EXHIBIT 10.1
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked "[***]", have been
separately filed with the Securities and Exchange Commission.
TRW / SCI
MULTIYEAR AGREEMENT
INCLUDES:
. PURCHASE AGREEMENT
. ASCI REVISION "D" DRAFT
. X. XXXXXX PCN LOG
. TERMS AND CONDITIONS
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT (this "Agreement") is entered into as of the 1st
day of April, 1996, by and between TRW TRW VEHICLE SAFETY SYSTEMS INC. ("VSSI"),
a Delaware corporation, TRW INC., an Ohio corporation, acting for and on behalf
of its TRW Safety Systems/Mesa operations ("Mesa") (VSSI, TRW Inc. and Mesa
being collectively referred to herein as "Buyer"), and SAFETY COMPONENTS
INTERNATIONAL INCORPORATED ("Seller") a Delaware corporation, for the purpose of
establishing the terms and conditions on which Buyer will purchase from Seller
and Seller will sell automotive airbag cushion assemblies ("Product").
Buyer and Seller agree as follows:
1.0 VOLUME AND PRICE
1.1 Volume and Price
----------------
(a) Buyer will purchase from Seller its requirements for Product as
described in Exhibit 1 hereto in accordance with the terms and conditions
set forth in Exhibit 1 for the identified calendar years, provided that
Seller's prices, delivery, technology and quality remain competitive.
(b) The associated volume estimates set forth in Exhibit 1 (the
"Volume Estimates") are provided solely for Seller's planning purposes and
do not constitute a commitment or obligation of any kind on the part of
Buyer to purchase such quantities. However, Seller shall maintain the
capacity to manufacture and ship twenty-five percent (25%) more than the
Volume Estimates in each calendar year.
(c) The Volume Estimates do not, in and of themselves, authorize
Seller to procure raw materials, manufacture Product or build inventories
in advance of Seller's receipt of Buyer's Releases (as defined below),
other than as stated in Section 2.4 below.
(d) Seller will supply all Product ordered by Buyer up to a maximum
of one hundred twenty-five percent (125%) of the Volume Estimates for each
calendar year.
2.0 RELEASES AND SUPPLY OF GOODS
2.1 Releases: Unless in Buyer's judgment supply frequency requirements
--------
dictate otherwise, Buyer will issue to Seller bi-weekly releases, in the form
specified by Buyer ("Releases"), consisting of a Shipping Authorization (as
described in Section 2.2) and the Material Planning & Authorization (as
described in Section 2.3). If there is any conflict in the terms of Releases,
the most recent Release will prevail; provided, however, that Seller will be
-------- -------
fully compensated hereunder for its actions in supplying Product identified by a
Shipping Authorization, in fabricating Product pursuant to a Fabrication
Authorization (as described in Section 2.3) and in procuring materials pursuant
to a Raw Material Authorization (as described below) taken or committed to prior
to the receipt of such later Release.
2.2 Shipping Authorization: Each Shipping Authorization will authorize
----------------------
Seller to ship specified quantities of Product for arrival at the location
designated by Buyer on specified due dates. Those quantities identified by a
Shipping Authorization will be the only quantities Seller is authorized to
deliver to Buyer.
2.3 Material Planning & Authorization: Each Material Planning &
---------------------------------
Authorization will state the following information:
(a) the quantities of Product that Seller will be authorized to
fabricate ("Fabrication Authorization").
(b) the quantities of Product for which Seller will be authorized to
procure the necessary raw materials ("Raw Material Authorization"). Buyer
will have no obligation for any fabrication with respect to the materials
procured pursuant to such Raw Material Authorization, other than as has
been authorized by a Fabrication Authorization.
2.4 Finished Goods Inventory: Seller will maintain at its sole expense
------------------------
finished goods inventory consisting of two (2) weeks' supply of the Product as
estimated on Buyer's latest Material Planning and Authorization (the "Finished
Goods Inventory"). Buyer at its option may draw down such inventory and in such
event Seller will have a reasonable time in which to replenish the Inventory.
The Finished Goods Inventory will be maintained at ASCI's Otay facility in Mesa,
Arizona.
2.5 Deliveries: Seller will deliver all Product in the quantities and on
----------
the dates specified by Shipping Authorization unless any variance thereto is
agreed in writing by Buyer. Seller will bear all expenses, losses or costs
reasonably incurred by Buyer as a result of any failure by Seller to deliver
Product in accordance with any Shipping Authorization. Seller will deliver
Product on either of the following trade terms designated by Buyer and in
-2-
accordance with the method of shipment (such as sea, air, rail or truck)
designated by Buyer:
(a) C.I.F. (Incoterms 1980) with All Risks Insurance, named port of
destination; or
(b) Delivered Duty Paid (Incoterms 1980), named place of destination.
Seller will separately invoice Buyer for the following (collectively, the
"Delivery Charges"): (i) freight to the named port or place of destination, (ii)
export licenses, export taxes and export fees, (iii) premium, if any, incurred
for the Insurance of Product during shipment, (iv) loading and unloading costs,
if any, and (v) if Buyer has designated Delivered Duty Paid trade terms, import
licenses, import duties, import taxes and import fees.
