ASSET PURCHASE
AND
MANUFACTURING
AGREEMENT
BETWEEN
Netrix Corporation
0000 Xxxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
And
THE SMT CENTRE S.E. INC.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx,XX 00000
THIS MANUFACTURING AGREEMENT ("Agreement") dated as of this _____
day of September 1999,
("Effective Date") is made and entered into by and between
Netrix Corporation
a Delaware Corporation,
("NETRIX")
with a principal place of business at
00000 Xxxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
And
THE SMT CENTRE S.E. INC.
a North Carolina corporation
("SMTC"),
with a principal place of business located at
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
and sets forth the terms and conditions under which SMTC will purchase certain
inventory and will manufacture certain products for NETRIX.
RECITALS
WHEREAS, SMTC is in the business of manufacturing electronic printed
circuit boards ("PCB") and other electronic components and devices; and
WHEREAS, NETRIX is in the business of manufacturing telecommunications
equipment; and
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WHEREAS, NETRIX desires to utilize the services of SMTC to manufacture
certain components; and
WHEREAS, SMTC, understanding the importance of the timely delivery and the
quality performance associated with the manufacture of PCBs and SYSTEMS for
NETRIX's operations, is willing to undertake the manufacture of PCBs and SYSTEMS
on behalf of NETRIX in accordance with the terms and conditions set forth
herein; and
WHEREAS, NETRIX desires to utilize the services of SMTC to repair certain
components; and
WHEREAS, SMTC, understanding the importance of the timely delivery and the
quality performance associated with the repair of PCBs and SYSTEMS to NETRIX's
operations, is willing to undertake the repair of PCBs and SYSTEMS on behalf of
NETRIX in accordance with the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and assurances
contained in this Agreement and other good and valuable consideration, the
sufficiency of which the parties hereby acknowledge, the parties, intending to
be legally bound, agree as follows:
1. DEFINITIONS
1.1 "Product" or "Unit" means one or more of the assemblies
manufactured by SMTC or acquired by SMTC on NETRIX's behalf
that are normally used to fulfill Orders.
1.2 "Order" means a request by NETRIX for SMTC to build, test and
ship Product to a specific customer
location.
1.3 "Agreement" means this document.
1.4 "P.O." shall mean Purchase Order.
1.5 "Material Uplift" or "Uplift" means the xxxx-up applied to material costs.
1.6 "Material Cost" means SMTC's standard cost for components used in the
manufacturing of Product.
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2. INVENTORY PURCHASE
2.1 SMTC agrees to purchase all NETRIX active system level inventory
("baseline inventory") presently located at the SMTC facility. SMTC shall pay
NETRIX for baseline inventory within 45 days of the date materials are consumed.
Notwithstanding the foregoing, SMTC shall cancel the purchase of any baseline
inventory not consumed within 6 months of the date of this Agreement and NETRIX
agrees to accept cancellation of the purchase of any such inventory. At that
time, all unconsumed baseline inventory will be placed in a NETRIX owned stock
location so that it may be utilized for repair/rework requirements, or in the
event that there is future demand for the inventory. NETRIX shall have the risk
of loss of any such unconsumed inventory.
2.2 SMTC will convert NETRIX P.O.'s for components with suppliers to
SMTC P.O.'s, provided, however, that the quantity of components in NETRIX P.O.'s
to be converted shall not exceed the quantity required for fulfilling NETRIX
orders to SMTC for assemblies over a six month period beginning Oct. 1, 1999, or
shall not exceed the suppliers minimum purchase quantities for a particular
component whichever is more.
2.3 NETRIX agrees to pay for all Non-cancelable P.O. balances for any
purchase order converted by SMTC in the event the ordered components are no
longer needed by SMTC for any reason.
2.4 SMTC will accurately determine baseline inventory consumed and
will provide monthly usage and forecasted usage reports. In addition, SMTC will
provide NETRIX with reasonable access to audit baseline inventory.
2.5 SMTC will not apply Uplift to baseline inventory
3. PERSONNEL:
3.1 SMTC agrees to hire up to six (6) existing employees of NETRIX's Charlotte
operations. These employees will be employed at the same level of compensation
they were receiving from NETRIX as of September 1, 1999, for a period of 6
months from the date their employment with SMTC begins. SMTC reserves the right
to terminate the employment of these employees for cause within the six month
period. At the end of the six-month period, employees will be evaluated as to
the appropriate compensation relative to their contribution and equivalent SMTC
position. After the six month period, SMTC reserves the right to make
compensation adjustments to the former NETRIX employees and may terminate their
employment at that time. The seniority of these employees, including time
employed by NETRIX, will be recognized as it relates to vacation benefits.
Benefits for NETRIX employees will be equivalent to those received by SMTC
employees with equivalent seniority.
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3.2 Upon successful completion of 6 months employment with SMTC, SMTC
shall pay to former NETRIX employees lump-sum compensation as a continuation
incentive equal to one (1) month's salary for salaried employees, or 174 hours
for hourly employees, based upon their level of compensation as of September 1,
1999. Payment of the continuation incentive shall be made only upon receipt of
payment from NETRIX of that amount due to former NETRIX Employees under this
provision.
