EXHIBIT 10.15
CONTRACT MANUFACTURING AGREEMENT
This Contract Manufacturing Agreement ("Agreement") is dated as of April 1,
2000, between X10 Wireless Technology, Inc., a Delaware corporation ("X10"), and
X10 Ltd., a Bermuda corporation ("Manufacturer").
RECITALS
A. X10 owns or licenses certain technology and other intellectual
property rights, which are utilized in various products that are designed,
developed, manufactured, marketed, distributed and sold by X10;
B. X10 and Manufacturer have entered into an Amended and Restated Product
Supply Agreement (the "Supply Agreement"), under which Manufacturer has agreed
to manufacture various products for X10;
C. X10 desires to engage Manufacturer to manufacture and sell certain
products to resellers of customized, bundled or private-labeled products, in
accordance with the terms and conditions of this Agreement; and
D. Manufacturer desires to sell certain broadband wireless products owned
by X10 to resellers of customized, bundled or private-labeled products, in
accordance with the terms and conditions of this agreement.
AGREEMENT
In consideration of the foregoing, the mutual covenants and conditions
contained in this Agreement and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
a. "Affiliate" means any corporation or other person or entity which
directly or indirectly controls, or is, directly or indirectly, controlled by,
or is under common control with X10 or Manufacturer, as the case may be.
b. "Ancillary Agreements" means the Amended and Restated Xxxx of
Sale and Assignment (the "Xxxx of Sale"), the Amended and Restated License
Agreement (the "License Agreement"), the Supply Agreement and the Amended and
Restated Research and Development Services Agreement (the "Research and
Development Agreement"), all of which have been made effective as of October 1,
1999.
c. "OEM" means a reseller of Products that are customized for that
OEM, bundled with or incorporated into other products of the OEM, or private-
labeled for the OEM.
d. "Products" means the products designed, developed, manufactured,
marketed, distributed or sold by X10 including, without limitation, those
products licensed or acquired by X10 pursuant to the License Agreement and the
Xxxx of Sale and any additional products that may be developed pursuant to the
Research and Development Agreement.
e. "X10 Technology" means technical information, plans,
specifications, circuit designs, market information, statistics and other
technical information and assistance and all other
confidential, trade secret or other proprietary information, know how and
technology owned or licensed by X10 relating to the Products.
2. X10 Product Delivery Requests for OEM Sales.
a. In the event that X10 shall identify a potential OEM purchaser of
Products, X10 may submit to Manufacturer a request for estimate containing
specifications for Products which X10 desires to sell to such OEM. Manufacturer
shall provide to X10, within thirty (30) days, a binding estimate of the cost
for manufacturing the proposed Products calculated pursuant to Section 5.c.
below and the minimum volume required for a production run. If the estimated
cost and volume is acceptable to X10, then X10 may, at its sole option, either:
(i) accept a purchase order from the OEM(s) for the sale of
the Product, at the agreed sales price, quantity and shipment date (each,
an "X10 Sale"); or
(ii) disclose the identity of the OEM(s) to Manufacturer and
authorize Manufacturer to accept a purchase order directly from the OEM(s)
upon the same terms as offered to X10; provided, that Manufacturer must
receive a purchase order within ninety (90) days after disclosure of the
identity of the OEM(s) by X10; provided, further, that upon execution of
the purchase order, Manufacturer shall provide an executed copy of the
purchase order to X10 (each, a "Manufacturer Sale").
b. In the event that Manufacturer identifies a potential OEM
purchaser of broadband wireless Products owned by X10, Manufacturer shall
disclose the identity of the OEM to X10 and X10 may, at its sole option, either:
(i) complete an X10 Sale of such broadband wireless Products;
or
(ii) authorize Manufacturer to complete a Manufacturer Sale of
such broadband wireless Products.
c. If X10 accepts a purchase order from the proposed OEM(s), X10 may
then submit to Manufacturer a purchase order for the manufacture of the Product
by Manufacturer. If Manufacturer accepts a purchase order from the OEM(s), then
Manufacturer shall proceed with the manufacture and sale of the Product directly
to the OEM(s) in accordance with the terms of such purchase order.
