1
EXHIBIT 10.34
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made this eighth day of November
1998 by and between UNIVERSAL ELECTRONICS INC., a Delaware corporation with
offices at 0000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000 and GENERAL INSTRUMENT
CORPORATION, a Delaware corporation with offices at 000 Xxxxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxxxxxx 00000. Seller and Buyer are sometimes referred to
individually as a "Party" and collectively as the "Parties".
The Parties, intending to be legally bound, agree as follows:
1. SCOPE Buyer shall purchase from Seller and Seller shall sell to
Buyer, upon the terms and conditions set forth herein, remote controls,
keyboards and peripheral devices (excluding dedicated devices such as single
function remotes) (the "Products") which are offered for sale by Buyer with
Buyer's analog and digital set top terminals. The Products will be developed by
Seller in accordance with the schedule (the "Milestone Schedule") set forth on
Exhibit A. The Milestone Schedule and the initial Specifications referred to
therein (the "Specifications") will be mutually agreed to by the Parties within
sixty days after the date hereof and may be changed only upon the written
consent of the Parties.
2. BUYER'S REQUIREMENTS
(a) Subject to the terms and conditions set forth in this Agreement,
from and after the date of Buyer's acceptance of the first shipment of the
Products in commercial quantities (which, for purposes of this Agreement, shall
mean quantities that in the aggregate equal or exceed 5,000 units of the
Products) and until the termination of this Agreement (the "Exclusive Period"),
Buyer shall purchase from Seller all of Buyer's requirements for Products
offered for sale in the United States with Buyer's analog and digital set top
terminals. Notwithstanding the foregoing, Buyer shall have the right to
purchase Products from other suppliers under the following circumstances:
(i) Until such time as Seller can provide Buyer with such
Products in commercial quantities, Buyer shall be entitled to purchase from
other suppliers Products necessary for the replacement of Products sold by
Buyer prior to the commencement of the Exclusive Period and to fulfill Buyer's
other customary product support obligations with respect to such Products sold
prior to the commencement of the Exclusive Period; provided, however, that
Buyer shall be entitled to continue purchasing Products from such other
suppliers regardless of whether Seller is able to provide such Products, if
Buyer's customer specifically requests such other Products;
(ii) Buyer shall be entitled to purchase from other suppliers
Products offered for sale by Buyer outside of the United States; except that in
the event Buyer is selling or will sell Products outside of the United States,
Buyer shall first give Seller an opportunity to demonstrate to Buyer's
reasonable satisfaction that Seller has an appropriate database library for
1
2
such Products offered or to be offered for sale outside of the United States,
and upon such showing, Seller and Buyer shall in good faith negotiate a
mutually acceptable agreement for the exclusive purchase and sale of such
Products outside of the United States during the Exclusive Period;
(iii) Buyer may purchase Products from other suppliers under the
circumstances set forth in Sections 3 and 6(a);
(iv) Buyer may purchase Products from other suppliers to satisfy
a request made by a customer for a Product manufactured by such other suppliers,
so long as Buyer does not promote, directly or indirectly, such other suppliers'
Products; and
(v) In the event that a Product is offered by another supplier
to Buyer with new technology which Seller is not willing to manufacture and sell
to Buyer on terms (including, without limitation, dates of availability and
price) no less favorable to Buyer than those offered by such other supplier,
Buyer shall have the right to purchase such Product from such supplier on the
offered terms; provided however, that Buyer shall provide Seller, to the extent
it is able after exerting its best efforts to obtain and release such
information, all information necessary to allow Seller to reasonably determine
whether or not it is willing to provide such Product. In the event Buyer is not
able or fails to release all such information to Seller, Seller reserves the
right to dispute the existence of the new technology or the favorableness of the
terms.
(b) Seller shall not, whether during or after the term of this
Agreement, sell to any party other than Buyer any product utilizing the same or
substantially similar exterior design as the Product.
3. TERM Unless otherwise terminated pursuant to the terms hereof, this
Agreement shall commence on the date first above written and shall continue for
the five (5) years thereafter (the "Term"), provided, however, that during the
ninety (90) day period immediately preceding the third (3rd) anniversary of this
Agreement, Buyer shall have the right to obtain good faith competitive price
quotes from other suppliers of products which are substantially similar to the
Products in design, functionality and quantities and Seller shall have to right
to meet or beat any such competitive price quote for such products. If Seller
meets or beats such competitive price quote for such products after receiving
from Buyer, to the extent Buyer is able after exerting its best efforts to
obtain and release such information, all information necessary to reasonably
determine that such products are substantially similar to the Products and to
reasonably prepare a price quote, this Agreement shall remain exclusive as to
those specific products during the balance of the Term. If Seller does not meet
or beat such competitive price quote, the provisions of Section 2(a) as to the
specific products to which Seller was unable to meet or beat the competitive
price quote shall be of no further force or effect. Nothing in this Section,
however, shall cause Seller to lose exclusivity as to any Products that are not
the subject of the good faith competitive price quote. In addition, in the event
Buyer is not able or fails to release all such information to Seller, Seller
reserves the right to dispute Buyer's belief that Seller was unable to meet or
beat such competitive price quote.