3.3 SMTC agrees to make space available to one (1) NETRIX employee for
a period of up to 1 year in order to facilitate their assistance to the SMTC
team in establishing priorities, performing quality audits, source inspections,
etc. Former NETRIX employees will be part of the SMTC team supporting NETRIX and
will report to SMTC supervision as assigned. NETRIX employees will have no
direct responsibility for any SMTC employees
4 MANUFACTURING.
4.1 NETRIX shall provide to SMTC all applicable assembly drawings,
routings, bills of material, process sheets and fixtures required for use in the
manufacture of Products.
4.2 All special tools and equipment furnished to SMTC or paid for by
NETRIX for use by SMTC in connection with this Agreement shall remain NETRIX
property, including all special tools and equipment identified as a reimbursable
item in the Agreement. All of NETRIX's property in the possession or control of
SMTC shall be (i) used only in filling orders for NETRIX, (ii) kept segregated
and clearly marked as NETRIX's property, (iii) maintained in good condition,
normal wear and tear being excepted, and (iv) surrendered immediately to NETRIX
upon demand.
4.3 SMTC agrees to manufacture product according to NETRIX
specifications. Any deviation from the standard must be with prior written
approval from NETRIX.
4.4 SMTC shall package Orders according to standard Electro-static
Discharge prevention practices, and ship them to a NETRIX specified address in
SMTC supplied shipping containers in accordance with NETRIX packaging
specifications.
4.5 NETRIX agrees to provide SMTC with a rolling projection of Product
requirements to be placed by NETRIX over the twelve (12) month period following
the date of the projection (hereafter the "Forecast"). NETRIX agrees to update
this Forecast at least quarterly in order for SMTC to have an accurate
projection of NETRIX product requirements for the next nine (9) months.
4.6 Provided NETRIX projected the Product requirement in its Forecast
at least three (3) months prior to the date of the Order, SMTC will ship Orders
for Product , within seven (7) working days of receiving notice from NETRIX.
SMTC, at its sole discretion, may accept Orders for Product not included in the
Page 5
NETRIX Forecast at least three (3) months prior to the date of the Order. SMTC
shall not, however, be liable for any penalty due to late shipment of any such
Order.
4.7 Occasionally NETRIX systems must be staged prior to shipment. SMTC
will provide space with adequate power drops for system staging at no charge.
5. QUALITY
5.1 SMTC agrees to build and/or repair Products to NETRIX
specifications.
5.2 SMTC agrees to utilize all reasonable effort to comply with
generally accepted manufacturing quality standards.
5.3 In manufacturing Products, printed circuit assemblies will be
manufactured in accordance with the most recent IPC-A-610 Class 2 workmanship
standards. All Products will be tested as specified by NETRIX. SMTC shall
maintain appropriate logs to record test results.
5.4 Both parties as part of an ongoing zero defect activity will share
quality data. Such data will be considered NETRIX's confidential information and
will be reviewed at quarterly meetings held at alternating sites. A defined test
procedure for each Product will be established prior to initiation of production
shipments. NETRIX is responsible for costs associated with modification of
fixtures and software to achieve quality goals.
5.5 Upon reasonable notice by NETRIX, SMTC agrees to provide access to
NETRIX during normal business hours to that part (and only that part) of SMTC's
facility devoted to the performance of NETRIX's work in order for NETRIX to
determine whether SMTC is conforming to the quality provisions of this
Agreement.
5.6 SMTC is required to advise NETRIX of test, configuration or other
issues which are determined to have a negative impact on delivery schedule,
within 1 business day of discovery of any such issue.
5.7 SMTC shall provide adequate space to allow for supervised source
inspection of the Products by NETRIX. NETRIX shall provide SMTC with reasonable
notice prior to source inspection at SMTC. Source inspections will be conducted
during SMTC's normal business hours and on a non-interference basis with SMTC's
other operations, which non-interference shall be determined at SMTC's
reasonable discretion.
5.8 SMTC will maintain ISO9002 & BABT 340 facility certifications. SMTC
will manage Product certification compliance and coordinate with agencies for
safety audits for any additional certification requested and paid for by NETRIX.
SMTC will notify NETRIX of any change in certification status. SMTC xxxx
Xxxx 6
reasonably cooperate with NETRIX on obtaining any necessary future
certifications at NETRIX's expense.
5.9 SMTC represents that all SMTC facilities and any major assembly
sub-contractors used by SMTC in the manufacture of Products presently have ISO
9002 certification. Should either SMTC or SMTC's major assembly sub-contractors
lose ISO 9002 certification, SMTC will notify NETRIX immediately. SMTC and it's
major assembly sub-contractors will then have sixty (60) days to be re-certified
5.10 NETRIX or a NETRIX OEM customer shall have the right, at its sole
cost and expense, to perform vendor qualifications, on-site source inspections,
or materials inspections at any time at SMTC's manufacturing facilities and SMTC
shall reasonably cooperate in that regard. If an inspection or test is made on
SMTC's premises, SMTC shall provide the inspectors with reasonable facilities
and assistance at no additional charge. Further, SMTC will notify NETRIX of the
anticipated ship date of any Order and if NETRIX notifies SMTC of its intention
to inspect materials, such inspection shall be made within three (3) days prior
to Product shipment. Failure to inspect materials at this time shall constitute
a waiver of NETRIX's right of inspection at SMTC's plant but not a waiver of
SMTC's obligations under Section 5.12. If vendor processes, procedures or
practices or source materials are found to be nonconforming, substandard or
defective as a result of such inspection, SMTC and NETRIX agree to immediately
address such problem and work with all expedience to rectify the situation.
