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SERVICES AGREEMENT
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Table of Contents
1. GRANT OF LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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2. SCOPE OF SERVICES; MINIMUM GUARANTEE; INITIAL INVENTORY; RIGHT OF FIRST REFUSAL . . . . . . . 2
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3. TERM; TERMINATION OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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4. REACQUISITION CONDITIONS; DEDICATED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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5. PURCHASE ORDERS; CHANGE ORDERS; PAYMENT AND DELIVERY TERMS . . . . . . . . . . . . . . . . . . 10
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6. PRICE; SAVINGS SPLIT; ADDITIONAL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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7. RESCHEDULING; CANCELLATION OF PURCHASE ORDERS; REMAINDERS . . . . . . . . . . . . . . . . . . 17
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8. QUALITY UNDERTAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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9. PROPRIETARY AND CONFIDENTIAL INFORMATION; NON-COMPETITION . . . . . . . . . . . . . . . . . . 20
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10. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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11. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 21
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12. DEFAULT BY GENICOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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13. DEFAULT BY ADC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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14. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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15. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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16. COMPLETENESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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17. SECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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18. AMENDMENTS AND SUPPLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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19. APPLICABLE LAW; NO CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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20. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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21. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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22. XXXXX GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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SERVICES AGREEMENT
THIS AGREEMENT is made and entered into as of the 18th day of December
1995, by and between GENICOM CORPORATION, a Delaware corporation, with its
principal place of business at 00000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000-0000 ("GENICOM"), ATLANTIC DESIGN COMPANY, INC., a
New York corporation, with its principal place of business at 0000 Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000 ("ADC") and XXXXX SERVICES
CORPORATION, a Delaware corporation, with its principal place of business at 0
Xxxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("XXXXX") as guarantor.
W I T N E S S E T H
WHEREAS, GENICOM and ADC are parties to (i) a stock purchase
agreement, dated December 15, 1995 (the "Purchase Agreement"), and related
agreements, whereby GENICOM has sold and ADC has purchased (A) certain
inventory and equipment owned by GENICOM and located at the plant (the "Plant")
historically operated in Reynosa, Mexico by GENICOM's subsidiary, Genicom de
Mexico, S.A. de C.V. ("GENMEX"), (B) all of the outstanding capital stock of
GENICOM's subsidiary, DATACOM de Mexico, S.A. de C.V. ("DATACOM"), and (C)
GENICOM's warehouse operations and assets in McAllen, Texas (the "McAllen
Facility"); and (ii) an agreement with respect to preferential consideration to
be given to GENICOM's products and services by ADC's ultimate parent, Xxxxx
Corporation, and its Affiliates, as defined below (the "Preferential
Consideration"); and
WHEREAS, as an essential part of the Purchase Agreement, the parties
have agreed, inter alia, that ADC shall manufacture and assemble Products and
perform Other Services, as those terms are defined herein, for GENICOM; and
WHEREAS, the parties have entered into a letter agreement, dated
November 27, 1995, as amended (the "Interim Letter Agreement"), and an interim
services agreement, dated December 17, 1995 (the "Interim Services Agreement"),
whereunder they have completed certain preliminary transactions.
NOW, WHEREFORE, in consideration of the sum of One Dollar and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
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1. GRANT OF LICENSE
1.01 (a) GENICOM hereby grants to ADC and its Affiliates a
nonexclusive license (the "License") at no cost for the term of this Agreement
to use all GENICOM owned and licensed patents, patent rights, processes,
designs, formulas, inventions, trade secrets, specialized technological
information and techniques not generally known in the industry, and all
enhancements, modifications or updates thereto, whether developed by GENICOM or
ADC (the "Intellectual Property"), for the sole purpose of performing its
obligations under this Agreement. No rights to the Intellectual Property shall
transfer to ADC or its Affiliates hereunder, and GENICOM shall retain all
right, title and ownership in and to the Intellectual Property and any
enhancements, modifications or updates thereto, including, without limitation,
any enhancements, modifications or updates developed by ADC or its Affiliates
in the course of performing under this Agreement.
(b) If ADC or its Affiliates uses the License in a manner not
authorized herein, GENICOM shall give written notice thereof to ADC, and
GENICOM will be entitled to specific performance and injunctive relief in
addition to any other remedies to which GENICOM may be entitled.
2. SCOPE OF SERVICES; MINIMUM GUARANTEE; INITIAL INVENTORY; RIGHT OF
FIRST REFUSAL
2.01 (a) During the term of this Agreement, ADC or its Affiliates
shall provide the following services to GENICOM (the "Services"):
(i) Manufacture, assemble and test Products, and refurbish and
remanufacture Products, pursuant to GENICOM's written specifications, including
without limitation, design and manufacturing specifications (the
"Specifications"). As used herein, "Products" is defined as the products
listed on Schedule 2.01(a)(i), delivered herewith;
(ii) Engineering, design and drafting services as mutually
agreed upon (the "Engineering Services");
(iii) Warehousing services, including without limitation,
integration of sourced Products; pick, pack and ship operations; storage of
finished goods and consigned inventory and additional related services as
mutually agreed upon (collectively, "Warehouse
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Services"). ("Engineering Services" and "Warehouse Services" shall be
collectively referred to herein as "Other Services.")
(b) The Services shall initially be performed at the Plant and the
McAllen Facility. Alternative or additional locations for the performance of
Services hereunder may be added as mutually agreed upon and reflected in a
Purchase Order, as defined below, or an amendment to this Agreement.
(c) During the term of this Agreement, the parties may add to, change,
or delete specific Products and Other Services by mutual agreement. It is
anticipated that GENICOM may delete the production of relay coils from the
Services to be provided hereunder.
(d) It is agreed that the parties shall meet from time to time to
discuss new and existing Products and the manufacturing processes associated
therewith, as set forth and provided for on Exhibit 2.01(d) (the "Technical
Operations Document").
2.02 (a) During the Minimum Guarantee Period , as defined below,
GENICOM guarantees that (i) it shall purchase Products from ADC at a total
price to GENICOM of no less than Fifty Four Million ($54,000,000) Dollars and
(ii) ADC shall expend no fewer than 980,000 man-hours to meet GENICOM such
production requirements (the "Minimum Guarantee").
(b) GENICOM shall use its best efforts to satisfy the Minimum
Guarantee during the first Contract Year. If, at the end of the first Contract
Year and succeeding four (4) months (the "Minimum Guarantee Period"), GENICOM
has failed to purchase Products valued at least as much as $54,000,000 (the
"Minimum Guarantee Product Requirements") for any reason, GENICOM shall pay to
ADC within thirty (30) days of receipt of an invoice, such payment to be in
lieu of any cancellation charges pursuant to Section 7.01(c) that may be
assessable in connection with the Minimum Guarantee Product Requirements, an
amount equal to ADC's lost profit margin. For the purposes of this subsection
(b) only, ADC's profit margin shall be deemed to be six (6%) percent of the
difference between $54,000,000 and the amount GENICOM paid to ADC during the
Guaranteed Minimum Period in fulfillment of Minimum Guarantee Product
Requirements;
(c) If ADC does not expend 980,000 or more man-hours during the
Minimum Guarantee Period, GENICOM shall pay ADC within thirty (30) days of
receipt of an invoice an amount equal to the product
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of Six ($6.00) Dollars per man-hour (the fixed cost portion of ADC's
fully-burdened labor rate) and the difference between 980,000 man-hours and
actual number of man-hours expended by ADC during the Minimum Guarantee Period.
2.03 (a) It is acknowledged by the parties that GENICOM owned
or had on order equipment, tools, and fixtures (the "Equipment"), an inventory
of parts and materials necessary for the assembly of the Products to be
produced hereunder (the "Initial Inventory"), work in process (the "Initial WIP
"). (The Equipment, Initial Inventory and Initial WIP are hereinafter
collectively referred as the "Acquired Assets".) It is further acknowledged by
the parties that ADC has issued a purchase order for the Equipment the Initial
Inventory and Initial WIP pursuant to the Interim Agreements and has made
partial payment therefor in accordance with a schedule attached to the Interim
Services Agreement. The balance thereunder shall be paid pursuant to the
Interim Services and/or Purchase Agreement, in accordance with their terms.
