(INDEMNIFICATION) OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO
THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, LOST PROFITS,
SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF OR RELATING
TO
THIS AGREEMENT OR CONNECTED WITH OR RESULTING FROM THE MANUFACTURE, SALE,
DELIVERY, RESALE, REPAIR, REPLACEMENT, OR USE OF ANY PRODUCTS OR THE FURNISHING
OF ANY SERVICE OR PART THEREOF, WHETHER SUCH LIABILITY IS BASED IN CONTRACT,
TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAD BEEN
WARNED OF THE POSSIBILITY OF ANY SUCH DAMAGES.
|
15.
|
INDEMNIFICATION.
|
(a) Buyer's
Indemnification.
Buyer
shall defend, indemnify and hold Manufacturer and its parent companies,
subsidiaries, affiliates, officers, directors, employees, agents and
representatives harmless from any and all claims, demands, liabilities, actions,
suits, proceedings, losses, injuries and death, including damages, judgments,
expenses and/or costs (including without limitation reasonable attorneys' fees
and related costs) based on or arising out of: (i) any claims or demands that
use of Buyer's Proprietary Information in manufacturing the Products constitutes
infringement; (ii) any claims or demands relating to the design of the Products;
(iii) any claims or demands by any third party that there was a failure to
warn
of any foreseeable use, improper use, misuse or defects of any Products; (iv)
any claims or demands relating to Buyer's negligence, use, ownership,
maintenance, transfer, transportation or disposal of the Products; (v) any
claims or demands of Buyer's violation or alleged violation of any federal,
state, or local laws or regulation, including without limitation, the laws
and
regulations governing product safety, labeling, packaging and labor practices;
(vi) any claims of patent, trademark, or copyright infringement; or (vii) any
claims or demands arising out of a breach by Buyer of any of the terms and
conditions of this Agreement. Manufacturer shall give written notice of any
claim or potential claim to Buyer within a reasonable time following the time
at
which Manufacturer first became aware of the circumstances which gave rise
to
such claim for indemnification hereunder. Buyer may, at its option, have control
of any litigation and appointment of counsel in defense of any third party
claims for which Manufacturer seeks indemnification hereunder. The obligation
to
indemnify under this Section
15
shall
survive the termination or expiration of this Agreement but not extend any
longer than two (2) years beyond the termination date.
(b) Manufacturer's
Indemnification.
Manufacturer shall defend, indemnify and hold Buyer and its parent companies,
subsidiaries, affiliates, officers, directors, employees, agents and
representatives harmless from any and all claims, demands, liabilities, actions,
suits, proceedings, losses, injuries and death, including damages, judgments,
expenses and/or costs (including without limitation reasonable attorneys' fees
and related costs) based on or arising out of: (i) any claims or demands that
use of Manufacturer's Proprietary Information in manufacturing the Products
constitutes infringement; (ii) defects in any Products caused by Manufacturer
in
manufacturing the Products; (iii) any claims or demands relating to
Manufacturer's negligence, use, ownership, maintenance, transfer, transportation
or disposal of the Products; (iv) any claims or demands of Manufacturer's
violation or alleged violation of any federal, state, or local laws or
regulation, including labor practices; (v) any claims of patent, trademark,
or
copyright infringement where Manufacturer is using Buyer's information not
in
conformance with this Agreement; or (vi) any claims or demands arising out
of a
breach by Manufacturer of any of the terms and conditions of this Agreement.
Buyer shall give written notice of any claim or potential claim to Manufacturer
within a reasonable time following the time at which Buyer first became aware
of
the circumstances which gave rise to such claim for indemnification hereunder.
Manufacturer may, at its option, have control of any litigation and appointment
of counsel in defense of any third party claims for which Buyer seeks
indemnification hereunder. The obligation to indemnify under this Section
15
shall
survive the termination or expiration of this Agreement but not extend any
longer than two (2) years beyond the termination date.
9
|
16.
|
MISCELLANEOUS.
|
(a) Notices.
All
notices and other communications required or permitted to be given under this
Agreement shall be in writing and hand-delivered, mailed by first-class mail
postpaid, sent by facsimile (so long as the party sending the facsimile has
the
ability to receive a confirmation of receipt from its facsimile machine) or
sent
by an overnight courier with a reliable tracing system, to each of the parties
to their respective addresses as noted in the first paragraph of this Agreement.
Notices that are mailed shall be deemed to have been given as of the fourth
business day following the date of mailing and notices that are hand-delivered
or sent by overnight courier are deemed to be given the next business day.
Either party may change its address for the giving of notice by so notifying
the
other party by ten (10) days prior written notice given in the manner set forth
in this section.
(b) Written
Modifications.
No
amendment, modification or release from any provision of this Agreement, the
Product Schedules attached hereto or Purchase Orders issued hereunder shall
be
of any force or effect unless it is in writing and signed by both authorized
parties hereto and specifically refers to this Section
16(b).
(c) No
Assignment.
This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempt to do so shall be void, except in
the
event of a merger or acquisition resulting the sale of substantially all of
the
party's assets.
(d) No
Waiver.
A
failure to exercise any right hereunder with respect to any breach shall not
constitute a waiver of such right with respect to any subsequent
breach.
(e) Independent
Contractors.
Each
party is acting as an independent contractor and not as agent, partner, or
joint
venturer with the other party for any purpose. Except as provided in this
Agreement neither party shall have any right, power, or authority to act or
to
create any obligation, express or implied, on behalf of the other.
(f) Fair
Labor Standards Act.
All
Products furnished hereunder will be manufactured in accordance with the Fair
Standards Labor Act of 1938, as amended, and the regulations and orders of
the
U.S. Department of Labor issued thereunder.
(g) Governing
Law.
The
validity, interpretation and performance of this Agreement shall be governed
by
the laws of the state of Manufacturer's place of business, being Utah, as set
forth in the first paragraph of this Agreement, without regard to such state's
conflicts of laws principles.
(h) Counterparts.
This
Agreement may not be executed in counterpart copies, except that Exhibits A
and
D may be supplemented or amended from time to time to reflect the addition
of
new products or to modify the terms and specifications for existing Products.
Any supplement or amendment to Exhibits A to E must be executed by both parties
hereto in writing and be assigned an appropriate contract tracking number so
that both parties are able to readily identify the current product schedule
terms in effect from time to time.
(i) Entire
Agreement.
The
terms and conditions of this Agreement, including all Product Schedules and
accepted Purchase Orders, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all previous
communication, either oral or written, between the parties hereto. There are
no
understandings, representations or warranties of any kind whatsoever, except
as
expressly set forth herein.
{
10
IN
WITNESS WHEREOF, the parties hereunto have caused this Agreement to be executed
as of the day and year first above written.
|
ClearOne
Communications, Inc.
|
Inovar,
Inc.
|
||||
|
By:
|
s/
Zee Hakimoglu
|
By:
|
/s/
Xxxxx Xxxxx
|
||
|
Name:
Zee Hakimoglu
|
Name:
Xxxxx
Xxxxx
|
||||
|
Title:
CEO/President
|
Title:
President/CEO
|
||||
|
ClearOne
Communications, Inc.
|
||
|
By:
|
/s/
Xxxxxx X. Xxxxxxxxx
|
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
||
|
Title:
Chief Financial Officer
|
||
11