5.11 SMTC shall provide to NETRIX Quality Information Reports that
allow monitoring of Product quality. Such reports include, but are not limited
to a "Rolling Yield Summary" for printed circuit assembly and test and for
system assembly and test and "Field Return Analysis."
5.12 SMTC will be responsible for performing all factory inspection and
acceptance testing of Products prior to shipment of such Products. Such
acceptance testing will be performed by SMTC in accordance with NETRIX's
standard testing and acceptance criteria. All Products which successfully pass
such acceptance testing will have documented test results available to NETRIX
upon its request, and will be deemed accepted by NETRIX. If such acceptance
testing is (i) not fully performed, (ii) not documented, or if (iii) the
Products fail to pass such acceptance testing, the affected Products will be
deemed not acceptable by NETRIX and cannot be used to complete Orders.
6. ENGINEERING CHANGES.
6.1 Engineering Change Orders ("ECO") are the method of changing the
xxxx of materials or specifications of NETRIX Products that may be made from
time to time during the term of this Agreement.
6.2 If an ECO is identified as critical by NETRIX, upon notification,
SMTC will suspend all shipments until the ECO is implemented and implement the
ECO within three (3) working days of receipt of such notice. Implementation of
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an ECO within three (3) working days, however, is contingent upon material
availability. All other ECO implementation schedules will be by mutual agreement
between NETRIX and SMTC.
6.3 Within thirty (30) days of the implementation of an ECO by SMTC,
NETRIX agrees to reimburse SMTC for the cost of any parts and/or material,
including long lead components and minimum buy components that cannot be used by
SMTC to produce Products due to the ECO implementations. In the case of parts
and materials not yet delivered by the suppliers, NETRIX also agrees to pay to
SMTC the cancellation charges or other liabilities incurred by SMTC in canceling
such parts and materials . SMTC shall use reasonable efforts to minimize the
costs of such cancellations. SMTC agrees to give NETRIX notice prior to any such
cancellation. Failure of NETRIX to approve any such cancellation, however, shall
not relieve NETRIX of its obligation to reimburse SMTC.
6.4 SMTC Proposed Changes. SMTC shall notify NETRIX of any
Product-related engineering change ("Engineering Change") proposed by SMTC. SMTC
shall supply NETRIX with a written description of the expected effect of the
Engineering Change, including the effect on price, performance, reliability, and
serviceability and the amount of any non-recurring engineering charges. NETRIX,
at its discretion, may elect to incorporate or not to incorporate any
SMTC-proposed Engineering Change into the Product design. If any SMTC-proposed
Engineering Change, accepted by NETRIX and incorporated into the Product design,
results in a reduced Product price, the cost savings to NETRIX will be shared by
NETRIX and SMTC for a period of 12 months in accordance with the following
formula: O - R = CS
Where:
O = Original Product Price
R = New Projected Product Price After Change
CS = Cost Savings
The New Product Price (NPP) will be established as follows:
(CS x 50%) + R = NPP
If a SMTC-proposed Engineering Change is accepted by NETRIX, the parties agree
to amend any outstanding Purchase Order accordingly, and the NPP shall apply to
all Products which include the SMTC-proposed Engineering Change delivered
hereunder. SMTC shall not change or modify the Product without NETRIX's prior
written consent. SMTC agrees that any and all SMTC-proposed Engineering Changes
shall be the property of NETRIX and SMTC hereby assigns any rights it might have
in such Engineering Changes to NETRIX. Notwithstanding the foregoing, however,
SMTC will retain all rights to proprietary process changes, manufacturing
inventions, and tooling regardless of its impact on price.
Page 8
6.5 NETRIX Proposed Changes. Provided the parties agree upon any
resulting unit price change, as provided below, SMTC shall incorporate
non-critical Engineering Changes proposed by NETRIX into the Product(s) on a
schedule to be agreed to by the parties.. Within seven (7) days of NETRIX's
notification of an Engineering Change, SMTC will provide NETRIX a written
quotation that includes any proposed increase or decrease in the unit price of
the Product. SMTC's quotation will include a comprehensive cost breakdown of the
added or reduced work scope resulting from the Engineering Change. The parties
shall agree upon any change which may apply to the unit price of the Product
within ten (10) days from the date of NETRIX's notification of an Engineering
Change, and this Agreement, as well as any applicable NETRIX P.O.(s), will be
amended accordingly.
6.6 NETRIX understands that P.O. delivery dates may be affected by any
Engineering Change due to material availability and P.O. dates may be amended by
mutual agreement.
7. PRICE
7.1 MATERIAL UPLIFT AND PROFIT RATES. For the first twelve months
after the date of first Order placement following the effective date of this
Agreement, "Material Uplift Rate" and "Pre-Tax Profit Rate" shall each be fixed
at Eight Point Zero Percent (8.0%). At the expiration of this initial
twelve-month period, "Material Uplift Rate" and "Pre-Tax Profit Rate" for the
subsequent quarter shall be the rate specified in the following grid
corresponding to the "Sales Level." "Sales Level" shall equal the total net
amount billed to NETRIX for Product over the previous twelve-month period and
shall be determined at the beginning of each quarter after the initial
twelve-month period.