2
3
4. FORECAST Beginning on the first day of the first calendar month after
the Products are available for shipment in commercial quantities and continuing
during the Term, Buyer shall provide to Seller on or before the first day of
each calendar month a forecast of expected aggregate monthly delivery
requirements for Products for that month and the immediately succeeding five
calendar months (each a "Forecast"). In each Forecast, Buyer shall state its
anticipated requirements by calendar month. The first four months of each
Forecast shall set forth binding commitment levels, as provided below, and the
remaining two months shall be non-binding commitment levels, as provided below,
and the remaining two months shall be non-binding forecasts without any related
purchase or sale obligations. The commitment levels shall be carried forward,
and may be adjusted, as follows in successive Forecasts:
(a) Quantities stated for the first month of each Forecast must
equal one hundred percent (100%) of the quantities forecasted for the second
month of the immediately preceding Forecast;
(b) Quantities stated for the second month of each Forecast
must be not less than eighty-five percent (85%) or more than one hundred
fifteen percent (115%), of the quantities forecasted for the third month
of the immediately preceding Forecast; and
(c) Quantities stated for the third month of each Forecast must
be not less than seventy-five percent (75%) or more than on hundred twenty-five
percent (125%), of the quantities forecasted for the fourth month of the
immediately preceding Forecast; and
(d) Quantities stated for the fourth month of each Forecast
must be not less than fifty percent (50%) or more than one hundred fifty
percent (150%), of the quantities forecasted for the fifth month of the
immediately preceding Forecast.
5. PURCHASE ORDERS Except as the Parties otherwise agree in writing,
concurrent with the delivery of the Forecast as set forth in Section 4 above,
Buyer shall issue a purchase order or purchase orders for, and Seller shall be
obligated to sell and deliver, the Products specified in the second month of
the most recent Forecast delivered with the purchase order or purchase orders;
except that the first purchase order or purchase orders issued by Buyer shall
be for the Products specified in the first and second months of the Forecast
delivered with such first purchase order or purchase orders. This purchase
order or purchase orders shall be applied toward and reduce all forecasted
quantities for the applicable month or months and then toward any subsequent
month or months of the Forecast. Except as provided in subsection 6(b) below,
the failure of Buyer to provide a schedule or to accept delivery pursuant to
the terms hereof for ninety (90) consecutive days or one hundred (100) days in
the aggregate, except for reasons excusing performance under Section 16 hereof,
shall be deemed a material breach of this Agreement and Seller may terminate
this Agreement by giving written notice to Buyer at any time thereafter prior
to the time Buyer schedules or accepts delivery in conformity with the terms
hereof.
4
6. CANCELLATION OF PURCHASE ORDERS
(a) FOR CAUSE If Seller fails to deliver the Products set forth in
a purchase order within thirty (30) days after the date specified for delivery
in such purchase order (or such later date as Buyer authorizes in writing),
regardless of whether performance by Seller is excused under Section 16 hereof,
Buyer may, upon written notice to Seller, cancel all or a portion of the
relevant purchase order without liability to Seller for such termination. If
Seller fails to deliver the Products within thirty (30) days after the dates
specified for delivery in the purchase orders issued by Buyer for three
consecutive months (or such later dates as Buyer authorizes in writing), except
if performance by Seller is excused under Section 16 hereof, Buyer, may, upon
written notice to Seller, (i) suspend its obligation under Section 5 to submit
purchase orders pursuant to a Forecast, and (ii) purchase Products and products
comparable to the Products from other suppliers, provided that, Buyer agrees
that such suspension shall only continue until such time as Seller is able to
resume timely delivery of Product; provided further that if Buyer has not
resumed such delivery after ninety (90) days, Buyer may notify Seller in writing
of Buyer's intent to terminate this Agreement, and if Seller shall fail to
resume delivery within thirty (30) days after receipt of such notification to
cure, this Agreement shall terminate at the end of the thirty (30) day period
without further notice from Buyer.
(b) FOR CONVENIENCE Upon proper written notice to Seller, Buyer may
cancel all or a portion of a purchase order prior to the shipment of any
Products pursuant to such purchase order or elect not to submit a purchase
order required under Section 5, in each case for Buyer's convenience. In the
event of such a cancellation or such an election not to submit a required
purchase order, Buyer and Seller shall have the following sole and exclusive
rights and obligations:
(i) PAYMENTS BY BUYER In the case of a purchase order properly
canceled, in whole or in part, Buyer shall be responsible for and shall pay to
Seller within fifteen (15) days after receipt of an invoice from Seller the sum
of (1) the purchase price for all canceled Products which have been completed by
Seller as of the date Seller receives Buyer's notice of cancellation, and (2)
the actual direct labor and material costs incurred by Seller for all work in
process for canceled Products as of the date Seller receives Buyer's notice of
cancellation, and (3) to the extent not included in clause (2), Seller's actual
cost of all components purchased for the canceled Products, and (4) re-stocking
charges, and (5) other commercially reasonable costs incurred by Seller due to
such cancellation.
(ii) SELLER'S ACTIONS UPON NOTICE Upon receiving Buyer's
notice of its cancellation of a purchase order or its election to not submit a
purchase order required under Section 5, Seller shall take the following
actions to the extent commercially reasonable and permitted by its suppliers:
(A) Provide Buyer with an identification of all
components for which Buyer must make a payment under Section 6(b)(i), Seller's
actual cost of such components, and the potential options for their disposition;
4
5
(B) Cooperate with Buyer to identify whether current work
in process should be completed, scrapped, or shipped to Buyer "as is";
(C) Make all commercially reasonable efforts to the extent
permitted by its suppliers to use the components for which Buyer must make a
payment under Section 6(b)(i) in other programs of Seller, in which case Buyer
shall be entitled to a credit against such payment in an amount equal to the
lesser of (1) Seller's actual cost of such components or (2) the amount received
by Seller due to the use of such components in the other programs;
(D) Reduce or cancel component orders to the extent
commercially reasonable and permitted by its suppliers.
(E) Attempt to return to the original vendor all
components for which Buyer must make a payment under Section 6(b)(i), in which
case Buyer shall be entitled to a credit against such payment in an amount equal
to the credit or refund received from each such vendor; and
(F) Attempt to sell to third parties on commercially
reasonable terms all components for which Buyer must make a payment under
6(b)(i), in which case Buyer shall be entitled to a credit against such payment
in an amount equal to the proceeds of such sales.
