MANUFACTURING AGREEMENT
THIS MANUFACTURING AGREEMENT ("Agreement") is made effective as of the 13 day of
June 2000 ("Effective Date") by and between Shanghai Industrial Investment
(Group), Co., Ltd. a corporation organized under the laws of the People's
Republic of China, located at 000 XxxxxXx Xxxxx Xxxx, Xxxxxxxx, Xxxxx (the
"Manufacturer") and XxXxxx.xxx, Inc., a corporation organized under the laws of
the State of Delaware, located at 0000 Xxxxxx Xxxxxxx Xxxxxxx, Xxxxxxx,
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America (the "Customer").
W I T N E S S E T H:
WHEREAS, Customer desires to have Manufacturer manufacture and assemble
certain Products (as hereinafter defined) pursuant to one or more Purchase
Orders (as hereinafter defined) issued by Customer in accordance with this
Agreement; and
WHEREAS, Manufacturer desires to manufacture and assemble such Products for
Customer hereunder;
NOW, THEREFORE, Customer and Manufacturer, intending to be legally bound,
hereby agree as follows:
SECTION 1: DEFINITIONS
Capitalized terms used in this Agreement and not otherwise defined herein
shall have the meanings set forth in the attached Glossary.
SECTION 2: SCOPE OF WORK
2.1 Products. Manufacturer shall manufacture and sell Products to Customer,
and Customer shall order and purchase the number of units of the Products set
forth on Schedule 2.1 from Manufacturer, in accordance with the terms and
conditions of this Agreement. All manufacture of Products by Manufacturer shall
be solely for Customer and not for Manufacturer's own account or other
purchasers. Manufacturer shall deliver to Customer's specified location only
that quantity of Products specified in Customer's Purchase Orders, at prices and
the delivery date(s) set forth in such Purchase Orders.
2.2 Project Coordination. Each party shall appoint a technical coordinator
to maintain technical liaison with the other party hereto in connection with the
manufacture of the Products. Each party may change its technical co-ordinator
from time-to-time upon prior written notice. Communication between the parties
regarding design or engineering of the Product shall be between the designated
coordinators.
2.3 Specifications. The Customer shall have primary responsibility for the
preparation of Specifications for the Product. The parties agree to cooperate
with each other to implement changes to the Specifications made by Customer from
time to time. The parties shall jointly review the impact of such changes, and,
in the event Manufacturer believes that any such change will affect the work
performed by Manufacturer under this Agreement, it shall notify Customer and
advise Customer of any such effect, including any impact on the manufacture or
assembly of the Product, design considerations, and the costs to be incurred by
Manufacturer and Customer as a result of such changes.
2.4 Quality Assurance. Manufacturer will build and test the Products in
accordance with the procedures and timetables mutually agreed by the parties
from time-to-time in writing (the "Procedures and Timetables"). Manufacturer
agrees to comply with applicable quality procedures and testing as set forth in
the Statement of Work, including any quality guidelines attached thereto, and
Manufacturer shall provide quality-control records and reports to Customer
promptly upon request.
2.5 Packaging. Packaging will be in accordance with Customer's standards,
unless otherwise mutually agreed in writing. Customer shall specify in each
Statement of Work, or otherwise as agreed by the parties, the trademarks and
trade dress features to appear on the Products and the publications to be
included in packaging.
SECTION 3: SHIPPING/DELIVERY/TITLE
3.1 FOB Terms. All Products covered under this Agreement shall be made
Manufacturer FOB origin, freight collect, or prepaid by Manufacturer and charged
to Customer per invoice. Customer may specify the carrier by so indicating
within a mutually agreeable, reasonable period of time prior to shipment. The
Manufacturer can also, within such period, suggest a carrier for selection by
the Customer. If Products are designated for export from the United States,
Customer is responsible for assuring compliance with applicable export laws, and
Customer will provide Manufacturer with instructions for the handling of export
shipments.
3.2 Delivery. Manufacturer shall fill a Purchase Order pursuant to the
delivery terms and dates set forth in such Purchase Order.
3.3 Title. Title to Customer Components will remain with Customer. Title to
any Manufacturer Components included in the Products will pass to Customer upon
the earlier of delivery to Customer or Manufacturer's receipt of payment for
such items. To the extent not otherwise provided in this paragraph, title to
Products will pass to Customer at point of shipment. The foregoing
notwithstanding, when a factoring arrangement is agreed and accepted by both
parties, the title transfer will be done in accordance with the factoring and
related arrangement (the "Factoring Arrangement") signed between the Customer ,
the Manufacturer and the relevant banks involved in such Factoring Arrangement.
SECTION 4: PRICING AND PAYMENT TERMS
4.1 Pricing. The purchase price per Product unit and other costs to be paid
by Customer for Product(s) accepted under this Agreement are specified in
Schedule 4.1. Changes to such prices shall be agreed on in connection with each
material change in an applicable Xxxx of Materials.