(b) ADC is required to inspect the Initial Inventory within
forty-five (45) days of its receipt and promptly notify GENICOM of any Obsolete
Material, as defined below. As used herein, "Obsolete Material" is defined as
Initial Inventory and Initial WIP which is (i) defective, or (ii) not active in
the list of parts and material required to manufacture and assemble Products
(the "Xxxx of Material") from GENICOM. GENICOM shall purchase such Obsolete
Material in ADC's possession at the end of such forty-five (45) day period at
ADC's original cost.
(c) At ADC's request, GENICOM shall purchase any remaining Initial
Inventory and Initial WIP in ADC's possession at the end of the Minimum
Guarantee Period, at such remaining Initial Inventory, or Initial WIP's
original cost to ADC plus interest on such amounts at the Prime Rate, as
defined below, applied on a monthly basis for the period from the date of
payment by ADC to the date of purchase by GENICOM. ADC shall provide GENICOM
with the opportunity to verify the amount of any Initial Inventory, Initial WIP
or Obsolete Material to be purchased by GENICOM. Thereafter, ADC shall
repurchase from GENICOM such remaining Initial Inventory and Initial WIP as
needed to fulfill its manufacturing requirements. The repurchase price for
such remaining Initial Inventory and Initial WIP shall be the price that ADC
would pay at such time of repurchase to third party suppliers in arms-length
transactions for the same or similar items, inclusive of shipping and handling
charges and taxes.
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(x) XXX xxxxx use its best efforts to expend the Initial Inventory
and Initial WIP prior to purchasing any additional materials, parts and other
supplies for the production of Products. To the extent that any of the Initial
Inventory and Initial WIP is fungible, it will be treated on a "first in-first
out" basis.
(e) The parties acknowledge and confirm that ADC has observed
GENICOM's annual physical count of the Initial Inventory and Initial WIP
conducted in October 1995 and has been provided with the opportunity to review
(including confirming sampling) GENICOM's practices for tracking decreases and
increases in Initial Inventory and Initial WIP since the physical count was
made.
(f) GENICOM shall introduce ADC to its suppliers of components
necessary for manufacturing the Products hereunder and, at the request of ADC,
shall use its best efforts ( to cause the terms and conditions of its supplier
agreements to inure to the benefit of ADC in furtherance of ADC's obligations
hereunder, subject to any limitations imposed thereon by such supplier
agreements. It is the intent of the parties hereto to cooperate in those
instances where GENICOM's supplier agreements preclude assumption by ADC so
that GENICOM and ADC shall be in substantially the same position as if said
supplier agreements are so assumed. Details of any supplier rebates or
discounts given to GENICOM in respect of the materials used to produce the
Products hereunder shall be disclosed in writing to ADC and delivered herewith
as Schedule 2.03(f).
2.04 So long as there is no default by ADC hereunder, and no event
which, with the giving of notice or the passage of time would become a default
by ADC hereunder, has occurred and is continuing, GENICOM shall give ADC a
right of first refusal to perform (a) all manufacturing of New Products, as
defined below, and Product related new services ("New Services") to be
outsourced by GENICOM to a company that is not an Affiliate of GENICOM; and (b)
work performed by an existing vendor that GENICOM intends to have another or a
different vendor perform ("Existing Vendor Services"). GENICOM shall serve
written notice of the right of first refusal on ADC (the "Right of First
Refusal Notice") which shall set forth a description of the New Products, New
Services or Existing Vendor Services required by GENICOM, Forecasts in
connection therewith, and an offer to negotiate prices therefor. ADC shall
have thirty (30) days to exercise the rights granted therein from the day on
which the Right of First Refusal Notice is delivered by advising GENICOM in
writing of ADC's intention to commence such
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negotiations. The parties shall thereupon commence good faith negotiations for
the New Products, New Services or Existing Vendor Services. If ADC does not
exercise the right of first refusal as granted above or if the parties cannot
reach a mutually acceptable agreement for the New Products, New Services or
Existing Vendor Services within forty-five (45) days from the date of ADC's
exercise notice, then GENICOM shall have the right to negotiate for the
provision of the New Products, New Services or Existing Vendor Services with a
third party. In the event that GENICOM receives a bona fide third-party offer
for such New Products, New Services or Existing Vendor Services (the "Third
Party Offer") and ADC's best and final price offer therefor was within three
(3%) percent of the Third Party Offer, GENICOM shall award the work to ADC at
such best and final price. As used herein, "New Products" is defined as
products whose form, fit or function have been substantially changed from
existing models
3. TERM; TERMINATION OPTION
3.01 The term of this Agreement shall be five (5) years commencing
on the date hereof, and shall be automatically extended for additional one (1)
year periods (each an "Option Period") unless either party shall provide the
other with written notice of its desire not to extend said term by no later
than one hundred eighty (180) days prior to the end of the initial five (5)
year period and each Option Period. As used herein, the term "Contract Year"
shall be defined as each successive twelve (12) month period commencing on the
date hereof.
3.02 (a) Subject to Section 2.04, GENICOM may early terminate
this Agreement (the "Termination Option") in the event that: (i) GENICOM, in
good faith, intends to order New Products, New Services or Existing Vendor
Services from ADC that would increase ADC's overall volume of manufacturing and
other activities under this Agreement by twenty (20%) or more sustainable
volume above the volume of such activities during the ninety (90) day period
immediately preceding the proposed increase (a "Volume Increase"), as measured
by the number of Product units in the case of New Products or Existing Vendor
Services for Products, man-hours in the case of New Services and Existing
Vendor Services for Other Services, and space requirements in the case of new
Warehouse Services, and (ii) as provided in Section 2.04, ADC and Genicom do
not negotiate mutually acceptable terms regarding such Volume Increase or ADC
does not accept an Offer to Match, as defined below, therefor. Such proposed
Volume Increase shall be evidenced
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by a Right of First Refusal Notice. GENICOM shall be precluded from
exercising the Termination Option if (i) a Right of First Refusal Notice
reflecting the proposed Volume Increase is not given to ADC six (6) months or
more prior to such Volume Increase, or (ii) such proposed Volume Increase would
increase ADC's capital requirements by twenty (20%) percent above ADC's
then-current annual fixed capital plan. It shall not be a default under this
Agreement if ADC does not accept a Volume Increase. If the Third Party Offer
is priced less than ninety-seven (97%) percent of ADC's best and final price,
GENICOM shall provide ADC with written notice thereof, including the name of
the third party and the terms and conditions of the Third Party Offer, and an
offer to substantially match the Third Party Offer or secure an alternate
provider upon comparable terms (the "Offer to Match"). ADC shall have thirty
(30) days to either accept the Offer to Match in writing or such offer shall be
deemed to be withdrawn, and GENICOM may either accept the Third Party Offer
and/or exercise the Termination Option. (The "Acceptance Period" is defined as
the period commencing on the date of ADC's receipt of the Right of First
Refusal Notice to the date on which ADC's right to accept the Offer to Match
expires.
(b) In the event GENICOM has the right to exercise the Termination
Option, as a condition precedent to the termination of this Agreement, GENICOM
shall, within thirty (30) days of the date that ADC refuses to accept the Offer
to Match, or if none, or the end of the Acceptance Period (whichever is
sooner), deliver written notice to ADC of its intent to (i) waive its right to
exercise the Termination Option (the "Waiver") or (ii) terminate this Agreement
(the "Termination Notice"), specifying an effective date for the termination
which shall be no less than thirty (30) days and no more than sixty (60) days
following delivery of said Termination Notice (the "Termination Date"). In the
event GENICOM delivers a Termination Notice to ADC, GENICOM shall comply with
the terms of the Reacquisition Conditions, as set forth and defined in Section
4.01.