Sales Level <$6M >$6M-$10M>$10M-$20M >$20M-$30M >$30M
Material Uplift Rate 13.0% 10.0% 8.0% 8.0% 8.0%
Pre-Tax Profit Rate 10.0% 9.0% 8.0% 7.5% 7.0%
7.2 PRICE. NETRIX Price equals Material Cost plus Material Uplift plus
Labor plus Pre-Tax Profit. "Material Uplift" equals the "Material Uplift Rate"
multiplied by "Material Cost." "Pre-Tax Profit" equals the "Pre-Tax Profit Rate"
multiplied by the sum of "Material Cost" and "Material Uplift" and Labor.
7.3 Shipments of Products are to be FOB manufacturing point. Payment
terms are net 30 days.
7.4 The labor rate for system level assembly and system level testing
shall be $27.85 per hour for the Initial Term of the Agreement as defined in
paragraph 14.1 below.
7.5 The labor rate for debug and repair activities associated with
repair of out of warranty Products shall be $55.00 per hour for the Initial Term
of the Agreement as defined in paragraph 14.1 below.
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7.6 SMTC shall provide raw material/component purchasing support to
NETRIX for engineering and repair operations at the price determined by the
Price grid of Section 7.1.
7.7 Exhibit A describes the part numbers and NETRIX prices for items
that will be included in the NETRIX Forecast.
7.8 Although selling prices for the Products set forth in Exhibit A are
firm, fixed prices, NETRIX will reasonably entertain price adjustments prior to
the conclusion of the 12 month period set forth in Section 7.2 which are the
results of component/material cost variances, or result from sole source or
industry wide conditions which are outside the reasonable control of SMTC.
NETRIX and SMTC shall recalculate pricing once the audited material price
variance is greater that +/- 3% of costed Xxxx of Material ("BOM") for a period
greater than 60 days. Extraordinary market conditions will be evaluated on a
case by case basis. SMTC will make reasonable efforts to document any and all
price variances.
7.9 Any non-recurring engineering costs associated with the fulfillment
of Order(s) under this Agreement shall be SMTC's actual direct cost plus 5%.
7.10 Title to the Products and the risk of loss shall be that of NETRIX
upon delivery of the Order to the common carrier by SMTC at the SMTC
manufacturing facility.
8. MATERIALS MANAGEMENT
8.1. NETRIX will provide SMTC a Forecast of Product requirements as
specified in paragraph 4.5 above. Regardless of whether Products or other
materials are actually Ordered by NETRIX, however, NETRIX agrees to pay for any
materials, labor and overhead costs incurred or legally obligated by SMTC in
connection with the manufacture of any Product Forecast by NETRIX as provided in
paragraph 8.3 below.
8.2 NETRIX may cancel Purchase Order(s) or any portions thereof for any
reason by written notice prior to the date of delivery. Cancellation shall be
effective upon SMTC's receipt of written notice to that effect from NETRIX, or
thereafter upon the date specified in such cancellation notice. In the event of
NETRIX cancels any Purchase Order effective within 90 days of the scheduled
delivery date, NETRIX agrees to pay SMTC for the reasonable and allocable
materials, labor, and overhead costs incurred or legally obligated prior to the
effective date of the cancellation. NETRIX agrees to purchase from SMTC, at
SMTC's cost plus negotiated material handling expenses, such materials that
remain in SMTC's inventory as well as actual labor expended and reasonable
out-of-pocket expenses. SMTC will deliver to NETRIX all completed Product(s) and
assemblies in process; procured on account of subject Purchase Order(s) and any
tooling, test and burn-in equipment owned by NETRIX and furnished to SMTC under
this Agreement. SMTC agrees that any cancellation charge may be subject to audit
Page 10
by NETRIX. To minimize cancellation charges, whenever practicable, procured
components will be used by SMTC, sold back to suppliers or canceled prior to
delivery. NETRIX agrees to pay actual cancellation or re-stocking charges
incurred by SMTC, not to exceed the value of material on order for Forecast
NETRIX orders. SMTC shall invoice NETRIX for any applicable cancellation charges
which shall be payable by NETRIX within 30 days of the date of invoice. NETRIX
and SMTC shall complete any audit activity as requested by NETRIX to verify such
charges within that 30 day period.
8.3 If NETRIX has not requested shipment of any Forecast Product within
sixty (60) days of its forecasted shipment date, NETRIX will, at its sole
discretion, either pay for the Products or pay a one percent (1%) per month
carrying charge for a maximum of four (4) months. At the end of that four (4)
month period, NETRIX agrees to immediately pay for the Product. SMTC will advise
NETRIX of any Products that were Forecasted but did not ship within sixty (60)
days of the Forecasted date.
8.4 Provided they have been Forecasted by NETRIX at least nine (9)
months prior to the date of the Order, SMTC will schedule the build and test of
Orders, within 2 working days of receiving written notice from NETRIX which
provides configuration information and "Ship To" information. Completed Orders
will be shipped within five (5) working days of Orders being scheduled.