4.2 Payment. Payment terms are net/60 days after the xxxx of lading date by
T/T transfer. At the same time when the xxxx of lading is issued, the
Manufacturer shall make out invoice to the Customer. In order to secure the
payment, the Customer and the Manufacturer agree to enter into a Factoring
Arrangement signed between the Customer, Manufacturer, and the relevant banks
which are involved in the Factoring Arrangement. Manufacturer and Customer agree
that the Bank of America and Industrial and Commercial Bank of China are
contemplated to be the banks involved in the Factoring Arrangement, but the
Manufacturer and Customer can mutually agree to involve other banks if
necessary. Payment should be made strictly according to the Factoring
Arrangement.
4.3 Invoicing. Manufacturer may invoice the Customer for Products upon
completion and shipment of such Products pursuant to Purchase Orders. To the
extent Manufacturer is entitled to do so under the Statement of Work, any
Purchase Order, or any Procedures and Timetables, Manufacturer may invoice for
Nonrecurring Charges, if any, as set forth in a Statement of Work, upon
commencement of production or as otherwise set forth in the applicable Statement
of Work and Purchase Order or any written Procedures and Timetables.
4.4 Taxes. Customer shall be responsible for sales, use, or custom taxes or
duties resulting from the sale or shipment of Products in accordance with its
Purchase Orders. Customer shall provide tax exemption numbers, if applicable,
for such purchases.
4.5 Factoring Arrangements. In order to finance the payment of the invoices
of the Products, Manufacturer, Customer and the relevant banks will enter into
the Factoring Arrangement on terms which are mutually agreeable to Manufacturer
and Customer. In connection with the Factoring Arrangement, Manufacturer makes
the warranty set forth in Section 9.2.
SECTION 5: PURCHASE ORDERS/FORECASTS
5.1 Forecasts. Customer has prior to, or will on, the Effective Date,
provide Manufacturer with a forecast of Customer's estimated Product
requirements covering period of one-year (the "One-Year Forecast"). Except as
provided in Section 5.2, forecast information shall be for planning purposes
only and shall not represent Customer's commitment to purchase any or all of
such units or create any other obligation whatsoever by Customer. As provided in
Section 3.2, requirements where delivery is scheduled to occur shall be covered
by one or more Purchase Orders.
5.2 Purchase Orders. Within six months after the Effective Date, Customer
will provide Manufacturer with its initial Purchase Order(s) for at least the
number of Products equal to 80% of the forecasts for the first six months of the
One-Year Forecast; however, Customer shall submit a Purchase Order for at least
100,000 units of the Product as one of such initial Purchase Orders promptly
after the Effective Date, and a Purchase Order for at least 150,000 units of the
Product, also as one of such initial Purchase Orders, within ninety (90) days of
the Effective Date. Thereafter, Customer will provide additional Purchase
Order(s) on a rolling ninety (90) day basis, for the number of Products equal to
100% of such 90-day forecasts in the One-Year Forecast.
5.3 Acceptance of Purchase Orders. Manufacturer shall accept Purchase
Orders conforming to the requirements of this Agreement and Statements of Work
then in effect. Manufacturer may, but is not required to, accept such Purchase
Orders which have additional terms, provisions and conditions. Manufacturer
shall indicate its acceptance of proposed Purchase Order(s) by written
acknowledgment of the Purchase Order(s) within seven (7) working days after
receipt .
5.4 Completion. Upon acceptance of each Purchase Order, Manufacturer will
manufacture and assemble the Products called for by such Purchase Order, conduct
final testing, and package the Products in accordance with the Products'
Specifications.
5.5 Inspection and Acceptance. Customer will inspect the Products in
Manufacturer's warehouse in Shanghai, China for quality assurance prior to
shipment to the United States. After inspection, if the quality is up to the
standard required by the applicable Statement of Work, the Customer will issue a
"Shipment Release Memo", in the form attached hereto as Exhibit 5.5, to the
Manufacturer. The Manufacturer should deliver the Products only when it receives
the "Shipment Release Memo" from the Customer. When a "Shipment Release Memo" is
issued, the Products are deemed to be qualified and accepted by the Customer.
SECTION 6: PURCHASE ORDER RESCHEDULING/CANCELLATIONS
6.1 Rescheduling. (a) Customer shall be entitled, without additional charge
or payment of associated costs, to change quantities (increase or decrease) or
reschedule delivery (acceleration or delay) of up to twenty five percent (25%)
of Products that are scheduled for delivery between thirty (30) and sixty (60)
days following Customer's request for such change, inclusive, and up to fifty
percent (50%) of Products that are scheduled for delivery sixty (60) or more
days after the date of such request.
(b) Manufacturer agrees to use its best efforts to accommodate requests for
rescheduling (acceleration and delay) and, before accepting such rescheduling
requests, may quote in writing applicable charges resulting from actual changes
in costs associated with such
rescheduling. If the parties are unable to agree on such changes, then
Manufacturer shall deliver as initially agreed, subject to Customer's right to
cancel Purchase Orders as provided herein.
6.2 Product Modifications. Manufacturer agrees to use its reasonable effort
to accommodate changes in versions of a Product within a reasonable time after
receiving a written request for such change.