(c) If GENICOM does not terminate this Agreement pursuant to
Sections 3.02(a) and 3.02(b), or fails to deliver a Waiver in a timely manner,
GENICOM's right to exercise the Termination Option shall be waived with respect
to such proposed Volume Increase only, and ADC shall not be obligated to
perform the Services required thereunder.
4. REACQUISITION CONDITIONS; DEDICATED ASSETS
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4.01 (a) GENICOM shall be required to comply with the
Reacquisition Conditions in the event that GENICOM (i) exercises the
Termination Option, or (ii) is in default of this Agreement and ADC elects to
terminate this Agreement due to such default. In such events, GENICOM's
compliance with the Reacquisition Conditions shall be a condition precedent to
GENICOM's allowing any other person, firm or corporation to perform the
Services or operate the Plant or McAllen Facility, or to GENICOM performing the
Services or operating the Plant or McAllen Facility on its own behalf.
(b) GENICOM may comply with either or both of the Reacquisition
Conditions, at GENICOM's option,(i) in the event that ADC is in default of this
Agreement and GENICOM elects to terminate this Agreement as a result of such
default, or (ii) this Agreement expires or this Agreement terminates due to a
Force Majeure Event, as defined below.
(c) As used herein, the "Reacquisition Conditions" shall have the
following meaning:
(i) GENICOM shall purchase the Dedicated Assets, as defined
below, at the higher of fair market value (as determined by mutual agreement of
GENICOM and ADC) or ADC's then-current net book value for such assets, provided
that materials and parts on order shall be treated pursuant to the manner in
which non- useable on-order Remainders, as defined below, are treated under
Section 7.03; and
(ii) GENICOM shall hire the Dedicated Employees, as defined
below, at their then-current rates of pay and benefits, or pay ADC the amount
of employee benefits required to be paid by ADC to Dedicated Employees
terminated by ADC due to the termination of this Agreement, at GENICOM's
option.
(d) In connection with GENICOM's fullfillment of either or both of
the Recquisition Conditions, as applicable, the parties shall take the
following actions, as applicable::
(i) ADC or its designee shall transfer, convey and assign
to GENICOM, in a manner as the parties shall mutually agree, (A) title to the
Dedicated Assets, free and clear of all claims, pledges, security interests,
liens, mortgages or encumbrances (collectively, "Liens"), and (B) such
agreements, including the Collective Barganing Agreement, and an amount equal
to the accruals for employee benefit plans regarding the Dedicated Employees as
are
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in the possession or control of ADC or its Affiliates;
(ii) ADC shall terminate or assign to GENICOM or its
designee (depending on the structure agreed upon by the parties) all other
agreements necessary for GENICOM or its designee to reacquire the Plant and
McAllen Facility, including without limitation, the Lease Agreement, the Plant
Sublease Agreement and the McAllen Sublease Agreement; provided that the
parties mutually agree upon a date for the termination of ADC's access to the
Plant and the McAllen Facility which would enable ADC to make an orderly
transition of its operations into alternate facilities and allow GENICOM to
effectively operate the Plant operations and the McAllen Facility as soon as
practicable.
(iii) The parties shall execute and deliver all such bills of
sale, assignment and assumption agreements or other documents reasonably
necessary to effect the transactions set forth in subsections 4.01(d)(i) and
4.01(d)(ii) above.
(e) As used herein, "Dedicated Assets" means the following items,
provided that they are (i) owned or controlled by ADC or its Affiliates; and
(ii) on-order, utilized or produced in connection with the Services provided
hereunder: (A) equipment, tools, fixtures and inventories of materials, parts,
and work in process, purchased, ordered, manufactured or assembled in
quantities and types reasonably related to GENICOM-issued Purchase Orders,
Change Orders, and Forecasts, and (B) capital improvements made by ADC at the
Plant or the McAllen Facility. As used herein, "Dedicated Employees" shall
mean the employees at the Plant and McAllen Facility engaged primarily (50% or
more of their time) in providing the Services hereunder.
4.02 It is hereby acknowledged by the parties that as of the date
hereof, the Acquired Assets acquired by ADC pursuant to the Interim Services
Agreement and the Purchase Agreement are Dedicated Assets. If ADC desires to
utilize Dedicated Assets for a party other than GENICOM or move the Dedicated
Assets from the Plant or the McAllen Facility, ADC shall obtain the prior
written consent of GENICOM, which shall not be unreasonably withheld.
4.03 (a) To the extent that any third party (including
governmental) consents or approvals are required for the above- described
termination transactions, the parties shall use best efforts to obtain the same
as soon as possible so that the Plant operations and the McAllen Facility can
be effectively operated by
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GENICOM or its designees on or about the Termination Date, subject to the last
clause of Section 4.01(d)(ii).
(b) ADC shall indemnify and hold harmless GENICOM against all
Liens upon any Dedicated Assets acquired by GENICOM pursuant to Section 4.01,
and claims arising from the conduct of ADC and its Affiliates hereunder, except
as otherwise specifically provided herein.
5. PURCHASE ORDERS; CHANGE ORDERS; PAYMENT AND DELIVERY TERMS
5.01 (a) The Services shall be rendered by ADC in accordance
with separate purchase orders ("Purchase Orders") and Change Orders, as defined
below, issued by GENICOM to ADC from time to time. All Purchase Orders, Change
Orders, confirmations and related documents shall be delivered by electronic
data interchange ("Electronic Data Interchange") in accordance with the
procedures set forth on Exhibit 5.01(a) hereto. Each Purchase Order shall
contain the following information:
(i) Description and quantity of Products to be shipped
or description of Other Service required;
(ii) The Product or Other Service unit price;
(iii) The required delivery schedule and place of delivery.
The cost of expedited delivery or delivery to a destination other than the FOB
Point, as defined below, will be negotiated on a case-by-case basis; and
(iv) Specifications or reference thereto if such
Specifications have been previously supplied by GENICOM to ADC.
(b) Initial Purchase Orders for a particular Product model or
design specification shall identify the quantity required to be manufactured
and delivered by ADC in the first ninety (90) days following the date of the
Purchase Order (the "Manufacturing Period"). GENICOM shall issue a Purchase
Order for its Product requirements for the initial Manufacturing Period within
five (5) days of the date hereof which shall provide for a written weekly
delivery schedule and Forecast, as defined and set forth below. Unfulfilled
Purchase Orders issued under the Interim Agreements shall be deemed Purchase
Orders under this Agreement. Commencing on the first business day of each
succeeding month after the date hereof or more frequently if necessary, subject
to Section 7 below,
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GENICOM shall amend and extend such Purchase Order and the 12-Month Forecast
(as defined below) portion of such Forecast by thirty (30) days. Industry
Trend Data, the GENICOM Strategic Plan, and the GENICOM Annual Operating Plan,
as those terms are defined below, shall be updated by GENICOM annually. The
parties acknowledge that it is their intent to maintain a minimum of ninety
(90) days manufacturing coverage during the term of this Agreement. GENICOM
may increase or decrease the quantities or, on an exception basis, the delivery
dates for particular Products ordered pursuant to a Purchase Order after the
issuance thereof subject to Section 7 hereof or ADC's reasonable approval.
(c) GENICOM shall provide ADC with the following type of forecast
information, as provided in Section 5.01(b) (the "Forecast"):
(i) "12-Month Forecast": Twelve (12) month plan by each
GENICOM business unit with a detailed monthly projection of the Services
required to be provided hereunder during such period, including without
limitation, the quantities and types of Products required.
(ii) "Industry Trend Data": Multi-year projection of
overall printer markets with a breakdown by printer class, including GENICOM's
chosen market cells. Such data as is currently available from industry
consultants and is in GENICOM's possession will be provided to ADC on the date
hereof and thereafter shall be updated and provided to ADC as set forth in
Section 5.01(b).
