EXHIBIT 10.27
AGREEMENT
This Agreement is made and entered into as of the 15th day of December,
1997, between DESA International, Inc., a Delaware corporation, which has its
principal place of business located at 0000 Xxxxxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as DESA) and Sengoku Works, Ltd., which
has its principal place of business located at 395 Xxxxxx-xxx, Kasai City, Hyogo
Pref., Japan (hereinafter referred to as Sengoku):
WHEREAS, DESA and Sengoku desire to enter into an agreement with regard
to vent free gas heaters (hereinafter referred to as the Products) per
Attachment A, to be manufactured by Sengoku and marketed by DESA. DESA
and Sengoku agree to the following terms and conditions:
1. (a) The term of this Agreement will be from the execution date
of this Agreement and will continue until December 31, 2008.
(b) Both companies must agree in writing for any extension of
the Agreement beyond the original ten (10) year period.
(c) DESA will arrange for Sengoku to purchase various
components direct from DESA's vendors at DESA's cost for use
only in DESA supplied Products. After termination of this
agreement, DESA's cost from DESA's vendors will no longer
apply to the various purchased components.
2. (a) As long as this Agreement remains in effect, DESA has
exclusive marketing rights for the Products to be sold into
the United States, Canada, Central and South American, Europe,
Middle East, and Australia directly or indirectly, under
various brand names designated by DESA.
(b) In order to retain these exclusive marketing rights, DESA
must place minimum annual orders during each January through
December period of this Agreement based on the volumes
outlined in Attachment B. If annual minimum orders are not met
in the first year, a charge of $4.20 USD will be levied for
each unit below the minimum. (See Attachment B).
(c) If Sengoku markets or sells the Products itself or through
third parties, as authorized by DESA, in no event will Sengoku
use or permit third parties to use DESA's brand names. The
heater design and trade dress are owned by DESA. Trade dress
includes color, packaging and graphic presentation that is
used by DESA brand labels.
(d) The Products refer to Attachment C.
3. (a) On or before December 15 of each year, during the term of
this Agreement, Sengoku will provide DESA with a price for the
Products. This price list will be for the period of the next
calendar year and will be denominated in US dollars, based on
our agreed currency band.
(b) All Products sold to DESA hereunder shall be sold at the
prices established by the previous December 15.
(c) In addition to the above referenced pricing, see
Attachment G for Purchase Volume Rebates to be effective years
two (2) and three (3) of this
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agreement. Specific rebate schedules for years four (4)
through ten (10) will be created.
4. (a) Sengoku will provide DESA's requirements of the products
F.O.B. Japan or China, with a Letter of Credit at sight plus
30 days based on U.S. Dollar prices listed on Attachment D.
Prices quoted are in U.S. dollars fixed for the first year of
the program. In years two (2) through ten (10) of the
agreement, product is anticipated to come from the Chinese
facility. Material currency fluctuations or political events
may have an impact on the cost of the product and Sengoku and
DESA agree to mutually renegotiate program costs if necessary.
(b) Sengoku agrees to procure the insurance from an AAA rated
(highest rated) insurance company organized and operating
under the laws of the United States or Canada, and such
insurance shall provide the risk coverage and name DESA as an
additional insured. (c) Title to and risk of loss of the
Products purchased hereunder by DESA shall pass to DESA upon
delivery thereof to the ocean carrier at the port selected by
Sengoku for shipment.
5. (a) DESA will provide annually, by each December 1, a twelve
(12) month forecast for all models of Products and will
provide monthly a rolling four (4) month forecast.
6. (a) DESA will provide Sengoku purchase orders based on one
hundred twenty (120) day lead times prior to shipment.
(b) Sengoku will be under no obligation to sell Products to
DESA unless DESA places firm and noncancelable purchase orders
not less than one hundred twenty (120) days prior to shipment
of each order for Products.
7. In the event Sengoku decides to cease producing the Products,
Sengoku will provide one (1) year prior written notice to
DESA. During this year, DESA can purchase tooling, fixtures
necessary for production at cost from Sengoku for manufacture
by DESA.