3. Manufacture and Shipment of Products. In the event of an X10 Sale:
a. Manufacturer agrees to manufacture the Products in accordance
with specifications provided by X10, in such quantities and for such delivery
dates as mutually agreed by the parties and in accordance with the terms and
conditions of this Agreement. X10 shall deliver a letter of credit to
Manufacturer prior to any shipment of Products hereunder, and Manufacturer's
shipment of products shall be conditioned on the timely delivery of such letter
of credit. X10 may inspect the manufacture of the Products for the purpose of
ensuring compliance with X10's specifications and evaluating the use of X10
Technology by Manufacturer. Any units of the Products which are returned due to
a defect or other manufacturing deficiency will be promptly replaced by
Manufacturer.
b. Manufacturer shall provide such packaging, instructions, warranty
information and other documentation (collectively, the "Documentation") as may
be specified by X10. All trademarks, trade names, service marks and copyrights
utilized by X10 in the Documentation shall remain the exclusive property of X10.
c. Manufacturer shall, pursuant to X10's instructions, ship the
Products ordered to the designated OEM on or prior to the shipment date
specified in the notice delivered pursuant to subsection 2.a(i), 2.a(ii), 2.b(i)
or 2.b(ii) above, as may be adjusted pursuant to this Section 3.
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4. No Competitive Products.
a. Manufacturer agrees that it shall not manufacture, nor cause or
allow any of its Affiliates (other than X10) to manufacture, the Products for
any reason except (i) as provided in this Agreement or the Ancillary Agreements,
or (ii) for its own account in connection with the sale of non-branded Products
listed in the License Agreement to OEMs and other resellers, which were not
introduced to Manufacturer by X10.
b. Except as provided in this Agreement or the Ancillary Agreements,
during the term of this Agreement, Manufacturer shall not manufacture, nor cause
any of its Affiliates (other than X10) to manufacture, for itself or for any
other party any product that is the same as, or similar in design, function or
appearance to, the Products.
5. Fees.
a. As consideration for the manufacturing and shipping services
performed by Manufacturer under subsection 2.a(i) or 2.b(i) of this Agreement,
X10 shall pay Manufacturer a fee equal to the actual costs of manufacturing and
shipping the Products ordered as calculated pursuant to subsection 5.c below.
Such fee shall be payable pursuant to a letter of credit after delivery of the
Products to the F.O.B. shipping point.
b. As consideration for the referrals generated by X10 in connection
with a Manufacturer Sale pursuant to subsection 2.a(ii) or 2.b(ii) of this
Agreement, Manufacturer shall pay to X10, on a quarterly basis, a fee,
calculated on a Product by Product basis, equal to the aggregate proceeds
received by Manufacturer from the sales of each such Product sold during such
period, less actual trade discounts, allowances, sales tax, freight charges and
returns (the "Net Proceeds"), less Manufacturer's costs of manufacturing each
such Product and less:
(1) 15% of the Net Proceeds for each Product sold, until the Net
Proceeds for such Product during the term of this Agreement reaches
$2,000,000; and
(2) 10% of the Net Proceeds for each Product sold, after the Net
Proceeds for such Product during the term of this Agreement reaches
$2,000,000.
c. Manufacturer shall provide an annual audited statement prepared
by an internationally-recognized auditor, agreeable to both parties, that
documents and itemizes, on an aggregate basis, the cost of manufacturing all
Products sold pursuant to this Agreement during the preceding year ended
December 31. X10 shall have the right to conduct, at any time, its own audit of
such costs, and Manufacturer shall make available to X10 and its representatives
all records and documentation required to conduct such audit, but in no event
more than two (2) times per calendar year. If the costs of manufacturing are
determined to be less than those provided by Manufacturer, Manufacturer shall
pay the shortfall to X10, as well as the costs of such audit. Costs of
manufacturing shall include:
i. Costs of materials;
ii. Factory overhead, including labor costs;
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iii. Incoming freight for raw materials; and
iv. Consumables.
d. The manufacturing fees shall be examined on an annual basis
during the term of this Agreement and may be amended in writing by mutual
agreement of the parties.
e. Manufacturer shall be responsible for collecting payment of the
purchase price by all OEMs for Products sold by Manufacturer pursuant to
Subsection 2.a.(ii) or 2.b(ii) of this Agreement, including arrangement for any
required letters of credit. Within five (5) business days after the end of each
calendar quarter, Manufacturer shall provide X10 a statement of all OEM sales
made by Manufacturer during such quarter. Within thirty (30) days after the end
of each calendar quarter, Manufacturer shall remit to X10 the aggregate fees due
and payable to X10 on Manufacturer Sales completed during such quarter as
determined in accordance with Section 5.b above.