2.6 Notification of Inability to Deliver: Seller will immediately notify
------------------------------------
Buyer of any inability to supply Product in accordance with the terms of a
Shipping Authorization. Seller may be required by Buyer to submit a plan to
prevent reoccurrence of such inability. Buyer may take such action as it deems
necessary to prevent reoccurrence, including increasing the required size of the
Finished Goods Inventory.
2.7 Invoices: Seller may not submit invoices to Buyer until after
--------
shipment to Buyer of the Product to which such invoices relate. All invoices
must include purchase order number, TRW part number, Release number, quantity
shipped and date of shipment. Payment will be due from Buyer within thirty (30)
days of invoice date but Buyer will be entitled to a one percent (1%) discount
if payment is made within ten (10) days of Buyer's receipt of Seller's Invoice.
3.0 QUALITY/PROCESS CONTROL
3.1 Specifications: Product will conform in all respects with all Buyer
--------------
drawings and specifications identified on purchase orders or Releases issued by
Buyer from time to time under this Agreement (the "Specifications").
3.2 Compliance with Quality Control Standards: Seller will comply with
-----------------------------------------
Buyer's Supplier Development Program Manual QPS-0100, Revision F, dated June
1995, and all amendments and supplements thereto and all restatements thereof
(the "Quality Manual"), the provisions of which are hereby incorporated herein
by reference. Seller acknowledges that it has previously received a copy of the
Quality Manual.
3.3 Compliance with Law: All Product supplied under this Agreement are to
-------------------
be manufactured and shipped in accordance with all applicable local, state and
federal laws and regulations.
-3-
4.0 GENERAL TERMS AND CONDITIONS
The provisions of this Agreement include the General Terms and Conditions
of Purchase which appear on the reverse side of Buyer's purchase order form (the
"Terms and Conditions"), a copy of which is attached as Attachment B to Exhibit
1 hereto, and which are hereby incorporated herein by this reference. In the
event of any conflict between the provisions of this Agreement and Exhibit 1
hereto or the Terms and Conditions, the provisions of this Agreement will
govern. This Agreement, together with Exhibit 1 hereto and the Terms and
Conditions, is in lieu of and overrides any contrary term or condition,
preprinted or otherwise, that may appear on any form used (a) by Buyer to
purchase, offer to purchase, or to confirm the purchase of any Product or (b) by
Seller to acknowledge such purchase, offer or confirmation.
5.0 TERMINATION
5.1 Termination Without Cause: Buyer, at its option, may terminate this
-------------------------
Agreement on at least ninety (90) days' prior written notice to Seller.
5.2 Termination For Cause: Buyer may terminate this Agreement upon the
---------------------
occurrence of any of the following events ("Default"):
(a) Seller's failure to comply with any term of this Agreement; or
(b) Seller's insolvency, bankruptcy or dissolution; or
(c) seller's failure to give Buyer, upon request, reasonable
assurances of Seller's future performance; or
(d) Any other event which causes reasonable doubt as to Seller's
ability to render due performance hereunder.
6.0 EFFECT OF TERMINATION
6.1 Seller's Obligation Upon Termination Without Cause: Upon Buyer's
--------------------------------------------------
termination of this Agreement pursuant to Section 5.1 above, Seller will, unless
otherwise directed by Buyer, (a) immediately terminate all work under this
Agreement; (b) transfer title and deliver to Buyer all finished Product
conforming to Buyer's Specifications, work in process (provided that Buyer
authorized the fabrication of such work in process by a Fabrication
Authorization) and raw material (provided that Buyer authorized the procurement
of such Raw Material by a Raw Material Authorization); and (c) take all action
necessary to protect property in Seller's possession in which Buyer has or may
acquire an interest and, if requested, return such property.
6.2 Buyer's Obligation Upon Termination Without Cause: Upon Buyer's
-------------------------------------------------
termination of this Agreement pursuant to Section 5.1 above,
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Buyer will pay to Seller an amount equal to the sum of: (a) the contract price
for all finished Product transferred and delivered to Buyer in accordance with
clause (b) of Section 6.1; plus (b) Seller's actual cost of the work in process
and raw materials transferred and delivered to Buyer in accordance with clause
(b) of Section 6.1, provided that Buyer's obligations under this clause may not
exceed the obligation Buyer would have had to Seller in the absence of
termination.
6.3 Seller's Claim Period: Seller will submit to Buyer promptly, but not
---------------------
later than sixty (60) days from the effective date of termination, its claim for
payment pursuant to Section 6.2 ("Termination Claim"). If Seller fails to submit
its Termination Claim within such period, Buyer may determine on the basis of
information available to it the amount, if any, due Seller with respect to the
termination and such determination will be final and binding on Seller.
6.4 Access to Records: Buyer will have access to Seller's premises and
-----------------
records, prior and subsequent to payment, to verify the Termination Claim.
