Manufacturing Contract
This Manufacturing Agreement ("Agreement") is entered into this 16th day of June
2000 by and between Web 2 U Ltd. having its place of business at Elder . . .
("Customer") and Flex International UK Ltd., having its place of business at 0
Xxxxxxxxxxx Xxxxxxxxx, Xxxxxxxx International Technology Park, Blantyre,
Glasgow, Scotland, G72 OBP ("Flextronics").
Customer has created a market for Customer's Products and is solely responsible
for the sales and marketing of the Products. Flextronics has developed processes
and practices for manufacturing products for many different electronic
applications and at Customer's request desires to manufacture Customer's
Products in accordance with Customer's specifications. Customer acknowledges
that Flextronics' expertise is manufacturing and that Flextronics'
responsibility related to the Customer's Products is limited to this extent. The
parties agree as follows:
1.0 WORK, LICENSE
Flextronics 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 Flextronics. Work shall mean to procure components,
materials and other supplies and to manufacture, test, and assemble products
(hereinafter "Products") pursuant to detailed written specifications for each
such Product which are provided by Customer and accepted by Flextronics and to
deliver such Products to a Customer designated location. For each Product or
revision thereof, written specifications shall include but are not limited to
xxxx of materials, schematics, assembly drawings, test specifications, current
revision number, and approved vendor list (hereinafter "Specifications") as
attached hereto,
Flextronics is granted by Customer a non-exclusive license during the term of
this Agreement to use all of Customer's patents, trade secrets and other
intellectual property required to perform Flextronics' obligations under this
Agreement.
2.0 FORECASTS, ORDERS, MATERIAL PROCUREMENT
2.1 Forecast. Customer shall provide Flextronics, on a monthly basis, a rolling
six (6) month Product forecast.
2.2 Purchase Orders. Customer will issue written purchase orders once per
calendar month which specify all Work to be completed within a minimum four (4)
month period commencing on the date of the purchase order, Each purchase order
shall reference this Agreement, and the applicable written Specifications as
described in Section 1.0. Purchase orders shall not be binding on Flextronics
until accepted by Flextronics at its discretion. Flextronics shall notify
Customer of rejection of any purchase order within five (5) working days of
receipt of such order.
Customer may use its standard purchase order form to release items, quantities,
prices, schedules, change notices, specifications, or other notice provided for
hereunder. 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.
2.3 Material Procurement. Customer's accepted purchase orders will constitute
authorization for Flextronics to procure, using standard purchasing practices,
the components, materials and supplies necessary for the manufacture of Products
("Inventory") covered by such purchase orders.
In addition, Customer authorizes Flextronics to purchase, in amounts beyond the
amount necessary to fill accepted purchase orders, the components, materials,
and supplies: i) with lead times greater than ninety (90) days at the time the
order is placed ("Long Lead Time Components") plus 30 days to account for the
order, shipment, receipt and manufacturing time and, ii) purchased in quantities
above the required amount in order to achieve: price targets ("Economic Order
Inventory"), and iii) purchased in excess of requirements because of minimum lot
sizes available from manufacturers ("Minimum Order Inventory"). Together these
are called "Special Inventory".
Flextronics may purchase Long Lead Time Components sufficient to meet all
deliveries under the purchase orders and forecast in effect at the time the
order with the supplier is placed, and may reasonably purchase Minimum Order
Inventory even if greater than the amount necessary to meet purchase orders and
forecast. Economic Order Inventory shall be purchased by Flextronics only with
the prior approval of Customer. Flextronics may, from time to time, hold Long
Lead Time Components and finished goods in inventory to increase customer
flexibility. The components and quantities of all such inventory will be
documented in a separate letter and signed by both Flextronics and Customer.
Customer will be responsible for all Inventory and Special Inventory purchased
by Flextronics under this Section 2.1 under the conditions provided elsewhere in
this Agreement.
