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EXHIBIT 10.32
DEVELOPMENT AND MANUFACTURING AGREEMENT
This Agreement effective the 13th day of April, 1993, by and between
LANCER CORPORATION, a Texas corporation, whose business address is 000 X. Xxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxx 00000 (hereinafter referred to as "LANCER") and
PACKAGED ICE, INC., a Texas corporation, whose business address is X.X. Xxx
00000, Xxxxxxx, Xxxxx 00000-0000 (hereinafter referred to as "PACKAGED ICE").
WITNESSETH:
WHEREAS, LANCER has a continuous program to design, develop, and
manufacture new systems, processes, apparatuses, articles, compositions of
matter, and the like for various purposes related to LANCER's business.
WHEREAS, PACKAGED ICE is the owner of certain proprietary and
confidential information with respect to an AUTOMATIC ICE BAGGER which
includes, but is not limited to, the subject matter of U.S. Patent No.
5,109,651 and other pending U.S. and foreign patent applications (hereinafter
referred to as the "LICENSED UNIT"); and
WHEREAS, the parties wish to mutually cooperate with respect to LANCER's
becoming the exclusive manufacturer of the LICENSED UNIT for PACKAGED ICE.
NOW THEREFORE, in consideration of the rights and obligations herein set
forth, the parties hereto agree as follows:
1. Development Phase. During the development phase, LANCER will
produce up to five prototype LICENSED UNITS for testing and approval for
PACKAGED ICE in accordance with the following terms and conditions:
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a. Simultaneously with the execution of this Agreement, PACKAGED ICE
will issue 16,077 shares of its common stock to LANCER, said
stock to be valued at $6.22 per share. The value of said 16,077
shares of common stock will be credited against the purchase
price of the first five hundred production units delivered to
PACKAGED ICE to reduce the cost of each of said units by Two
Hundred Dollars per unit.
b. PACKAGED ICE has provided Design and Performance Criteria, know-
how, and manufacturing drawings in the English language to LANCER
relating to the LICENSED UNIT (the Design Package); and LANCER
will produce a complete set of drawings for its new production
unit.
c. LANCER will use its reasonable best efforts to prototype and
deliver to PACKAGED ICE on or before October 1, 1993 at LANCER's
main office in San Antonio, Texas, up to a maximum of five
LICENSED UNITS which will be essentially identical to a
production unit, i.e. a production prototype. There will be no
charge to PACKAGED ICE for the first LICENSED UNIT delivered to
it;
d. After delivery of the first LICENSED UNIT, PACKAGED ICE may elect
to purchase up to four additional prototype LICENSED UNITS for
field testing. Upon receipt of PACKAGED ICE's written purchase
order, LANCER will manufacture and deliver the additional
prototype LICENSED UNITS to PACKAGED ICE. PACKAGED ICE shall pay
LANCER $5,000.00 each, f.o.b., LANCER's Plant in San Antonio,
Texas upon delivery of each additional LICENSED UNIT.
2. Manufacturing Phase. Upon completion of the filed testing,
which is not to exceed ninety days, PACKAGED ICE shall issue its Purchase Order
for a minimum of Thirty-Six Hundred LICENSED UNITS. If problems are found
during the field test, the test period shall be extended for the time required
to correct the problem.
Upon issuance of the Purchase Order, the Manufacturing Phase shall
commence in accordance with the following terms and conditions:
a. The initial term of the manufacturing contract shall be the
earlier of three years or until the thirty-six hundred LICENSED
UNITS have been delivered.
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b. LANCER will commence production at a monthly rate of units in
accordance with the schedule to be provided by PACKAGED ICE an
attached hereto as Exhibit "B" and, will escalate to produce a
minimum of 1200 units during the first year.
c. LANCER will guarantee the price for the first nine months of
actual production at $5,000.00 per unit, bolted to a forkliftable
pallet and plastic wrapped. Additional packaging will require an
additional charge. Actual production will commence upon receipt
of the first purchase order.
d. All sales under this Agreement shall be f.o.b. LANCER's Plant,
San Antonio, Texas. The terms of payment shall be subject to
LANCER's policy on credit rating its customers. This rating may
be reviewed and changed from time to time, thereby changing the
terms of payments.
e. Prior to the end of the first nine months of actual production,
LANCER will provide PACKAGED ICE with a costed xxxx of material
depicting LANCER's manufacturing cost. The price for LICENSED
UNITS will be adjusted for units delivered subsequent to said
first nine month production period on the following formula:
Manufacturing Cost divided by 0.65.
