EXCLUSIVE MANUFACTURING AGREEMENT
This Agreement is entered into on June 10, 2004 ("Effective Date") by
and between XXXXXXX XXXXX ("Xxxxx"); XXXXXXX XXXXX ENTERPRISES, LTD.
("CaseyCo"), a California limited liability company; XXXXXXX XX ("Ho"); UKING
SYSTEM INDUSTRY CO., LTD. ("UKing") a corporation; XXXXX XXXXX
("Xxxxx"); HIPMG, INC. ("Hipmg") and CIRTRAN-ASIA, INC. ("Cirtran"), a Utah
corporation (together the "Parties").
RECITALS
A. CaseyCo, UKing and HIPMG own the design of or market exercise
equipment known as the Ab King(R) Pro (the "Initial Product")
and a cooking appliance known as the Hot Dog Express(TM) (the
"Second Product"). The Initial Product and the Second Product
were developed by one or more of Xxxxx, Ho and Hayek.
B. Cirtran is a contract manufacturer with capabilities to
manufacture and assemble products.
C. CaseyCo, UKing and HIPMG desire that Cirtran be its exclusive
manufacturer for the Initial Product, the Second Product and
certain Additional Products developed by Xxxxx, Ho or Hayek
described below and Cirtran is willing so act, subject to the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
the parties agree as follows:
1. Exclusivity. Xxxxx, CaseyCo, Ho, UKing, HIPMG, Hayek and their
affiliates are sometimes referred to herein collectively as the
"Developers". The Developer which has marketing rights for a particular
Product is referred to herein as the Distributor of such Product.
During the term of this Agreement, the Developers agree that Cirtran
shall have the exclusive right to manufacture (i) the Initial Product,
(ii) the Second Product and (iii) subject to Cirtran and the
appropriate Distributor reaching agreement as to certain terms
described below, all additional Products ("Additional Products")
hereafter developed by the Developers or any of them or their
affiliates. For purposes of this Agreement, an affiliate of a Developer
is a person or entity that controls, is controlled by or under common
control with the Developer, where control includes any right to
participate in directing the activities of the person or entity through
contract, position as an officer or director, or possession of a 10% or
greater voting ownership interest. To the extent that a proposed
Additional Product requires payment to an affiliate of the Developers
which is not then a party to this Agreement, such affiliate's signature
on the relevant Appendix A-x shall signify the affiliate's agreement to
be bound by this Agreement as it relates to that Additional Product and
all subsequent Additional Products for which payment is to be made to
that affiliate. Whenever a Developer develops a potential Additional
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Product which it desires to commercialize, it shall so notify Cirtran
and the other Developers, and the parties will negotiate in good faith
the terms of an Appendix A-x adding such Additional Product to this
Agreement.
2. Identification of Products. Appendix A-1 and Appendix A-2 describes the
Initial Product and the Second Product. From time to time, the parties
hereto shall add Additional Products in accordance with Paragraph 1
hereof by signing or initialing a new Appendix A-x describing the
Additional Product, which Appendix shall be attached to and form part
of this Agreement. The Initial Product, the Second Product and all such
Additional Products are referred to individually as a "Product" and
collectively as the "Products" and Appendix X-0, Xxxxxxxx X-0 and all
of the Appendices A-x shall be referred to collectively as Appendix A.
For each Product, the relevant Appendix A shall describe the Product,
the initial transfer pricing of the Product and all payments to be
owing by Cirtran to the Developers or Distributor on the sale of the
Products and any other terms relating to such Product.
3. Basic Manufacturing Agreement. During the term of this Agreement,
Cirtran agrees to use reasonable commercial efforts to perform the work
(hereinafter "Work") pursuant to purchase orders or changes thereto
issued by Customer and accepted by Cirtran. Work shall mean to
manufacture, assemble, test and deliver Products pursuant to detailed
written specifications, workmanship standards and quality requirements
for each such Product which are provided by Customer and accepted by
Cirtran. Cirtran may perform the Work directly or through
subcontractors, and it is anticipated that substantially all
manufacturing will be performed by contractors in China or other low
wage locations.
4. Obligations of the Developers and Distributor.
(a) The Distributor shall use its reasonable commercial efforts to promote
the sale of the Products.
