EXHIBIT 10(t)
STATE OF NORTH CAROLINA
WAKE COUNTY
MEMORANDUM OF AGREEMENT
THIS AGREEMENT is entered into between Med Covers, Inc., a North Carolina
Corporation ("Med Covers") and Koszegi Industries, Inc., an Indiana Corporation
and its parent company, Forward Industries, Inc., jointly and severally, and
collectively referred to herein as "Koszegi."
SUMMARY: Med Covers and Koszegi are manufacturers, distributors, and sellers of
products used to carry and protect equipment and other products. Koszegi is
phasing out US production of certain items in its product line and it is the
intent that Med Covers shall manufacture these items in its existing facilities
in North Carolina for resale by Koszegi. Koszegi has resources related to its
current manufacturing which will no longer be required when this takes place,
some of which Med Covers shall acquire. This memorandum sets out the basic
terms of the cooperation between the parties.
MANUFACTURING
1. Med Covers shall manufacture and Koszegi shall purchase those products
required by Koszegi and of a type presently produced by Koszegi's
production plant in the United States, in such quantities as Koszegi may
determine it requires. Products, pricing, and quantities shall be
established for various products on a reasonable basis, it being the intent
that Med Covers provide manufacturing capability to replace Koszegi's
present production. Notwithstanding, Med Covers shall not be required to
accept orders to produce any product in quantities beyond its reasonable
capabilities, nor shall Koszegi be required to purchase products if
Medcovers is unable to meet specific requirements of price, requested
delivery date or production capability for that order. Where material or
labor costing assumptions provided by Koszegi have been used by Med Covers
to establish its prices, and said assumptions are subsequently determined
to have been clearly erroneous, Med Covers reserves the right to adjust
pricing on future orders of the same product, or future releases against a
blanket purchase order, to the extent of necessary adjustments. Except as
otherwise provided in this paragraph, acceptance of an order by Medcovers
shall be deemed acceptance of the price and terms relating to that order.
2. Quality shall be equivalent to that of products presently produced by
Koszegi in its own facilities. Koszegi may provide, at its discretion and
expense, a person having
quality control experience to reasonably monitor production at the Med
Covers Kenly, N.C., facility and to coordinate quality control matters with
Med Covers production personnel for their mutual interest in maintaining
customer satisfaction and minimizing rejected or otherwise unsatisfactory
products. Each party may report to the other's management any quality
control issues not reasonably resolved and which require management
involvement. It is understood that Koszegi's quality control coordinator
shall have neither responsibility for, nor authority to, direct the
activities of Med Covers employees. If Koszegi has employed an on-site
quality control representative, then the representative must sign off on a
sample production for any project before Med Covers begins full production.
Med Covers may not change the design, appearance, or materials used without
a new signed-off sample approved or written approval from Koszegi. When a
shipment has been approved by the Koszegi representative, that shipment
shall be deemed to have met Koszegi standards. However, Med Covers shall
continue to be responsible for manufacturing defects of individual items
within that shipment.
3. Unless otherwise agreed, Med Covers shall not be required to maintain
inventory of any products, and shall be entitled to invoice all product
orders when completed, taking into account requested shipping dates.
Notwithstanding, Med Covers shall be entitled to rely on purchase orders
for deferred shipping dates to develop economical production runs, and may
produce product in advance which it shall hold at its own expense until the
shipping date shown on the purchase order.
4. It is recognized that for purposes of marketing and customer relations,
Koszegi desires that the manufacturing of its products by Med Covers not be
publicized or disclosed except as may be required by law. Med Covers shall
take reasonable steps to use Koszegi labeling, packaging materials, and
documentation separate from its own. However, Med Covers shall not be
liable to Koszegi for any disclosures unless arising out of gross
negligence or wilful or wanton acts of Med Covers management personnel. Med
Covers shall not be required to give false information to any party, or
omit information concerning its manufacture of product where to do so would
expose Med Covers to criminal or civil liability.
5. Payment terms shall be net 30 days from invoice date, 2% discount if paid
within 10 days, unless otherwise agreed. Failure to pay invoices overdue by
at least 15 days shall result in a late charge of 1.5% per month on the
outstanding balance. For purposes of this paragraph, payment dates shall be
calculated based on the date payment is received by Med Covers. If
collection actions are commenced in respect of
unpaid balances, Med Covers shall be entitled to court costs and reasonable
attorney fees up to the maximum amount allowed by law.
6. In the event that Med Covers makes a separate charge for design, creating
patterns, or making tools or dies for specific products, then the patterns,
tools or dies shall become the property of Koszegi. Any patterns, tools or
dies provided to Med Covers by Koszegi shall remain the property of
Koszegi. Otherwise, all designs, patterns, tools or dies shall remain the
property of Med Covers. Any software or other digital files relating to
design or production of products shall also be subject to any restrictions
imposed by the owner or licensor of the software used to prepare said
files, including but not limited to the requirement that Koszegi obtain at
its own expense software licenses necessary to use the specific data files
to be provided by Med Covers. Except as otherwise provided in this
paragraph, any and all design work carried out by Med Covers shall be
deemed for the purposes of carrying out its manufacturing obligations under
this agreement and shall not be deemed "work for hire."