(iii) "GENICOM Strategic Plan": Two (2) year revenue only
projection by each GENICOM business unit with Product, industry, and channel
detail to generate strategic objectives, including without limitation, Product
specific projections, new Product introduction plans, and end of life plans for
existing Products. GENICOM's current Strategic Plan will be provided to ADC
on the date hereof and thereafter shall be updated and provided to ADC as set
forth in Section 5.01(b).
(iv) "GENICOM Annual Operating Plan": One (1) year
operations plan by each GENICOM business unit with a detailed monthly
projection of expenses and revenues by Product, to be used for resource
planning, capacity sizing, and expense budgeting for the period covered by such
plan. GENICOM's 1996 Operating Plan will be provided on the date hereof and
thereafter shall be updated and provided to ADC as set forth in Section
5.01(b).
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5.02 All Purchase Orders and Change Orders shall be subject to this
Agreement and acceptance by ADC, such acceptance not to be withheld if the
Purchase Order or Change Order is consistent with Forecasts provided pursuant
to Sections 5.01(b) and 5.01(c), and not to be unreasonably withheld in all
other cases. ADC shall use its best efforts to be ready to serve GENICOM's
requirements as set forth hereunder and in Purchase Orders and Change Orders.
ADC shall notify GENICOM by Electronic Data Interchange within three (3) days
of ADC's acceptance or rejection of any Purchase Order, or such Purchase Order
shall be deemed accepted.
5.03 (a) All changes, modifications and amendments to a Purchase
Order shall be set forth in a Change Order. Either party hereto may request a
Change Order before the delivery of Product or performance of Other Service
hereunder. A Change Order shall reference the Purchase Order it is amending
and identify the change with specificity. The effective date of any
Specification or engineering change will be mutualy agreed upon in writing. The
parties may orally agree to change a Purchase Order provided that a written
Change Order reflecting such changes is exchanged via Electronic Data
Interchange within twenty-four (24) hours thereafter. As used herein, a
"Change Order" is defined as a written amendment to a Purchase Order, including
without limitation, the price terms, agreed to in writing by the parties
hereto. The term "Change Order" includes purchase and engineering Change
Orders.
(b) In the event that ADC receives a proposed Change Order, ADC
shall, in its sole discretion, make a good faith determination of the cost of
such Change Order within five (5) business days, and shall notify GENICOM of
the price thereof, if any, which price offer shall remain open for thirty (30)
days. ADC shall not commence work on any Change Order unless it is at no
additional cost to GENICOM or has obtained GENICOM's prior written acceptance
of the price thereof.
5.04 In the event of a conflict between a Purchase Order, a Change
Order, this Agreement, the Interim Services Agreement and/or the Interim
Letter Agreement, unless the intent of the parties to supersede this Agreement
the Interim Services Agreement and/or the Interim Letter Agreement, is clearly
reflected in a Change Order, the order of precedence shall be as follows: (1)
this Agreement, (2) the Interim Services Agreement, (3) the Interim Letter
Agreement, (4) a Change Order, and (5) a Purchase
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Order.
5.05 Delivery shall be FOB such location as the parties may
mutually agree upon (the "FOB Point"). The initial FOB Point shall be the
McAllen Facility. The time of delivery shall be within five (5) days (plus or
minus) of the required delivery schedule, as set forth in the applicable
Purchase Order. Title to the Products shall pass from ADC to GENICOM upon
delivery to GENICOM at the FOB Point.
5.06 On a weekly basis, ADC will invoice GENICOM through the
Electronic Data Interchange for Products delivered to the FOB Point and Other
Services performed during the preceding week, net of any credits due to
GENICOM; provided, however, that GENICOM shall not be charged for those days of
Warehouse Services for Products delivered to the FOB Point more than five (5)
days prior to the date specified on the relevant Purchase Order. Payment shall
be due net thirty (30) days. GENICOM shall pay an interest charge on
outstanding balances ten (10) or more days past due at the Prime Rate.
5.07 Specific parts or materials whose procurement time exceeds
(90) days on a non-expedited basis ("Long Lead-Time Items") shall be identified
by ADC to GENICOM promptly after ADC becomes aware of such procurement time.
ADC shall purchase Long Lead-Time Items in accordance with the Forecasts. Long
Lead-Time Items not used due to cancelled Purchase Orders shall be treated as
Remainders.
6. PRICE; SAVINGS SPLIT; ADDITIONAL COSTS
6.01 The initial prices for Products to be provided hereunder are
set forth on Schedule 2.01(a)(i) and the price for Warehouse Services is One
Hundred Two Thousand Eight Hundred Forty Three ($102,843) dollars per month.
Said prices shall be fixed for the first Contract Year, except as otherwise
provided for herein.
6.02 (a) The parties shall meet no later than thirty (30) days prior
to the end of each Contract Year to establish prices (up or down) for the
following Contract Year. Such price changes shall be based upon actual
changes to ADC's labor, material and overhead costs at the Plant anticipated
during the following Contract Year, including without limitation, price changes
that may result due to additional or reutilized Dedicated Assets. The
percentage change of all prices changes in the aggregate shall not
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exceed the percentage change in the Core Inflation Rate, as defined below, from
the start to the end of the then-concluding Contract Year, excepting increases
due to mutually agreed-upon capital investments by ADC. As used herein, the
"Core Inflation Rate" is defined as the Consumer Price Index for the United
States, urban wage earners and clerical workers, exclusive of food and energy
prices, as announced from time to time by the Department of Labor s Bureau of
Labor Statistics.
(b) Notwithstanding anything contained herein to the contrary,
prices may be varied by ADC (i) at any time due to (A) cost reductions
implemented by either party relating to the subject matter of this Agreement,
as provided for in Section 6.03 below; (B) Catastrophic Changes or Beneficial
Changes, as those terms are defined below; or (C) End of Life Products, as
defined below; and (ii) quarterly due to Economies of Scale, as defined and
provided for below.
(c) As used herein, a "Catastrophic Change" is defined as an
increase in ADC's material cost rates due to printer industry- wide single part
cost increases beyond the control of either party in excess of three (3%)
percent which cause an increase in the total cost of a Product of more than
three (3%) percent. As used herein, a "Beneficial Change" is defined as a
printer industry-wide decrease in ADC's material cost rates due to single part
cost decreases in excess of three (3%) percent which cause a decrease in the
total cost of a Product of more than three (3%) percent. Catastrophic Changes
and Beneficial Changes shall be passed on to GENICOM on a dollar-for-dollar
basis in the form of price increases or decreases, as the case may be.
(d) As used herein, a Product is by definition an "End of Life
Product" if (i) GENICOM declares it to be such, or (ii) the manufacturing
volume thereof is no longer economically viable for either party hereto, as
mutually agreed upon on a case by case basis. Unused parts and materials
associated with End of Life Products shall be treated as Remainders under
Section 7.03(c).
(e) In the event that (i) GENICOM's Purchase Order requirements
for Products exceeds the Minimum Guarantee during the Minimum Guarantee Period,
or (ii) ADC exceeds the Labor Target, as defined below, ADC may decrease the
prices of Products on a prospective basis to reflect any economies of scale
enjoyed by ADC due to such increased volume of activity (the "Economies of
Scale"). ADC may subsequently increase said prices prospectively
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if the Economies of Scale are not sustained, up to the agreed upon prices for
such Contract Year. The parties shall discuss any such price adjustments at
their Quarterly Meetings, as defined below. As used herein, the "Labor Target"
is defined as a threshold number of man-hours of manufacturing and assembly
activity by ADC at the Plant in a given Contract Year, as mutually agreed upon
by the parties hereto. The Labor Target shall be reset annually when the
parties meet to discuss annual price changes. The Labor Target for the first
Contract Year is One Million Two Hundred Thousand (1,200,000) man-hours.