(iii) DELIVERY OF FINISHED PRODUCTS, WORK IN PROCESS, AND
COMPONENTS Upon receipt of Buyer's payment for finished Products pursuant to
Section 6(b)(i), all such finished Products shall be delivered to, or at the
direction of, Buyer and such Products will be subject to all of the terms and
conditions set forth in this Agreement, including, without limitation, the
acceptance and warranty provisions hereof. Upon receipt of Buyer's payment for
work in process and components, all such work in process and components shall be
delivered to Buyer, or at Buyer's direction, in accordance with the delivery
provisions of Section 7; provided however that any such work in process and
components shall not be subject to any of the terms and conditions set forth in
this Agreement, including without limitation, the acceptance and warranty and
indemnification provisions hereof. Buyer shall bear the risk, and all costs and
expenses, including, without limitation, storage, transportation, shipping,
recalling, repackaging, reshipping, and the like, associated with the shipment
and delivery of all such Product, work in process and components.
(iv) AUDIT Before any payment is made to Seller pursuant to
Section 6(b)(i), Buyer shall have the right to audit Seller's records at
reasonable times, using a nationally recognized accounting firm of its choice,
to substantiate any and all charges payable to Seller. Buyer shall notify Seller
of its election to have such audit performed within ten (10 days of its receipt
of Seller's invoice and such audit will take place within fifteen (15) days from
Buyer's receipt of Seller's invoice and shall be completed within twenty (20)
days of start of such audit, after which Buyer shall immediately pay to Seller
all charges as determined by the audit. Such accounting firm and each of the
persons actually performing the audit will, if requested, execute Seller's
standard non-disclosure agreement with respect to such audit. Seller may dispute
the findings of any such audit and in such case, Buyer and Seller shall meet
within ten (10) days from
5
6
hours. The goal of the cost reduction program target shall be to reduce the
prices stated in Exhibit B to this Agreement by a minimum of 6% per year. Any
cost savings which are achieved by Seller as a result of implementing cost
reductions, whether proposed by Buyer or Seller, shall reduce the purchase
price of the Products by fifty percent (50%) of the cost reduction. On each
anniversary of this Agreement, the costs to which future cost reductions shall
be compared shall be the costs of the Product in effect on the day immediately
preceding such anniversary. Buyer acknowledges and agrees this Section sets
forth goals of the Parties to improve efficiencies and costs and Buyer agrees
that under no circumstances shall Seller be liable to Buyer for any amount or
in any other fashion in the event such goals are not achieved.
(d) MOST FAVORED CUSTOMER Seller warrants that the prices,
payment terms and other terms and conditions stated for the Products and
services covered by this Agreement are not less favorable than prices, payment
terms or other terms and conditions accorded to Seller's most favored customers
for like products for use in similar applications and sale or use in similar
markets and sales in similar quantities. If at any time during the term of this
Agreement, Seller gives any other customer more favorable payment terms and
other terms and conditions for equipment, parts and services which are
substantially comparable to those sold to Buyer hereunder, Seller shall
immediately extend such prices, payment terms and other terms and conditions to
Buyer as well.
10. SOFTWARE LICENSE For the life of the Products within which any
"Software" is delivered by Seller, Seller hereby grants to Buyer, Buyer's
customers, and each of their successors and assigns (hereinafter collectively,
"Licensees"), a fully paid, nonexclusive worldwide license to use only, and for
no other purpose whatsoever, such Software in connection with such Licensees'
use and operation of the Products. The prices of the Products include the fee
and any royalties for this license of the Software. For purposes of this
Section, the term "Software" shall mean the portions of the Products consisting
of programs, data, and routines for use in the Product. Software shall include
such programs, data, and routines embodied in the Products as are commonly
referred to as "firmware" and computer programs comprising a series of
statements or instructions in machine readable or human readable form in any
medium, including magnetic tape, disks, printed listings or optical media, and
related materials such as flow charts, logic diagrams, manuals, and other
documentation and Seller's Library of infrared codes. Each Licensee agrees,
that except for the use specified in this Section 10, such Licensee shall (i)
not use, copy or reproduce the Software in any manner; (ii) not modify or adapt
the Software in any way; (iii) not translate, reverse assemble, reverse compile
or reverse engineer, decompile, disassemble, or create derivative works of the
Software; or (iv) not transfer, assign, rent, sell, distribute or otherwise
dispose of the Software or this license (including granting sublicenses) to
anyone or in any manner other than to another Licensee hereunder.
11. PRODUCT DESIGN The external designs for the Products made by
Seller for Buyer hereunder as set forth on Exhibit D (the "External Designs")
are works made for hire by Seller for Buyer. Except as otherwise agreed to
between the Parties, Seller hereby confirms that Buyer has the sole right,
title, and interest in and to all proprietary rights in the External Designs,
all design patents and design patent applications relating to the External
Designs and all documentation, methods, processes, and information relating to
the External Designs. Seller
8
7
hereby acknowledges that it has no design patent or design patent applications
or any other proprietary rights relating to the External Designs.
Except as otherwise agreed to between the Parties, Seller hereby
assigns to Buyer, its successors and assigns, all right, title and interest in
and to the External Designs, together with the right to seek protection by
obtaining design patents therefor and to claim all rights or priority
thereunder, and the same shall become and remain Buyer's property regardless of
whether such protection is sought. Buyer shall have the right to cause design
patent applications to be filed thereon through counsel designated by Buyer.
Seller shall give Buyer and its counsel all reasonable assistance, at Buyer's
sole expense, in connection with the preparation and prosecution of any such
design patent application and shall cause to be executed and delivered to Buyer
all such assignments or other instruments or documents as Buyer may reasonably
request to carry out the intent of this paragraph.