8.5 It is the responsibility of SMTC to provide a list of long lead
materials and request from NETRIX authorization to purchase such materials to
insure scheduled delivery. NETRIX agrees to provide a written response to such
request within five (5) working days of a request by SMTC.
8.6 NETRIX, agrees to be liable to pay for
non-returnable/non-cancelable ("NR/NC") material once NETRIX approves its
acquisition by SMTC.
8.7 NETRIX may place "Emergency Orders" (i.e., for accelerated
delivery, increased quantities or a combination of both), and SMTC agrees to
review all potential alternative approaches with NETRIX and make reasonable
efforts to fulfill such emergency orders.
8.8 SMTC shall order components as specified by NETRIX's Authorized
Vendor List ("AVL"). Before ordering or purchasing from a third party, SMTC
shall first utilize any available NETRIX inventory. SMTC shall conduct receiving
inspection on all purchases.
9. REPAIR SERVICES
9.1 SMTC shall provide a stockroom with system support for NETRIX owned
spares, sub-assemblies and finished Products with the equivalent level of
inventory control processes as an SMTC stockroom.
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9.2 SMTC shall ship directly to NETRIX customers items from NETRIX's
spares inventory as needed to support NETRIX's Return-Material-Authorization
("RMA") process within the timeframes specified to be mutually agreed upon.
9.3 SMTC shall accept receipt of all NETRIX RMA Product and route them
correctly for repair or scrap according to NETRIX guidelines.
9.4 SMTC will use its best efforts to debug and repair returned
Products but will not charge NETRIX more than a percentage of board cost as
specified on Exhibit A. If, within twenty-eight (28) days after receipt of the
returned Product, SMTC is unable to repair the returned Product, SMTC will, at
NETRIX's option and at NETRIX's expense, ship such Product to NETRIX and sell to
NETRIX a replacement at the SMTC price listed in Exhibit A minus the current
pre-tax profit from the price grid in Section 7.1.
9.5 SMTC will upgrade any returned Products to the current revision at
NETRIX's expense.
9.6 SMTC will re-assemble any systems returned for repair and route
them to system test after the sub-assemblies have been repaired and upgraded.
10. WARRANTY
10.1 SMTC warrants that Products delivered by SMTC will be free from
defects in workmanship under normal use and operation for a period of one (1)
year from the date of shipment.
10.2 SMTC warrants that Repairs delivered by SMTC will be free from
defects in workmanship under normal use and operation for a period of ninety
(90) days from the date of shipment.
10.3 SMTC further warrants that all Products will conform in every
respect to IPC-A-610-2 standards.
10.4 SMTC'S ENTIRE OBLIGATION UNDER THIS WARRANTY SHALL BE LIMITED TO
REPAIR OR REPLACEMENT OF ANY PARTS OR PRODUCTS, WHICH PROVE TO BE DEFECTIVE
WITHIN THE WARRANTY PERIOD.
10.5 EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 10.1, 10.2
AND 10.3 ABOVE, SMTC HEREBY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT WILL SMTC BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO
DAMAGES FOR LOSS OF PROFITS OR LOSS OF GOOD WILL EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES IN ADVANCE. SMTC SHALL NOT BE LIABLE FOR ANY CLAIM
OR DEMAND AGAINST NETRIX BY ANY OTHER PARTY.
Page 12
10.6 SMTC shall not have any warranty obligation whatsoever where
SMTC's Product has been subjected to attempted repair, disassembly, physical
abuse or other misuse after shipment.
10.7 NETRIX shall notify SMTC of any alleged defect within the time
prescribed above and, promptly upon SMTC's written request, shall send Products
believed to be defective to SMTC for inspection. SMTC will use its best efforts
to return any repaired or replaced Products within ten (10) days from date SMTC
receives the same but no later than thirty (30) days.
10.8 All Products delivered hereunder shall have the date of
manufacture marked on the Product, and all repaired Products shall have the date
of repair marked on the Product. Replacement and warranty repair of defective
Products, including return transportation charges only, shall be at SMTC's
expense.
11. PENALTIES
11.1 NETRIX Penalties. NETRIX shall pay an interest charge equal to 1%
per month for invoices not paid within thirty (30) calendar days of invoice date
to the address specified in paragraph 16.8 together with all costs and
reasonable attorneys fees.
11.2 SMTC Penalties. With respect to any Orders for Forecasted Product
placed with sufficient manufacturing and material lead times and accepted by
SMTC, which are shipped more than five (5) business days after the agreed
shipment date as a result of SMTC's failure to perform adequately in the
planning, scheduling, or manufacturing of PRODUCT for NETRIX, SMTC agrees to pay
a penalty equal to Zero Point Three Three Percent (0.33%) Per Day of the total
charge for the late Product to NETRIX, with a total amount of the penalty not to
exceed the sum of the agreed upon Pre-Tax Profit as specified in Section 7.1
above for any late Product plus one percent (1%) of the sum of (Material Cost
plus Material Uplift plus Labor) for any late Product, on an item-by-item basis.
Notwithstanding the foregoing, SMTC will pay no penalty for any delay resulting
from industry-wide shortages, parts allocations, force majeure and component
obsolescence.