6.5 Buyer's Obligation Upon Termination for Cause: Buyer will have no
---------------------------------------------
obligation to Seller if this Agreement is terminated by Buyer because of the
occurrence of a Default.
6.6 Exclusive Remedy: Section 6.0 is a complete statement of Seller's
----------------
recoverable damages related to Buyer's termination of this Agreement with or
without cause. Seller hereby waives all other direct, indirect, consequential,
incidental, or other damages (including lost profits) for Buyer's termination of
this Agreement, even if Buyer has been advised of the possibility of such
damages.
6.7 Surviving Rights and Obligations: Termination of this Agreement will
--------------------------------
not terminate vested rights or relieve either party from due performance of all
obligations which by their nature continue after the termination of this
Agreement, including, but not limited to, the following paragraphs of the Terms
and Conditions:
Paragraph 5 Product Warranties
Paragraph 6 Product Indemnification
Paragraph 7 Infringement Indemnification
Paragraph 13 Proprietary Information-
Confidentiality--Advertising
Paragraph 14 License to Repair; Use of Copyrighted
Materials
Paragraph 15 Indemnity/Insurance
-5-
7.0 MERGER/AMENDMENT
This Agreement supersedes all prior agreements and understandings between
the parties respecting the subject matter hereof. The provisions of this
Agreement may not be amended, supplemented or otherwise modified except by a
written agreement signed by an authorized individual for each party.
8.0 HEADINGS
Section headings used in this Agreement are for convenience only and are
not a part of this Agreement for any other purpose.
9.0 GOVERNING LAW
This Agreement will be governed by and construed in accordance with the
laws of the State of Michigan. The parties hereto stipulate that any litigation
which relates to this Agreement or the transactions contemplated hereby may only
be filed in the United States District Court for the district in which Buyer's
principal place of business is located, except that if such court lacks subject
matter jurisdiction, any such action may be filed in a court of the State of
Michigan having subject matter jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
TRW VEHICLE SAFETY SYSTEMS SAFETY COMPONENTS
INC. INTERNATIONAL INCORPORATED
By:_______________________ By: ______________________
Title:________________ Title: CEO
---------------------
Date: 1/8/97 Date: Dec. 4, 1996
------------ ----------
TRW INC.
By:_______________________
Title:________________
Date:___________, 1996
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The information marked by "[***]" has been omitted pursuant to a request for
---
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
EXHIBIT 1
=========
DRAFT FOR AIRBAG PURCHASE AGREEMENT - REVISION "D" - JULY 12, 1996
------------------------------------------------------------------
This Airbag Purchase Agreement is entered into this 1st day of April, 1996 by
and between TRW VEHICLE SAFETY SYSTEMS INCORPORATED, a Delaware Corporation
("TRW") and SAFETY COMPONENTS INTERNATIONAL INCORPORATED, a Delaware Corporation
("SCI"), acting on behalf of its Automotive Safety Components International
Division ("ASCI"), for the purpose of establishing the terms and conditions on
which TRW will purchase from ASCI and ASCI will supply automotive airbag cushion
assemblies ("Product").
1 General (Basis For Multi-Year Agreement)
----------------------------------------
1.1 The long term agreement will consist of a four year contract for
calendar years 1996, 1997, 1998 and 1999.
1.2 [ *** ]
---
1.3 Contributing factors inclusive in calendar year 1996 Cost Reductions
shall include peso devaluation benefits, productivity improvements,
overhead reduction, off-all scrap savings, freight savings and ASCI
cost reduction projects which were identified as part of the Calendar
Year 1996 Cost Reduction directive.
1.4 The following programs have been identified as Calendar Year 1996 Cost
Reduction directive programs. [ *** ]
---
Please Note: Should current program products change from stated Part Number and
-------------------------------------------------------------------------------
Revision level stated in Attachment "A", provisions Stated in Section 5 "PRODUCT
--------------------------------------------------------------------------------
DESIGN CHANGES" will apply.
---------------------------
The information marked by "[***]" has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
Draft for Airbag Purchase Agreement - Revision "D" - July 12, 1996
Page Two
1.5 The following programs have been identified as Calendar Year 1996
Cost reduction directive programs. [ *** ]
---
1.6 In Calendar Years 1997, 1998, and 1999, Value Analysis program
------------------------------------------------------------------------
savings will be evenly split between ASCI and TRW after ASCI has
----------------------------------------------------------------
been reimbursed for cost of implementation.
------------------------------------------
1.7 ASCI shall maintain all current business (platforms/volumes)
presently held by ASCI, Ensenada and will receive replacement
business for current programs through calendar year 1999 provided
that TRW is awarded the replacement business by their customers,
and as long as ASCI remains competitive. Please see Attachment
"A" for current platform program designations and associated
volumes.
1.8 [ *** ]
---
1.9 [ *** ]
---
1.10 [ *** ]
---
1.11 In calendar years 1997, 1998 and 1999, should the aggregate total
of passenger and driver cushions exceed the volumes listed in
Attachment "A" (1,966,966 products), TRW will continue to enjoy
the per unit savings from each product purchased above the listed
volumes.