12. INSIGNIA Neither Party shall use the other Party's name,
trademarks, trade names, logos, nor any descriptions or representations made by
the Parties without the prior written consent of the such other Party.
13. WARRANTIES Seller represents and warrants to Buyer that during
the Warranty Period (as such term is defined below), (a) the Products will
conform to the applicable Specifications set forth on Exhibit A attached hereto,
(b) the Products will be free from defects in material or workmanship under
normal use and service, (c) all services will be performed by Seller in a
workmanlike manner in accordance with good commercial practices and in
conformance with the Specifications, (d) Buyer's Software and the hardware
incorporated in the Products shall perform so as to enable to Products to meet
the Specifications, and (e) all Products shall function under ordinary use in
conformance with the Specifications. The foregoing warranties shall apply to
each Product for a period of fifteen (15) months from the date such Product is
manufactured (the "Warranty Period").
Seller shall repair or replace all Products which do not conform to
any of the foregoing warranties so long as Buyer (i) notifies Seller within the
Warranty Period in reasonable specificity the Products which fail to conform to
such warranties and (ii) return all such Products within fifteen (15) days after
such notification is received by Seller. Seller shall repair or, at Seller's
option, replace the defective Product within 15 days after it has been received
by Seller. The repaired or replacement Product shall be warranted as set forth
in this Section for a period equal to the greater of (a) the remaining balance
of the original warranty period or (b) ninety (90) days; provided, that in the
case of a defect discovered within the first 60 days of the warranty period with
respect to a Product, the repaired or replaced Product shall be warranted as set
forth in this Section for a period equal to 13 months from the date such Product
is received by Buyer. Seller shall reimburse Buyer for all transportation costs
associated with the return by Buyer of a defective Product to Seller for
warranty repair and shall bear all risk of loss or damage to the Product while
in transit. Seller shall reimburse Buyer for all transportation costs for the
return of the repaired or replaced Product to Buyer and shall bear all risk of
loss or damage to the Product while in transit. In the event any Product
returned by Buyer to Seller is determined by Seller to not be defective, Seller
shall notify Buyer of such determination and Buyer shall within ten (10)
9
8
days of receipt of such notice instruct Seller what to do with such Product. If
Seller does not receive such instruction from Buyer, Seller shall have the
right to scrap such Product with no other obligation or notice to Buyer.
In the event that statistical evidence as determined by Buyer
suggests a catastrophic failure rate of more than 5% of the Products in the
field and/or returned to Buyer for repair (a "Catastrophic Failure Condition"),
then Seller shall reimburse Buyer for all of its actually and reasonably
incurred costs associated with such Catastrophic Failure Condition, including
the actually and reasonably incurred costs of recall from Buyer's customer if
so requested by Buyer's customer. Seller shall replace all Products affected by
a Catastrophic Failure Condition or, at Buyer's option, reimburse Buyer for
cost of replacement products from other suppliers. In the event any Product
returned by Buyer to Seller is determined by Seller to not be defective, Seller
shall notify Buyer of such determination and Buyer shall mutually agree what to
do with such Product. If the Parties are unable to agree within sixty (60) days
of Seller's receipt of such Product, Seller shall have the right to scrap such
Product with no other obligation or notice to Buyer.
In the event that statistical evidence as determined by Buyer
suggests a catastrophic failure rate of more than fifteen (15) percent, then,
in addition to the remedies in this Section, Buyer may terminate this Agreement
by providing written notice to Seller. In the event that Seller, in good faith,
disputes Buyer's determination, Buyer and Seller agree to mutually and in good
faith resolve such dispute.
THE WARRANTIES MADE BY SELLER IN THIS AGREEMENT, WHEREVER LOCATED, ARE IN LIEU
OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND SELLER NEITHER MAKES
NOR INTENDS, NOR DOES IT AUTHORIZE ANY OF ITS AGENTS OR REPRESENTATIVES TO
MAKE, ANY OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, ARISING UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR IN CONNECTION WITH THE USE OR
PERFORMANCE OF ALL OR ANY PART OF THE PRODUCT, INCLUDING WITHOUT LIMITATION
LOSS OF USE OR PERFORMANCE OF THE PRODUCT, LOST REVENUES OR PROFITS, WHETHER
SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT (INCLUDING, WITHOUT
LIMITATION, THE BREACH OF THIS AGREEMENT OR ANY TERMINATION OF THIS AGREEMENT
BUT EXCLUDING SELLER'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 21), TORT
(INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE EVEN IF THE OTHER
PARTY HAS BEEN WARNED OR IS OTHERWISE AWARE OF THE POSSIBILITY OF ANY SUCH LOSS
OR DAMAGE IN ADVANCE.
10
9
14. Changes to Specifications
(a) BY BUYER Buyer may from time to time request changes to the
Specifications for the Products or the work required of Seller. If any change(s)
requested by Buyer result(s) in any increase to Seller's costs or time of
performance under this Agreement, then to the extent such change(s) and
its/their effect(s) is/are not addressed by specific terms and conditions of
this Agreement, Seller shall within ten (10) business days inform Buyer of all
such changes and effects and Buyer and Seller shall promptly negotiate a
reasonable adjustment of payments, schedules, lead times, and all other relevant
items or issues in order to make a commercially reasonable and equitable
adjustment for Seller.
(b) BY SELLER Seller shall make no change to the
Specifications, to any materials or component parts described therein, or to the
Products, including without limitation changes in form,fit function, design,
appearance or place of manufacture of the of the Products or changes which would
affect the reliability of any of the Products, without Buyer's express written
consent which consent will not be unreasonably withheld or delayed.
15. CONSEQUENTIAL DAMAGES Neither Party shall be liable for any
consequential damages as a result of the breach of this Agreement, including,
without limitation, loss of profits, loss of good will, or business
interruption, even if advised or otherwise aware of the possibility that such
damages may arise, but excluding Seller's indemnification obligations under
Section 21.