Page 13
12. INSURANCE
With the exception of baseline inventory repurchased by NETRIX as
provided in paragraph 2.1 above, while NETRIX-owned property of whatever kind is
in SMTC 's possession or control, SMTC shall be responsible for all loss or
damage and shall, at its expense, secure or maintain extended insurance coverage
in an amount to cover replacement cost. Such insurance shall name NETRIX as
additional insured and loss payee and provide NETRIX with 10 days prior notice
of cancellation, as evidenced by certificates of insurance delivered to NETRIX.
13. INDEMNIFICATION
13.1 NETRIX shall settle or defend, at NETRIX's expense, and pay all
costs, fines, judgments, reasonable attorney fees, reasonable attorneys fees of
counsel for SMTC and damages ("Costs") resulting from all proceedings or claims
against SMTC and its subsidiaries for infringement or alleged infringement by
the Units furnished under this Agreement, or any part or use thereof, of
copyrights, patents, or other intellectual property rights now or hereafter
existing in the United States. This indemnification will not apply to any matter
arising out of a claim for which NETRIX is entitled to indemnification from SMTC
as provided in Section 13.2. NETRIX shall notify SMTC if it is or becomes aware
of any right of, or protection afforded to, a third party as set forth above
that might affect SMTC's ability to provide Units under this Agreement. SMTC
shall provide written notice to NETRIX of any such proceeding or claim of which
it becomes aware as soon as practicable after it becomes aware of the proceeding
or claim.
13.2 SMTC shall settle or defend, at SMTC's expense, and pay all Costs
resulting from all proceedings or claims against NETRIX and its subsidiaries for
infringement or alleged infringement of copyrights, patents, or other
intellectual property rights now or hereafter existing in the United States
arising from or relating to the process or procedures by which the Units
furnished under this Agreement, or any part or use thereof, are manufactured by
SMTC or any modification to the Units proposed by SMTC which it knew or had
reason to believe violated any such intellectual property right. SMTC shall
notify NETRIX if it is or becomes aware of any right of, or protection afforded
to, a third party as set forth above that might affect NETRIX's ability to
receive Units under this Agreement. NETRIX shall provide written notice to SMTC
of any such proceeding or claim of which it becomes aware as soon as practicable
after it becomes aware of the proceeding or claim.
13.3 Reasonably promptly after obtaining knowledge of a matter which
will give rise to a Claim covered by Section 13.1 or 13.2, the party who may be
entitled to indemnification (the "Indemnitee") shall give the party who may be
obligated to provide indemnification (the "Indemnitor") written notice of the
Claim (a "Notice of Claim"); provided, however, that no failure or delay in
giving any such Notice of Claim shall relieve the Indemnitor of its obligations
except, and only to the extent, that it is prejudiced thereby. A Notice of Claim
shall specify in reasonable detail the nature and all known particulars related
to an indemnified Claim. The Indemnitor shall (i) promptly inform the Indemnitee
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of all material developments with respect to a Claim which is the subject of a
Notice of Claim and (ii) inform the Indemnitee promptly after the Indemnitor has
made a good faith determination, based on the facts alleged in such Notice of
Claim or which have otherwise become known to the Indemnitor, either that the
Indemnitor acknowledges that it has an indemnification obligation hereunder in
respect of such Claim or that the Indemnitor has made a good faith determination
that it has no indemnification obligation hereunder in respect of such Claim.
The Indemnitee shall have the right, but not the obligation, to participate, at
its own expense, in the defense of any third party Claim through legal counsel
selected by it and shall have the right, but not the obligation, to assert any
and all cross-claims or counterclaims which it may have. So long as the
Indemnitor is in good faith performing its obligations under this Section 13.3,
the Indemnitee shall (i) at Indemnitor's cost and expense, cooperate in all
reasonable ways with the Indemnitor and (ii) not settle any such Claim without
the prior written consent of the Indemnitor. If the Indemnitor fails to perform
its obligations under this Section 13.3, or if the Indemnitor shall have
informed the Indemnitee in writing that the Indemnitor does not have an
indemnification obligation in respect of such Claim, then the Indemnitee shall
have the right, but not the obligation, to take the actions which the Indemnitor
would have had the right to take in connection with the performance of such
obligations and, if, as determined by a court of competent jurisdiction, the
Indemnitee is entitled to indemnification hereunder in respect of the event or
circumstance as to which the Indemnitee takes such actions, then the Indemnitor
shall, in addition to indemnifying Indemnitee for the Claim, indemnify the
Indemnitee for all of the Costs incurred in connection therewith. If the
Indemnitor proposes to settle or compromise any third party Claim, the
Indemnitor shall give written notice to that effect (together with a statement
in reasonable detail of the terms and conditions of the settlement) to the
Indemnitee a reasonable time prior to effecting the settlement. Notwithstanding
anything contained herein to the contrary, the Indemnitee shall have the right
to object to the settlement of any third party Claim, whereupon (A) the
Indemnitee will assume the defense of such Claim for its own account and as if
it were the Indemnitor and (B) the Indemnitor shall be released from any and all
liability with respect to such Claim to the extent that such liability exceeds
the liability which the Indemnitor would have had in respect of such a
settlement.