6.3 Cancellation. Customer may, by written notice, cancel shipments of
Products that are scheduled for delivery more than sixty (60) days after receipt
of such notice. Upon receipt of notice of cancellation, Manufacturer shall stop
work on the canceled portion of existing Purchase Orders immediately.
Manufacturer agrees to use its reasonable efforts to return, reuse, or sell any
Manufacturer Components covered by the canceled portion of the applicable
Purchase Order. Manufacturer will make good faith efforts to effectively
minimize costs associated with such cancellation.
6.4 Cancellation Charges. With respect to canceled Purchase Orders,
Customer agrees to pay Manufacturer:
(a) For Components (other than items provided or paid for by Customer)
acquired solely for the execution of such Purchase Order, Manufacturer's
out-of-pocket costs for such Components, minus amounts saved as a result of
any return, reuse, or sale; plus
(b) For completed work and work in progress that cannot be used to
fill other orders, Manufacturer's costs for actual and reasonable labor and
supplies incurred pursuant to Customer's Purchase Orders up to the date of
receipt of notice of cancellation.
In no event shall cancellation charges set forth previously exceed the
price of the Products covered by the canceled portion of the Purchase Order.
To the extent the purchase of long lead time items is authorized in writing
by Customer, Customer will purchase such parts to the extent they cannot be
returned, reused, or sold, for the amount Manufacturer has paid for such items.
Obligations for payment for Nonrecurring Charges, as set forth in
Statements of Work or Purchase Orders, are not subject to reduction unless
associated costs can actually be avoided. If such cost can be avoided, all
reasonable effort will be made to minimize such cost and to reduce the required
payments in an equitable manner.
Manufacturer will provide Customer with documentation adequate to support
such claim for cancellation charges. Components and completed work and work in
progress that are paid for by Customer pursuant to such cancellation charges
shall be Customer's property and shall be held or delivered to Customer as
Customer may request.
Notwithstanding the foregoing, Customer shall have no obligation to pay
cancellation charges where cancellation is occasioned by the failure of
Manufacturer to perform its obligations under this Agreement.
SECTION 7: COMPONENTS
7.1 Customer Components. Customer may identify to Manufacturer certain
Components that must be used in the manufacturing of the Product. Either these
Components may be consigned by Customer or Manufacturer may be directed by
Customer to purchase such components from Customer's approved vendor list (the
"AVL"). If Manufacturer offers alternative to Customer's AVL, the alternative
must be approved in writing by Customer prior to use in production of Products.
Manufacturer acknowledges that Customer may have from time- to-time other
manufacturers of Products for markets other than North America and Asia who will
also need and use the Components in the manufacture of the Product. Accordingly,
in times of material shortages in Components, if any, Customer has the right to
allocate Components among the various manufacturers, even if Manufacturer has
placed an order for Components from a vendor which vendor has accepted such
order. Manufacturer hereby agrees to abide by any such allocation to the extent
it reduces the number of Components the Manufacturer ordered and shall change
its order in such case to no more than the number of Components allocated to the
Manufacturer by the Customer, but in any event, such allocation shall not affect
Manufacturer's ability to deliver the sufficient amount of Products as ordered
by Customer.
7.2 Programs. If computer programming is incorporated in the Products,
procurement of such programming shall be the responsibility of Manufacturer or
Customer as set forth in the applicable Statement of Work or Xxxx of Materials.
Any restrictions or payment obligations imposed by the original source on
Manufacturer's or Customer's use or handling of such programming shall be set
forth in a separate signed writing. There shall be no payment or reimbursement
obligation on Customer's part for programming obtained or provided by
Manufacturer unless such payments or reimbursements are set forth in a Xxxx of
Materials that indicates that Customer has accepted such obligation.
7.3 Change in Manufacturer's Components. Any change in vendors of material
for Manufacturer components shall be approved in writing by Customer prior to
such change.
SECTION 8: PERFORMANCE REVIEWS
Customer and Manufacturer agree to review quarterly the business
performance to date of each party to include such items as quality, delivery,
communications, responsiveness, and cost fluctuations.
SECTION 9: WARRANTY
9.1 Manufacturer's Warranty - Manufacture. Manufacturer warrants (a) that
the Products will conform in all material respects to their Specifications; (b)
that subject to the terms
of the Factoring Arrangement, Customer shall receive good and marketable title
to the Products upon delivery, free of any liens or claims; and (c) that the
Products will be free of defects in workmanship and materials for the lesser of
one (1) year after delivery to Customer or one (1) year after purchase and
opening of the Products by end-user customers or purchasers. Manufacturer shall
have no responsibility for defects in Customer Components, but Manufacturer
agrees to cooperate in processing applicable third-party warranty claims and in
taking advantage of remedies, if any, available from the original sources of
such Customer Components. The foregoing warranty shall not apply if the Products
or component parts have been subjected to abuse, misuse, accident, alteration,
or neglect. The aforementioned warranties shall inure to Customer, its
successors and assigns, and those who purchase or use each Product.
9.2 Manufacturer's Warranty - Factoring Arrangement. Manufacturer warrants
that it has obtained a line of credit of Xxx Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx
Dollars (USD $100,000,000) from the Industrial and Commercial Bank of China to
fund the manufacture of the Products, which line of credit is related to the
overall Factoring Arrangement.