16. FORCE MAJEURE Notwithstanding anything contained herein to
the contrary, neither Seller nor Buyer shall be liable or in default hereunder
because of any failure to perform in accordance with the terms and conditions of
this Agreement if such failure arises from any cause beyond its reasonable
control, including, but not limited to, actions taken or failed to be taken by
Buyer, compliance with regulations, law, orders or instructions of any foreign
government, federal, state or municipal government or any department or agent
thereof, acts of God, act or omissions of the other Party, acts of civil or
military authority, fire, strikes, embargoes, war, riots or other forms of civil
unrest ("Force Majeure"). The Party so effected shall resume performance
promptly after the cessation of a Force Majeure. Nothing herein to the contrary
shall relieve Buyer from its obligation to pay Seller in accordance with the
terms hereof for any conforming Product ordered and accepted by Buyer.
17. ASSIGNMENT This Agreement may not be assigned or otherwise
transferred nor may any duties be delegated by either Party hereto without the
prior written consent of the other party, which consent will not be unreasonably
withheld or delayed, except that either party may assign or delegate to a
parent, subsidiary, or affiliate of the assignor, or to an entity acquiring
substantially all of the assets due to merger, acquisition or consolidation, so
long as the assignor remains liable for the full and faithful performance of the
assignee hereunder. Any assignment or other transfer in violation of this
Section 17 shall be void and of no effect. Subject to this restriction, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the Parties, their permitted successors and permitted assigns.
10
18. PERFORMANCE The failure by either Party to insist upon the strict
performance of any of its rights or any of the terms or provisions of this
Agreement in a particular instance shall not be construed as a waiver of the
same or different rights or terms or provisions in subsequent instances. All
remedies, rights, undertakings and obligations hereunder shall be cumulative,
and none shall operate as a limitation of any other remedy, right, undertaking
or obligation hereunder.
19. COPYRIGHT Seller represents and warrants to Buyer that Seller has
obtained, and there are in full force and effect, all rights necessary to
design, engineer, manufacture and sell the Products and otherwise to perform
its obligations under this Agreement. The Products shall not infringe any
copyright, mask work, patent or trademark or misappropriate any trade secret or
any other right of any third party. To Seller's knowledge, no claims that the
Products or any component thereof infringes any copyright, mask work, patent or
trademark or misappropriates any trade secret or other right has been asserted
or threatened against Seller, and no claim is pending against Seller or against
any person or entity from which Seller obtained such rights.
20. INDEMNIFICATION
(a) BY SELLER Seller shall indemnify and hold harmless Buyer and its
stockholders, directors, officers, employees, agents, subsidiaries, affiliates
and subcontractors from and against any losses, damages, liabilities, expenses
(including reasonable attorney's fees), costs, claims, suits, demands, actions,
causes of action, proceedings, judgments, assessments, deficiencies and
occasioned by, arising out of or resulting from (i) any misrepresentation or
breach of warranty or covenant, default or non-fulfillment of any agreement by
Seller under this Agreement; (ii) any costs on account of physical damage to
tangible property and personal injuries, including death, to persons, arising
from any breach of this Agreement by Seller, or any negligent act or omission
or willful misconduct of Seller; and (iii) all costs resulting from, caused by,
relating to or arising out of Seller's relationships with its employees,
suppliers, subcontractors, agents and consultants in the course of its
performance except matters for which Buyer has agreed to indemnify Seller; and
(iv) negligent acts or omissions or willful misconduct of Seller in connection
with the conduct of Seller's business, including any assertions regarding
unfair competition or violations of laws by Seller.
(b) BY BUYER Buyer shall indemnify and hold harmless Seller, its
stockholders, directors, officers, employees, agents, subsidiaries, affiliates
and subcontractors from and against losses, damages, liabilities, expenses
(including reasonable attorneys' fees and expenses, including without
limitation any such fees and expenses incurred in connection with any appellate
proceeding), costs, claims, suits, demands, actions, causes of action,
proceedings, judgments, assessments, deficiencies and occasioned by, arising
out of or resulting from (i) any misrepresentation or breach of warranty or
covenant, default or non-fulfillment of any agreement by Buyer under this
Agreement; (ii) any costs on account of physical damage to tangible property
and personal injuries, including death, to persons, arising from any breach of
this Agreement by Buyer, or any negligent act or omission or willful misconduct
of Buyer; (iii) all costs resulting from, caused by, relating to or arising out
of Buyer's relationships with its employees, suppliers,
11
subcontractors, agents and consultants in the course of its performance except
matters for which Seller has agreed to indemnify Buyer; (iv) negligent acts or
omissions or willful misconduct of Buyer in connection with the conduct of
Buyer's business, including any assertions regarding unfair competition or
violations of laws by Buyer; and (v) any costs occasioned by, arising out of or
resulting from any dispute or disagreement between Buyer and any approved
purchasers of the Product.
