PREFERRED SUPPLIER AGREEMENT
THIS PREFERRED SUPPLIER AGREEMENT Is dated and made Effective as
of the FIRST day of NOVEMBER 1998. BETWEEN:
NORTHPORT INDUSTRIES, INC. a corporation duly incorporated under
the laws of the State of Nevada hereinafter called the "VENDOR" and/or
"NORTHPORT" and
VMI, INC.
a wholly owned subsidiary of Northport, incorporated under the
laws of the State of Texas hereinafter called "VMI" and
INDUSTRIAL LOVING S.A. de C.V.
a wholly owned subsidiary of VMI, incorporated under the laws of
the Republic of Mexico hereinafter called "VMI MEXICO" and
W.E.T. AUTOMOTIVE SYSTEMS, LTD.
a company Incorporated under the laws of the Province of
Ontario, having its head office at the City of Windsor, in the County of
Essex, 0000 Xxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxx, X0X SNS hereinafter called "WET
CANADA" and
W.E.T. AUTOMOTIVE SYSTEMS (TEXAS), INC.
a corporation incorporated under the laws of the State of
Texas, in the United States of America, hereinafter called "WET TEXAS"
RECITALS: WHEREAS
A. WET CANADA is the majority shareholder of WET TEXAS, which
Corporation also owns manufacturing facilities in Mexico;
B. WET CANADA manufactures seat heaters for the automotive industry
and for other customers from facilities owned by WET Canada in Windsor
Ontario, and from facilities owned by WET TEXAS in Mexico,
C. Northport is the Parent of VMI, a wholly owned subsidiary of Northport,
and VMI Mexico is a wholly owned subsidiary of VMI;
D. WET CANADA and WET TEXAS wish to contract for the purchase of wire
harnesses utilized in the manufacture of seat heaters with Northport to be
manufactured by VMI Mexico on purchase orders issued to VMI.
E. For purposes of this Agreement, Northport, VMI and VMI Mexico shall
collectively be treated as the "Seller", and WET Canada and WET Texas shall be
permitted to enforce any rights or obligations against Northport, VMI and VMI
Mexico as parties jointly obligated hereunder;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and promises herein contained, and for other good and
valuable consideration (the receipt and sufficiency whereof is hereby
acknowledged by each of the parties hereto), the parties covenant and agree
with one another as follows:
TERMS OF PREFERRED SUPPLIER AGREEMENT
I . This Agreement will cover the manufacture of wire harnesses by the Seller
in Mexico for WET CANADA and WET TEXAS (the "Buyer") for delivery to and
installation into seat heaters by Wet Texas' manufacturing facility in Mexico.
II. PREFERRED SUPPLIER STATUS
2.1 The Seller shall be designated as the Buyer's Preferred Supplier of wire
harnesses to the extent of the manufacturing capacity of sixty employees, more
or less, of VMI Mexico working on a full time basis during the term of this
Agreement.
2.2. The Seller, must maintain an agreeable and acceptable quality,
price and delivery rating from the Buyer for all parts produced, failing
which, the Buyer may at its option terminate the Agreement unless the Seller
can remedy any failure to meet such terms within thirty (30) days of notice of
any deficiency. It is the intent that Seller shall furnish World-Class parts
to the Buyer.
The Buyer shall specify in each Purchase Order (or if not specified, the terms
and conditions of the prior purchase order for the same products shall
prevail) such criteria as to quality, price and delivery as the Seller is
required to meet. Sample parts supplied to Seller with a purchase order will
form the basis of determining the quality requirements of the Buyer.