9.3 Customer Warranty. Customer warrants it has the right (a) to consign
Customer Components to Manufacturer for incorporation in the Products in
accordance with the Manufacturing and Design Documentation and (b) to authorize
Manufacturer to use, for purposes of manufacturing and assembling the Products
hereunder, any information provided by Customer and contained in the
Manufacturing and Design Documentation.
9.4 Liability and Remedy. (a) Subject to Section 9.4(b), Manufacturer's
sole and exclusive liability and customer's sole and exclusive remedy for any
claim based on the foregoing warranties shall be, at Manufacturer's option, to
repair or replace (with new or functionally equivalent and compatible parts) or
if it is unable to repair or replace such Products, credit Customer's account
for any Products found not to conform to such warranties during the warranty
period. Alternatively, if Customer takes responsibility for processing end-user
warranty repairs, Manufacturer shall provide assistance, replacement of
Manufacturer Components, processing, and labor for replacement, at no charge, in
order for Customer or its representative to respond to such warranty claims.
Customer shall request return authorization from Manufacturer prior to release
of the defective units. Defective units shall be delivered to Manufacturer
freight prepaid and Manufacturer shall be responsible for return destination
charges in the United States for verified warranty claims. Manufacturer shall
process warranty claims and release repaired or replaced units within seven (7)
working days after receipt, provided that consigned or inventory components or
assemblies are available.
(b) If,
(i)(A) within the first six-month period commencing upon the
first Product shipment date (the "First Shipment Date"), one-half of
one percent (0.5%) or more of the Products, and
(B) After the six month anniversary of the First Shipment Date,
one-tenth of one percent (0.1%) or more of the Products,
within the first thirty (30) days after the first use (the "First
Use") of the Product by the user, and
(ii) any time within the warranty period specified previously
after the thirtieth day after First Use of the Product, one-half of
one percent (0.5%) or more of the Products, exhibit defects of the
same kind and nature, and such defects are the result of faulty
workmanship by Manufacturer or defects in materials arising from any
cause for which Manufacturer is responsible (such as defects in
Manufacturer Components), then Manufacturer agrees to give
compensation, or render assistance, at Manufacturer's sole expense, to
Customer as provided in the following:
(i) Delivery of replacement Products found to be defective to
the place designated by Customer; and
(ii) Field service for the replacement of such defective Products
or reimbursement to Customer of Customer's labor and
shipping costs in replacing such defective Products at such
rates as may be mutually agreed on from time to time.
The warranty provided in this Section 9.4(b) shall be subject to Customer's
satisfaction of the following conditions: (a) a description of the failure of
the Products alleged or found to be defective shall be furnished to Manufacturer
in writing within thirty (30) days of discovery by Customer of such defect; (b)
the defects so described shall be the result of workmanship defects in
Manufacture's side and shall be subject to Manufacturer's verification; (c) no
Products alleged or found to be defective shall be disposed of by Customer for
at least sixty (60) days after Manufacturer receives such description in
writing; and (d) such defective Products shall forthwith be returned to
Manufacturer by Customer, freight payable at destination, if Manufacturer so
requests.
9.5 Conforming Products. For Products that are returned to Manufacturer by
Customer for warranty repair or replacement and are found by Manufacturer to
conform to the product Specifications and such conformity is verified by
Customer, Customer shall pay Manufacturer shipping charges and duties.
9.6 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
MANUFACTURER SHALL HAVE NO LIABILITY FOR THE PRODUCTS OR ANY COMPONENTS THEREIN,
INCLUDING ANY LIABILITY FOR NEGLIGENCE, MANUFACTURER MAKES AND CUSTOMER RECEIVES
NO WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS
AGREEMENT OR ANY OTHER COMMUNICATION, AND MANUFACTURER SPECIFICALLY DISCLAIMS
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
SECTION 10: LIMITATION OF LIABILITY
10.1 Exclusion of Certain Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS,
LOSS OF USE, OR DATA OR INTERRUPTION OF BUSINESS, WHETHER SUCH ALLEGED DAMAGES
ARE LABELED IN TORT, CONTRACT, OR INDEMNITY, EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 Time Limitations. Actions by either party, however asserted, other
than in respect of any infringement of Intellectual Property Rights, shall be
commenced within two years from the date the cause of action accrues.
SECTION 11: INTELLECTUAL PROPERTY RIGHTS
11.1 Indemnification. (a) Subject to Section 11.1(b), Manufacturer, at its
own expense, shall protect, defend, hold harmless, and indemnify Customer and
any subsequent owner of the Products, and shall pay any damages, agreed upon
settlement amounts, or necessary costs (including attorney fees and fines)
finally awarded with respect to all proceedings or claims against it or them for
the infringement of any Intellectual Property Rights resulting from
Manufacturer's manufacture and assembly processes or the use of Manufacturer
Components where such use necessarily and solely causes the infringement.
Customer shall not agree to settle any such proceeding or claim without the
written consent of Manufacturer, which consent shall not be unreasonably
withheld.