21. INTELLECTUAL PROPERTY CLAIMS If any claim, suit, action or
proceeding is brought against Buyer or any of its officers, directors,
stockholders, agents, subsidiaries, affiliates, subcontractors, assignees and
employees) purchasing or using the Products hereunder on the basis of an
allegation that the manufacture, use or sale of the Products, or use of
associated software, infringes or violates United States or foreign letters
patent, copyright, mask work, trademark, trade secret or other intellectual
property rights of any third party (collectively, "Intellectual Property
Claims"), Seller shall indemnify, defend and hold harmless such persons or
entities from and against all costs, liabilities, expenses and damages,
including without limitation court costs and reasonable attorney's fees, arising
out of or resulting from Intellectual Property Claims. As part of its
obligations under this Section 21, Seller shall: (i) at Seller's expense, defend
and at its option with Buyer's written approval, which approval shall not be
unreasonably withheld or delayed, settle the claim, suit, or action, and (ii)
pay the costs and damages, including without limitation court costs and
attorney's fees, awarded against such indemnified parties arising out of the
Intellectual Property Claims. If a Product delivered or to be delivered under
this Agreement becomes the subject of an Intellectual Property Claim, or if as a
result of an Intellectual Property Claim, or the settlement thereof, the
production, use, repair or sale of Products is prohibited, Seller shall, at its
expense, do one or more of the following: (a) obtain for Buyer the right to
sell, repair or use the infringing Product without any additional cost to Buyer,
(b) modify the infringing Product so that it becomes non-infringing, while
remaining in commercially reasonable compliance with the Specifications, subject
to Buyer's technical approval, which approval will not be unreasonably withheld
or delayed or (c) replace the infringing Product with a non-infringing unit that
performs substantially the same functions in substantially the same manner,
while remaining in commercially reasonable compliance with the Specifications.
Notwithstanding, Seller shall have no liability for any infringement from (y)
use of the Products in combination with other items, unless Seller sold, made or
specifically recommended or approved them all as a combination, or the
combination would be necessary for use in the ordinary course in connection with
the Product, or (z) modification of Products after delivery, unless either
Seller or an authorized agent of Seller made, specifically recommended or
approved the modification, or the modification constitutes normal repair,
replacement or implementation of Seller provided options and enhancements for
the Products.
22. THIS SECTION INTENTIONALLY OMITTED.
13
12
23. YEAR 2000 COMPLIANCE
(a) PRODUCTS Seller warrants that the Products to be furnished
pursuant to this Agreement shall, when used in accordance with the Product
documentation, be able to accurately process date/time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and between the
twentieth and twenty-first centuries, and the years 1999 and 2000, including
leap year calculations. Where a purchase requires that specific Products must
perform as a package or system, this warranty shall apply to the products as a
system. In the event of any breach of this warranty, Seller shall restore the
Products to the same level of performance as warranted herein, or repair or
replace the Products with conforming Products so as to minimize interruption to
Buyer's customers' ongoing business processes, at Seller's sole cost and
expense.
(b) SELLER'S OPERATIONS Seller warrants that all products it
uses in connection with providing the Products and other services to Buyer
under this Agreement shall be able to accurately process date/time data
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000, including leap year calculations. In the event of any breach of this
warranty, Seller shall undertake all commercially reasonable efforts to replace
non-compliant products with compliant products and to minimize interruption to
Buyer's ongoing business operations, at Seller's sole cost and expense.
24. CERTAIN OBLIGATIONS
(a) SALES COLLATERAL Seller shall, at its sole cost and
expense, provide Buyer with such quantities of quality printed sales
literature, other similar sales tools and training as has been customarily
provided by Seller to similarly situated customers under similar circumstances
to permit Buyer to effectively promote the sale of the Products.
(b) SAFETY STOCK Seller shall, at its sole expense, keep in
storage a supply of backup units and inventory of the Products equal to
one-half of one months forecast which is averaged based on a rolling
twelve-month rolling forecast, which will be used to satisfy its warranty,
maintenance and other obligations.
(c) SUPPLIER MANAGEMENT MODEL The Parties agree to mutually
develop a cost effective supplier management program whereby reduced inventory
liabilities, product lead-time reductions and overall acquisition cost
reductions are implemented. This program may include but is not limited to
stocking of key components, kanban delivery methods, direct ship to customers,
and other leading edge procurement practices as identified by the Parties.
Seller will provide any incremental cost impacts to Buyer and the Parties will
mutually determine the best program to implement.
(d) QUARTERLY BUSINESS REVIEWS ("QBR") Seller shall consult
with Buyer no less than once each calendar quarter in order to perform a
thorough review of Seller's performance under this Agreement, shall implement a
continuous productivity program to reduce
14
13
lead times, improve quality, reduce costs, and achieve other manufacturing
process improvements, and shall provide Buyer with such information, including
analytical and manufacturing documentation, as Buyer may reasonably request from
time to time regarding quality control of the Products. The locations of QBR
meetings shall be held at sites alternately selected by Seller and Buyer and
mutually agreed upon. A detailed QA Procedures are attached hereto for reference
as Exhibit E. Seller shall use best efforts to address all production issues
within its control according to Exhibit E, and shall provide Buyer with a
monthly report of inventory.
25. TERMINATION This Agreement may be terminated:
(a) By either Party upon written notice to the other Party in
the event of a material breach of this Agreement by the other Party (except for
a breach covered within subsection 6(a)) which is not cured within thirty (30)
days (five (5) days in the event of a breach of payment) after written notice of
such breach; provided however, that where a given default, by its nature would
require more than thirty (30) days to cure, the defaulting Party shall have more
time within which to effect a cure, provided that it commences and continues to
commercially and reasonably expend efforts to cure and completes such cure
within no later than sixty (60) additional days; or
(b) By written notice by Buyer in the event that Seller
engages in a sale of assets, merger, or the transfer of management or control of
a significant ownership to a direct competitor of Buyer and such new controlling
party does not affirm its obligations under this Agreement; or
(c) By Buyer pursuant to Section 6(a) or Section 13.
26. NOTICES All notices and demands of any kind which either the
Buyer or the Seller may be required or desire to serve upon the other under the
terms of this Agreement shall be in writing and shall be served to the Parties
at the addresses set forth below or at such other addresses as may be designated
hereafter by the Parties in writing. The personal delivery or the sending of a
notice by Federal Express (or similar overnight delivery method) or by postage
prepaid, certified mail, return receipt requested shall be sufficient service.