The information marked by "[***]" has been omitted pursuant to a request for
---
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
Draft for Airbag Purchase Agreement - Revision "D" - July 12, 1996
Page Three
1.12 [ *** ]
---
1.13 Cost savings realized from product manufacturing in China are not
included in savings calculations. Amendment(s) for "China Bag"
manufacturing may be forthcoming.
1.14 "Terms and Conditions of Purchase" for this agreement have been
provided, see Attachment "B". Because the savings commitments provided
by ASCI are tied to production orders from TRW over a four year
period, the following altered language for Section 10 - Termination
for Convenience, shall apply:
1.14.1 Termination for Convenience: Buyer, at its option may
---------------------------
terminate this Agreement on at least ninety (90) days' prior
written notice to Seller.
1.14.2 Effect of Termination
---------------------
1.14.2.1 Seller's Obligation Upon Termination for Convenience:
-----------------------------------------------------
Upon Buyer's termination of this Agreement pursuant
to Section 1.14.1 above, Seller will, unless
otherwise directed by Buyer, (a) immediately
terminate all work under this Agreement; (b) transfer
title and deliver to Buyer all finished Product
conforming to Buyer's Specifications work in process
(provided that Buyer authorized the fabrication of
such work in process by a Fabrication Authorization)
and raw material (provided that Buyer authorized the
procurement of such Raw Material by a Raw Material
Authorization); and (c) take all action necessary to
protect property in Seller's possession in which
Buyer has or may acquire an interest and, if
requested, return such property.
1.14.2.2 Buyer's Obligation Upon Termination for Convenience:
----------------------------------------------------
Upon Buyer's termination of this Agreement pursuant
to Section 1.14.2.1 above, Buyer will pay to Seller
an amount equal to the sum of: (a) the contract price
for all finished Product transferred and delivered to
Buyer in accordance with clause (b) of Section
1.14.2.1; plus (b) Seller's actual cost of the work
in process and raw materials transferred and
delivered to Buyer in accordance with clause (b) of
Section 1.14.2.1, provided that Buyer's obligations
under this clause may not exceed the obligation Buyer
would have had to Seller in the absence of
termination. In addition, Buyer shall reimburse
Seller for all cost savings provided to Buyer within
------------------------
a twelve month period from the time of termination.
--------------------------------------------------
(previously read "...outlined in this agreement up to
and including that offered for Calendar Year 1996.)
The information marked by "[***]" has been omitted pursuant to
---
a request for confidential treatment. The omitted portion has
been separately filed with the Securities and Exchange Commission.
Draft for Airbag Purchase Agreement - Revision "D" - July 12, 1996
Page Four
1.14.2.3 Seller's Claim Period
---------------------
Seller will submit to Buyer promptly, but not later than
sixty(60) days from the effective date of termination,
its claim for payment pursuant to Section 1.14.2.2
("Termination Claim"). If Seller fails to submit its
Termination Claim within such period, Buyer may determine
on the basis of information available to it the amount,
if any, due Seller with respect to the termination and
such determination will be final and binding on Seller.
2 Calendar Year 1996 Cost Reduction Payout (Paid by ASCI.)
--------------------------------------------------------
2.1 [ *** ]
---
2.2 New product prices will be put into effect on April 1, 1996. These
prices will be those listed in Attachment "A". TRW should adjust
current purchase orders to reflect these prices.
2.3 ASCI will provide the balance of the cost reductions (from the one
time management challenge) via additional product price reductions or
lump sum distribution on or before December 15, 1996.
3 Pricing Formula
---------------
[ ***
---
]
Draft for Airbag Purchase Agreement - Revision "D" - July 12, 1996
Page Five
4 Annual Savings for Calendar Years 1997, 1998 and 1999
-----------------------------------------------------
4.1 Savings will be calculated as a fixed percentage of direct labor
cost, variable overhead cost (burden on labor), fixed overhead cost
(ASCI Value Added) and G & A cost only.
---------
4.2 The fixed percentage used for savings will be determined by that
outlined in Sections 1.4 through and including Section 1.8 of this
document.
4.3 Contributing factors inclusive in these savings totals shall include
peso devaluation benefits, productivity improvements, overhead
reductions, freight savings, off-all scrap savings and 50% of value
analysis (V.A.) benefits not listed in Sections 1.4 and 1.5 (the other
50% from V.A. benefits will be provided to TRW as additional savings
for each specific program).
5 New Business
------------
5.1 All new business will be presented using the newly described pricing
formula described in Section 3.
5.2 Price of labor, overheads (both variable and fixed), G & A and profit
will remain constant for the first year of production (from Production
Ramp date), providing no design alterations have been made.
5.3 Price reductions for additional years will follow that described in
Section 4.