2.3 The Buyer warrants and represents dud any and all machinery, equipment and
raw materials supplied by Buyer to Seller pursuant to the terms of this
Agreement shall be fit for the purpose intended, and capable of producing
parts to meet the quality requirements of Buyer such that the Seller's
utilization of such machinery, equipment and raw materials will permit the
Seller to
4.5 in the event that the Seller fails to produce acceptable quality parts
or incurs was of materials and supplies higher than Buyer's experience, the
Buyer shall make available engineering, quality control and other specialized
staff to the Seller so as to assist the Seller reaching its quality
obligations: The cost of any of the Buyer's personnel as is required by the
Sell shall be reimbursed to the Buyer at an agreed upon rate to be determined,
when possible, prior to the involvement of such of Buyer's representatives,
with the intent to recompense the Buyer direct costs of providing such
representatives plus ll0% for overhead and expenses. If the parties
should fail to reach agreement in advance of the involvement of such
personnel, the same shall determined by arbitration.
V. TERMINATION
5.1 If within one hundred and eighty (180) days of the date of the initial
start of production under this Agreement and during the term of this
Agreement:
(i) Seller does not achieve and maintain a world-class quality level that
would be compliance with automotive standards;
or at any time during the term of this Agreement:
(ii) Seller does not maintain an acceptable Buyer delivery raft for two
consecutive months, subject to failure to ship as a result of war invasion,
insurrection, riot, breakdown, strikes, lockouts, labour disputes, accidents,
fire or any other cause or causes which are beyond the Supplier's reasonable
control ("force majeure");
the Buyer may terminate this agreement (subject the ability of Seller to
remedy pursuant to Paragraph 2.2) and its purchase obligations in whole or in
part without further liability.
V1. PRICING & PURCHASE ORDERS
6.1 The Seller agrees to furnish cost break-down details for all components
and systems to be manufactured by the Seller. Such detail shall include
assembly rate, time studies and material costs, The Buyer agrees to keep all
such information In confidence,
6.2 In consideration of Preferred Supplier Status, the parties agree to
negotiate a long-term agreement with appropriate price reductions in
accordance with commercially reasonable terms usual to the automotive industry
for similar long-term Supplier Agreements.
6.3 Engineering changes approved by the Buyer may become the basis for a price
adjustment (increase or decrease). no Seller agrees to provide Buyer with
sufficient costs detail of engineering changes to determine the
appropriateness of any change in price,
6.4 Purchase Orders shall be submitted by the Buyer to the Seller during the
term of this Agreement and shall set out tam and conditions as to price,
delivery, payment and credit terms, product specification and such other
details relating to the Purchase Order as are set out therein. If no price,
quantity required, delivery schedule and such other terms regarding payment,
shipment, risk, Insurance, ate. is set out, the last invoice for such
products previously supplied shall apply.
6.5 Unless expressly amended or agreed upon In writing by the Seller and the
Buyer (and, in the event of such agreement, only to the extent thereof), the
warranties previously given by the Seller to the Buyer in respect of quality
and physical condition of the wire harnesses and component parts thereof and
the terms and conditions of prior Purchase Orders shall apply to all purchases
by the Buyer from the Seller sold under this Agreement.
6.6 The Purchase Orders "I set out a price per piece for the production of the
wire harnesses and other component parts, during the first yea of this
contract, based on a manufacturing cost" including all burdens, of $8.80 US
per hour ($8.00US per hour actual cost plus 10% profit) converted to a fixed
price per piece based on the manufacturing time currently required by the
existing suppliers of such product to produce such parts.
6.6.1 After the and of the first calendar yea, the parties shall review the
actual manufacturing cost of the Supplier to manufacture the parts under the
Purchase Order, and to the extent that the manufacturing cost of the Supplier
is less than $8.00US per hour, the parties shall negotiate a reduction in the
hourly rate that is used in Paragraph 6.6 to establish the price per piece for
the production of products.
6.6.2 The parties shall meet annually on the anniversary date of the contract
to review further reductions in the hourly rate utilized to determine a piece
price. For purposes of such meetings, the Supplier shall disclose its
financial information with sufficient details so as to disclose its actual
cost of production.