(f) ADC will notify GENICOM at least sixty (60) days prior to any
mid-Contract Year price adjustments as provided for above. If GENICOM and ADC
disagree on the amount of a price adjustment proposed to be made under this
Section 6.02, and such disagreement cannot be resolved by discussion between
the chief executive officer of GENICOM and the chief operating officer of ADC,
the disagreement shall be submitted to arbitration pursuant to Section 20
hereof and the current prices shall remain in effect pending the outcome of the
arbitration proceeding. Any price change determined appropriate by the
arbitrator shall be retroactively applied to the date established by the
parties (or, if necessary, the arbitrator) as appropriate.
6.03 (a) The parties shall make good faith efforts to reduce the cost
to GENICOM of the Products and Other Services provided hereunder. In the
event that the total of all prices for Products based upon the fixed demand as
projected in Schedule 6.03(a) is less than the Baseline, as defined below, the
difference shall be divided equally between the parties as a savings split (the
"Savings Split"). The "Baseline" is defined as an amount equal to the total of
all 0000 Xxxxxx Xxxxxxx prices for Products based upon a fixed annual demand,
as projected in Schedule 6.03(a). The Savings Split shall not be paid unless
and until ADC has recovered the capital investment it made, if any, in
connection therewith.
(b) The Savings Split shall be paid to the parties for the
remaining term of this Agreement as follows: ADC shall reduce the price of
Products and Other Services by fifty (50%) percent of the realized savings.
In lieu thereof, ADC may issue GENICOM a credit in said amount on a monthly
basis applicable to future invoices.
(c) The parties shall meet within three (3) months after the date
hereof and thereafter on a quarterly basis to establish cost reduction programs
for purposes of the Savings Split, their dates
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of implementation, including price adjustments, as mutually agreed, and the
means to measure the impact of such cost reduction programs (the "Quarterly
Meetings"). At the Quarterly Meetings, the parties shall also review progress
in reducing costs, agree on additional cost reduction programs, confirm the
amount of price reductions subject to the Savings Split and make any price
adjustments pursuant to Section 6.02(e). If Product redesign results in the
obsolescence of equipment, tools, materials and parts, and a cost savings
benefit subject to the Savings Split, the parties shall share the cost i.e.,
the difference between the net book value and recovery value, of such obsolete
items.
6.04 GENICOM will be responsible for certain additional charges,
defined as those charges constituting costs and expenses not contained in
Schedule 2.01(a)(i) or the Purchase Orders where the cause is not due to ADC or
the performance of its obligations under this Agreement and which fall into one
or more of the following categories:
(a) Overtime; Downtime/Workflow Interruption. ADC shall obtain a
Change Order from GENICOM in advance of incurring any overtime or downtime
expense due to a Change Order. There shall be no charge for ADC expenses
incurred due to permitted reschedulings made in accordance with Sections
7.01(a) and 7.01(b). As used herein, "downtime expense" means the labor cost
incurred by ADC for the period when ADC's normal manufacturing process of a
Product to be produced hereunder is halted, delayed or interrupted.
(b) Specifications Changes. GENICOM shall be liable for ADC's
expenses incurred in connection with any Specification or engineering change
initiated by GENICOM, except as provided in Section 7.01(b). ADC shall obtain
an engineering Change Order from GENICOM in advance of incurring any expense
which ADC believes should be paid by GENICOM, provided that, if such changes
will result in cost reductions or in such other circumstances as ADC and
GENICOM may determine are appropriate, the sharing of such expenses may be
agreed to.
(c) Obsoleted Material. Subject to Section 6.03(c), materials
(on-hand or subject to non-returnable or non-cancelable orders) which are
reasonably related to issued Purchase Orders or Change Orders and which are
rendered obsolete as a result of any GENICOM requested specification or
engineering change, including without limitation, material purchased by ADC due
to a Purchase Order from GENICOM, shall be treated as Remainders. The
effective
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date of any specification or engineering change will be mutually agreed upon in
writing.
(d) Rework Labor Costs. GENICOM shall pay for any additional
labor costs required to implement a Change Order calling for rework labor.
Prior to beginning any such work, ADC will provide GENICOM with estimated
additional labor and material costs and obtain a Change Order therefor.
7. RESCHEDULING; CANCELLATION OF PURCHASE ORDERS; REMAINDERS
7.01 (a) GENICOM may reschedule (increase or decrease)without
penalty the delivery of Products and Product groupings ordered pursuant to a
Purchase Order in accordance with the following table:
Days Before Scheduled Shipment Percent Rescheduled
------------------------------ -------------------
0-30 0%
31-60 15%
61-90 30%
(b) GENICOM may reschedule the delivery of Products without
penalty due to engineering changes described in Schedule 7.01(b) (the
"Reconfiguration Matrix").
(c) In the event that GENICOM causes a change in the delivery
schedule except as provided in Sections 7.01(a) and 7.01(b) above, GENICOM
shall pay ADC, for work in process, completed but unshipped work, or the
material or assemblies being rescheduled in accordance with Section 7.03.. The
schedule of a single line item in a Purchase Order may not be changed more than
twice during any forty-five (45) day period. Purchase Orders that cannot be
rescheduled under this Agreement will be fulfilled in accordance with the
schedule set forth in the original applicable Purchase Order or last accepted
Change Order pertaining thereto.
7.02 GENICOM may cancel all or any part of any Purchase Order
subject to a cancellation charge which the parties hereto undertake to
negotiate in good faith on a case-by-case basis, except as provided for in
Section 7.04 below, based upon ADC's costs due to such cancellation, including
without limitation, any cost related to Remainders, as provided for in Section
7.03 below, actual labor expended, and reasonable out-of-pocket expenditures.
In addition, a material burden of three (3%) percent shall be added to such
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costs.
7.03 Remaining parts and materials purchased or ordered by ADC to
fulfill Purchase Orders issued by GENICOM and work in process manufactured or
assembled hereunder, exclusive of remaining Initial Inventory and Initial
WIP,remaining after their scheduled use ("Remainders") shall be treated as set
forth in this Section. In the event that any Remainders are useable in the
manufacture and assembly of Products for which GENICOM has issued Purchase
Orders, GENICOM shall pay ADC interest on ADC's cost of said Remainders during
the period commencing on the approximate date of their original intended use
and ending on the date of actual use. The applicable rate of interest shall be
the prime rate as published in the Wall Street Journal (the "Prime Rate") on
the date of such actual use, applied on a monthly basis. If Remainders are not
useable as described above, ADC shall use its best efforts to minimize the cost
to GENICOM of such items by attempting to return them to suppliers or, in the
case of on-order Remainders, attempt to cancel open purchase orders therefor,
without a penalty. In the event that all or part of the Remainders are
non-useable, non-returnable, non-cancellable, or returnable or cancellable
with penalties or other expenses, GENICOM shall (at GENICOM's option, as
applicable) either (i) buy them from ADC at ADC's original cost plus seven (7%)
percent, (ii) pay ADC for its return or cancellation costs, or (iii) in the
case of on-order Remainders, assume ADC's obligations therefor.
7.04 In addition to the payments that may be required under
Section 7.01, 7.02 and 7.03, if (i) GENICOM's Purchase Order requirements
reduce ADC's manufacturing activities at the Plant in any thirty (30) day
period by thirty (30%) percent or more, and (ii) GENICOM fails to provide ADC
with thirty (30) days prior written notice of its intent to so reduce its
Purchase Order requirements, then GENICOM shall pay ADC an amount equal to
either (at GENICOM's option): (A) the employee benefits that would have been
paid to DATACOM employees as of the closing date of the Purchase Agreement if
such employees had been terminated on such date, provided that such employees
are terminated by ADC during said thirty (30) day period, or (B) such
employees' salaries and benefits for said thirty (30) day period.
8. QUALITY UNDERTAKING
8.01 (a) ADC agrees that the Products produced hereunder shall
conform to all Specifications provided to ADC by GENICOM.