3.0 SHIPMENTS, SCHEDULE CHANGE, CANCELLATION
3.1 Shipments. All Products delivered pursuant to the terms of this Agreement
shall be suitably packed for shipment in accordance with Customer's
Specifications, marked for shipment to
Customer's destination specified in the applicable purchase order and delivered
to a carrier or forwarding agent. Shipment will be F.O.B. Flextronics' facility
at which time risk of loss and title will pass to Customer. All freight,
insurance and other shipping expenses, as well as any special packing expenses
not included in the original price quotation for the Products, will be paid by
Customer.
3.2 Quantity Increases and Shipment Schedule Chances. For any accepted purchase
order. Customer may (i) increase the quantity of Products or (ii) reschedule the
quantity of Products and their shipment date as Provided in the table below:
Maximum Allowable Variance From Purchase Order Quantities/Shipment Dates
------------------------------------------------------------------------
# of days before Allowable Maximum Maximum
Shipment Date Quantity Reschedule Reschedule
on Purchase Order Increases Quantity Period
----------------- --------- -------- ------
0-30 10% 0 0
31-60 20% 10% 30 days
61-90 30% 20% 30 days
91-120 50% 30% 60 days
Any purchase order quantities increased or rescheduled pursuant to this Section
may not subsequently be increased or rescheduled without the prior written
approval of Flextronics. All other changes in quantity or shipment date require
Flextronics' prior written consent and shall be subject to an inventory carrying
charge of 1.5% per month for Inventory and Special Inventory procured to support
the original schedule. Allowable quantity increase% are subject to material
availability. Flextronics will use reasonable commercial efforts to meet
quantity increases. If there are extra costs
to meet a schedule increase in excess of the above limits, Flextronics will
inform Customer for its approval in advance.
3.3 Cancellation. Customer may not cancel any portion of Product quantity of an
accepted purchase order without Flextronics' prior written approval, not to be
unreasonably withheld. If the parties agree upon a cancellation, Customer will
pay Flextronics for Products, Inventory, and Special Inventory affected by the
cancellation as follows: (i) 100% of the contract price for all finished
Products in Flextranics' possession, (ii) 110% of the cost of all Inventory and
Special Inventory in Flextronics' possession and not returnable to the vendor or
usable for other customers, whether in raw form or work in process, less the
salvage value thereof, (iii) 105% of the cost of all Inventory and Special
Inventory on order and not cancelable, (iv) any vendor cancellation charges
incurred with respect to Inventory and Special Inventory accepted for
cancellation or return by the vendor, and (v) expenses incurred by Flextronics
related to labor and equipment specifically put in place to support Customer's
purchase orders.
Flextronics will use reasonable commercial efforts to return unused Inventory
and Special Inventory and to cancel pending orders for such inventory, and to
otherwise mitigate the amounts payable by Customer.
If the forecast for any period is less than the previous forecast supplied over
the same period, that amount will be considered canceled and Customer will be
responsible for any Special Inventory purchased or ordered by Flextronics to
support the forecast.
4.0 ENGINEERING CHANGES
Customer may request, in writing, that Flextronics incorporate engineering
changes into the Product. Such request will include a description of the
proposed engineering change sufficient to permit Flextronics to evaluate its
feasibility and cost. Flextronics' evaluation shall be in writing and shall
state the costs and time of implementation and the impact on the delivery
schedule and pricing of the Product. Flextronics will not be obligated to
proceed with the engineering change until the parties have agreed upon the
changes to the Product's Specifications, delivery schedule and pricing and upon
the implementation costs to be borne by the Customer including, without
limitation, the cost of Inventory and Special Inventory on-hand and on-order
that becomes obsolete.
5.0 TOOLING, NON-RECURRING EXPENSES, SOFTWARE
Flextronics shall provide non-Product specific tooling at its expense. Customer
shall pay for or obtain and consign to Flextronic any Product specific tooling
and other reasonably necessary non-recurring expenses, to be set forth in
Flextronics' quotation. All software which Customer provides to Flextronics is
and shall remain the property of Customer.
Customer grants Flextronics a license to copy, modify and use such software
required to perform FIextronics' obligations under this Agreement. All software
developed by Flextronics to support the process tooling or otherwise shall be
and remain the property of Flextronics.
