CONTRACT
Exhibit 10.3
CONTRACT
THIS
CONTRACT (the “Agreement”) is entered into this
17th day of June, 2006 and shall be
effective as of the Effective Date (as hereinafter defined) by and among VERSO TECHNOLOGIES, INC.,
000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, hereinafter sometimes called
“VERSO,” VERSO VERILINK, LLC, 000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, a
wholly-owned subsidiary of VERSO, hereinafter sometimes called “VV” and together with
VERSO, the “VERSO Parties”, and CM SOLUTIONS, INC., 0000 Xxxxx Xxxxxx Xxxx, Xxxxxxx,
Xxxxxxxxxxx, 00000, hereinafter sometimes called “CM.”
WHEREAS, VV is the owner of various inventory comprised of electronic components, including,
but not limited to, integrated circuits, resistors, capacitors, and other related items; and
WHEREAS, VV desires to sell, and CM desires to purchase, $4,000,000.00 in such electronic
components upon the terms and conditions hereinafter set forth; and
WHEREAS, in consideration of CM purchasing such components, the VERSO Parties agree to
purchase the assembled products utilizing such components and further agree to provide purchase
orders to CM in a minimum amount of $2,000,000.00 per quarter for the next three (3) years, all
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, for and consideration of $10.00 and the mutual benefits derived herefrom and
other good and valuable consideration VERSO Parties and CM do hereby contract and agree as follows:
1) CM shall purchase $4,000,000.00 in various electronic components, including, but not
limited to, integrated circuits, resistors, capacitors and other related
items. A copy of such electronic components is attached hereto as “Exhibit A” and incorporated
herein by reference as if copied fully in words and figures. CM shall pay the sum of $2,000,000.00
for an outright purchase of $2,000,000.00 of such electronic components. This payment shall be
made to VERSO within two (2) business days of the Effective Date (as hereinafter defined). CM shall
hold the remaining $2,000,000.00 of electronic components. Upon the purchase by the VERSO Parties
of least $2,000,000.00 in products of original inventory as described on “Exhibit A”, CM shall
(without any additional consideration) assign to VV the remainder of such unused original inventory
and CM shall be excused from making any additional payment pursuant to Paragraph 1, and whereupon
VV shall instruct CM to hold such components on assignment for the benefit of the VERSO Parties.
CM may only use the purchased electronic components to fulfill the purchase orders of the VERSO
Parties, unless the VERSO Parties otherwise agree.
VV represents it has physically delivered to CM various electronic components, including but
not limited to integrated circuits, resistors, capacitors and other related items as described in
“Exhibit A” attached hereto. VV and CM each acknowledge that neither has had an opportunity to
conduct a physical inventory of such electronic components set forth in “Exhibit A” attached hereto
and in the event there is a discrepancy in the quantity of items described in “Exhibit A” and that
actually delivered to CM, VV and/or CM may request a physical audit of such electronic components
and any such issues shall be resolved by making an inventory adjustment.
2) The VERSO Parties agree to purchase the product assembled using the electronic components
from CM as follows:
Within one (1) year from the date of this Agreement the VERSO Parties shall purchase
$1,000,000.00 of original inventory as described in “Exhibit A” of such
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assembled product, plus pay a surcharge of $160,000.00 in cash within twelve (12) months from the
date of this Agreement. Within twenty-four (24) months from date of this Agreement the VERSO
Parties shall purchase an additional $1,000,000.00 of original inventory in product and pay a
surcharge of $80,000.00 in cash.
During the first year of this Agreement, in the event the VERSO Parties fail to purchase
$1,000,000.00 in products of original inventory as described in “Exhibit A”, the VERSO Parties
shall pay in cash the difference in the above amount of product purchased by VERSO and
$1,160.000.00 on or before the
17th day of August , 2007. This payment shall be the only
obligation of the VERSO Parties and CM’s only remedy in the event the VERSO Parties fail to make
this purchase.
During the second year of this Agreement in the event the VERSO Parties fail to purchase an
additional $1,000,000.00 of original inventory as described in “Exhibit A”, the VERSO Parties shall
pay in cash the difference in the above amount of product purchased by VERSO and $1,080,000.00 on
or before the 17th day of August, 2008. This payment shall be the only obligation of the VERSO Parties and
CM’s only remedy in the event the VERSO Parties fail to make this purchase.
In the event, the VERSO Parties purchase $2,000,000.00 of original inventory as described in
“Exhibit A” from CM, prior to the expiration of 24 months from the date of this Agreement CM shall
prorate surcharge. The VERSO Parties shall pay to CM such prorata surcharge within thirty (30)
days of such notice to the VERSO Parties by CM of such amount.