On November 11th of each year, LANCER will provided PACKAGED ICE
with a new costed xxxx of material which will determine the price
beginning on January 1 of each subsequent year.
Any additional features or design changes may result in an
additional costs which will be made at the time such changes are
introduced.
Manufacturing Cost shall be defined as costs of production less
the cost of engineering, sales, G & A, interest, and profits.
f. PACKAGED ICE will take delivery of LICENSED UNITS within ten
calendar days following completion of manufacture. the LICENSED
UNITS will be delivered in lot sizes to PACKAGED ICE's
discretion.
LANCER will invoice for LICENSED UNITS upon completion of
manufacture, regardless of shipment date.
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3. Term. The Manufacturing Contract shall be automatically
renewed for subsequent three year periods upon expiration of a given
term provided that LANCER is competitive in both price and quality.
Competitiveness of the price shall be determined by obtaining three good
faith bids from qualified manufacturers. LANCER shall be given the
opportunity to match the average of the three bids and retain its
manufacturing rights.
PACKAGED ICE may, at its sole discretion, opt to commence its own
manufacturing operation at the conclusion of any three year period.
4. Purchase Orders. Purchase Orders are non-cancelable without the
payment of cancellation charges, work-in-progress, materials on hand or
committed for, and other related cost. All Purchase Orders will require a
minimum 90-120 days lead time. If there are longer lead time components, then
the lead times shall be increased accordingly.
5. Warranty. All LICENSED UNITS manufactured by LANCER shall be
covered by LANCER's standard Manufacturer's Warranty, a copy of which is
attached hereto as Exhibit "A".
6. Product Liability. LANCER shall not be liable for any product
liability claims except those arising out of manufacturing defects and,
PACKAGED ICE agrees to indemnify an save LANCER harmless against all other
product liability claims. PACKAGED ICE will maintain product liability
insurance in the amount of Ten Million Dollars naming LANCER as an additional
insured.
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7. Tooling. During and following completion of the development
program, PACKAGED ICE agrees to pay for specialized production tooling per
LANCER's quotation provided LANCER obtains PACKAGED ICE's prior written
approval, which amount will be paid by PACKAGED ICE upon its receipt o the
invoices approved by LANCER and receipt of blueprints of such specialized
tooling. This tooling will include injection molding tools, membrane switch
tooling, vacuum forming tools, and related specialized tooling. Upon payment,
title of said special tooling shall become fully vest in PACKAGED ICE (and
plainly marked "Property of Packaged Ice, Inc.") and remain the personal
property of PACKAGED ICE, except as provided hereinafter. The tooling shall be
used only for he purpose of producing the LICENSED UNITS for PACKAGED ICE and
will not be removed from LANCER's and/or its subcontractors' premises without
the written consent of PACKAGED ICE. PACKAGED ICE shall give LANCER sixty days
written notice if PACKAGED ICE elects to remove the tooling from LANCER and its
subcontractors, providing there has been an uncured breach of this Agreement.
LANCER will provide normal maintenance for the tooling at its own
expense. Replacement cost of tolls that have reached the end of their service
life will be paid by PACKAGED ICE.
No tooling changes will be made without the prior written approval of
PACKAGED ICE.
LANCER will pay for welding fixtures, drill fixtures, and related
assembly tooling which shall remain the property of LANCER.