8. In the event DESA ceases marketing the Products, Sengoku
cannot establish new distribution to sell in markets described
in paragraph 2(a) until inventory in possession of DESA is
sold. This period is not to exceed one (1) year. DESA will
comply with the provisions of paragraph 2(a) of this Agreement
during this twelve (12) month notice period. DESA would allow
Sengoku to use heater design and tooling in the event this
agreement is canceled and all contract provisions have been
met. In no event will Sengoku use or allow third parties to
use DESA's brand names.
9. Both parties agree to work together cooperatively in order to
develop cost reductions and to further improve the performance
of the Products. DESA and Sengoku will share equally in any
cost reductions after the first year quotation regardless of
the originator.
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10. Product planning meetings will be held by the parties on at
least an annual basis at a time and place mutually agreed upon
by the parties.
11. The parties agree that this Agreement is not assignable and
may not be succeeded to by any third party without the express
written consent of both DESA and Sengoku. Such consent will
not be unreasonably withheld.
12. The parties, in signing this Agreement, execute an
Indemnification Agreement in the form of Attachment E. Sengoku
will provide liability insurance coverage of a minimum of $5
million per occurrence. Sengoku will also provide annually a
Certificate of Insurance specifying: (a) a minimum of $5
million Product Liability Insurance by an insurer authorized
to write insurance in the United States; (b) DESA as an
additional name insured; (c) the applicable deductible to be
covered by Sengoku; and (d) the name and address of an
authorized United States claim agent.
13. DESA will provide technical assistance where necessary and
appropriate, however, Sengoku will provide complete
indemnification to DESA for any and all patent infringement
liabilities that may occur from the introduction of the
products into the United States and Canada.
14. DESA and Sengoku will mutually develop a quality level
agreement that will be employed by both companies for purposes
of establishing Product Acceptance Criteria at time of receipt
of Products by DESA. An Acceptable Quality Level (AQL)
agreement will be developed and signed by appropriate Quality
Assurance supervisory personnel, as well as by an officer, of
both companies.
15. Sengoku shall, at its own cost, obtain and maintain the
necessary International Approval Services (IAS) certifications
for the Products for the United States.
16. (a) Sengoku will provide a two (2) year warranty on defective
Products only. The two (2) year period will begin on the
invoice date held by the end user. Refer to Attachment F for
warranty language.
(b) Termination of the Agreement will not affect Warranty
obligation.
17. (a) Sengoku will provide DESA with a list of recommended
service parts for the Products.
(b) Pricing for parts will correspond to the same December 15
and adjustment guidelines outlined in paragraph 3.
(c) During the term of this Agreement and for a period three
(3) years after Sengoku's last shipment of Products to DESA
hereunder, DESA agrees to provide after sale service for the
Products in the territories marketed by DESA, and Sengoku
agrees to supply DESA with a supply of replacement parts. DESA
agrees to purchase a reasonable supply of replacement parts
for the repair of products under Warranty.
(d) DESA can balance parts inventories on an annual basis.
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(e) If the Agreement is not renewed, DESA can return all
unused service parts for a full refund of the purchase price.
18. Sengoku will indemnify DESA for the costs it incurs relating
to the following:
(a) catastrophic field failure and/or recall (defect defined
as failure greater than three (3) percent of the units sold in
any year);
(b) required notification to the Consumer Product Safety
Commission (CPSC) under the 15b reporting requirements.
19. Sengoku shall, at its own cost, maintain all machinery,
tooling and equipment, used to manufacture the Products in
good working order.
Dated and agreed upon this 15th day of December, 1997.
DESA INTERNATIONAL, INC. SENGOKU WORKS, LTD.