3) The VERSO Parties shall provide CM a minimum of $2,000,000.00 in purchase orders for
electronic products each quarter beginning the date of this Agreement for the next three (3) years,
being a total of $8,000,000.00 per year in electronic products.
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4) In the event, the VERSO Parties fail to provide a minimum of $2,000,000.00 in purchase
orders per quarter in electronic products for the next three (3) years, the VERSO Parties shall pay
to CM as damages for any purchase orders totaling less than $2,000,000.00 in any quarter the sum of
$25,000.00 for each quarter such purchase orders fall below $2,000,000.00. This payment shall be
the only obligation of the VERSO Parties and CM’s only remedy in the event the VERSO Parties fail
to make this purchase.
Notwithstanding the foregoing, if the VERSO Parties purchase the assembled products using the
electronic components from CM as provided in Paragraph 2 of this Agreement and pay the surcharge as
set forth in Paragraph 2 of this Agreement, then the VERSO Parties shall have no obligation to pay
any amount pursuant to this paragraph. In addition, notwithstanding anything herein to the
contrary, the VERSO Parties shall have no obligation to pay any surcharges or damages pursuant to
this Agreement for failing to purchase assembled products using the electronic components within
specified time frames if such failure results from CM’s inability or failure to perform in a timely
manner its obligations in respect of the manufacture of such products.
5) The VERSO Parties and CM each acknowledge that CM shall be entitled to pledge all or any
part of such electronic components purchased herein to secure any indebtedness for the purchase of
such electronic components from VV.
6) As a condition precedent to the effectiveness of this Agreement, all electronic components
to be purchased hereto shall be inspected by CM and deemed usable by CM in making product and shall
be located at its place of business at 0000 Xxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx 00000. CM
shall inspect such components and deliver a notice of acceptance to
the VERSO Parties within 0
days of the date
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hereof, the date of delivery of such notice is referred to herein as the “Effective
Date”. Any unusable product as determined by CM, in its good faith discretion, shall not be
purchased by CM hereunder and shall be returned by CM to the VERSO Parties and the VERSO Parties
shall repurchase or exchange, as the case may be, such product for the price set forth in “Exhibit
A”.
7) CM shall be responsible for all risk of loss to the electronic components upon delivery of
the components to CM’s facility until the balance of any such electronic components are assigned to
VV as provided in Paragraph 1 of this agreement. Upon such assignment VV shall assume the
risks of providing insurance for such electronic components and the obligation to pay for such
insurance. VV may request CM to continue to provide insurance under its policy of insurance as
long as such components are located at the facility of CM in Corinth, Mississippi; however, such
request shall be in writing and VV shall promptly reimburse CM for the additional costs related to
insuring such electronic components.
8) All purchases of products by the VERSO Parties from CM shall be subject to the provisions
of the Manufacturing Agreement to be signed by the VERSO Parties and CM, including the pricing,
inspection and warranty provisions of such agreement. Such manufacturing agreement shall be signed
contemporaneously with this agreement and is made a part of this agreement by reference.
9) VV warrants that it is the owner of all property described in “Exhibit A” attached hereto
and all such property is conveyed to CM free from any adverse lien, security interest or
encumbrance and that VV will defend title against all claims and demands of all persons any time
claiming the same or any interest therein.
10) If any provision of this Agreement is held invalid, such invalidity shall not affect the
validity or enforcement of the remaining provisions of this Agreement.
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11) This Agreement shall inure for the benefit of the parties hereto and their respective
representatives, successors and assigns. No party hereto shall assign any rights hereunder without
the consent of the other parties hereto.
12) This Agreement has been delivered by the VERSO Parties to CM in the City of Corinth,
County of Xxxxxx, State of Mississippi and shall be governed and construed in accordance with the
laws of the State of Mississippi.
13) If a dispute should arise, the parties shall have the option to submit the dispute to
arbitration under the rules for commercial arbitration of the American Arbitration Association.
WITNESS OUR SIGNATURES, this
the 17th day of July, 2006.
| VERSO TECHNOLOGIES, INC. | CM SOLUTIONS, INC. | |||||||
By:
|
/s/ Xxxxxx X. Xxxxxxx | By: | /s/ Xxxxxxx Xxxxxx | |||||
| Xxxxxx X. Xxxxxxx | Xxxxxxx Xxxxxx | |||||||
| Printed Name | XXXXXXX XXXXXX | |||||||
| PRESIDENT | ||||||||
| EVP & CEO | ||||||||
| VERSO VERILINK, LLC | ||||||||
By:
|
/s/ Xxxxxx X. Xxxxxxx | |||||||
| Xxxxxx X. Xxxxxxx | ||||||||
| Printed Name | ||||||||
| EVP & CEO | ||||||||
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