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All shop drawings, engineering drawings, specifications, bills of
materials, and elated engineering data is the property of LANCER, however, in
the event LANCER discontinues its business operation, or terminates this
Agreement without cause, or if LANCER cannot meet the reasonable requirements
with adequate lead time, the drawings shall become the property of PACKAGED
ICE. Furthermore, if PACKAGED ICE opts to change manufacturers or to do its
own manufacturing as provided herein, LANCER will set its drawings and other
data to PACKAGED ICE for $250,000.00.
8. Design Changes and Apparatus. LANCER will make no material
changes in the design that materially changes or affects the quality or
performance of the LICENSED UNIT without the prior written approval of PACKAGED
ICE.
PACKAGED ICE shall be liable for paying all fees associated with
regulatory agency approvals such as NSF, UL, or City of Los Angeles and any
quarterly or annual inspection fees. PACKAGED ICE shall determine which
approvals are necessary.
9. Manufacturing and Sales Rights. PACKAGED ICE shall retain the
exclusive right to market the LICENSED UNITS in the U.S. and throughout the
world except as otherwise limited by its prior License Agreements with third
parties.
LANCER shall have the exclusive manufacturing rights to supply PACKAGED
ICE's total requirements for the LICENSED UNITS pursuant to the terms of this
Agreement. LANCER will not sell to any third party without prior written
approval from PACKAGED ICE.
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10. Spare Parts. LANCER agrees that upon commencing production, it
will guarantee a minimum stocked inventory of spare parts as necessary to meet
the market demands. Such inventory levels will be mutually determined by
LANCER and PACKAGED ICE following completion of the development phase.
Thereafter, such inventory levels will be adjusted as required to meet the
market demands. Spare parts shall be priced at not more than 2-1/2 times
LANCER's actual costs. Furthermore, LANCER and PACKAGED ICE will assess the
spare parts prices on an annual basis and make adjustments as mutually agreed
upon.
11. Confidentiality. LANCER and PACKAGED ICE have disclosed and it
is anticipated will continue to disclose to each other or may come in contact
with or observe certain confidential information that is the property of the
other. Each party warrants that it will hold all such confidential information
pertaining to design, specifications, know-how, technical data, and marketing
data belonging to the other party in strict confidence. Each party shall keep
such information confidential, and shall not divulge or disclose and shall take
every reasonable precaution to see that its directors, officers, employees,
representatives, and shareholders shall not divulge or disclose such
confidential information and materials constituting any part thereof, to any
other person at any time during the life of this Agreement.
The term "confidential information" shall mean information that is not:
(a) previously known to a party as a matter of written records, (b) disclosed
to a third party by either party hereto either prior to or subsequent to its
disclosure to the other party hereto without an
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obligation on such third party to keep such information in strict confidence,
(c) previously unpublished, published or otherwise made available to the public
through sources other than LANCER or PACKAGED ICE, (d) information which a
party has given its written consent to the other party to disclose to another;
or (e) information which is made known to a party by a third party under no
obligation of confidentiality to either party.
12. Patent Rights. Any inventions or know-how made or developed
and/or patent applications and patents filed or owned by or licensed to a party
hereto prior to the date of this Agreement shall continue to belong to such
party and shall not be affected by this Agreement.
All right, title, and interest in and to the LICENSED UNITS and all
patents applications and patents, both domestic and foreign, that are filed or
granted for said LICENSED UNITS shall be the exclusive property of and belong
to PACKAGED ICE, and LANCER shall have the exclusive manufacturing rights in
the LICENSED UNITS except as set forth herein.
With respect to PACKAGED ICE's prior inventions that related to or cover
the LICENSED UNIT, PACKAGE ICE agrees to grant and grants to LANCER a royalty-
free, exclusive manufacturing license as aforesaid. Any improvements relating
exclusively to the LICENSED UNITS made by LANCER during the term of this
Agreement, including patentable inventions, will be disclosed to PACKAGED ICE
and will be assigned to PACKAGED ICE provided that PACKAGED ICE proceeds with
the filing of patent applications within six months following the date of
disclosure. LANCER shall have the
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exclusive manufacturing license under the terms of this Agreement. If PACKAGED
ICE declines to proceed with patent protection within said six month period,
LANCER will retain title to the invention and obtain patents in its own right.