6.0 PRODUCT ACCEPTANCE AND WARRANTIES
6.1 Product Acceptance. The Products delivered by Flextronics, will be inspected
and tested as required by Customer within thirty days of receipt. If Products
are found to be defective in material or workmanship, Customer has the right to
reject such Products during said period. Products
not rejected during said period will be ideemed accepted. Customer may return
defective Products, freight collect, after obtaining a return material
authorization number from Flextronics to be displayed on the shipping container
and completing a failure report, Rejected Products will be repaired or replaced
at Flextronics' option and returned freight pre-paid. If the Product is source
inspected by Customer prior to shipment, Customer will inspect goods within five
(5) days of request date.
6.2 Express Warranty. Flextronics warrants that the Products will conform to
Customer's applicable Specifications and, will be free from defects in
workmanship for a period of ninety (90) days from the date of shipment.
Materials are warranted to the same extent that the original manufacturer
warrants the materials. This express warranty does not apply to (a) materials
consigned by Customer to Flextronics; (b) defects resulting from Customer's
design of the Products; or (c) Product that has been abused, damaged, altered or
misused by any person or entity after title passes to Customer. With respect to
first articles, prototypes, pre-production units, test unit; or other similar
Products, Flextronics makes no representations or warranties whatsoever.
Notwithstanding anything else in this Agreement, Flextronics assumes no
liability for or obligation related to the performance, accuracy,
specifications, failure to meet specifications or defects of or due to tooling,
designs or instructions produced or supplied by Customer and Customer shall be
liable for costs or expenses incurred by Flextronics related thereto. Upon any
failure of a Product to comply with the above warranty, Flextronics' sole
obligation, and Customer's sole remedy, is for Flextronics, at its option, to
promptly repair or replace such unit and return it to Customer freight collect.
Customer shall return Products covered by the warranty freight pre-paid after
completing a failure report and obtaining a return material authorization number
from Flextronics to be displayed on the shipping container.
FLEXTRONICS MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION
WITH CUSTOMER, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR
CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.0 PAYMENT TERMS, ADDITIONAL COSTS AND PRICE CHANGES
7.1 Price and Payment Terms. The price for Products to be manufactured will be
set from time to time through purchase orders issued by Customer and accepted by
Flextronics. All prices quoted are exclusive of local excise, sales, use and
similar taxes, and any duties, and Customer shall be responsible for all such
items. Payment for any Products, services or other costs to be paid by Customer
hereunder is due thirty (30) days net from the date of invoice and shall be made
in lawful UK currency. If Customer is late with payments, or Flextronics has
reasonable cause to believe Customer may not be able to pay, Flextronics may
require prepayment or delay shipments or suspend work until confirmation of
payment satisfactory to Flextronics is received.
7.2 Letter of Credit. Upon Flextronics request at any time during the term of
this Agreement, Customer agrees to obtain and maintain as stand-by letter of
credit (LOC) to minimise the financial risk to Flextronics for its performance
of Work under this Agreement. The LOC shall be for a minimum period of time of
six (6) months and shall be for the total amount which is equal to the total
value of the risks associated with Inventory. Special Inventory, and the
accounts receivable
from Customer, which risks are calculated as set forth in Exhibit 7.2. The
calculation shall be based upon the forecast provided by the Customer pursuant
to Section 2.1. The draw-down procedures under the LOC shall be determined
solely by Flextronics. Flextronics will, in good faith, review Customer's
creditworthiness periodically and may provide more favorable terms once it feels
it is prudent to do so. Customer agrees to provide all necessary financial
information required for Flextronics to make proper assessment of
creditworthiness.
7.3 Supplementary Invoices. Flextronics reserves the right to raise an invoice
in respect of components, materials and supplies purchased to date, including
but not limited to Long Lead Time Components, Economic Order Inventory, Minimum
Order Inventory, Long Order Coverage Components and Consigned Stock, in addition
to raising an invoice for any other costs and expenses reasonably incurred by
Flextronics in anticipation of the supply of future orders. All such invoices
are payable within 30 days from the date of the invoice and shall be paid by
Bankers wire transfer in lawful US currency. Interest shall be applied on any
late payments at the rate of 1.5% of the invoiced value or part thereof delayed.