6.7 The manufacturing time required by the existing suppliers to produce such
parts shall be furnished by the Buyer to the Seller (if available) prior to
the issuance of a Purchase Order.
6.8 The Seller shall give access to all time studies as have been conducted or
are in the process of being conducted by the Seller to the Buyer in order to
verify the time needed by the supplier to manufacture the parts for which a
Pmvhaoc Order will be issued to the Seller. The Seller shall be permitted to
satisfy itself as to the time required to manufacture the pots, prior to the
Seller accepting any Purchase Order from the Buyer.
6.9 The Buyer shall have the right on any products produced by the Seller to
request time studies to be conducted by the Seller, or jointly by the Buyer
and
Seller, or by the Buyer alone, and the Seller shall give access to the Buyer
to all of the Seller's facilities so as to conduct time studies requested by
the Buyer.
6.10 The Seller may, in its discretion, either accept or reject any
Purchase order from the Buyer. Such acceptance or rejection shall be in
writing to the Buyer within thirty (30) business days of the receipt of a
Purchase Order from the Buyer. If the Seller fails to provide a written
rejection of a Purchase Order, the Seller shall be deemed to have accepted
such Purchase Order.
6.11 If there is any dispute between the parties as to piece price
based on manufacturing time involved, the Seller shall nevertheless be
permitted to accept a Purchase Order based on the formula set out in paragraph
6.6, subject to arbitration of the manufacturing time actually required by the
Seller's employees to produce such parts. The Seller must indicate that the
Purchase Order is subject to arbitration, if it wishes to arbitrate the
manufacturing time involved. In the event that following the conducting of
time studies and further negotiations between the parties, they am unable to
establish a manufacturing time to their mutual agreement, the issue shall
be submitted to arbitration in accordance with the terms of this Agreement,
and any parts manufactured under the Purchase Order shall be repriced based on
such manufacturing time as is agreed upon, or ultimately determined by
arbitration. Ile Purchase Price paid on such parts as were produced up to the
time of arbitration shall be retroactively amended. The Buyer may rescind
future Purchase Orders on such parts for which the arbitration establishes a
manufacturing time greater than that claimed by the Buyer. The Seller shall
be permitted to reject any subsequent Purchase Orders for parts, for which the
arbitration confirms the manufacturing time a was claimed by the Buyer.
VII SUPPLY OF RAW MATERIALS/
PAYMENT OF DOWN TIME
7.1 The Buyer shall supply on a consignment basis to a warehousing facility of
the Seller in Texas all material and component parts as will be required by
the Seller in accordance with the Buyer's quality requirements as set out in
Section 2.3, to manufacture the parts under Purchase Orders. The Seller shall
be responsible for the delivery of material and component pads to the Seller's
manufacturing facilities in Mexico, and the delivery of finished goods io
warehousing facilities of the Buyer in Mexico.
7.2 In the event that the Buyer fails to supply adequate materials or deliver
materials on a timely basis to the Seller to ensure the production
requirements of Seller, it shall reimburse the Seller $4.40US per hour of
labour downtime in its manufacturing facility in Mexico (which amount shall be
adjusted proportionally to any adjustment provided for under Paragraph 6.6
(.1) and (.2)) to the hourly rate being used for such number of workers as are
employed by the Seller In manufacturing products for the Buyer for all lost
production time due to material shortages. The Seller shall, on a weekly
basis, disclose to Buyer how many of its employees are engaged full time,
and, to the extent they are not engaged full time, the percentage of the time
in which employees engaged on a part-time basis are engaged in the manufacture
of products for the Buyer. The Buyer shall be prompt to attend the Seller's
facilities from time to time so as to confirm the actual number of employees
manufacturing the product for the Buyer and the percentage of time such
employees commit to such manufacture.
7.3 Any waste of inventory as a result of inefficient manufacturing processes
or spoilage or poor quality or any loss of Inventory or damage of whatever
nature and kind of materials while in the possession of the Seller shall be
reimbursed to Buyer by Seller. Inventory of materials and supplies and
component parts belong to Buyer at all times, but are at Seller's risk while
in their possession and control.