6 Product Design Changes
----------------------
6.1 Should a design alteration occur on an existing product, and the level
of the design change requires that a new part number be assigned, for
purposes of this agreement the new design will be treated as "New
Business" and will follow that outlined in Section 5.
6.2 Should a design alteration occur on an existing product, and the level
of the design change not require that a new part number be assigned,
the cost differential for this product will determined through the use
of the new Pricing Formula described
Draft for Airbag Purchase Agreement - Revision "D" - July 12, 1996
Page Six
in Section 3. Savings from this design change, provided it is not
included in Sections 1.4 and 1.5, will be provided to TRW. Design
change items inclusive in Section 1.4 and 1.5 have been included in
the Calendar Year 1996 Cost Reduction total by ASCI.
6.3 Savings resulting from Product design changes recommended by ASCI
personnel will be split evenly between TRW and ASCI.
7 Peso Adjustment/Mexican Government Mandated Labor Increases
-----------------------------------------------------------
7.1 For Calendar Years 1996, 1997, 1998 and 1999, TRW will not receive
benefit or loss for Mexican Peso fluctuations, nor will existing
product prices listed in Attachment "A" be effected by Mexican
Government Mandated Wage increases.
8 Amendments To Previously Executed Airbag Purchase Agreement(s)
--------------------------------------------------------------
8.1 Once executed, this Agreement will supersede all previous agreement,
either written or oral.
The information marked by "[***]" has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
ATTACHMENT A
[***
---
]
ATTACHMENT B
Draft of 5/29/90
----------------
TERMS AND CONDITIONS OF PURCHASE
--------------------------------
"Buyer" means the TRW Safety Systems/Mesa operation of TRW Inc. and
TRW Vehicle Safety Systems Inc.; "Buyer's Terms" means the terms and conditions
on the face and back of this order and any other terms and conditions
specifically incorporated herein by reference; "Seller" means the vendor shown
on the face of this order; and "Goods" means the products of Seller shown on the
face of this order and all raw materials, components, tooling, equipment and
supplies to be delivered by and all services to be provided by Seller hereunder.
1. Acceptance: (a) Seller will be deemed to have accepted this order when
----------
Seller returns the acknowledgement copy of this order or begins performance
under this order. Seller's acceptance is limited to acceptance of Buyer's
Terms. Buyer hereby objects to and rejects any proposal by Seller for
additional or different terms. If Seller proposes additional or different
terms which relate to the description, quantity, price or delivery schedule
of the Goods, Seller's proposal will operate as a rejection of Buyer's
offer; in all other cases, Seller's proposal will be deemed a material
alteration of Buyer's Terms, and Buyer's Terms will be deemed accepted by
Seller without Seller's additional or different terms.
(b) If this order is deemed an acceptance of Seller's prior offer, Buyer's
acceptance is limited to Buyer's Terms. Any proposal by Seller for
additional or different terms or any attempt to modify Buyer's Terms will
be deemed a material alteration of Buyer's Terms, and Buyer objects to and
rejects such other terms, but this order will not operate as a rejection of
Seller's offer unless it contains variances in the terms of the
description, quantity, price or delivery schedule of the Goods.
(c) Seller and Buyer agree that, notwithstanding the prior or subsequent
use by Seller of any order form, invoice or other document containing
printed terms or conditions, they are contracting solely on the basis of
this order, which contains the entire understanding of the parties and is
intended as a final expression of their agreement and a complete statement
of the
-1-
Draft of 5/29/90
----------------
terms thereof, and may not be amended, modified or otherwise supplemented
unless such amendments, modifications or supplements are in writing and
signed by Buyer's authorized representative. A provision contained in any
order form, invoice or other document used by Seller (whether prior or
subsequent to the date hereof) which is inconsistent with this subparagraph
will have no force or effect and will not be binding on the Buyer unless
such provision is contained in an order form, invoice or other document
dated subsequent to the date hereof and is specifically initialled by
Buyer's authorized representative.
2. Delivery: (a) Time is of the essence in this order. Seller will make
--------
deliveries in the quantities and at the times specified herein or in
releases issued hereunder. If Seller's deliveries fail to meet Buyer's
delivery schedule, Buyer, in addition to its other rights, may direct
expedited routing and charge Seller for any excess costs incurred as a
result.
(b) Buyer will not be liable for Seller's commitments or production
arrangements in excess of the amount or in advance of the time required
under Buyer's delivery schedule. If Seller delivers Goods in advance of
Buyer's delivery schedule, Buyer may either (i) return such Goods at
Seller's expense for proper delivery; or (ii) withhold payment for such
Goods until the scheduled delivery date and place such Goods in storage for
Seller's account until the scheduled delivery date. While the Goods are
being returned in accordance with (i) of the preceding sentence or being
retained in accordance with (ii) of such sentence, the Goods will be at
Seller's risk.