(b) Manufacturer shall not have any liability hereunder based on (i)
required compliance by Manufacturer with Manufacturing and Design Documentation
originating with and furnished by Customer (or the combination of the Products
with other apparatus not included in the deliveries to Customer), if such
compliance (or combination) necessarily and solely gives rise to such
proceedings or claims; (ii) infringement or alleged infringement caused solely
by Customer Components; (iii) Customer's failure to provide prompt notice to
Manufacturer of any such proceeding or claim and copies of all communications,
notices, and/or other actions relating to such claim; or (iv) infringements
resulting from modifications or alterations made after shipment by Manufacturer.
11.2 No Other Rights. Except for any licenses and immunities that are
expressly granted by this Agreement, nothing in this Agreement or any course of
dealing between the parties will be deemed to create a license from either party
to the other of any Intellectual Property Right, whether by estoppel,
implication, or otherwise.
11.3 Manufacturing and Design Documentation. Manufacturer shall segregate
all Manufacturing and Design Documentation and provide Customer with a set of
copies thereof as requested by Customer from time to time. Except for copies
needed to be retained for Manufacturer to complete its obligations under this
Agreement and one copy which may be
retained in a segregated manner solely for nonproductive archival purposes for
reference concerning Manufacturer's obligation hereunder, Manufacturer shall
turn over such materials to Customer upon termination of this Agreement.
11.4 Confidential Exchanges. The parties have executed a Mutual
Nondisclosure Agreement, dated May 26, 2000, relating to the exchange of certain
confidential information. Such Agreement is hereby incorporated in this
Agreement by reference.
(a) The foregoing notwithstanding, the parties shall mutually prepare a
press release announcing the terms of this Agreement to the public, and shall
mutually agree to the timing of such release to the public; provided that the
substance and timing of such release is sufficient for Customer to comply with
its disclosure obligations and requirements under Securities laws, rules and
regulations of the United States and the States thereof, and/or the rules and
regulations of any Securities Exchange upon which the Customer's securities are,
or may, at the time of such required disclosure, be listed or included
(collectively, the "Customer Disclosure Obligations"). In any event, Customer
may disclose the terms and existence of this Agreement at the appropriate time
in order to meet its Customer Disclosure Obligations.
SECTION 12: TERM AND TERMINATION
12.1 Term. This Agreement shall commence on the Effective Date and shall be
in effect for an initial term of thirty-six (36) months. Thereafter, this
Agreement shall renew for successive terms of one (1) year by mutual agreement
of the parties at least six (6) months prior to the end of the initial term or
each successive term.
12.2 Termination of Agreement. Notwithstanding the provisions of Section
12.1, this Agreement may be terminated by either party (unless a specific party
is provided for below, then by such specific party) at any time upon the
occurrence of any one or more of the following events of default:
(a) The other party defaults (except for payment default by Customer)
in the performance of any material requirement or obligation
under this Agreement or any other written agreement between the
parties concerning the subject of this Agreement, and such
default is not cured within thirty (30) days after written notice
of such default is sent to such party, or if such default is not
capable of being cured within such thirty (30) days, the
breaching party has not commenced and is not continuing to take
meaningful steps to cure such default;
(b) Customer fails to make any payment required by the Factoring
Arrangement to Manufacturer on the date due, and fails to cure
such default within the time provided in the Factoring
Arrangement; or
(c) The other party ceases to do business, makes a composition or
assignment for the benefit of its creditors, makes a general
arrangement with its creditors concerning any extension or
forgiveness of any of its secured debt, becomes bankrupt or
insolvent, suffers or seeks the appointment of a receiver to the
whole or any material part of its business, takes any action to
liquidate or wind up the whole or any material part of its
business, is found subject to any provisions of any bankruptcy
code concerning involuntary bankruptcy or similar proceeding, or
suffers a material adverse change in its financial position such
that payments hereunder may be affected or delayed by a creditor
or administrator of the business of the other party.
(d) The Customer may terminate this Agreement upon thirty (30) days
prior written notice in the event it sells all or substantially
all of its assets, or is subject of a merger, consolidation or
acquisition resulting in the Customer not being the surviving
entity, or if a majority of the voting stockholders prior to such
merger, consolidation or acquisition are no longer a majority of
the Customer after such merger, consolidation or acquisition,
provided however if the Customer so terminates the Agreement
within the first twelve months of the initial term, Customer
shall purchase from Manu- facturer the machinery, equipment,
tooling and unused Manufacturer Components that the Manufacturer
cannot use for any purpose other than the manufacture of the
Product, for an amount equal to Manufacturer's direct cash
investment for such machinery, equipment, tooling and unused
Manufacturer's Components, which investment amount shall be
accounted for and documented by Manufacturer to Customer's
reasonable satisfaction.
(e) The Customer may terminate this Agreement upon thirty (30) days
prior written notice if there is an epidemic failure of, or
material defect in the Product line as a whole, provided that
after joint reasonable efforts by both Manufacture and Customer,
the epidemic failure can not be cured within a reasonable period
of time requested by the customer.