13.4 This Section 13 states the entire rights and obligations of NETRIX
and SMTC regarding infringement of copyrights, patents, or intellectual property
rights now or hereafter existing in the United States and shall survive
expiration or termination of this Agreement.
14. TERM AND TERMINATION
14.1 This Agreement shall commence as of the Effective Date and
continue for a minimum period of three (3) years ("Initial Term"). This
Agreement shall be extended thereafter for one (1) year periods unless either
party shall give written notice of termination at least ninety (90) days prior
to the end of the then current Term.
Page 15
14.2 Either party may immediately terminate this Agreement, in whole or
in part, in the event that the other party shall become insolvent, file or have
filed against it (and not dismissed within thirty (30) days) a petition in
bankruptcy, undergo a reorganization pursuant to a petition in bankruptcy filed
with respect to it, or makes an assignment of their assets for the benefit of
creditors.
14.3 In addition to the rights set forth above, NETRIX shall have an
immediate right of termination in the event that SMTC does not attain the
delivery or quality criteria set forth in Paragraph 6. SMTC shall be given a
written 30 day notice to cure any such problem.
14.4 Upon termination by NETRIX as provided in this Agreement, SMTC
agrees to transfer to NETRIX: (1) any outstanding orders it has placed for raw
materials/component parts; (2) inventory on hand related to the Products; (3)
dedicated fixtures or equipment pertaining to the manufacture or assembly of the
Product paid for by NETRIX; and (4) all manufacturing/assembly know-how related
to SMTC's manufacture of the Product, including but not limited to,
assembly/test documentation and test programs. All applicable cancellation
charges will apply in regard to this termination.
14.5 In the event that this Agreement is terminated, SMTC will use its
best efforts to assist NETRIX in securing and establishing an alternate source
of supply by transfer of NETRIX documents, and provided such support shall be
limited to a three (3) month period and shall take place only within the
Continental United States and further provided that NETRIX pays all charges
described in Paragraph 8.2 in the event of termination.
14.6 SMTC may terminate this Agreement thirty (30) days or more after
making written demand for payment to NETRIX in the event that NETRIX fails to
pay an invoice submitted to it within the net forty-five (45) days from date of
invoice as required. In the event SMTC terminates this Agreement pursuant to
this paragraph, NETRIX shall be liable for all applicable cancellation charges.
15. CONFIDENTIAL INFORMATION.
15.1 Protection of Confidential and/or Proprietary Information. Each
party hereby agrees that all information which is disclosed to it by the other
party or its representatives (a) in writing or some other physical form or
electronically and designated to be proprietary and confidential or (b) is
disclosed to it initially orally or visually and identified at the time of
initial disclosure as proprietary or designated in writing as proprietary, will
be safeguarded by the receiving party in the same manner the receiving party
safeguards its own proprietary and confidential information of like character.
No such information will be divulged to third parties without the prior written
consent of the disclosing party. Notwithstanding the foregoing, SMTC
acknowledges that (a) all NETRIX engineering drawings, schematics and software,
customer lists, and customer information, and pricing under this Agreement are
considered proprietary even if they are not so designated; (b) all information
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with regard to order volumes, pricing, quality performance data and rate of
repair for any NETRIX Product are confidential; (c) SMTC will not contact any
NETRIX customer without NETRIX's prior written consent; and (d) SMTC will not
compile a customer list or divulge any of the names, contact persons or
purchasing history of NETRIX customers except in furtherance of its performance
of this Agreement.
15.2 Notwithstanding anything above to the contrary, this Agreement
shall not impose any obligation upon the receiving party with respect to any
portion of the received information which (i) is now, or which hereafter,
through no act or failure to act on the part of the receiving party, becomes
generally known or available, (ii) is known to the receiving party at the time
of receiving such information as established by written records, (iii) is
furnished by the disclosing party to others without restriction on disclosure,
(iv) is hereafter furnished to the receiving party by a third party, as a matter
or right and without restriction on disclosure, (v) is independently developed
by the receiving party, or (vi) is authorized in writing for release by the
disclosing party.
15.3 This section 15 shall survive the termination of this Agreement.
16. GENERAL
16.1 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction, such invalidity
or unenforceability shall not affect the enforceability of any other provisions
of this Agreement not held to be invalid. The remaining provisions of this
Agreement shall continue in effect as though any such invalid or unenforceable
provisions were deleted.
16.2 AMENDMENTS. This Agreement can only be modified in writing, signed
by a duly authorized Corporate Officer of each party to the Agreement. No
Amendment shall be deemed effective, notwithstanding proper execution, until a
duplicate original of such Amendment is received by each party in accordance
with provisions of Section 16.7 of this Agreement.
16.3 COMPLIANCE WITH LAWS. Each party agrees to comply with all
applicable laws, rules and regulations with regard to the performance of its
obligations under this Agreement and indemnify and hold the other party harmless
from any loss resulting from its failure to obey all such laws, rules and
regulations.
16.4 Export Control Compliance. Both parties acknowledge that the
products, software, and documentation covered by this Agreement may be subject
to the rules and regulations of United States Department of Commerce Office of
Export Administration and other import or export restrictions from or to
applicable countries. When required, both parties will cooperate to provide such
documentation as may be required under any such laws, rules, or regulations, and
neither party will make any shipments nor take any actions in violation of such
requirements.