3. Quality: Seller will maintain an inspection and quality system acceptable
-------
to Buyer and in conformity with any drawings, specifications and data which
are part of this order and with any quality program of Buyer described in
materials referenced on the face of this order and incorporated herein by
such reference. Seller will maintain adequate authenticated inspection and
test reports, affidavits, and certifications relating to the work performed
under this order, retain such records for a period of ten (10) years after
completion of this order or as otherwise specified by Buyer, and make such
records available
-2-
Draft of 5/29/90
----------------
to Buyer upon request. Seller acknowledges that Buyer may reduce its
incoming inspection procedures in reliance upon Seller's maintenance of a
quality system as required hereunder.
4. Inspection and Acceptance of Goods: (a) Buyer may inspect all Goods ordered
----------------------------------
hereunder at all times and places, including during the period of
manufacture. Such inspection may at Buyer's option include confirmation of
Seller's compliance with required quality control procedures. Seller will
permit Buyer and/or its designess access to Seller's facilities at all
reasonable times and will provide all tools, facilities and assistance
reasonably necessary for such inspection and/or confirmation at no
additional cost to Buyer. All Goods are subject to final inspection and
acceptance anytime after delivery to Buyer.
(b) Notwithstanding any acts of Buyer which may be deemed under applicable
law to constitute acceptance of the Goods, payment for delivered Goods will
not constitute acceptance thereof. Buyer many reject any Goods which do not
meet the specifications set forth in this order. Buyer may return any such
Goods to Seller for reimbursement, credit, replacement or correction as
Buyer may direct, or Buyer may correct and/or replace such Goods at
Seller's cost. Any Goods rejected by Buyer will be at Seller's risk and
expense and Seller will not thereafter tender such Goods for acceptance
unless the former rejection or requirement of correction is disclosed.
Seller will reimburse Buyer for any packaging, handling and transportation
costs Buyer incurs with respect to rejected Goods.
(c) Buyer may revoke its acceptance of Goods at any time, whether or not a
substantial modification to the Goods has been made, if a defect in the
Goods which could not have been discovered during Buyer's normal inspection
procedures or which is not normally discoverable until the Goods are used
substantially impairs the value of the Goods to Buyer.
(d) Neither Buyer's exercise of nor its failure to exercise, any rights
provided hereunder will relieve the Seller from responsibility for such
Goods as are not in accordance with the order requirements or impose
liability on Buyer therefor.
-3-
Draft of 5/29/90
----------------
5. Product Warranties: (a) Seller warrants that the Goods (i) will be fit and
------------------
sufficient for the purpose intended (if Seller knows or has reason to know
the particular purpose for which Buyer intends to use the Goods); (ii) will
be of merchantable quality and free from all defects, including defects in
material and workmanship, and, if not of Buyer's detailed written design,
defects in design; and (iii) will conform with all representations,
descriptions, samples, drawings, plans, specifications, designs and other
data supplied by Seller or listed on the front side of this order. The
foregoing warranties are in addition to those available to Buyer by law.
(b) All warranties hereunder will survive Buyer's acceptance, use and/or
payment and will run to Buyer and its customers.
(c) Buyer's review or approval of any samples, drawings, specifications or
other data developed by Seller in connection with this order will not limit
Seller's responsibility under the warranties contained herein or alter the
cost, rate of output or delivery requirements of this order.
(d) Buyer's specifications and requirements take precedence over industry
standards. Seller will advise Buyer in writing if Buyer's specifications or
requirements are not as extensive as industry standards.
6. Product Indemnification: Seller will indemnify, defend and hold harmless
-----------------------
Buyer, its officers, employees, agents, successors, assigns, customers, and
users of its products from and against any and all losses, expenses,
damages, claims, suits and liabilities (including recall, repair and
replacement expenses and other incidental and consequential damages; court
costs and attorneys' fees) arising as a result of actual or alleged breach
of any warranties or other terms contained herein or arising under any
strict tort or negligence claims premised on either an actual or alleged
defect in the Goods. At Buyer's request, Seller will assume promptly full
responsibility for the defense of any action described in this paragraph
which may be brought or threatened by a third party against Seller and/or
Buyer.
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7. Infringement Indemnification: Seller will indemnify and hold harmless
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Buyer, its officers, employees, agents, successors, assigns, customers and
users of its products from and against any and all losses, expenses,
damages, claims, suits and liabilities (including incidental and
consequential damages, court costs and attorneys' fees) arising as a result
of any claim that the manufacture, use, sale or resale of any Goods
infringes any patent, utility model, industrial design, copyright, or other
intellectual property right in any country. Seller will, when requested by
Buyer, defend any action or claim of such infringement at its own expense.
Seller's obligations under the preceding two sentences will apply even
though Buyer furnishes all or any portion of the design of or specifies all
or any portion of the processing for the Goods. If the sale and/or use of
the Goods is enjoined or, in Buyer's sole judgment, is likely to be
enjoined, Seller will, at Buyer's election and Seller's sole expense,
either procure for Buyer the right to continue using such Goods, or replace
same with equivalent noninfringing goods, or modify such Goods so they
become noninfringing, or remove same and refund the purchase price,
including transporation, installation, removal and other charges incidental
thereto.