12.3 Payment Obligations. No termination of this Agreement shall release
Customer from any obligation to pay Manufacturer any amount that has accrued or
become payable at or prior to the date of termination.
12.4 Survival. Notwithstanding any termination of this Agreement, the
provisions of Sections 1, 3.3, 4.2, 4.4, 4.5, 6.3 (except in the case of
termination by the Customer pursuant to Section 12.2(e)), 6.4, 9, 10, 11, 13.1,
13.2, 13.11, 13.13 and 13.14 shall continue in accordance with their terms. If
the Agreement is terminated pursuant to the terms hereof, Purchase Orders
shall remain in effect and Manufacturer may continue to obtain parts and
supplies to fill such Purchase Orders, unless such Purchase Orders are cancelled
by Customer pursuant to Section 6.3 in which case the procedure of Section 6.3
shall be followed with respect to such cancelled Purchase Orders.
SECTION 13: GENERAL TERMS
13.1 Indemnification. Each party shall indemnify and defend the other party
against all claims, suits, losses, expenses, and liabilities for bodily injury,
personal injury, death, and property damage directly or indirectly caused by any
Products or through the intentional acts or negligence of such party or of any
person for whose actions said party is legally liable. Both parties shall carry
and maintain liability insurance coverage to satisfactorily cover its
obligations under this Agreement.
13.2 Arbitration. Any dispute, controversy, or claim arising out of,
relating to, or in connection with, this Agreement, including any question
regarding its existence, validity, or termination, shall be referred to and
finally resolved by arbitration under the Rules of China International Economic
and Trade Arbitration Commission of the China Council for the Promotion of
International Trade (CIETAC) in effect at the time of the arbitration, which
Rules are deemed to be incorporated by reference into this clause. The place of
arbitration shall be Beijing, P. R. China, and the language of the arbitration
shall be Chinese and English. The arbitral award shall be in writing and shall
be final and binding on the parties. The award may include an award of costs,
including reasonable attorneys fees and disbursements. The arbitral award may
grant any relief deemed by the arbitration tribunal to be just and equitable,
including, without limitation, specific performance. If the Foreign Trade
Arbitration Commission is not in existence at the time of the proposed
arbitration, this Section 13.2 will have no effect.
13.3 Independent Contractor Status. Each of the parties hereto shall
conduct the work to be performed hereunder as an independent contractor and not
as an agent or employee of the other party. Subject to the terms and conditions
of this Agreement, each party shall choose the means to be employed and the
manner of carrying out its obligations hereunder. Each party shall have sole
responsibility for the supervision and payment of its personnel and, except as
agreed in writing, all other costs and expenses required to perform its
obligations hereunder.
13.4 Freedom of Action. Except as restricted by Intellectual Property
Rights of a party hereto or of third parties, nothing in this Agreement shall
limit the right of Customer or Manufacturer to develop, have developed, procure,
and/or market products or services now or in the future, including any that may
be competitive with those that are subject of this Agreement. Neither party
shall be required to disclose planning information to the other except for the
forecast described in Section 5.1.
13.5 Exclusivity. Customer shall meet its Asia and North American
requirements for Products exclusively from Manufacturer during the term of this
Agreement, provided Manufacturer meets (a) the Product quality, (b) pricing
requirements and (c) volume demands,
required by Customer, provided herein, in the Schedules and attachments hereto,
and in any Purchase Order or any Procedure and Timetable. In addition, the
Customer can also purchase Products from the Manufacturer to meet the demand of
other markets in the world.
13.6 Trademarks and Trade Names. Neither this Agreement nor the sale of
Products hereunder shall be deemed to give either party any right to use any of
the other party's trademarks or trade names without such other party's specific,
written consent.
13.7 Compliance with Governmental Legal Requirements. Manufacturer shall
comply with the provisions of all applicable United States federal, state, and
local laws, regulations, rules, and ordinances applicable to technology products
which are manufactured outside the U.S. and imported into the U.S. Customer
shall provide for similar governmental and safety certifications or approvals
(including, without limitation, UL clearance). Should the Products fail to meet
the applicable approvals, standards, or regulations, other than as a result of
pending applications or actions with respect to the issuance thereof,
Manufacturer may cease production until Customer and Manufacturer agree to
required changes and applicable qualifications are met without causing breach of
this Agreement.
13.8 Export Controls. Each party agrees that it will not knowingly (a)
export or re- export, directly or indirectly, any technical data (as defined by
the U.S. Export Administration Regulations), including software received from
the other under this Agreement to; (b) disclose such technical data for use in;
or (c) export or re-export directly or indirectly, any direct product of such
technical data, including software to, a destination to which such export or
re-export is restricted or prohibited by U.S. or non-U.S. law without obtaining
prior authorization from U.S. Department of Commerce and other competent
government authorities to the extent required by those laws. This clause shall
survive termination or cancellation of this Agreement.
13.9 Force Majeure. Neither Customer nor Manufacturer shall be considered
in default or liable for any delay or failure to perform any provision of this
Agreement if such delay or failure arises directly or indirectly out of an act
of nature, acts of the public enemy, freight embargoes, strikes, quarantine
restrictions, unusually severe weather conditions, insurrection, riot, and other
such causes beyond the control of the party responsible for the delay or failure
to perform.