7. Each part acknowledges that to carry out the production provided for in
this agreement, disclosure of business and technical information which has
actual and potential commercial value may be required, including but not
limited to customer and prospect names and lists, design, pricing, and
costing information not being generally known. In order that its
confidential and proprietary information may be protected, each party
promises to the other that it and its personnel will not, during the term
of the Agreement and for a period of three (3) years thereafter (regardless
of the reason for the termination of the Agreement):
a. Med Covers shall not solicit for orders, accept orders from or service
any customer of Koszegi in respect of products manufactured by Med
Covers for Koszegi during the term of this agreement;
x. Xxxxxxx shall not solicit for orders, accept orders from, or service
any customers or prospects of Med Covers in respect of products
manufactured by Med Covers in its own name, during the term of the
Agreement;
c. Disclose to any individual, firm, association, corporation, or other
enterprise, nor use for one party's own benefit, any business, trade,
financial, customer, product or sales information which shall become
known to the other in the course of carrying out the obligations under
this Agreement, such information being deemed
confidential to the extent not known generally in the trade.
Each acknowledges that the remedies at law for the breach of any of the
promises contained in this paragraph shall be deemed inadequate and that
either party shall be entitled to injunctive relief for any such breach.
8. Product warranties for accepted goods are limited to repair or replacement
of products arising out of defects in materials or workmanship. All other
warranties are disclaimed and excluded, including but not limited, to
express or implied warranties of merchantability and express or implied
warranties of fitness for a particular purpose. Koszegi shall not extend to
any third party, by express terms or implication, any warranty excluded
under this paragraph, and shall indemnify and hold Med Covers harmless from
any and all claims arising therefrom, including but not limited to court
costs and attorney fees. Med Covers shall accept return for credit of
products which Koszegi or its customers have rejected, consistent with
applicable Uniform Commercial Code provisions, for failure to meet quality
requirements.
RESOURCES -- TANGIBLE ASSETS
9. Upon the transition of production of any product or products from Koszegi
to Med Covers, Koszegi shall ship to Med Covers at its expense its
remaining inventory of materials used in the manufacture of those products
to be manufactured by Med Covers. Med Covers shall not be obligated to
purchase this inventory until required for firm orders placed by Koszegi,
but Med Covers shall endeavor to use Koszegi inventory before purchasing
similar inventory elsewhere. All inventory shall be sold at the lower of
cost or market, taking into account any variations in shipping costs to
produce a cost delivered Kenly, N.C., not greater than Med Covers could
obtain from a regular supplier of that material. Provided that Koszegi has
paid all amounts due Med Covers, Med Covers shall remit to Koszegi the
appropriate payment for inventory used not later than the 10th of the
following month.
10. Koszegi shall deliver to Med Covers at its facility all patterns, tools and
dies used for production of products which Med Covers is to manufacture for
Koszegi. Koszegi shall retain ownership of these resources.
11. Med Covers shall select and purchase certain production machinery and
equipment owned by Koszegi located in its South Bend, Indiana, facility,
provided that Med Covers shall select and purchase at least $200,000
thereof based on prices as
determined below. Once Med Covers has completed its selection, Koszegi
shall maintain the equipment in substantially the same condition as on the
date of selection, and the machinery and equipment selected shall comprise
a complete package from which items may not be deleted or substituted
without the consent of both parties. Pricing shall be as agreed not to
exceed appraised orderly liquidation value prices as shown on the Accuval
appraisal dated April 7, 1998, copy attached hereto as Exhibit "A", and
includes disassembly, packing, and shipping to the appropriate Med Covers
facility. Risk of loss or damage remains with Koszegi until received by Med
Covers.
Koszegi shall provide a xxxx of sale with warranties of title to Med
Covers, and shall provide releases or termination of any security
interests, UCC filings, and the like, if any, which may affect title to the
equipment, provided that the obligation to pay for the machinery and
equipment shall be secured by such machinery and equipment, and Med Covers
hereby grants Koszegi a security interest therein and agrees to cooperate
with Koszegi in filing required UCC-1's thereon and taking all action
necessary to maintain a perfected first lien thereon until the purchase
price therefor is paid. The parties agree to promptly execute a separate
security agreement containing standard provisions and such other documents
as may be required to perfect the security interest as set out herein. No
payment shall be due for the first 6 months after final shipment of the
equipment. Thereafter, payment shall be based upon Med Covers invoices of
products purchased by Koszegi at the rate of 3% on the first $150,000.00 of
products invoiced per month by Med Covers, 4.5% of the next $50,000.00 and
6% on all amounts in excess of $200,000.00 until the outstanding balance
has been paid in full. Provided that Koszegi has paid the qualifying
invoices according to terms as set out herein, Med Covers shall remit to
Koszegi the appropriate payment not later than the 10th of the following
month. However, if after 36 months this Agreement has expired and not been
renewed, or if this agreement is terminated pursuant to Paragraph 17, then
any outstanding balances shall be due. In this event, Med Covers shall
either pay all outstanding balances in full or elect to amortize the
remaining balance over 18 months in 18 equal payments bearing interest at
8% per annum and shall sign a promissory note(s) to this effect.