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GENICOM retains the right to inspect items to be purchased hereunder at time of
completion and prior to shipment from the Plant to assure conformance with such
Specifications. Additionally, GENICOM shall have the right, subject to ADC's
reasonable approval as to dates and times, to visit, and have GENICOM's
customers visit, and inspect ADC's facilities where Products are being
manufactured and assembled and to observe ADC's manufacturing, assembly and
other processes.
(b) ADC shall develop a written quality assurance program (the
"Quality Assurance Program"), a copy of which shall be supplied to GENICOM, for
Product manufacturing, assembly and delivery. ADC shall meet or exceed
GENICOM's current performance level against the quality and delivery
performance standards set forth in Exhibit 8.01(b) (the "Quality Standards")
and show continuous improvement to bring such processes towards the objectives
set forth in the Quality Standards, subject to the Specifications. The Quality
Assurance Program shall be updated and supplied to GENICOM annually. ADC shall
maintain the ISO registration of the Plant operations at ISO 9000, except with
respect to printed circuit board subassemblies, and shall meet all applicable
U.L., F.C.C. and C.S.A. standards for manufacturing processes. The status of
ISO, U.L., F.C.C., VDE and C.S.A. standards as of the date hereof is set forth
is Schedule 8.01. It is the desire of the parties that ADC show continual
improvement in the quality standards of its Product manufacturing and assembly
processes.
8.02 ADC agrees that the Products produced hereunder shall be free
of defects in material and workmanship under normal use and operation for a
period of one (1) year from date of delivery at the FOB Point, except that the
undertakings set forth in this Section 8.02 and Sections 8.03 and 8.04 shall
not apply to defects due to Specifications or defective material provided by or
acquired from GENICOM.
8.03 ADC shall repair (at the Plant or other ADC facility) or
replace defective or non-conforming Product, provide GENICOM with a refund
therefor or reimburse GENICOM for the costs of repair (parts and labor only)
effected by GENICOM. Repaired or replacement units shall be covered by the
quality undertaking set forth in Sections 8.01 and 8.02. The form of
compensation (repair, replacement, refund or reimbursement) shall be at
GENICOM's option, subject to ADC's reasonable approval, and made within thirty
(30) days of GENICOM's request. Notwithstanding the foregoing, ADC
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shall only be obligated to reimburse GENICOM for GENICOM's repair costs to the
extent that such costs are equal to or less than ADC's cost of repair, refund
or replacement.
8.04 Should there be field failures of any Product produced hereunder
in excess of three (3%) percent of the total number of such Products delivered
to the FOB Point during any three-month period, ADC will, in addition to the
remedies provided in Section 8.03 hereof, pay shipping, air freight, or
expediting fees incurred by GENICOM in connection with such failed Product.
Such reimbursable expenses may include all reasonable and necessary costs of
providing field repairs, including transportation and related expenses,
provided however, that prior to incurring expenses for field repairs, GENICOM
shall provide ADC with written notice thereof and an opportunity to conduct
such field repairs on its own account or to send representatives with GENICOM's
field engineers or repair technicians to investigate the claimed Product
defects. In the event that such field failures are due to Specifications or
defective material provided by or acquired from GENICOM, GENICOM shall pay ADC
for all reasonable and necessary costs incurred by ADC in connection with said
investigation, including transportation and related expenses.
8.05 THE AGREEMENTS SET FORTH IN THIS SECTION 8 SPECIFICALLY
EXCLUDE ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ADC DOES NOT UNDERTAKE THAT THE PRODUCTS WILL MEET U.L., F.C.C., CSA OR VDE
PRODUCT STANDARDS. THESE UNDERTAKINGS ARE IN LIEU OF ALL OTHER WARRANTIES,
WRITTEN OR ORAL, EXPRESSED OR IMPLIED, IN RELATION TO THE PRODUCTS PRODUCED
HEREUNDER. IT IS HEREBY EXPRESSLY AGREED THAT ANY IMPLIED OR STATUTORY
WARRANTIES UNDER THE SALE OF GOODS ACT, 1893 (AS AMENDED) IN RELATION TO THE
PRODUCTS PRODUCED HEREUNDER ARE EXCLUDED TO THE FULLEST EXTENT PERMITTED BY
LAW.
8.06 IN NO EVENT SHALL ADC BE LIABLE TO ANY THIRD PARTY FOR ANY
CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES DUE TO DEFECTIVE OR
NON-CONFORMING PRODUCTS.
9. PROPRIETARY AND CONFIDENTIAL INFORMATION; NON-COMPETITION
9.01 GENICOM and ADC agree to keep in confidence and not disclose to
others all knowledge, information and data furnished to it by the other and
claimed by either to be proprietary or confidential. GENICOM and ADC agree that
neither shall use or reproduce for use in any way any proprietary or
confidential
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information of the other except in furtherance of the relationship set forth in
this Agreement. Such information includes without limitation, all GENICOM
Forecasts, cost data, Product Specifications, Bills of Material and
manufacturing processes. GENICOM and ADC agree to protect such proprietary or
confidential information with the same standard of care and procedures which
each uses to protect its own proprietary or confidential information and shall
ensure that their respective parent companies, subsidiaries, directors,
officers, employees and agents shall comply with this Section. This Section
shall not be applicable and shall impose no obligation on a party with respect
to any portion of proprietary or confidential information which:
(a) was at the time received or which thereafter becomes, through
no act or failure on the part of such party, generally known or available to
the public;
(b) is known to such party at the time of receiving such
information as evidenced by documentation then rightfully in the possession of
such party; provided that the proprietary or confidential information provided
by GENICOM to persons in its employ who are subsequently employed by ADC shall
continue to be considered confidential and proprietary to GENICOM and subject
to ADC's obligations of confidentiality contained herein;
(c) is rightfully furnished to such party by a third party without
restriction by that third party on disclosure and not subject to any
obligations of confidentiality owed by the parties hereto or to a third party;
or
(d) is released from restrictions imposed hereunder by written
release given by the owner of the information.
9.02 During the term of this Agreement, neither ADC, GENICOM nor
any of their Affiliates shall, directly or indirectly, on their own behalf or
on behalf of any other entity (i) solicit any of the customers of the other
party for the purpose of competing with such other party; (ii) except as
provided for in the Purchase Agreement, hire or attempt to hire any employees
of GENICOM; and (iii) ADC and its Affiliates shall not utilize the Plant or the
McAllen Facility to compete with GENICOM or on behalf of a competitor of
GENICOM in the business of designing and selling high-speed printers.
10. INSURANCE
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XXX xxxxx xx responsible for insuring at fair market value (i) the
Dedicated Assets; and (ii) the Product stored by ADC hereunder. ADC shall
provide business interruption insurance with respect to its operations
hereunder in favor of GENICOM. Coverage shall be provided to the policy limits
set forth in Schedule 10. In line fire suppression, if functional as the date
hereof, shall be maintained by ADC at the McAllen Facility to minimize
insurance premiums. Each party hereto shall cause its respective insurers to
waive such insurer's right of subrogation with respect to the other party.
11. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.01 GENICOM hereby represents and warrants to ADC the following:
(a) GENICOM has all necessary or appropriate right, title and
ownership interest in the Intellectual Property embodied in the Products to be
manufactured by ADC for GENICOM hereunder, and has the authority to grant the
License to ADC;
(b) Based on GENICOM's experience and assuming normal business
conditions, GENICOM is not aware of any condition that would cause a material
or sole supplier of components used in the manufacture or assembly of the
Products to cease supplying such components to GENICOM or DATACOM or to refuse
to supply such components to ADC;
(c) GENICOM is not in material dispute with any of its suppliers
of raw materials relating to the quality of such materials, late deliveries, or
sums owed by GENICOM to any such supplier or otherwise;
(d) Not more than (10%) percent of the aggregate amount of all the
purchases made by GENICOM in the past year have been obtained from the same
supplier; and
(e) GENICOM's subsidiaries, GENMEX and DATACOM, do not have any
supplier arrangements that would have a material affect on the Plant operations
or Product manufacturing and assembly if such arrangements were substantially
altered or terminated.