7.4 Additional Costs. Customer is responsible for (a) any expediting charges
reasonably necessary because of a change in Customer's requirements which
charges are preapproved, (b) any overtime or downtime charges incurred as a
result of delays in the normal production or interruption in the workflow
process and caused by: (1) Customer's change in the Specifications; or (2)
Customer's failure to provide sufficient quantities or a reasonable quality
level of consigned materials where applicable to sustain the production
schedule. Customer caused delays as a result of consigned inventory will result
in a special charge to the Customer of 1.5% of the sales price of the Product
for each month, or part thereof, delayed.
7.5 Price Changes. The price of Products to Customer may be increased by
Flextronics if (a) the market price of fuels, materials, raw materials,
equipment, labor and other production costs, increase beyond normal variations
in pricing as demonstrated by Flextronics, and (b) the parties agree to the
increase after good faith negotiation.
7.6 Cost Reductions. Flextronics agrees to seek ways to reduce the cost of
manufacturing Products by methods such as elimination of components, obtaining
alternate sources of materials, redefinition of assembly or test methods. Upon
implementation of such ways which have been initiated by Flextronics,
Flextronics will receive fifty percent of the demonstrated cost reduction.
Customer will receive one hundred Percent of the demonstrated cost reduction
upon implementation of such ways initiated by Customer.
8.0 TERM AND TERMINATION
8.1 Term. The term of this Agreement shall commence on the date hereof above and
shall continue thereafter until terminated as provided in Section 8.2 or 10.9.
8.2 Termination. This Agreement may be terminated by either party (a) for any
reason, with or without cause, upon Sixty (60) days written notice to the other
party, or (b) if the other party defaults in any payment to the terminating
party and such default continues without cure for a period of fifteen (15) days
after delivery of written notice thereof by the terminating party to the other
party,
or (c) if the other party defaults in the performance of any other material term
or condition of this Agreement and such default continues unremedied for a
period of thirty (30) days after delivery of written notice thereof by the
terminating party. Termination of this Agreement shall not affect the
obligations of either party which exist as of the date of termination. Upon
termination for any reason whatsoever, Customer shall be responsible for the
finished Products, Inventory, and Special Inventory in existence at the date of
termination in the same manner as for cancellation as set forth in section 3.3.
Notwithstanding termination of this Agreement, Sections 6.2, 9.0, and 10.1 shall
survive said termination. Upon termination, Flextronics shall raise an invoice
in respect of components, materials and supplies purchased to date, including
but not limited to Long Lead Time Components, Economic Order Inventory, Minimum
Order Inventory, Long Order Coverage Components and Consigned Stock, in addition
to raising an invoice for any other costs and expenses reasonably incurred by
Flextronics in anticipation of the supply of future orders. All such invoices
are payable within 30 days from the date of the invoice and shall be paid by
Bankers wire transfer in lawful US currency. Interest shall be applied on any
late payments at the rate of 1.5% of the invoiced value or part thereof delayed.
9.0 LIABILITY LIMITATION
9.1 Patents, Copyrights, Trade Secrets, Other Proprietary Rights. Customer shall
defend, indemnify and hold harmless Flextronics from all claims, costs, damages,
judgments and attorney's fees resulting from or arising out of any alleged
and/or actual infringement or other violation of any patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights, trade
secrets, proprietary rights and processes or other such rights in connection
with the performance by Flextronics of its obligations under this Agreement.
Flextronics shall promptly notify Customer in writing of the initiation of any
such claims.
THE FOREGOING STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER
CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL
PROPERTY RIGHTS.