BY__________________________ BY________________________
XXXX X. XXXXX
ITS _________________________ ITS ______________________
WITNESSED BY: BY________________________
_____________________________ ITS_______________________
WITNESS___________________
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ATTACHMENT A
PRODUCT DRAWINGS
Product drawings will be supplied by Sengoku after further product development
and will be attached to this Agreement as Attachment A. The absence of Product
drawings at the time of the signing of this document should in no way detract
from the meaning, terms or conditions of this Agreement.
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ATTACHMENT B
YEARLY VOLUMES
In order to maintain exclusive marketing rights in the countries identified in
the Agreement, DESA will comply with the provisions of paragraph 2 of this
Agreement. That paragraph refers to Attachment B and the minimum yearly order
volumes outlined herein:
1st year: 20,000 Heaters
Annual volumes will adjust based on market conditions and direction.
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ATTACHMENT C
PRODUCTS
Products are referred to as vent free gas heaters manufactured by Sengoku, or
its subsidiaries. The program is not limited to technology or style.
Internal product packaging is to be comparable to current Comfort Glow gas
heaters. External packaging includes litho label on front of carton, supported
by flexo printing on balance of cartoning.
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ATTACHMENT D
PRICE LIST
Price schedule covering units and parts is based on projected competitive costs
for 1998 and may be adjusted to address market conditions.
U.S. DOLLARS
FOB CHINA/JAPAN
MODEL PROPANE AND NATURAL GAS
Three (3) Plaque Heater 64.00
Five (5) Plaque Heater 76.30
Three (3) Plaque Heater - Thermostat 84.40
Five (5) Plaque Heater - Thermostat 99.30
Prices above are for calendar year 1998. Future annual price increases will be
determined by market conditions.
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ATTACHMENT E
INDEMNIFICATION AGREEMENT
This Agreement is made and entered into as of the 15th day of December, 1997,
between DESA International, Inc., a Delaware corporation, which has its
principal place of business located at 0000 Xxxxxxxxxx Xxxxx, Xxxxxxx Xxxxx
Xxxxxxxx 00000 and Sengoku Works, Ltd., which has its principal place of
business located at 000 Xxxxxx-xxx, Xxxxx Xxxx, Xxxxx Xxxx., Xxxxx.
NOW, THEREFORE, for good and valuable consideration, including the production
agreement executed by the parties on even date herewith and the mutual covenants
of the parties set forth herein, DESA and Seller agree as follows:
1. PRODUCT LIABILITY CLAIMS.
A. Seller shall indemnify, defend and hold DESA and its distributors
harmless from and against any and all claims, losses, damages, judgments, costs
and expenses, including but not limited to reasonable attorney's fees, arising
from, associated with or relating to any Product or Products. This includes but
is not limited to claims involving allegations of negligence, defects in the
design or manufacture, and strict liability because a product is unreasonable
dangerous. In all events, the design, manufacture and information provided with
the Products shall be the sole responsibility of Sengoku. Nothing, however,
contained herein, shall relieve DESA and its distributors from responsibility
for any claim, loss or damage which is caused by any change, modification or
remodeling which DESA or its distributors makes in the Products(s) without the
knowledge or consent of Seller.
X. XXXX shall notify Seller within fifteen (15) days of receiving
notice of a claim hereunder. Upon receipt of notice from DESA, Seller shall
assume responsibility for the claim, including any defense thereof, and DESA
shall reasonably cooperate with Seller in any defense of the claim.
C. Without limitation of its duty to indemnify DESA and its
distributors, Seller agrees to maintain in force for the life of any Product
produced by Seller hereunder, products liability insurance coverage, including
broad form vendor's coverage, for property damage and bodily injury combined,
naming DESA and its distributors as an additional insured. Seller shall supply
DESA with a certificate of insurance evidencing this coverage annually. Seller's
insurance shall afford minimum coverage of $5,000,000 per occurrence.
2. NOTICE. Any notice required or permitted under the terms of this
Agreement shall be in writing in English and shall be delivered by registered
air mail, with postage fully prepaid, or telex, telefacsimile or cable. If any
notice is made by telex, telefacsimile or by cable, it shall be confirmed by air
mail. All notices required hereunder shall be sent to the addresses written
below ro such other address as shall be provided in writing. Notice made by
letter shall be deemed to have been given ten (10) days after the date of
mailing and notice by telex or cable shall be deemed to have been given when
received.