(b) Ho and Hayek will provide ongoing services to Cirtran including: (i)
locating suitable third party manufacturers in China or other low wage
areas, (ii) locating suitable sources of supply for raw materials and
components for the Products, and (iii) assisting Cirtran in negotiating
agreements with the manufacturers and suppliers. As part of the
negotiations for the addition of a Product to this Agreement, Cirtran
and the Developers will determine to what extent, if any, Ho and Hayek
will be compensated for such services directly by Cirtran. Such
compensation will be paid by Cirtran if, and to the extent that, it is
set forth on the appropriate Appendix A.
(c) The existing molds, dies, jigs and other customized equipment or
know-how needed to manufacture the Initial Product shall be transferred
to Cirtran at the price set forth on Appendix A-1. As part of the
negotiations for the addition of a Product to this Agreement, the
parties will determine and set forth on the relevant Appendix A whether
tooling, molds, dies and jigs for the Product will be financed by
Cirtran (in which case such materials shall be the property of Cirtran)
or whether such materials will be financed by, and the property of,
another party (in which case the Developers shall cause the materials
to be made available to Cirtran on a timely basis).
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(d) The Developers hereby release any rights any of them may claim to
manufacture the Products inconsistent with this Agreement.
(e) Ho and Hayek will introduce Cirtran to the current manufacturers and
suppliers for the Products as soon as practicable after execution of
this Agreement.
5. Possible Additional Consideration. As part of the negotiations for the
addition of a Product to this Agreement, Cirtran may agree to cause its
parent, Cirtran Corporation, to grant nonqualified stock options (the
"Options") to some or all of Xxxxx, Ho and Hayek. The negotiations will
include the strike or exercise price of the Options, the number of
shares purchasable on exercise of the options, any vesting requirements
or other conditions to exercise and the expiration date of the Options.
6. Covenant of Good Faith. The various terms of adding a Product to this
Agreement as described herein shall be negotiated by the parties in
good faith at the time that a new Product has been developed.
7. Purchase Orders. Distributor will issue written purchase orders for the
Product from time to time. With respect to the Initial Product, the
Distributor will issue an initial binding blanket purchase order for
the quantity of Product listed on Appendix A-1. The Distributor will
then issue subsequent orders specifying the delivery dates and
quantities of the Product covered by the blanket purchase order. With
respect to other Products, the relevant Appendix A may require a
similar blanket order. In any event, all purchase orders shall conform
to this Agreement and each Purchase Order shall be deemed to
incorporate by reference the relevant Appendix A. The parties agree
that the terms and conditions contained in this Agreement shall prevail
over any terms and conditions of any purchase order, acknowledgment
form or other instrument. Cirtran may reject any order that does not
conform to this Agreement or for which Product is no longer available
at the quoted price. Cirtran shall notify Customer of rejection of any
purchase order within five (5) working days of receipt of such order.
8. Material Procurement. Purchase orders issued by Customer in conformance
to this Agreement will constitute authorization for Cirtran to procure,
using standard purchasing practices, the components, subassemblies,
materials and supplies necessary for the manufacture of Products
("Inventory") covered by such purchase orders.
9. Forecast. Every month Customer will send to Cirtran a non-binding
rolling forecast of their next 12 months demand for each Product.
10. Delivery Terms. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for shipment, and marked for
shipment to Customer's destination specified in the applicable purchase
order. Unless otherwise agreed in writing by Cirtran, the transfer
price shall be paid in full (in cash or letter of credit obtained by
Customer or its customer for the benefit of Cirtran drawn on a U.S.
bank in form acceptable to Cirtran) prior to release to the carrier or
forwarding agent. Shipment will be F.O.B. the factory or final assembly
plant of Cirtran's subcontractor, at which time risk of loss and title
will pass to Distributor. All freight, insurance and other shipping
expenses from the F.O.B. point, will be paid by Distributor.
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11. Intellectual Property. All designs, manuals, instructional videos and
software which Developers provide to Cirtran are and shall remain the
property of the relevant Developer. Developers grant Cirtran a license
to copy, modify and use such intellectual property solely in connection
with and to the extent required to perform Cirtran's obligations under
this Agreement. Cirtran is granted by the relevant Developer a
non-exclusive license during the term of this Agreement to use all of
Developer's patents, design patents, trade secrets and other
intellectual property in the Products, solely in connection with and to
the extent required to perform Cirtran's obligations under this
Agreement.