9.2 Product Liability. Customer agrees that, if notified promptly in writing and
given sole control of the defense and all related settlement negotiations, it
will defend Flextronics from any claim or action and will hold Flextronics
harmless from any loss, damage or injury, including death, which arises from any
alleged defect in design, workmanship or materials of any Products. Customer
shall, if requested by Flextronics, name Flextronics as an additional insured
under Customer's product liability policies for any Products.
9.3 No Other Liability. EXCEPT FOR THE EXPRESS WARRANTIES CREATED UNDER THIS
AGREEMENT, IN NO EVENT SHALL FLEXTRONICS BE LIABLE TO CUSTOMER FOR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE
ARISING OUT OF THIS AGREEMENT OR THE SALE OF PRODUCTS BY CUSTOMER, WHETHER SUCH
LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY
OF NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF FLEXTRONICS 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.
10.0 MISCELLANEOUS
10.1 Confidentiality. All written information and data exchanged between the
parties for the purpose of enabling Flextronics 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 without the prior written consent of the disclosing party.
Confidential Information disclosed pursuant to this Agreement shall maintain
confidential for a period of three (3) years after the disclosure thereof.
10.2 Entire Agreement. This Agreement constitutes the entire agreement between
the Parties with respect to the transactions contemplated hereby and supersedes
all prior agreements and understandings between the parties relating to such
transactions. Customer shall hold the existence and terms of this Agreement
confidential, unless it obtains Flextronics' express written consent otherwise.
In all respects, this Agreement shall govern, and any other documents including,
without limitation, preprinted term and conditions on Customer's purchase orders
shall be of no effect.
10.3 Amendments. This Agreement may be amended only by written consent of both
parties.
10.4 Independent Contractor. Neither party shall, for any purpose, be deemed to
be an agent of the other party and the relationship between the parties shall
only be that of independent contractors. Neither party shall have any right or
authority to assume or create any obligations or to make any representations or
warranties on behalf of any other party, whether express or implied, or to bind
the other party in any respect whatsoever.
10.5 Expense. In the event a dispute between the parties hereunder with respect
to this Agreement must be resolved by litigation or other proceeding or a party
must engage an attorney to enforce its right hereunder, the prevailing party
shall be entitled to receive reimbursement for all associated reasonable costs
and expenses (including, without limitation, attorneys fees) from the other
party.
10.6 Security Interest. Until the purchase price and all other charges payable
to Flextronics hereunder have been received in full, Flextronics hereby retains
and Customer hereby grants to Flextronics a security interest in the Products
delivered to Customer and any proceeds therefrom. Customer agrees to Promptly
execute any documents requested by Flextronics to perfect and protect such
security interest.
10.7 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of California excluding its choice of law principles. The
parties consent to the exclusive jurisdiction of the state and Federal courts in
Santa Xxxxx County, California.
10.8 Successors, Assignment. This Agreements shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives. Neither party shall have the right to assign or otherwise
transfer its rights or obligations under this Agreement except with the prior
written consent of the other party, not to be unreasonably withheld.
10.9 Force Majeure. In the event that either party is prevented from performing
or is unable to perform any of its obligations under this Agreement (other than
a payment obligation) due to any Act of God, fire, casualty, flood, earthquake,
war, strike, lockout, epidemic, destruction of production facilities, riot,
insurrection, material unavailability, or any other cause beyond the reasonable
control of the party invoking this section, and if such party shall have used
its best efforts to mitigate its effects, such party shall give prompt written
notice to the other party, its performance shall be excused, and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrences. Regardless of the excuse of Force Majeure, if such
party is not able to perform within ninety (90) days after such event, the other
party may terminate the Agreement. Termination of this Agreement shall not
affect the obligations of either party which exist as of the date of
termination.
ACCEPTED AND AGREED TO:
CUSTOMER: FLEXTRONICS INTERNATIONAL UK LTD
Xxxxxx X. Xxxxx [Illegible Name]
---------------------------------------- --------------------------------
By: /s/ Xxxxxx X. Xxxxx By: [Illegible Signature]
------------------------------------- -----------------------------
Title: CEO, Web 2U Ltd. Title: Finance Director
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