8. Changes: Buyer may at any time by a written order but without notice to
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sureties change drawings, designs, specifications, materials, packing, time
and place of delivery or method of transportation. If any such change
increases or decreases the cost or time required for Seller's performance
hereunder, an equitable adjustment will be made and this order will be
modified in writing accordingly. Any claim by Seller for any adjustment
hereunder must be made within ten (10) days of the date Seller is first
notified of the change. If Seller's claim includes any cost for property
made obsolete as a result of the change, Buyer may prescribe the manner in
which such property will be disposed. Pending the resolution of any dispute
regarding any such adjustment, Seller will diligently pursue the order as
changed. No change to design, material, process, procedures or practice is
to be made by Seller without written authorization by Buyer.
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Draft of 5/29/90
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9. Force Maieure: If, due to forces beyond its control, Buyer determines to
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alter Buyer's delivery schedule to delay delivery, the provisions of this
paragraph (rather than the preceding paragraph) will control. Seller will
hold any such delayed Goods at the direction of Buyer and will deliver them
when the cause affecting the delay has been removed. Buyer will be
responsible only for Seller's direct additional costs (excluding interest
on the purchase price) incurred in holding the Goods or delaying
performance at Buyer's request. Either party will be excused from
performance which has been made impracticable by the occurrence of a
contingency the nonoccurrence of which was a basic assumption on which the
order was offered and accepted, or by good faith compliance with any law,
even if later found invalid.
10. Termination for Convenience: Buyer may terminate this order or any part of
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it for its convenience by written notice to Seller. Upon receipt of notice
of termination, Seller will immediately stop all work hereunder and cause
any of its suppliers or subcontractors to cease such work. Buyer will pay
Seller for all goods which are (i) ready for shipment in accordance with
this order's delivery schedule prior to Seller's receipt of the termination
notice, (ii) conform to all requirements of this order, and (iii) are free
and clear of all encumbrances. Buyer will not pay for any work done after
Seller's receipt of notice of termination, nor for any costs incurred by
Seller's suppliers or subcontractors which Seller could reasonably have
avoided.
11. Termination for Cause: Buyer may terminate this order or any part hereof
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for cause in the event of a Default by Seller."Default" means (i) Seller's
failure to comply with any of the terms and conditions of this order; (ii)
Seller's failure to give Buyer, upon request, reasonable assurances of
Seller's future performance; (iii) insolvency, bankruptcy, liquidation or
dissolution of Seller; or (iv) any other event which causes reasonable
doubt as to Seller's ability to render due performance hereunder. If, after
termination for Default, it is determined that Seller was not in Default,
the rights and obligations of the parties will be the same as if the
termination was for Buyer's convenience.
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Draft of 5/29/90
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12. Default--Cancellation: In the event of Default, Buyer may, upon written
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notice to Seller but without further liability to Seller, (i) waive all or
any part of the Default; (ii) agree in writing to any change in or
modification of this order as Buyer may in its judgment deem advisable;
(iii) cancel this order in whole or in part; (iv) purchase goods in
substitution for those to be supplied by Seller hereunder and charge Seller
for any excess cost resulting therefrom; and/or (v) exercise any other
rights or remedies Buyer may have under applicable law. Seller's liability
for Default will include Buyer's incidental and consequential damages.
13. Proprietary Information--Confidentiality--Advertising:
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(a) Seller will consider all information furnished by Buyer hereunder
(including drawings, specifications, or other documents prepared by Seller
for Buyer in connection with this order) to be confidential and will not
disclose any such information to any other person, or use such information
itself for any purpose other than performing this order, unless Seller
obtains Buyer's prior written permission. Seller will not advertise or
publish the fact that Buyer has contracted to purchase Goods from Seller,
or disclose any information relating to the order without Buyer's written
permission.
(b) Unless otherwise agreed in writing, no information disclosed in any
manner or at any time by Seller to Buyer will be deemed secret or
confidential, and Seller will have no rights against Buyer with respect
thereto except such rights as may exist under patent laws.
14. License to Repair; Use of Copyrighted Materials: Seller hereby grants to
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Buyer a nonexclusive, royalty-free, irrevocable, worldwide license to
repair, rebuild, reconstruct and relocate the Goods. Seller also grants to
Buyer a nonexclusive, paid-up, irrevocable, worldwide license to use all
copyrighted materials of Seller which are furnished to Buyer during the
course of Seller's performance hereunder and which relate to any Goods.
Without limiting the generality of the foregoing, Buyer's use of such
copyrighted materials pursuant to such license may include reproduction,
distribution to customers and others and public display.