12. Pricing. As to specific Products, Cirtran and the relevant Distributor
shall agree upon an initial transfer price at which the Product will be
sold to Distributor or its customer in Appendix A. Thereafter, Cirtran
may adjust the transfer price upon at least fifteen (15) days notice to
the relevant Distributor. The transfer price in effect prior to the
adjustment shall be effective for firm orders (including quantities and
delivery dates) received prior to the effective date of the adjustment
and which require shipment no more than fifteen (15) days after the
effective date.
13. Term, Termination. This Agreement shall be for an initial term of
thirty six (36) months, and shall continue thereafter on a month to
month basis unless terminated by either party on written notice. Any
termination pursuant to the preceding sentence shall be effective on
the later of (i) thirty days after the date of the notice, or (ii) the
date that Distributors completes their purchases pursuant to all
blanket orders outstanding at the date of the notice. This Agreement
may also be terminated by either party:
(a) for any reason upon ninety (90) days written notice to the other party;
provided that if Developers terminate pursuant to this clause 13(a)
during the first twenty (20) months of this Agreement, Developers,
jointly and severally, shall pay Cirtran an early termination fee of
$150,000.00;
(b) if the other party defaults in any payment to the terminating party and
such default continues without a cure for a period of ten (10) days
after the delivery of written notice thereof by the terminating party
to the other party;
(c) if the other party defaults in the performance of any material term or
condition of this Agreement other than the payment of money and such
default continues un-remedied for a period of thirty (30) days after
the delivery of written notice thereof by the terminating party to the
other party.
14. Obligations on Termination. Termination of this Agreement for any
reason shall not affect the obligations of either party which exist as
of the date of termination. Upon termination for any reason whatsoever,
Distributor shall be responsible for the finished Products and
Inventory in existence at the date of termination in the same manner as
for cancellations as set forth in Section 7. Any purchase orders shall
be fulfilled by Cirtran unless cancelled as provided in section 7.
15. Product Warranty. Cirtran will pass on to Distributor the benefit of
any warranties with respect to the Products which Cirtran obtains from
its subcontractor manufacturers. OTHER THAN AS PROVIDED IN THE
PRECEDING SENTENCE, CIRTRAN DISCLAIMS ALL WARRANTIES, EXPRESSED OR
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IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
16. Third Party Intellectual Property. Developers shall defend, indemnify
and hold harmless Cirtran from all costs, judgments and attorney's fees
arising from any claim that Cirtran's manufacture of the Products under
this Agreement infringes any third party patents, patent rights,
copyrights or trade secrets. Cirtran shall promptly notify Developers
in writing of the initiation of any such claims, give Developers sole
control of any defense or settlement, and provide Developers reasonable
information and assistance in resolving such claim.
17. Product Liability. Developers agree that they will jointly and
severally defend Cirtran from any claim or action and will hold Cirtran
harmless from any third party loss, damage or injury, including death,
which arises from any alleged defect of Developer's design of any
Products. Similarly, Cirtran agrees that, if notified promptly in
writing and given sole control of the defense and all related
settlement negotiations, it will defend Developers from any claim or
action and will hold Developers harmless from any third party loss,
damage, or injury, including death, which arises from any alleged
workmanship defect of any Products; provided that Cirtran's obligation
to defend and its liability pursuant to this Paragraph 17 shall be
limited to the amount, if any, which Cirtran is able to collect from
the subcontractor manufacturer of the Product with respect to such
workmanship defect.
18. Limitation on Liability. EXCEPT FOR THE EXPRESS WARRANTIES CREATED
UNDER THIS AGREEMENT AND EXCEPT AS SET FORTH OTHERWISE IN THIS
AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR
ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND
OR NATURE ARISING OUT OF THIS AGREEMENT OR THE SALE OF PRODUCTS,
WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT
(INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR
OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY
SUCH LOSS OR DAMAGE, AND EVEN IF ANY OF THE LIMITED REMEDIES IN THIS
AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE.
19. Other Terms, Order of Precedence. The T&C are hereby incorporated by
reference. In the event of any inconsistency between this Agreement,
the T&C or other documentation relating to the purchase of the
Products, the order of precedence shall be:
(a) This Agreement, including Appendix A, (b) Purchase Orders.
20. Confidentiality. All written information and data exchanged between the
parties for the purpose of enabling Cirtran to manufacture and deliver
Products under this Agreement that is marked "Confidential" or the
like, shall be deemed to be Confidential Information. The party which
receives such Confidential Information agrees not to disclose it
directly or indirectly to any third party, or to use it for any purpose
other than as required under this Agreement, without the prior written
consent of the disclosing party. Confidential Information disclosed
pursuant to this Agreement shall be maintained confidential for a
period of three years after the disclosure thereof.