VIII. CONVEYANCE OF MACHINERY AND EQUIPMENT
BY THE BUYER TO THE SELLER
8.1 The Buyer is the owner of various machinery and equipment used in the
manufacturing of wire harnesses and agrees to supply such machinery and
equipment as is required for the Seller to complete its Purchase Orders,
and/or to supply now or replacement equipment so as to permit the Seller to
complete its Purchase Orders for the Buyer, to Seller's manufacturing
facilities in Mexico. Such equipment shall comply with Buyer's warranties
and representations as to fitness, as set out in Section 2.3.
8.2 The Buyer shall retain ownership of-all such machinery and equipment as is
supplied to the Seller; provided that the Seller shall, during its control and
use of such equipment, maintain it in accordance with prudent business
standards and Insure it, with loss payable to the Buyer. At the termination of
this Agreement, all such machinery and equipment shall be returned to the
Buyer in good operating condition, subject only to reasonable wear and
tear.
8.3 Such machinery and equipment shall only be used by the Seller to
manufacture parts for the Buyer or those authorized by the Buyer and for no
other purpose whatsoever.
IX. CONFIDENTIALITY & NON-DISCLOSURE
9.1 The Seller shall keep confidential any and all information, plans, ideas,
or other know how supplied to it by Buyer.
9.2 Any and all diagram, drawings, plans, models, samples, papers, notes,
books or other documents, working diagrams, or other notes -or records as are
provided to the Seller, or as are prepared by the Seller for Buyer, or for its
own purposes in the course of its performance of its duties on behalf of
Buyer, shall be hold in trust for, and made available to Buyer and to no
others.
9.3 The Seller shall not directly or indirectly disclose or use at any time,
any secret or confidential information, diagram, drawing, plans, models,
samples, papers, notes, books or other documents or parts or prototypes of
same, nor any processes, methods, formulae, apparatus, specifications,
materials or sources of supply, customers, their identities and requirements,
discoveries, Inventions, patents, (Including applications and rights in
other), contracts, financial personnel, research, or other matters, including
matters though not technically trade secrets, the dissemination of a knowledge
whereof might prove prejudicial to Buyer, without the express written consent
of Buyer.
9.4 In the event that the Seller is approached to enter into a contract with
another party for the design, supply, assembly or manufacture of parts similar
in nature to those supplied or manufactured for Buyer, the Seller shall advise
in writing Buyer of the nature and terms of such contract. Seller agrees that
it shall not enter into any such contract with any party in competition with
the Buyer, and under no circumstances would it in the performance of any
contract with such a third party, utilize Buyer's equipment or raw materials.
The Seller further agrees that the Buyer would got first priority for the
completion of its Purchase Orders in the event of competing time demands
between Buyer and any third party.
9.5 The Seller's obligations set out in this Article DC and in Articles X and
XI shall continue beyond the termination of any contractual arrangements
between Buyer and the Seller. These obligations shall be binding on the
assigns, executors, administrators and other legal representatives of the
Seller.
9.6 The Seller agrees that it will not, without the written permission of the
Buyer, use the Confidential Information which it is obligated hereunder to
maintain in confidence for any reason other than to enable the Seller to
manufacture parts for the Buyer.
9.7 It is understood that no right or license Is granted to the Seller by the
Buyer in connection with the Confidential Information disclosed hereunder.
9.8 Any documents, drawings, materials, samples or specifications supplied by
the Buyer, and all copies thereof, shall be returned upon request or within
thirty (30) days after expiration or termination of this Agreement.