(f) GENICOM is not in default of the financial covenants in any
loan agreement between it and any lender. In the event that GENICOM is in
default of any such loan covenants, GENICOM shall
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give prompt oral notice thereof to ADC's chief operating officer, which notice
shall be subject to Section 9 and disclosed within ADC and XXXXX on a strict
need to know basis. If GENICOM receives notice that any such loan shall be or
has been accelerated (whichever notice is received sooner), GENICOM shall
promptly notify ADC thereof and ADC may (at ADC's option) terminate this
Agreement without regard to any applicable cure period. Such termination shall
be deemed to be due to GENICOM's default hereunder.
11.02 Each party represents to the other party that it is duly
incorporated in accordance with the laws and regulations of the jurisdiction of
its incorporation, and that it has duly executed and delivered this Agreement,
and that this Agreement constitutes the legal, valid and binding obligation of
such party, enforceable against it in accordance with its terms. The
signatories hereto represent that they have full power and all necessary
authority to execute and deliver this Agreement.
11.03 (a) ADC and GENICOM shall each indemnify and hold
harmless the other party from and against all claims, actions, proceedings,
liabilities, losses, costs and expenses (including reasonable attorneys' fees
with respect thereto) arising out of or attributable to the breach of any
representation or warranty made herein by such breaching party.
(b) A party making a claim for indemnification pursuant to this
Section 11.03 (the "Indemnitee") shall notify the other party (the
"Indemnitor") in writing of the nature of any such claim promptly upon receipt
of knowledge of the facts upon which such claim is based, setting forth
specifically the representation or warranty with respect to which the claim is
made, if applicable, the facts giving rise to the alleged basis for the claim,
and the amount of liability asserted, to the extent known. The Indemnitor
shall have the right to conduct the defense of any such claim or action against
the Indemnitee, provided that it so elects by notice to the Indemnitee promptly
upon receipt of notice thereof from the Indemnitee. In defending, compromising
or settling any such claim or action, the Indemnitor shall exercise due regard
for the Indemnitee's continuing business interests and, where compromising or
settling any such claim, shall provide for a complete release of claims in
favor of the Indemnittee. The Indemnitee shall fully cooperate with the
Indemnitor in defense of all such claims or actions which the Indemnitor elects
to defend, and the Indemnitee shall have the right, at its own cost and
expense, to employ
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counsel to assist in such defense, which counsel may consult or confer with and
advise counsel or other representatives of the Indemnitor with respect thereto.
The Indemnitee's cooperation shall include making available the time and
assistance of the officers and other employees of the Indemnitee and providing
access to and the right to make copies of and excerpts from all pertinent
documents, books and records.
12. DEFAULT BY GENICOM
In the event that (a) GENICOM shall fail to pay within thirty (30)
days after the date when due any amounts due to ADC hereunder and fails to cure
within three (3) business days of receipt of notice thereof, or (b) GENICOM
shall commit a material breach of any other term, condition or covenant
contained herein or in the Purchase Agreement, the Lease Agreement, the Plant
Sublease or the McAllen Sublease Agreement, and shall fail to cure same within
said thirty (30) days after receipt of written notice from ADC so to do,
provided that if such default by its nature cannot be cured within said thirty
(30) days and does not involve the payment of money, then if GENICOM shall not
immediately upon notice from ADC commence curing such default and diligently
and continuously pursue such remedy and cure such default within ninety (90)
days; or (c) GENICOM shall make an assignment for the benefit of creditors, or
if a proceeding in bankruptcy, receivership or insolvency shall be instituted
by or against GENICOM and GENICOM does not move to vacate such proceeding
within sixty (60) days thereof, or if a trustee or receiver shall be appointed
for GENICOM, then ADC may, at its option, terminate this Agreement and, in such
event, GENICOM, upon ADC's written request, shall comply with and pay the sums
referred to in the Reacquisition Conditions. The termination of this Agreement
by ADC because of the happening of said events of default and the payment to
ADC of such sums shall be without prejudice to any claims which ADC may have
against GENICOM growing out of GENICOM's default under this Agreement. No
failure of ADC to exercise any right, power or privilege shall operate as a
waiver thereof, or as a waiver of any other right, power or privilege.
13. DEFAULT BY ADC
In the event that (a) ADC (i) shall fail to pay within thirty (30)
days after the date when due any amounts due to GENICOM hereunder and fails to
cure within three (3) business days of receipt of notice thereof, or (ii) shall
commit a material breach of any term, condition or covenant contained herein or
in the
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Purchase Agreement, the Lease Agreement, the Plant Sublease Agreement or the
McAllen Sublease Agreement, and shall fail to cure same within thirty (30) days
after receipt of written notice from GENICOM so to do, or (iii) commits
consistent and substantial quality failures as measured by the Quality
Assurance Program or delivery failures; provided that if such default by its
nature cannot be cured within said thirty (30) days and does not involve the
payment of money, then if ADC or XXXXX shall not immediately upon notice from
GENICOM commence curing such default and diligently and continuously pursue
such remedy and cure such default within ninety (90) days; or (b) ADC shall
make an assignment for the benefit of creditors, or if a proceeding in
bankruptcy, receivership, or insolvency shall be instituted by or against ADC
and ADC does not move to vacate such proceeding within sixty (60) days thereof,
or if a trustee or receiver shall be appointed for ADC, then GENICOM may, at
its option, terminate this Agreement. In the event that GENICOM terminates
this Agreement, GENICOM may, at its option, reacquire either or both of the
Dedicated Assets or the Dedicated Employees, as provided in Article 4 by
complying with and paying the sums referred to in the Reacquisition Conditions
as a condition precedent to such reacquisition. The termination of this
Agreement by GENICOM because of the happening of any of such events of default
shall be without prejudice to any claims which GENICOM has against ADC growing
out of ADC's default under this Agreement. No failure of GENICOM to exercise
any right, power or privilege hereunder shall operate as a waiver thereof, or
as a waiver of any other right, power or privilege.
14. FORCE MAJEURE
14.01 In the event that either party hereto is prevented from
performing or is unable to perform any of its obligations under this Agreement,
except for the payment of money, due to any act of God, fire, casualty, flood,
war, strike, lockout, epidemic, destruction of production facilities, riot,
insurrection, or any other cause (a "Force Majeure Event") beyond the
reasonable control of the party invoking this section (the "Non-Performing
Party"), the Non-Performing Party shall give prompt written notice thereof to
the other party, and the Non- Performing Party's failure to perform shall be
excused and the time for performance shall be extended for the period of delay
or inability to perform due to such occurrence.
14.02 The Non-Performing Party shall notify the other party in
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writing within fifteen (15) days of the Force Majeure Event of the anticipated
date that it will be able to resume substantial performance of its obligations
hereunder. In the event that the Non-Performing Party is unable to resume
substantial performance within a period of ninety (90) days after such notice,
the other party may terminate this Agreement without regard to any applicable
cure period and GENICOM may, at its option, reacquire either or both of the
Dedicated Assets or the Dedicated Employees, as provided in Article 4 by
complying with and paying the sums referred to in the Reacquisition Conditions.
15. NOTICES
15.01 (a) Any notice to be given to any of the parties hereto
shall be delivered or sent by telex, facsimile transmission or prepaid
registered post to their respective addresses as given herein or such other
address as shall have been subsequently notified in writing by them to the
person serving such notice:
If to GENICOM: Genicom Corporation
14800 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxx 000, Xxxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: President
Fax: (000) 000-0000
with a copy to: McGuire, Woods, Battle &
Xxxxxx, L.L.P.
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Att.: Xxxx Xxxxx Sellers, Esq.