Page 17
16.5 RELATIONSHIP BETWEEN PARTIES. The parties acknowledge and agree
that they are now and will continue at all times during the term of this
Agreement to be independent parties. In no event will either party engage in
conduct or hold itself out to be a joint venture partner, employee,
representative, franchisee, servant or agent of the other.
Neither party will have any right to bind or obligate the other in any manner.
16.6 WAIVER. Either party's failure to exercise, in whole or in part,
or delay in exercising any right under this Agreement will not preclude any
future exercise of the same right or the exercise of any other right hereunder.
16.7 NOTICES. All notices required or permitted under this Agreement
shall be in writing, delivered to the party at the address set forth below, or
such other address as either party may specify by notice in accordance with this
paragraph by express delivery service or by facsimile or telefax. Notices shall
be delivered to the following addresses:
To: Netrix Corporation
00000 Xxxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn.: President
cc: Vice President Operations
Fax Number: 000-000-0000
To: The SMT Centre S.E. Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attn.: Vice-President & General Manager
Fax Number: 000-000-0000
Address information, facsimile numbers and contact information may be changed
unilaterally by each party as needed without regard to any other provisions of
this agreement.
16.8 Title and Headings. The headings to the sections of this Agreement
are inserted for convenience of reference only and will not be considered a part
of this Agreement.
16.9 Force Majeure. Neither party will be liable nor deemed to be in
default for delay or failure in performance or interruption of service hereunder
resulting directly or indirectly from acts of God, wars, floods, riots, labor
strikes, worldwide parts shortages, or transportation shortages (a "force
majeure"), provided, however, the provisions of this section shall not apply to
obligations to make payments when due. The party claiming excuse for failure to
perform due to force majeure shall notify the other party in writing within 2
days of the existence of the force majeure cause and its expected duration.
Page 18
With no regard to cause of the force majeure, if the notifying party is not able
within fifteen (15) days after the occurrence to commit to resume substantial
performance of its obligations within seventy-five (75) days after such
commitment, the other party may declare such party to be in default without
regard to any applicable cure period.
16.10 DISCLOSURES. Nothing contained in this Agreement shall be deemed
to be an assignment or transfer of any intellectual property rights by either
party to the other, except for any disclosure by NETRIX which is required to be
used by SMTC to perform its obligations hereunder and all such disclosures shall
constitute a non-exclusive royalty free license to SMTC to use all such
disclosures but only to the extent required by SMTC to fulfill its obligations
hereunder.
16.11 AUTHORITY. Each party warrants that it has the unqualified right
to enter this Agreement, that it is the owner of or has the right to transfer
all rights and licenses to all technology, intellectual property and other
deliverables under the terms of this Agreement, and that each has the right to
perform all obligations under this Agreement.
16.12 ASSIGNMENT. Neither party may assign or otherwise transfer its
rights and obligations under this Agreement without the written consent of the
other party, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, NETRIX may assign this Agreement in connection with the sale of
substantially all of the assets of the company. Notwithstanding the foregoing,
SMTC may also assign this Agreement to an affiliated company of equal or greater
capitalization.
16.13 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the United States of America and the Commonwealth
of Virginia.
16.14 TRADEMARKS. Notwithstanding any other provisions of this
Agreement, neither party shall have the right to use trademarks, service marks
or trade names of the other party (including those of any subsidiaries) directly
nor indirectly for any reason without prior written approval of the other party.
16.15 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding between the parties with respect to the subject matter hereof
and merges all prior discussions and negotiations between them. There are no
oral representations or inducements pertaining thereto which are not contained
herein; and neither of the parties hereto shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or as duly set forth on
or subsequent to the date hereof in writing and signed by a proper and duly
authorized officer or representative of the party hereto to be bound thereby.
16.16 EFFECTIVE DATE. This Agreement is not effective and shall have no
force whatever until fully executed by all of the parties hereto.
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16.17 JOINT EFFORTS. This Agreement has been drafted by the mutual
efforts of the parties after consultation with counsel and shall not be
construed against any party as a result thereof.
16.18 EXECUTION IN COUNTERPARTS. The Agreement may be executed in any
number of counterparts with the same effect as if all parties had signed the
same document. All counterparts shall be construed together and shall constitute
one Agreement.
16.19 WARRANTY OF NON-INFRINGEMENT. NETRIX warrants that it is not
aware of any claim for infringement or alleged infringement by the Units to be
manufactured under this Agreement, or any part or use thereof, of copyrights,
patents, or other intellectual property rights now or hereafter existing in the
United States.
16.20 PUBLICITY. The existence and terms of this Agreement shall remain
confidential. Neither party shall make any public announcement relating to this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld, conditioned or delayed.
17. SIGNATURES
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by its duly authorized representative, intending to be legally bound
thereby.
Date: Date:
NETRIX CORPORATION. THE SMT CENTRE S.E. INC.
By:________________________________ By:_____________________________
Page 20
EXHIBIT A
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Netrix Part Number Netrix Purchase Price Repair Percentage Maximum Repair Charge
Allowed Change
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