13.10 Engineering Changes. Customer shall retain engineering control over
the entire Product, including Components, subassemblies and all other data and
material. All engineering changes and sourcing changes must be approved by
Customer before implementation by Manufacturer. The cost increases or decreases
incurred as a result of engineering and sourcing changes will be reviewed and an
equitable adjustment shall be made in the price or shipping schedule or both,
including costs to Manufacturer for any material that is rendered excess due to
the change. Such changes will be implemented only upon receipt by Manufacturer
of Customer's written request to proceed with the change.
13.11 Notices. Unless otherwise specified in this Agreement, all notices
and other communications permitted or required hereunder shall be in writing and
shall be mailed, telecopied, telegraphed, telexed or delivered to the other
party at the address set forth in the following (or at such other address as
either party shall designate in writing to the other party during the term of
this Agreement pursuant to the terms of this Section 13.11) and shall be
effective at the earlier of the time received of five working days after
dispatch in accordance with the terms of this Section. Each notice to Customer
or Manufacturer shall be addressed, until notice of change thereof, as follows:
If intended for Customer, to:
XxXxxx.xxx, Inc.
0000 Xxxxxx Xxxxxxx Xxxxxxx - 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000, X.X.X.
Attn: Vice President - Manufacturing
Telecopier Number: 0 (000) 000-0000
If intended for Manufacturer, to:
Shanghai Industrial Investment (Group) Co., Ltd
000 XxxxxXx Xxxxx Xxxx, Xxxxxxxx, Xxxxx
Attn: Xx. Xxxx Pengfei
Telephone Number: 00-00-00000000
Fax Number: 00-00-00000000
E-mail: Xxxxxxxx@xxxxxx0.xxx.xxx.xx
---------------
13.12 Assignment. (a) Subject to Sections 13.12(b), this Agreement may not
be assigned by either party without the prior written consent of the other
party, except that Customer may assign this Agreement, in whole or in part, to
any successor to all or substantially all of its business and assets relating to
the subject matter of this Agreement, or to any subsidiary or affiliate (defined
to mean any entity at least 50 percent of whose voting or profits interests are
owned or controlled, directly or indirectly, by Customer). Any attempted
assignment or transfer of any of the rights, duties, or obligations herein shall
be void if not in compliance with this subsection.
(b) Manufacturer may select manufacturing partners (the "Manufacturing
Partners") acceptable to Customer (it is acknowledged that Shanghai Video and
Audio Electronics Co. Ltd. is an acceptable manufacturing partner). In such
case, (i) the Manufacturing Partners shall be jointly and severally included
along with the Manufacturer in the definition of "Manufacturer" herein in the
context of the Manufacturer's duties and obligation hereunder and (ii) the
Manufacturer shall not be relieved of any duties or responsibilities hereunder.
13.13 Governing Law . This Agreement shall be governed by the laws of the
People's Republic of China.
13.14 Waiver. No failure or delay on the part of either party hereto in
exercising any right or remedy under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right or remedy.
No provision of this Agreement may be waived except in writing signed by the
party granting such waiver.
13.15 Severability. If any provision of this Agreement is held to be
invalid, the other provisions will not be affected.
13.16 Complete Agreement. This Agreement (including the attachments hereto,
Procedures and Timetables after the date hereof and Purchase Orders issued and
to be issued hereunder from time to time) constitutes the complete and exclusive
final written expression of all the terms of agreement between parties. It
supersedes all prior agreements, understandings, and negotiations concerning the
matters specified herein. Any representations, promises, warranties or
statements made by either party that differ in any way from the terms of this
Agreement and any amendments, modifications or changes hereto, shall not be
binding on either party unless made in writing and signed by a duly authorized
representative of each party.
13.17 Execution in Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
13.18 Approval. This agreement is subject to approval of the Board of
Directors of Customer and the Manufacturer's bank.
13.19 Language. This agreement is written in the Chinese and English
version. Both languages are equally authentic. In the event of any discrepancy
between the aforementioned versions, the Chinese version shall prevail.
13.20 Subject to the approval of XxXxxx.xxx's Board of Directors, Customer
will issue Manufacturer warrants to purchase 75,000 Common Shares of Customer,
with an exercise price equal to the closing price of Customer's Common Shares on
the Nasdaq SmallCap Market on the day preceding such Board of Director's
approval, which warrants shall be exercisable for a period of five (5) years
from the date of issuance. The obligations of Customer in this Section 13.19 is
further subject to Manufacturer's provision of all representations, warranties,
agreements and other items to Customer which is required for Customer to comply
with exemptions from registration under Section 4(2) of the U.S. Securities Act
of 1933, as amended, as it relates to the issuance of the warrants.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the Effective Date.
XXXXXX.XXX SHANGHAI INDUSTRIAL
INVESTMENT (GROUP) CO., LTD.