Improvements which are developed by LANCER for other purposes but which may be
incorporated into the LICENSED UNITS are excluded, however, LANCER will grant a
royalty free license to PACKAGED ICE to use said improvements in connection
with the LICENSED UNIT. The term of such license shall continue for the life
of any patent covering said improvements. If an improvement is not patented
and constitutes a trade secret, the term of the license for such improvement
shall be for fifty years.
13. Patent Infringement.
a. PACKAGED ICE agrees that it shall, at its own expense, defend,
indemnify and hold harmless LANCER and its subsidiaries against
any claims, actions, or causes of action based on an alleged
infringement of any United States industrial Property Rights,
whether they be a patent, trade secret, trademark, or copyright,
of a third party, regarding any element, part or combination
provided or made pursuant to this Agreement, and PACKAGED ICE
shall pay all damages, awards, profits, interests, attorneys'
fees, and cost levied against LANCER, provided that LANCER
promptly notifies PACKAGED ICE of any such claims, actions, or
causes of action and provided further that LANCER renders
reasonable assistance in the defense of such suit or suits.
b. In the event that LANCER incorporates into the LICENSED UNIT any
of its inventions, or trade secrets, or any matter protectable by
trademark or copyright, LANCER agrees that it shall, at its own
expense, defend, indemnify and hold harmless PACKAGED ICE and its
subsidiaries against any claims, actions, or causes of action
based on an alleged infringement of any United States industrial
Property Rights, whether they be a patent, trade secret,
trademark, or copyright regarding any element, part or
combination provided or made pursuant to this Agreement, or trade
secrets, or any matter protectable by trademark or copyright, and
LANCER shall pay all damages, awards, profits, interests,
attorneys' fees, and costs levied against PACKAGED ICE, provided
that PACKAGED ICE promptly notifies LANCER of any such
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claims, actions, or causes of action and provided further that
PACKAGED ICE renders reasonable assistance in the defense of such
suit or suits.
14. Insolvency. Upon commencement by PACKAGED ICE of any act of
bankruptcy, receivership, insolvency, dissolution, liquidation, or other
similar proceedings, LANCER shall automatically be granted a non-exclusive
right and license under all patents, trade secrets, trademarks, and know-how to
make, use, and sell LICENSED UNITS throughout the world. LANCER shall also be
granted the first option to purchase the special tooling at its depreciated
value. In the event that PACKAGED ICE causes such proceedings to be dismissed
within ninety (90) days of such commencement, the non-exclusive right and
license and the purchase option shall be terminated provided that LANCER is
reinstated as the exclusive manufacturer under the terms of this Agreement.
15. Termination. This Agreement and the rights and obligations
hereunder may be terminated at any time by either party in the event the other
party has failed to perform any material obligations hereunder by giving such
other party sixty days' notice in writing of the intention to terminate and he
reasons therefor; provide, however, that should such other party during said
sixty day period perform such obligations, this Agreement shall continue in
full force and effect.
16. Assignment. Neither this Agreement nor any of the licenses
herein granted shall be assignable or otherwise transferable by either party
hereto, either in whole or in part without the prior written consent of the
other party except that this Agreement and the rights and licenses and
obligations herein provided shall inure to the benefit of and be binding upon
the successor of the entire business relating to the subject matter hereof of
such party.
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17. Status of Parties. Any work performed by either party hereunder
shall be in that party's capacity as an independent contractor and not as a
agent or representative of the other party and it is expressly understood that
this understanding does not constitute a joint venture by the parties hereto.
18. Notices. Notices to be given by PACKAGED ICE or LANCER pursuant
to this Agreement shall be given by certified or registered mail, return
receipt requested, at the addresses first above written.
19. Law. This Agreement shall be governed in all respects by the
laws of the State of Texas except that all questions relating to patents and
patent applications shall be governed by the laws of the country in which such
application is filed or such patent issued.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the date first above written.
LANCER CORPORATION PACKAGED ICED, INC.
By:_______________________________ By:_______________________________
Xxxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxx
Chairman of the Board President
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