BUYER: General Instrument Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Executive Vice President
With required copies to: General Instrument Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Group General Counsel Commercial
General Instrument Corporation
15
14
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Procurement Department
SELLER: Universal Electronics Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President and Chief Operating Officer
With a required copy to: Universal Electronics Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
If by personal delivery, service shall be deemed complete upon such delivery. If
by overnight delivery method or by certified mail, service shall be deemed
complete upon the date shown on the return receipt where the signature of the
Party's employee or agent appears or if no date is shown, on the date such
receipt is received by the sending Party.
27. CONTINUATION In the event that any of the provisions of this
Agreement or the application of any such provisions to the Parties hereto with
respect to their obligations hereunder shall be held by a court of competent
jurisdiction to be unlawful or unenforceable, the remaining portions of this
Agreement shall remain in full force and effect and shall not be affected,
impaired or invalidated in any manner.
28. PROPRIETARY INFORMATION Each Party, on behalf of itself and its
officers, directors, employees and other authorized representatives
(collectively, "Agents") agrees to maintain in confidence all Proprietary
Information (as defined below) disclosed or to be disclosed to it by the other
Party in connection with this Agreement which it obtains in the course of the
transactions contemplated hereby. The Parties agree that all Proprietary
Information shall remain the property of the disclosing Party. Each Party shall
use its reasonable best efforts to cause its Agents to comply with the terms of
this Section, and each Party shall be responsible for any breach of these
provisions by such Party's Agents.
"Proprietary Information" as used herein means any proprietary plans
and information, including, without limitation, information of a technological
or business nature (including, without limitation, all trade secrets,
technology, intellectual property, data, marketing plans, summaries, reports,
mailing lists, or other non-public information relating to a Party's business,
whether written or oral and, if written, however produced or reproduced)
received by or otherwise disclosed to the receiving person from or by the
disclosing person, that is marked proprietary or confidential, or bears the
marking of like import, or that the disclosing person states to be considered
proprietary or confidential at the time of disclosure and confirms in writing to
be proprietary or confidential within ten (10) business days after such
disclosure. Proprietary Information shall also include the terms of this
Agreement.
16
15
Information shall not be deemed to be Proprietary Information, and the
receiving Party shall no obligation with respect thereto, or to any part
thereof, to the extent such information: (i) is approved for release by prior
written authorization of the disclosing person; (ii) is disclosed in order to
comply with a judicial order issued by a court of competent jurisdiction, any
order or directive of a governmental agency or other entity, or with government
laws or regulations, in which event the receiving person shall give written
notice to the disclosing person of such disclosure as soon as practicable and
shall cooperate with the disclosing person in using all reasonable efforts but
at disclosing Party's sole cost and expense to obtain an appropriate protective
order or equivalent, provided that the information shall continue to be
Proprietary Information to the extent it is covered by such protective order or
equivalent; (iii) is already known to the receiving person at the time or
receipt of disclosure, as evidenced by written records made prior to such
receipt or disclosure, or subsequently becomes publicly available without any
fault of the receiving person or is already publicly available prior to receipt
or disclosure; or (iv) is independently developed or formulated by the
receiving person, or its related companies without breach of this Agreement as
evidenced by files of the receiving Party in existence at the time of
disclosure by the disclosing Party.
Notwithstanding the above, however, a Party may disclose (subject to a
reasonable nondisclosure agreement prohibiting further disclosure) the terms of
this Agreement and related agreements or documents to a bona fide prospective
purchaser (by merger, stock acquisition or otherwise) of substantially all the
assets of such Party or its ultimate corporate parent, or to its legal or
financial advisors who have signed nondisclosure agreements or are otherwise
obligated to maintain the confidential nature thereof; provided, however, that
each Party shall remain liable for any breach of this provision by those
persons to whom it discloses such Proprietary Information.
29. ENTIRE AGREEMENT This Agreement constitutes the final agreement
between the Parties pertaining in any manner to the subject matter hereof, and
contains all of the covenants and undertakings between the Parties with respect
to said subject matter. Each Party to this Agreement acknowledges that no
written or oral representations, inducements, promises or agreements have been
made which are not embodied herein. Except for the Warrant of even date hereof,
a copy of which is attached hereto, any and all prior or contemporaneous
written or oral agreements between the Parties pertaining in any manner to the
subject matter of this Agreement, including without limitation that certain
Memorandum of Understanding dated July 28, 1998, are expressly superseded and
canceled by this Agreement. No modification of this Agreement shall be effected
by the acknowledgment or acceptance of purchase order or shipping instruction
forms or any other document containing terms or conditions at variance with or
in addition to those set forth herein, all such varying or additional terms
being hereby objected to.
30. COUNTERPART This Agreement may be executed in multiple counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
31. U.N. CONVENTION The Parties agree to exclude the application of the
U.N. Convention on Contracts for the International Sale of Goods, 1980.
17
16
32. TERMINATION Termination or expiration of this Agreement for any
reason shall not release either Party from any liabilities or obligations set
forth in this Agreement which (i) the Parties have expressly agreed shall
survive any such termination or expiration, or (ii) remain to be performed or
by their nature would be intended to be applicable following any such
termination or expiration, including but not limited to liabilities or
obligations set forth in Sections 6, 7, 8, 9(a), 9(b), 10, 11, 13, 15, 20, 21,
23, 28, this Section 32, and 34.
33. RELATIONSHIP Nothing in this Agreement will be deemed to
constitute, create, give effect to or otherwise recognize a joint venture,
partnership, or business entity of any kind and the rights and obligations of
the Parties will be limited to those expressly set forth herein. Nothing herein
will be construed as providing for the sharing of profits or losses arising out
of the efforts of the Parties hereto, except as may be provided for in any
resulting agreement between the Parties.