By:/s/ Xxxxxxx Xxxxx By:/s/ illegible
--------------------------- --------------------------
Xxxxxxx Xxxxx
--------------------------- --------------------------
Name (Print or Type) Name (Print or Type)
Title:Chairman and CEO Title: Illegible
------------------------ -----------------------
Glossary
Terms in this Agreement, to the extent not defined elsewhere in the Agreement,
shall mean as follows:
"Xxxx of Materials" shall mean a listing or reference for the Components and
Programs included in or required for the manufacture or assembly of the Products
based on their Specifications. Generic or staple Components may be provided for
in general terms sufficient to give Customer an estimate of approximate cost.
"Components" shall mean parts, materials, and supplies included in or required
for each Product, as provided in the Xxxx of Materials for such Product. The
Components will include all equipment, Programs, or Intellectual Property Rights
included in or required for each Product. Components may be manufactured by or
for Manufacturer ("Manufacturer Components") or obtained from or through
Customer ("Customer Components"), if so indicated in the Xxxx of Materials for
the Products and otherwise shall be considered obtained by Manufacturer from
other sources ("Third-Party Components").
"Days" shall mean calendar days unless otherwise specified, provided that if a
deadline falls on a Saturday, Sunday, or holiday, it shall be extended until the
following regular business day.
"Delivery" shall mean delivery of Products, FOB Manufacturer's facility in
Shanghai, China.
"Intellectual Property Rights" shall mean any rights under patent, semiconductor
chip protection, copyright, trade secret, trademark, or similar laws which would
restrict the manufacture, assembly, or distribution of the Products or the
subsequent use, sale, or repair of the Products as purchased by Customer from
Manufacturer hereunder.
"Manufacturing and Design Documentation" shall mean materials and media provided
to Manufacturer by Customer or third-party contractors, suppliers, or licensors
acting at Customer's request or created by Manufacturer or third-party
contractors, suppliers, or licensors acting at Manufacturer's request, in each
case specifically for use in the manufacture and assembly of Products hereunder,
including drawings, routings, Bills of Materials, schematics, circuit diagrams,
Specifications, and test documents.
"Nonrecurring Charges (NRC)" shall mean charges for special development or other
activities listed under this designation in a Statement of Work, Purchase Order,
or Procedure and Timetable.
"Products" shall mean the Customer's GlobalPC personal computer specified in
each Purchase Order issued under this Agreement, and as described in the
Specifications, which comprises the
integrated unit described in each Statement of Work. There can be multiple
versions of a Product, based on differences provided for under Bills of
Materials and Statements of Work.
"Purchase Order" shall mean an order to purchase a specific quantity of a
Product submitted by Customer and accepted by Manufacturer in accordance with
this Agreement, which refers to the version and volume of Products to be
manufactured and purchased; price terms; scheduled delivery dates (unless
submitted on open delivery terms); and "sold to," "invoice to," and "ship to"
addresses.
"Specifications" shall mean the description of the Product, as provided through
detailed drawings, an approved vendor list, in-process and final test criteria,
or similar documentation.
"Statement of Work" shall mean a document relating to a particular Product,
documented and agreed on by Manufacturer and Customer, which refers to the
Specifications for the Product that Manufacturer agrees to manufacture or
assemble pursuant to Purchase Orders Customer may submit hereunder. If multiple
versions of a Product are contemplated, an initial Statement of Work may give a
generalized description or provide sample specifications and leave the detailed
specifications of each version to the terms of further Bills of Materials or
Statements of Work. Price terms, packaging, and applicable testing procedures
for each Product may be set forth in a Statement of Work or Procedure and
Timetable. A Statement of Work may include minimum volume purchase commitments
to be satisfied through future Purchase Orders. A Statement of Work may be
implemented by reference to a new or changed Xxxx of Materials. A Statement of
Work may provide for special packaging or logo requirements.
SCHEDULE 2.1
Number of Units
Total amount of units in 2000 shall be at least 705,000 units.
SCHEDULE 4.1
Pricing
The actual cost per unit of Product will be established by both parties
based upon the lowest costs that the Manufacturer and the Customer each in good
faith using best efforts can secure relating to the manufacture of the Products,
(the "Manufacturing Costs") including, but not limited to, Manufacturer
Components and Customer Components, respectively, and Manufacturer's and
Customer's respective related overhead and processing fees, and packaging costs
and ocean freight costs, and banking and finance costs. In no event shall the
cost per unit for the first 100,000 units exceed US $292.00. The pricing for
next batch of 150,000 shall be decided jointly by the Customer and the
Manufacturer later on according to the actual cost at that time.
EXHIBIT 5.5
Form of Shipment Release Memo
No. __________
Date:
From: XxXxxx.xxx
To: Shanghai Industrial Investment (Group) Co. Ltd.
Dear Sirs:
This memo is a confirmation that the GPC products specified below have been
inspected and accepted. They are released for shipment.
Product Model
---------------------- ---------------------------------------------------------
Lot identification Serial numbers:
---------------------- ---------------------------------------------------------
Number of units in shipment Remarks:
---------------------- ---------------------------------------------------------
XxXxxx.xxx, Inc.
---------------------
Authorized Signature