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Draft of 5/29/90
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15. Indemnity/Insurance: To the extent Seller's agents, employees or
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subcontractors enter upon premises occupied by or under the control of
Buyer or any of its customers or suppliers in the course of the performance
of this order, Seller will take reasonable steps to prevent any injury to
persons or property arising out of acts or omissions of such agents,
employees, or subcontractors. Except to the extent that any such injury or
damage is due solely and directly to Buyer's negligence, Seller will
indemnify, defend and hold Buyer, its officers, employees and agents,
harmless from and against any and all losses, expenses, damages, claims,
suits, or any liability whatsoever (including incidental and consequential
damages, court costs and attorneys' fees) arising out of any act or
omission of Seller, its agents, employees or subcontractors. Seller will
maintain and require its subcontractors to maintain (i) public liability
and property damage insurance, including contractual liability (both
general and vehicle) in amounts sufficient to cover obligations set forth
above, and (ii) workers' compensation and employer's liability insurance
covering all employees engaged in the performance of this order for claims
arising under any applicable workers' compensation, occupation disease or
health and safety laws and/or regulations. Seller will furnish certificates
evidencing such insurance which will expressly provide that no expiration,
termination or modification will take place without thirty (30) days'
written notice to Buyer. Any property of Buyer used by Seller in the
performance of this order will be deemed to have been under the sole
custody and control of Seller during the period of such use by Seller.
16. Buyer's Property: (a) Buyer will retain title to any property Buyer
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furnishes to Seller. Seller will not alter or use such property for any
purpose other than that specified by Buyer or for any other person without
the prior written consent of Buyer. Seller will keep adequate records of
such property, which records will be made available to Buyer upon request,
and will store, protect, preserve, repair and maintain such property in
accordance with sound industrial practice, all at Seller's expense.
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Draft of 5/29/90
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(b) If Buyer's property becomes lost or damaged while in Seller's
possession, Seller will indemnify Buyer or replace such property at
Seller's expense, in accordance with Buyer's request. At the completion,
cancellation or termination of this order for which Buyer's property was
required, Seller will request disposition instructions for all such
property, or the remainder thereof, whether in its original form or in
semiprocessed form. Seller will make such property available to Buyer at
Buyer's request, in the manner directed by Buyer, including preparation,
packaging and shipping as directed. Expenses for preparation for shipment
will be for Seller's account and shipment will be made F.O.B. Seller's
plant.
17. Tooling: Unless otherwise specified in this order, all tooling and/or all
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other articles required for the performance hereof will be furnished by
Seller, who will maintain such articles in good condition and replace them
when necessary at Seller's expense whether furnished by Buyer or Seller.
Seller will not use any such article furnished by Buyer except for
performance by Seller hereunder.
18. Compliance with Laws: In the performance of this order, Seller will fully
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comply with all applicable law and will hold Buyer harmless from any
liability resulting from Seller's failure to so comply.
19. Taxes: Seller's prices will be exclusive of any federal, state or local
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sales, use or excise taxes levied upon, or measured by, the sale, the sales
price, or use of the Goods. Seller will list separately on its invoice any
such tax lawfully applicable to the Goods and payable by Buyer with
respect to which Buyer does not furnish to Seller lawful evidence of
exemption.
20. Setoff: All claims for money due or to become due from Buyer will be
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subject to deduction or setoff by Buyer for any counterclaim arising from
this or any other transaction with Seller.
21. Notice of Delay: Seller will immediately give Buyer a detailed written
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notice of any event (including an actual or potential
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Draft of 5/29/90
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labor dispute) of which Seller becomes aware and which may delay Seller's
timely performance of this order.
22. Payments: Buyer will pay the prices stipulated on this order for Goods
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delivered and accepted, less deductions, if any, as herein provided, but
only upon submission by Seller of an invoice. The prices for Goods will not
be subject to any variation without the prior written consent of Buyer.
Unless otherwise specified, Buyer will pay for partial deliveries accepted
by the Buyer.
23. Remedies: The rights and remedies provided Buyer herein will be cumulative
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and in addition to any other remedies provided by law or equity. Buyer's
waiver of a breach of any provision hereof will not constitute a waiver of
any other breach.
24. Severability: Any provision of this order which is finally determined to
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be unlawful will be deemed severed from this order and every other lawful
provision of this order will remain in full force and effect.
25. Assignments and Subcontracting: No part of this order may be assigned or
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subcontracted without the prior written approval of Buyer.
26. Government Contracts: (a) The provisions of the following sections of the
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Federal Acquisition Regulations (48 C.F.R. Part 52) are incorporated herein
by this reference: (i) 52.222-26, Equal Opportunity (APR 1984); (ii)
52.222-35, Affirmative Action for Special Disabled and Vietnam Era Veterans
(APR 1984); and (iii) 52.222-36, Affirmative Action for Handicapped Workers
(APR 1984).
(b) If the face of this order specifies that this order is issued under
government contract, (i) the terms and conditions on form GC-1 (Rev. 10/86)
are herein incorporated by this reference and will govern over any
inconsistent terms herein; (ii) all references to Buyer herein will include
reference to the United States Government.
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Draft of 5/29/90
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27. Fair Labor Standards: Seller warrants that the Goods will be made in
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compliance with the Fair Labor Standards Act of 1938, as amended.
28. Governing Law: This order will be governed by the laws of the state shown
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in Buyer's address on the face of this order.
5/29/90
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