6. Shipping.
a. For all X10 Sales, Manufacturer shall deliver the Products to the
F.O.B. shipping point. For Manufacturer Sales, the Products shall be shipped and
title shall transfer as agreed by Manufacturer and the respective OEM(s).
b. For all X10 Sales, X10 shall be responsible, at its sole cost,
for compliance with all applicable laws and regulations concerning the
importation of the Products into the United States or any other destination
country, as well as for payment of all customs duties and freight costs for
shipment of the Products from Manufacturer to the destination specified by X10.
For Manufacturer Sales, responsibility for payment of customs duties and freight
costs and compliance with laws and regulations concerning the importation of
Products shall be determined by agreement between Manufacturer and each OEM.
7. Warranties.
a. X10 represents and warrants that it has the full right and power
to enter into this Agreement.
b. Manufacturer represents and warrants that it has, and shall
maintain throughout the term of this Agreement, all licenses, registrations and
other certifications required for it to operate its business and manufacture the
Products and has the full right and power to enter into this Agreement.
c. Manufacturer warrants to X10 and to all purchasers of Products
that all units of Products shipped will meet or exceed (1) the specifications of
the Products as developed by X10, as enhanced to X10's satisfaction, (2) X10's
standards of quality, and (3) all requirements of all applicable laws of the
United States or other jurisdictions in which the Products are sold, as well as
the country of origin with respect to the manufacture, packaging and labeling of
the Products.
d. Manufacturer shall obtain and maintain during the term of this
Agreement a policy of product liability insurance in an amount of not less than
$5 Million per claim, which
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covers the Products manufactured under this Agreement. Such insurance policy
shall be issued by an insurance company acceptable to X10 and shall name X10 as
an additional insured.
8. Assignment. Neither party may assign or otherwise transfer this
Agreement, its right and benefits, without the prior written consent of the
other party. Any attempted transfer without such consent shall be void and of
no effect.
9. Confidentiality.
a. "Confidential Information" shall consist of all information and
materials clearly identified in writing as Confidential Information including,
without limitation, formulas, methods, know how, processes, designs and new
products of X10.
b. Manufacturer agrees to protect and preserve as confidential the
Confidential Information. Except as otherwise expressly permitted under this
Agreement, Manufacturer will not disclose the Confidential Information to any
person or entity other than third parties who have a specific need to know such
information for use in furtherance of this Agreement and who agree, in writing,
to hold all such information in confidence. Manufacturer will use the
Confidential Information only to manufacture and sell Products in accordance
with this Agreement, and will not use the Confidential Information for any other
purpose. Manufacturer will not allow any other person or entity (including
Affiliates) to use any of the Confidential Information in any way, without X10's
prior written consent.
c. The Confidential Information shall not include (i) information
which at the time of disclosure to Manufacturer is generally available to the
public, or which after disclosure becomes generally available to the public by
publication or otherwise; and (ii) information received from a third party under
no obligation of confidentiality. Further, the confidentiality provisions of
this Section 9 shall not apply to prohibit disclosure of Confidential
Information (x) as required by applicable disclosure laws; or (y) in connection
with a court order requiring disclosure, in which case Manufacturer must provide
immediate notice of such order to X10 and cooperate in any attempt to quash such
order.