X. NON-COMPETITION AGREEMENT
10,1 Each of Northport VM1 and VM1 Mexico agree that they shall not,
for a period being the longer of (a) five (5) years from the date of this
Agreement, or (b) twenty-four (24) months from the date of the completion of
the last Purchase Order for the Buyer, for any reason whatsoever except as may
be approved in writing by the Buyer:
(a) divert, or attempt to divert any business of or any customers of the Buyer
to any other competitive businesses;
(b) directly or indirectly, either individually or in partnership jointly or
in conjunction with any person or persons, firm, association, syndicated
company or corporation, as principal, agent, shareholder, employee, or in any
manner whatsoever, own, engage in, be employed in, participate in, land money
to, guarantee the debts or obligations of, or permit their names to be used or
have any interest In any business which manufactures seat heaters, or
component parts thereof, within Canada the United States, Central and South
America;
(c) attempt to divert any business activity or any customers of the Buyer to
any competitor engaged in the manufacture of heated seats or their components
or intending to become a competitor in such field, by direct or indirect
inducement or otherwise, or to do or perform directly or indirectly any other
act injurious or proudicial to the Buyer.
10.2 All restrictions in this Article am reasonable and valid, and all
defenses to the strict enforcement thereof are hereby waived by Northport and
The Seller.
10.3 In the event of a breach of the provisions of this Agreement, the
restrictive time period as set out shall be suspended from the time of such
breach until a final Court determination (including all appeals) is obtained
and thereafter, if such Court determination is resolved in favour of the
Buyer, the balance of the unexpired time period shall run from the date of
such final Court determination.
10.4 To the extent that a Court of competent Jurisdiction shall
determine that the provisions of this Agreement am unreasonable, either as to
geographic area covered or time, or both, then in such event these provisions
as to non-competition shall be enforceable in accordance with their term to
such extent, as may, by such Court, be deemed to be reasonable as to
geographic area or limitation of time.
10.5 The parties Author agree that In the event of breach of the
covenants against competition, even though any damages suffered will be
substantial, such damages may be difficult to ascertain and money damages may
not afford adequate relief, therefore, in the event of breach the parties
agree that in addition to such other remedies as may be available, the party
seeking to enforce such covenant shall have the right to obtain temporary and
permanent injunctive relief as against the parties in breach.
X1. ARBITRATION
11.1 Where any matter in dispute between the parties pursuant to this
Agreement provides for a reference to arbitration, such arbitration shall be
conducted pursuant to the provisions of the American Arbitration Association
Commercial Arbitration Rules, in the jurisdiction of Texas and subject to the
substantive laws of the State of Texas.
11.2 The parties shall proceed to arbitration of disputes as a
condition precedent to any civil action being commenced, and any order or
award resulting from arbitration shall be capable of enforcement by the
parties as if it were a judgment of a court of competent jurisdiction
in the jurisdiction where such award or order is to be enforced.
X11, TERM
12.1 Unless otherwise specified in this Agreement or renewed, the term will
be for the period November 1, 1998 to October 31, 2001.
IN WITNESS WHEREOF the parties hereto have caused to be hereunto affixed
their respective corporate seals duly attested by the hands of their proper
officers in that behalf, this 20TH day of JANUARY, 1999.
SIGNED, SEALED AND DELIVERED in the presence of
NORTHPORT INDUSTRIES, INC.
per: /s/Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx, President
I have authority to bind the Corporation
VMI, Inc.
per: /s/Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx
I have authority to bind the Corporation
INDUSTRIAL LOVING S.A. de C.V.
per: /s/
General Manager
I have authority to bind the Corporation
W.E.T. AUTOMOTIVE SYSTEMS LTD.
per:/s/Xxxx Xxxxxxxxxx, Xx.
Xxxx Xxxxxxxxxx, Xx., President
I have authority to bind the Corporation
W.E.T. AUTOMOTIVE SYSTEMS, (TEXAS), INC.
per:/s/Xxxx Xxxxxxxxxx, Xx.
Xxxx Xxxxxxxxxx, Xx., President
I have authority to bind the Corporation