RESOURCES -- PERSONNEL
12. Koszegi shall provide to Med Covers relevant employment details of
important management and operational employees, excluding sales and service
personnel. Prior to Koszegi giving notice of termination to any of these
employees, Med Covers
shall be given to the opportunity to approach and offer employment to any
employees it considers desirable for its operations in North Carolina.
Koszegi shall be supportive of Med Covers efforts in this regard. However,
Med Covers shall not be under obligation to offer employment to any Koszegi
employee, and Koszegi shall make no representations concerning the terms
and conditions of any position which Med Covers may offer except with the
express consent of Med Covers. Unless specifically offered by Med Covers to
a specific employee, neither party shall make any representations to an
employee, express or implied, that relocating to North Carolina should be
deemed an inducement to enter into an employment contract or in any other
way to modify the common law relationship of employment at will.
GENERAL CONDITIONS
13. Koszegi and Med Covers are independent parties, and the relationship is
that of a buyer and a seller of goods. The relationship does not create a
general agency. Neither has authority to bind the other in any relationship
to third parties.
14. The prices of all products shown sold by Med Covers to Koszegi are in U.S.
dollars, F.O.B. factory. Koszegi shall submit purchase orders for
acceptance by Med Covers at its offices in Raleigh, North Carolina. Unless
otherwise agreed, Med Covers shall ship, F.O.B. Kenly, North Carolina, when
production is completed.
15. Each party acknowledges the others ownership of all patents and trademarks
pertaining to its products and that it will acquire no interest in such
intellectual property rights by reason of this agreement.
16. Subject to the provisions for termination as hereinafter provided, the term
of the Agreement, as amended from time to time, shall begin on the date of
execution of this Agreement and shall expire three years thereafter unless
renewed in writing signed by both parties not less than 180 days prior to
the expiration date.
17. Upon failure of a party to substantially comply with this agreement,
including, but not limited to, timely payment of moneys owed to the other,
either party may terminate the Agreement after giving sixty (60) days
written notice to the other of the intent to terminate for cause, after
setting out, with particularity, the basis for the termination, and the
other party not having cured the ground(s) for the noticed termination
within forty-five days after the notice having
been given. The parties shall deal with each other in good faith during the
sixty (60) day period after any notice to terminate has been given.
Notwithstanding, Med Covers shall be under no obligation to manufacture or
ship any products if payment for prior shipments remain outstanding past
their due date. Remedies under this paragraph shall be in addition to any
other remedies available to the other under prevailing law.
18. Any notice required or permitted to be given under the Agreement shall be
sufficient if in writing, and if sent by registered mail to the principal
office of the party being noticed.
19. The Agreement shall be binding upon and shall inure to the benefit of the
parties, their respective representatives, successors and assigns. This
Agreement shall not be assigned without the written consent of the other
parties, such consent not to be unreasonably withheld.
20. The Agreement shall be deemed to express, embody and supersede all previous
understandings, agreements and commitments, whether written or oral,
between the parties with respect to the subject matter hereof and to fully
and finally set forth the entire agreement between the parties. No
modifications shall be binding unless stated in writing and signed by both
parties.
21. The Agreement shall be governed by the laws of the State of North Carolina
including the applicable provisions of the Uniform Commercial Code -- Sales
except where in conflict with the specific terms of this Agreement. All
purchases of product by Koszegi shall be deemed to take place in Raleigh,
Wake County, North Carolina, regardless of the originating point of the
order or where shipment takes place.
22. Any controversy or claim arising out of related to this Agreement, or
breach thereof, shall be settled by arbitration in accordance with the
Commercial Rules of the American Arbitration Association and judgment upon
the award rendered by the arbitrator or arbitrators may be entered in any
court having jurisdiction thereof. Any award in arbitration may include
attorney fees to the prevailing party. During any period of arbitration,
the parties hereto shall otherwise perform its duties and obligations under
the terms of this Agreement until settlement of such arbitration.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate
originals effective , 1998.
Med Covers, Inc.
By: /s/ Title: C.E.O.
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(CORPORATE SEAL)
ATTEST: /s/ Xxxx Xxx Xxxxxx
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7/31/98 Secretary
Koszegi Industries, Inc.
By: Title:
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(CORPORATE SEAL)
ATTEST:
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Secretary
Forward Industries, Inc.
By: Title:
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(CORPORATE SEAL)
ATTEST:
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Secretary