10. Term; Termination.
a. This Agreement shall be for a term of five (5) years and shall
thereafter be automatically renewed for successive five (5) year terms, unless
terminated by either party by written notice at least thirty (30) days prior to
the end of the current term.
b. If Manufacturer defaults in the performance of this Agreement,
X10 may terminate this Agreement by giving written notice to Manufacturer, said
termination to be effective on the thirtieth (30th) day after mailing such
notice if Manufacturer has not prior thereto cured such default to X10's
satisfaction.
c. X10 may terminate this Agreement, by giving thirty (30) days'
written notice, in the event of any effort or attempt by Manufacturer to
transfer, without the written consent
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of X10, any or all of the rights granted hereunder, whether by assignment,
license, or by any other means.
d. Either party may terminate this Agreement, by giving ten (10)
days' written notice, in the event of filing by the other party of a petition
for bankruptcy or insolvency or both, or in the event of any adjudication that
the other party is bankrupt or insolvent or both, or after the filing by the
other party of any petition or pleading asking reorganization, readjustment, or
rearrangement of the other party's business under any law relating to bankruptcy
or insolvency, or upon or after the appointment of a receiver for all or
substantially all of the property of the other party or upon or after the making
by the other party of any assignment for the benefit of creditors or upon or
after the institution of any proceedings for the liquidation or winding-up of
the other party's business or for the termination of its corporate charter.
e. Upon termination of this Agreement for any reason whatsoever,
Manufacturer shall immediately return to X10 all information, documents and
materials, and all copies thereof, relating to the X10 Technology, the Products
and any Confidential Information.
11. Continuing Obligations. Upon termination of this Agreement,
Manufacturer shall deliver to X10, in the manner requested by X10, all designs,
specifications, prototypes and other information relating to any request for or
performance of any services or the design, development or manufacture of any
Products pursuant to this Agreement. In addition, Manufacturer shall complete
and ship all outstanding orders to OEMs. Termination of this Agreement shall not
relieve Manufacturer of any obligation to X10 existing at the time of the
termination. In addition, the provisions of Sections 7 ("Warranties"), 9
("Confidentiality"), 10 ("Term; Termination"), 11 ("Continuing Obligations"), 17
("Waiver"), 18 ("Governing Law"), 19 ("Severability") and 20 ("Attorneys' Fees")
shall survive termination or expiration of this Agreement for any reason.
12. Indemnity.
a. Indemnification. Each party (the "Indemnifying Party") shall
defend, indemnify and hold the other party and its officers, directors, agents,
customers and sublicensees harmless from and against any loss, damage, injury,
liability, claims, causes of action or other expense, including reasonable
attorneys' fees involved in the defense of any such action, that the other party
may suffer arising out of or resulting from (i) any breach or alleged breach of
any of the terms or conditions of this Agreement or any representations or
warranties of the indemnifying party made in this Agreement, in any purchase
order, or otherwise, or (ii) any act or omission of the indemnifying party, or
the servants, agents or subcontractors of the indemnifying party, in the
delivery of Products or in the performance of any work hereunder.
b. Indemnification Procedure. In the event the Indemnifying Party
is obligated to indemnify the other Party (the "Indemnified Party") under this
Agreement, the Indemnified Party will, as soon as is reasonably practicable, (i)
provide the Indemnifying Party with prompt written notice of any claim for which
indemnification is required, (ii) tender the
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defense of any such claim to the Indemnifying Party, (iii) provide full
cooperation for such defense at the Indemnifying Party's expense, and (iv) not
settle without the Indemnifying Party's prior written approval, which approval
shall not be unreasonably withheld. Notwithstanding the foregoing, failure to
give prompt notice as required by this Section 12.b. shall not preclude any
claims for indemnification unless such failure has the effect of prejudicing the
rights of the Indemnifying Party with respect to such claim. The Indemnified
Party may participate in any such defense or settlement with counsel of its own
choosing at its expense.
13. Limitation of Liability. In no event will Manufacturer be liable for
any consequential, indirect, exemplary, special or incidental damages including,
without limitation, any lost profits, arising from or relating to this
Agreement. Manufacturer's total cumulative liability in connection with this
Agreement, whether in contract, tort or otherwise, will not exceed the amount of
fees actually paid to Manufacturer hereunder.
14. Force Majeure. No failure or omission by either party in the
performance of any obligation hereunder shall be deemed a breach of this
Agreement, nor create any liability if same shall arise from acts of God, acts
of war, condemnation, appropriation, governmental regulations or orders, floods,
the elements, fire, explosions and other casualties, embargo, or any other
occurrences beyond the reasonable control of such party ("Force Majeure"). Each
party agrees to promptly notify the other party of any of the foregoing
occurrences and the non-performing party shall be excused from performance, to
the extent it relates to the Force Majeure, so long as such conditions prevail;
provided, however, that if the non-performing party remains unable to perform
for a continuous period of ninety (90) days, the other party may terminate this
Agreement on ten (10) days' written notice to the non-performing party.