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3. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Kentucky, United States of America. The parties
agree the proper venue for any dispute arising under this agreement or the
production agreement of even date herewith shall be an international arbitration
court.
4. BINDING EFFECT. This Agreement shall be binding upon properly
approved successors and assigns of the parties.
5. CAPTIONS. The captions of the sections of this Agreement are for
convenience only and shall not be considered or referred to in resolving
questions of interpretation.
6. ENTIRE AGREEMENT. This Agreement represents the complete
understanding of the parties with respect to Seller's duty to indemnify DESA and
its distributors, and it supersedes all prior agreements and understandings
between the parties with respect to the matters set forth herein. This Agreement
may not be amended except by a writing designated as such as signed by
authorized representatives of both parties.
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ATTACHMENT F
WARRANTY INFORMATION
KEEP THIS WARRANTY
Model
Serial No.
Date Purchased
Always specify model and serial numbers when communicating with the factory.
We reserve the right to amend these specifications at any time without notice.
The only warranty applicable in our standard written warranty. We make no other
warranty, expressed or implied.
LIMITED WARRANTY
COMFORT GLOW VENT-FREE RESIDENTIAL GAS HEATERS
DESA International warrants this product to be free from defects in materials
and components for two (2) years from the date of first purchase, provided that
the product has been properly installed, operated and maintained in accordance
with all applicable instructions. To make a claim under this warranty the Xxxx
of Sale or cancelled check must be presented.
This warranty is extended only to the original retail purchaser. This warranty
covers only the cost of part(s) required to restore this heater to proper
operating condition. Warranty part(s) MUST be obtained through authorized
dealers of this product and/or DESA International who will provide original
factory replacement parts. Failure to use original factory replacement parts
voids this warranty. The heater MUST be installed by a qualified installer in
accordance with all local codes and instructions furnished with the unit.
This warranty does not apply to parts that are not in original condition because
of normal wear and tear, or parts that fail or become damaged as a result of
misuse, accidents, lack of proper maintenance or defects caused by improper
installation. Travel, diagnostic cost, labor, transportation and any and all
such other costs related to repairing a defective heater will be the
responsibility of the owner.
TO THE FULL EXTENT ALLOWED BY THE LAW OF THE JURISDICTION THAT GOVERNS THE SALE
OF THE PRODUCT; THIS EXPRESS WARRANTY EXCLUDES ANY AND ALL OTHER EXPRESSED
WARRANTIES AND LIMITS THE DURATION OF ANY AND ALL IMPLIED WARRANTIES, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE TO TWO (2)
YEARS FROM THE DATE OF FIRST PURCHASE; AND DESA INTERNATIONAL'S
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LIABILITY IS HEREBY LIMITED TO THE PURCHASE PRICE OF THE PRODUCT AND DESA
INTERNATIONAL SHALL NOT BE LIABLE FOR ANY OTHER DAMAGES WHATSOEVER INCLUDING
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
Some states do not allow a limitation on how long an implied warranty lasts or
an exclusion or limitation of incidental or consequential damages, so the above
limitation on implied warranties, or exclusion or limitation on damages may not
apply to you.
This warranty gives you specific legal rights, and you may also have other
rights that vary from state to state.
For information about this warranty write: DESA International
0000 Xxxxxxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxxx Xxxxx, XX 00000-0000
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ATTACHMENT G
PURCHASE VOLUME REBATES
If purchases exceed the forecast in years two (2) and three (3), the following
Volume Rebate Program is in effect.
Number of Units Percentage of Rebate
Year Two Purchases exceed 2% of purchases
40,000 Units over 40,000
Year Three Purchases exceed 2% of purchases
50,000 Units over 50,000
The rebate shall be paid by Sengoku to DESA by February 1, of each business
year.