Fax: (000) 000-0000
If to ADC or XXXXX: Atlantic Design Company, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
with a copy to: Xxxxx Services Corporation
Xxx Xxxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
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(b) Any such notice shall be deemed to have been served (if
delivered personally) at the time of delivery or (if sent by telex or
facsimile) at the time of despatch or (if posted as aforesaid) on the fourth
working day after the envelope containing the same shall have been put into the
post, provided that if, in the case of a notice sent by telex, facsimile or
post, there shall be a cessation or effective suspension (whether total or not
and whether or not official) of the relevant service before the deemed time or
date of receipt of notice, then such notice shall be deemed to have been served
as if it had been sent when the relevant service was effectively resumed.
(c) Proof that (i) the envelope containing the notice was properly
addressed and posted as a prepaid first class recorded delivery letter, or (ii)
a true copy of the notice bears a facsimile machine stamp of the date of
transmission and the telephone address of the recipient, shall be sufficient
evidence of service.
16. COMPLETENESS
This Agreement, the Purchase Agreement, the Lease Agreement, the Plant
Sublease Agreement and McAllen Sublease Agreement, the Preferential
Consideration and the exhibits annexed hereto and thereto set forth the entire
understanding of GENICOM and ADC relating to the subject matter referred to
herein and no representations or warranties are made by GENICOM or ADC, except
as set forth herein and therein. Such agreements supersede all proposals, oral
or written, and all negotiations, conversations or discussions heretofore had
between the parties hereto as to the subject matter hereof.
17. SECTIONS
All references to sections refer to sections of this Agreement, unless
otherwise stated.
18. AMENDMENTS AND SUPPLEMENTS
The parties may amend, modify, supplement or waive any provisions of
this Agreement in such manner as may be agreed upon in a written instrument
executed by the parties. No such amendment, modification, supplement or waiver
shall be effective unless it is in writing and signed by the parties hereto.
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00. APPLICABLE LAW; NO CONSEQUENTIAL DAMAGES
(a) This Agreement is governed by and is to be interpreted
pursuant to the laws of the State of New York.
(b) Except as otherwise expressly stated herein, in no event shall
any of the parties hereto be liable to any other party to this Agreement, for
any consequential, indirect or incidental damages due to a default or breach
under this Agreement.
20. ARBITRATION
Any controversy, dispute or claim arising out of the interpretation,
performance or breach of this Agreement (including disputes as to the
jurisdiction of the arbitrator), except for issues pertaining to Intellectual
Property and Section 9 shall be resolved at the request of either party hereto
("Initiation") directed to the American Arbitration Association ("AAA") by a
binding arbitration conducted in New York, New York by a single Arbitrator
reasonably familiar with computer and peripherals manufacturing and contract
law in accordance with the Commercial Arbitration Rules ("CAR") of the AAA,
except as modified by the terms of this Section. The Arbitrator shall apply
New York substantive law to the matter(s) which are the subject of the
arbitration. The Arbitrator shall have the power to grant such legal and
equitable remedies and award such damages as may be granted or awarded by a
trial level judge of the State of New York. The Arbitrator shall prepare and
provide to the parties a written decision ("Decision") on all matters which are
the subject of the arbitration, including factual findings and the reasons
which form the basis of the Decision of the Arbitrator. The Arbitrator shall
not have the power to commit errors of law and the award may be vacated or
corrected in any New York court of competent jurisdiction for any such error.
The Decision shall have the effect and be enforceable as if it were a final
judgement. Costs of the arbitration shall be borne as directed by the
Arbitrator. The parties hereby agree that the CAR are modified as follows:
(a) If the parties have not agreed to an Arbitrator within thirty
(30) days after the Initiation of arbitration, then the AAA shall appoint a
single neutral Arbitrator as soon thereafter as practicable.
(b) The parties shall be permitted discovery under the supervision
and rules set by the Arbitrator, including the right to
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take depositions pursuant to New York rules of civil procedure; provided
however, that discovery shall be completed within sixty (60) days of selection
or appointment of the Arbitrator. The Arbitrator shall have power to impose
such sanctions as the Arbitrator deems appropriate for failure of a party or
counsel for a party to comply with discovery rules established by the
Arbitrator.
(c) A hearing before the Arbitrator shall be held no later than
one hundred twenty (120) days after Initiation of arbitration, unless a hearing
is waived by the parties.
(d) No later than ten (10) days from the date of closing of the
arbitration hearing, or, if an oral hearing has been waived, from the date of
transmitting final statements and proofs to the Arbitrator, the Arbitrator
shall render a written Decision.
21. GENERAL
21.01 This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which together constitute one
and the same instrument.
21.02 In each instance where the consent or approval of GENICOM or
ADC is required, unless otherwise provided, such consent or approval shall not
be unreasonably withheld or delayed.
21.03 If any clause, term or provision of this Agreement shall be
judged invalid by any court or administrative agency, such invalidity shall not
affect the validity or operation of any other clause, term or provision; and
such invalid clause, item or provision shall be deemed to have been deleted
from this Agreement.
21.04 (a) Neither ADC nor GENICOM may (i) transfer or assign
this Agreement, except to an Affiliate, or (ii) undergo a Voluntary Change of
Control, as defined below, without the other party's approval, which approval
shall not be unreasonably withheld. No party may transfer or assign this
Agreement to a competitor of the other party. As used herein, "Voluntary
Change of Control" shall mean the transfer of a majority of the outstanding
shares of capital stock or equivalent interests ordinarily having voting rights
in a negotiated transaction to an entity that is not an Affiliate. The term
"Affiliate" means any corporation or other entity controlling, controlled by or
under common control of the subject company ("control" shall mean the
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ownership of a majority of the outstanding shares of capital stock or
equivalent interests ordinarily having voting rights). A party seeking to
transfer or assign this Agreement shall provide the other party hereto with no
less than thirty (30) days written notice thereof. The party receiving such
notice shall have ten (10) days from the date of receipt of the notice to
either approve or object in writing to such transfer or assignment. Failure to
respond or object in writing during said ten (10) day period shall be deemed an
approval of the proposed transfer or assignment.
(b) In the event that this Agreement is transferred or assigned
(i) with approval, then the other party shall take all necessary actions to
effect the assignment of the Lease, the Sublease, the Preferential
Consideration, and related agreements to such assignee; (ii) without approval,
then the party making such assignment or transfer shall be in default
hereunder.
21.05 Each party warrants that the information to be furnished by it
to the other hereunder will, to the best of its knowledge and belief, be
correct in all material respects. Each party shall notify the other promptly
in the event that it comes to such party's attention that information provided
by the supplying party contains an error or omission.
21.06 The relationship created by this Agreement is a
purchaser-independent contractor relationship. Nothing herein shall create a
partnership, joint venture, agency, trust, or other relationship between
GENICOM and ADC.
21.07 All payments required hereunder shall be made in the currency
of the United States unless expressly stated otherwise.
21.08 The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
21.09 Any waiver by any party hereto of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Except as otherwise expressly
provided herein, any waiver must be in writing.
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21.10 Except as otherwise expressly stated herein, all payment terms
shall be thirty (30) days net.
21.11 Wherever calculations herein are based upon values supplied by
one party hereto, the other party shall have the right to examine such
supporting material as it may reasonably deem necessary in order to verify such
values.
21.12 This Agreement is intended for the benefit of the parties
hereto and their permitted transferees or assigns, and no other person shall be
entitled to rely upon this Agreement or be entitled to any benefits under this
Agreement.
22. XXXXX GUARANTEE
By its signature hereon, XXXXX hereby guarantees the performance of
ADC hereunder (the "XXXXX Guarantee"), provided however, that the XXXXX
Guarantee shall terminate immediately in the event there is a transfer or
assignment of either party's rights and obligations hereunder pursuant to
Section 21.04, except where such transfer or assignment by ADC is to an
Affiliate of ADC or not approved or deemed approved by GENICOM.
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date above written.
GENICOM CORPORATION ATLANTIC DESIGN COMPANY, INC.
-------------------------- --------------------------
By: Xxxxx X. Xxxx By:
Its: Senior Vice President Its: Vice President
Guarantor:
XXXXX SERVICES CORPORATION
---------------------------
By: Xxxxx Xxxxxx
Its: Vice President
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