15. Relationship of Parties. The relationship of Manufacturer to X10 is
and during the term of this Agreement shall be solely that of an independent
contractor. Manufacturer will not have, and will not represent that it has, any
power, right or authority to bind X10, or to assume or create any obligation or
responsibility express or implied, on behalf of X10 or in X10's name, except as
herein expressly provided. Nothing stated in this Agreement shall be construed
as making partners of Manufacturer and X10, nor as creating any agency,
employment or franchise relationship between the parties.
16. Notices. All notices or other communications hereunder shall be in
writing and shall be made by hand delivery, internationally-recognized overnight
courier, electronic mail or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
X10: X10 Wireless Technology, Inc.
00000 00xx Xxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Attn: President
e-mail: xxxx@x00.xxx
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Manufacturer: X10 Ltd.
Xxxx 0000-0, Hilder Center
0 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx,
Xxxx Xxxx
e-mail: xxxxx@xxx.xxx
or at such other address as shall be furnished by any of the parties by like
notice, and such notice or communication shall be deemed to have been given or
made as of the date so delivered, if delivered personally, one (1) day after
deposit with an internationally-recognized overnight courier, and three (3)
calendar days after so mailed, if sent by registered or certified mail.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and all prior
arrangements and negotiations between the parties are hereby deemed to be merged
therein. This Agreement may be modified or amended only by mutual written
consent of the parties; provided, however, that after the effective date of
X10's first firm commitment underwritten public offering of its securities
registered under the Securities Act of 1933, as amended, any such modification
or amendment shall be effective only if it is approved by a majority of the
directors serving on the Audit Committee of the Board of Directors of X10.
18. Waiver. Failure by either party to enforce at any time any term or
condition under this Agreement shall not be a waiver of the right to act on the
failure of such term or condition and shall not impair or waive that party's
right thereafter to enforce each and every term and condition of this Agreement.
19. Governing Law. This Agreement will be governed and construed in
accordance with the laws of the State of Washington as applied to transactions
taking place wholly within Washington between Washington residents. The parties
hereby expressly consent to the exclusive personal jurisdiction of and venue in
the state and federal courts located in King County, Washington for any lawsuit
filed there arising from or related to this Agreement. Notwithstanding the
foregoing, however, X10 may bring an action for injunctive or equitable relief
in any jurisdiction it deems reasonably necessary to protect its proprietary
rights. This Agreement shall not be subject to or governed by the United Nations
Convention on Contracts for the International Sale of Goods, which is
specifically disclaimed by the parties.
20. Severability. If any portion of this Agreement shall be held invalid
or inoperative, then, so far as is reasonable and possible, the remainder of
this Agreement shall be considered valid and operative, and effect shall be
given to the intent manifested by the portion held invalid or inoperative.
21. Attorneys' Fees. The substantially prevailing party in any action
between the parties which is based on this Agreement or any document related
hereto shall have its reasonable attorneys' fees and other costs incurred in
such action or proceeding including any incurred for pre-suit, trial,
arbitration, post-judgment and appeal, paid by the other party.
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22. Waiver of Conflicts. Each party to this Agreement acknowledges that
Xxxxxx Godward LLP ("Xxxxxx Godward"), outside general counsel to X10,
represents only X10 with respect to the matters contained in this Agreement and
does not represent Manufacturer in connection herewith. Manufacturer understands
that and agrees that it should not rely upon the advice of Xxxxxx Godward with
respect to the matters contained herein, and that it has had adequate
opportunity to obtain the advice of independent legal counsel with respect to
the matters contained in this Agreement.
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In Witness Whereof, the parties have executed this Contract Manufacturing
Agreement as of the date set forth below.
X10 Ltd., X10 Wireless Technology, Inc.,
a Bermuda corporation a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxx Xxxxxxxx
--------------------------------- ---------------------------------
Xxxxxx Xxxxxxxxx, President Xxxx Xxxxxxxx, CFO
Date: August 9, 2000 Date: August 9, 2000
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