34. CHOICE OF LAW This Agreement shall be governed by and construed
under, and the legal relations between the Parties hereto shall be determined in
accordance with, the laws of the State of California, without giving effect to
such state's conflict of law principles. If either Party employs attorneys to
enforce any rights arising out of or relating to this Agreement, the prevailing
Party shall be entitled to recover its reasonable attorney's fees, costs and
other expenses.
35. AUTHORIZATION Each Party to this Agreement represents and warrants
to, and agrees with the other, that it has the right, power and authority to
enter into, and perform all its obligations under, and has taken all the
requisite corporate action to approve the execution, delivery and performance of
this Agreement and that the execution, delivery and performance of this
Agreement shall not result in the breach or non-performance of any agreements it
has with third parties. The representations and warranties of this Section 35
are made as of the effective date of this Agreement.
36. ANNOUNCEMENTS Except as may otherwise be required by applicable
law, neither Party shall make any public announcement regarding this Agreement
or the relationship and transactions contemplated herein without the prior
written consent of the other. Notwithstanding the foregoing, the Parties agree
to make commercially reasonable efforts to make an announcement within two (2)
weeks of the execution of this Agreement.
37. TIME OF THE ESSENCE The Parties acknowledge and agree that time is
of the essence in connection with the performance of their respective
obligations and duties under this Agreement.
18
17
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year
hereinabove written.
GENERAL INSTRUMENT CORPORATION UNIVERSAL ELECTRONICS INC.
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXX X. XXXXXX
-------------------------- --------------------------
Xxxxxxx X. Xxxxxx Xxxx X. Xxxxxx
Xx. Director, Procurement President and COO
19
18
EXHIBIT A
The Specifications and Milestone Schedule shall be the specifications and
milestone schedule currently being reviewed by the Parties, together with such
changes upon which the Parties may mutually agree.
19
EXHIBIT B
PURCHASE PRICE: Initially, $5.50 per unit based upon the
Specification agreed to by the parties at the time of
signing this Agreement, however, it is understood and
agreed that such purchase price shall be adjusted from
time to time upon the mutual agreement of the parties
in the event the Specification shall be changed or as
otherwise allowed under this Agreement. All such
prices shall be reflected in the purchase orders that
are issued from time to time, and at all times such
prices shall be based upon the achievement of the
Gross Margin Guarantee (as provided below).
PAYMENT: Sixty (60) days following receipt of invoice from
Seller, which invoice shall be delivered to Buyer at
the same time the Product shall be delivered.
DELIVERY: F.O.B. Shipping port
GROSS MARGIN GUARANTEE: Buyer guarantees that Seller shall receive a gross
margin on all sales of Product of no less than 30%,
consequently, if necessary, the Purchase Price shall
be adjusted in order for Seller to receive such 30%
gross margin. Seller shall provide each Buyer each
Quarter the actual Gross Margin. Notwithstanding
anything contained with this Exhibit B or the
Agreement to the contrary, it is understood and
agreed to by the parties that presently Seller's
actual cost of the Product is such that the gross
margin which Seller shall receive for sales of the
Product to Buyer, based upon the current
Specifications, is less than 30% and that as an
accommodation to Buyer, the purchase price of the
Product shall not be adjusted in order for Seller to
achieve a 30% gross margin. It is further understood
and agreed to by the parties that notwithstanding the
cost savings sharing provisions of this Agreement,
Buyer shall enjoy and not share any cost savings which
occur, regardless of whether such savings result from
proposals from Buyer or Seller, until such time as
Seller's gross margin on sales of the Product equal
30%.
For purposes of this Agreement, the term "gross margin" shall mean revenues from
the sale of the Products less the cost of goods sold attributable to the
Products, a such amounts are determined in accordance with generally accepted
accounting principles, consistently applied.
20
PURCHASE PRICE REBATE: During the Term of this Agreement, Buyer shall
earn an annual rebate of its purchases of Product,
as follows:
When Buyer has purchased and paid for more than $3,500,000 of Products,
Buyer shall earn 2% of the Purchase Price paid on each additional dollar
of purchases made up to and including $5,000,000 of Products;
When Buyer has purchased and paid for more than $5,000,000 of Products,
Buyer shall earn 3% of the Purchase Price paid on each additional dollar
of purchases made up to and including $10,000,000 of Products;
When Buyer has purchased and paid for more than $10,000,000 of Products,
Buyer shall earn 4% of the Purchase Price paid on each additional dollar
of purchases made up to and including $15,000,000 of Products;
When Buyer has purchased and paid for more than $15,000,000 of Products,
Buyer shall earn 6% of the Purchase Price paid on each additional dollar
of purchases made up to and including $20,000,000 of Products;
When Buyer has purchased and paid for more than $20,000,000 of Products,
Buyer will earn 10% of the Purchase Price paid on each additional dollar
of purchases made thereafter.
The rebates payable hereunder shall accrue quarterly and shall be paid to
Buyer within sixty (60) days after the end of the quarter in which they were
earned.
SOFTWARE DEVELOPMENT FEES
$35,000* - To be paid as follows:
Fifty percent (50%) upon the execution of Agreement and the
balance upon approval of software and device code library.
* The Software Development Fees are based upon Seller's current understanding
of Buyer's specifications. Any substantial changes to these specifications prior
to Buyer's approval of the software and device code library may require an
adjustment to these fees. Any such adjustment shall be paid upon the approval by
Buyer of the software and device code library.
MASKING COSTS
$2,500 - To be paid as follows:
Fifty percent (50%) upon the execution of Agreement and the balance upon
approval of software and device code library.
21
EXHIBIT D
The External Design shall be the external design currently being reviewed by
the Parties, together with such changes upon which the Parties may mutually
agree.
22
EXHIBIT E
The QA Procedures shall be QA Procedures currently reviewed by the Parties,
together with such changes upon which the Parties may mutually agree.