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21. Assignment. This Agreement shall be binding upon the parties and their
respective successors and assigns; provided that neither party may
assign this agreement without the written consent of the other party.
Consent to assignment shall not be unreasonably withheld; provided that
the consenting party may require evidence to its reasonable
satisfaction that the proposed assignee will be able to perform the
obligations of the proposed assignor.
22. Notices. All notices hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, sent by
document, overnight delivery service or, to the extent receipt is
confirmed, telecopied to the appropriate address or number set forth
below.
Notice to Cirtran shall be addressed to:
Cirtran-Asia, Inc.
0000 Xxxxx 0000 Xxxx
Xxxx Xxxxxx Xxxx, Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Fax: 000-000-0000
Notices to Developers shall be addressed to the address listed under their
respective signatures.
or at such other address and to the attention of such other person as
either party may designate by written notice to the other.
23. Governing Law. This agreement shall be governed by and construed by the law
of Utah, disregarding the conflicts of laws provisions thereof.
24. Attorney's Fees. In the event of any litigation concerning any controversy,
claim or dispute among the parties hereto, arising out of or relating to this
Agreement or the breach hereof, or the interpretation hereof, the prevailing
party shall be entitled to recover from the losing party reasonable expenses,
attorneys' fees, and costs incurred therein or in the enforcement or collection
of any judgment or award rendered therein.
25. Jurisdiction and Venue. Legal proceedings commenced by a party arising out
of any of the transactions or obligations contemplated by this Agreement shall
be brought exclusively in the federal courts located in Salt Lake City, Utah, or
in the absence of federal jurisdiction, in state courts in Salt Lake City, Utah.
The parties irrevocably and unconditionally submit to the exclusive jurisdiction
of such courts and agree to take any and all future action necessary to submit
to the jurisdiction of such courts. The parties irrevocably waive any objection
that they now have or hereafter may have to the laying of venue of any suit,
action or proceeding brought in any such court and further irrevocably waive any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
26. Waiver. No term or provision of this Agreement shall be deemed waived unless
such waiver shall be in writing and signed by the party making such waiver. Any
waiver of a particular breach of this Agreement shall not constitute a waiver of
any other breach, nor shall any waiver be deemed a continuing waiver unless it
so states expressly.
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27. Survival of Obligations. The obligations of confidentiality arising under
this Agreement are intended to survive any termination of this Agreement.
28. Force Majeure. "Force Majeure" as used herein shall mean any of the
following events or conditions: acts of state or governmental action (including
customs delays or restrictions), orders, legislation, regulations, restrictions,
priorities or rationing, riots, disturbance, war (declared or undeclared),
interruption of transportation, embargo, export-import limitations, national
disease outbreaks, fire, earthquake, flood, hurricane, typhoon, explosion, and
major accident. Cirtran shall not be considered in default or liable for any
delay or failure to perform any provisions of this Agreement if such delay or
failure arises directly or indirectly out of Force Majeure. Upon the occurrence
of an event of Force Majeure, Cirtran will cooperate with the Distributor in
minimizing the impact of the Force Majeure event.
29. Merger. This Agreement and its Appendices contain the entire agreement of
the parties and supersedes all previous written and oral agreements with respect
to the subject matter hereof other than any purchase orders heretofore issued to
Cirtran.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
CIRTRAN CORPORATION
By: /s/
Xxxxx Xxxxxxxx, President
/s/
Xxxxxxx X. Xxxxx
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Fax:
XXXXXXX XXXXX ENTERPRISES, LTD.
By /s/
Xxxxxxx X. Xxxxx, Its ______
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Fax:
0
/x/
Xxxxxxx Xx
00X, Xx. 000, Sec. 1
Fu Shing South Road
Taipei, Taiwan, R.O.C
Fax:
UKING SYSTEM INDUSTRY CO., LTD.
By /s/
Xxxxxxx Xx, CEO
10F, Xx. 000, Xxx. 0
Xx Xxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxx, R.O.C
Fax:
/s/
Xxxxx Xxxxx
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Fax:
HIPMG, INC.
By /s/
Xxxxx Xxxxx [President]
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx
0000 Xxxxx Xxxxxx, XX 00000 Fax:
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