Exhibit 10.2
CONFIDENTIAL TREATMENT REQUESTED BY SYNERON MEDICAL LTD.
TURN - KEY MANUFACTURING AGREEMENT
This agreement is effective as of the 31 of August, 2003 (the Effective Date) by
and between: SYNERON MEDICAL LTD., with a principal place of business at
Industrial Zone Yokneam Illit, 20692. X.X.X. 000, Xxxxxx.
Hereinafter referred to as "Customer".
AND
U.S.R. ELECTRONIC SYSTEMS (1987) LTD., with a principal place of business at Xx.
00 Xxxxxx xx. Xxxxxxxxxx Xxxx, Xxxxxxx 00000, Xxxxxx
Hereinafter referred to as "CONTRACTOR".
Whereas Customer designs, manufactures and sells Electro-Optical Medical
Equipment which includes subassemblies components and know- how, that
is confidential and proprietary property of Customer; and whereas
Customer desires to buy manufacturing services; and
Whereas Contractor is in the business of Turn - Key projects; and
Whereas Contractor declares that it has an approved enterprise status granted
by the Investment Center classified as a class "A" development zone for
the manufacture of electronic devices, and it has no knowledge of
circumstances that should bring to the termination of such status; and
Whereas Contractor Declares that it has all the capabilities and equipment to
supply manufacturing services for Customer's Products stipulated in
APPENDIX A attached hereto; and
Whereas Contractor desires to sell and deliver its manufacturing services to
Customer for installation and use in accordance with Customer
specifications and standards as well as other general commercial
practices, and
Now therefore, the parties hereto have agreed and do hereby agree as follows:
1.0 PRECEDENCE:
1.1 The terms and conditions and appendices herein shall govern all services
performed by Contractor pertaining to the subject matter.
1.2 It is the intent of the parties that this Agreement and its appendices
represent the entire agreement and prevail over the terms and conditions
of any purchase order, acknowledgment form or order instruction.
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2.0 TERM
2.1 This Agreement shall commence on the Effective Date and shall continue
for an initial term until December 31, 2003. This Agreement shall
automatically be renewed for successive one (1) year increments unless
either party request in writing, at least ninety (90) days prior to the
anniversary date, that this Agreement not to be renewed.
3.0 SCOPE OF WORK
Contractor will, pursuant to the specifications given by Customer, shall
perform manufacturing services on behalf of Customer. This manufacturing
services shall include, but not be limited to, labor, materials, testing,
packaging and delivery to Customer.
4.0 CONTRACTOR'S OBLIGATIONS
4.1 Contractor shall provide Customer with the following services:
- Material planning,
- Material procurement,
- Assembly of printed circuit boards & cables
- Final assembly & integration of the Product
- In Circuit test
- Functional test
- Packaging and delivery.
4.2 Customer's production facilities
Contractor will be obliged to allocate to Customer, production and
storage space as well as trained production and testing personnel as an
integral part of this Agreement. Customer and Contractor will agree on
the details thereof during the negotiations on the final format of
APPENDIX B and not later than September the 1st 2003.
Contractor shall apply for and receive the ISO13488 standard for the
production facility, by no later than December 15 2003. During the term
of this agreement, the manufacturing services provided by the Contractor
hereto shall confirm in all respects with the ISO13488 standard.
5.0 CUSTOMER'S OBLIGATIONS CUSTOMER WILL PROVIDE THE FOLLOWING:
- Technical specifications,
- Standard Operation Procedures,
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- Drawings,
- Xxxx Of Materials,
- Approved Vendors list,
- Gerber data, CAD files,
- Quality requirements,
- Technical support, as required.
6.0 ORDERS AND FORECASTS
6.1 Customer will provide Contractor, on a monthly basis, with a three (3)
months Product Orders. It is agreed that Customer will provide
Contractor, on a monthly basis, with a rolling three (3) months Product
Forecast extending beyond the three (3) months orders.
6.2 Customer will have the right to reschedule orders according to the
following schedule without additional charges:
NO. OF DAYS FROM DELIVERY % OF ORDER TO BE RESCHEDULED
-------------------------- ----------------------------
1 - 30 **
31 - 60 **
61 - 90 **
6.3 Contractor will supply all orders that do not exceed the forecast at the
delivery times set forth in each purchase order. Late deliveries will
carry (without prejudice) a late delivery charge at the rate of ** per
week for the first 14 days, ** for per week thereafter and not more than
** , to be deducted from the consideration due to the Contractor for
labor and xxxx-ups.
6.4 Contractor shall undertake all reasonable efforts, including expediting
materials and allocating capacity, in order to support Customer's request
for increased production.
6.5 During the period from the Effective Date until December 31, 2003 the
Contractor will be required to manufacture and deliver: (1) As Sub
Contractor ** , and spare parts for the ** ; and (2) As Turn key ** , and
spare parts for the ** - according to the guidelines set forth in
Appendix "C".
7.0 MATERIAL PROCUREMENT
The material procurement undertaking, pursuant to this Agreement, will be
carried-out by the Contractor. The Contractor carries full responsibility
to the material procurement.
7.1 Contractor is authorized to purchase materials using standard purchasing
practices including, but not limited to acquisition of materials
recognizing Economic Order Quantity, ABC buy policy and long lead time
components management, in order to meet
** REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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the requirements of Customer's orders and forecasts. Economic Order
Quantity for items which are un-returnable to vendor or un-usable for
other clients of the Contractor must be pre-approved by Customer. Long
lead items may be ordered taking into the account the Forecast, provided
that orders of long lead items for the Forecast Period will be
pre-approved.
Customer recognizes its financial responsibility for the materials
purchased by Contractor on behalf of Customer and according to the orders
and forecasts properly issued by Customer.
7.2 Customer reserves the right to purchase and/or produce some of the
required materials and give the said materials to Contractor for the
purpose of manufacturing Customer's Products. The list of the said
materials will be stipulated when and if such a situation will arise.
Transportation of any tools and materials during the work process between
Customer's and Contractor's sites shall be carried out by Contractor
immediately when the need arises at the Contractor's cost and
responsibility.
7.3 Contractor is responsible for monitoring supplier's quality, according to
the specifications provided by Customer for all purchased materials.
7.4 Subject to section 15 hereto, in the event of termination of this
Agreement or a cancellation of a Purchase Order, and/or discontinuance of
a Product, or excess materials created by an Engineering Change, Customer
agrees to compensate Contractor for unused Products and material
inventory which are affected by such termination, cancellation or
discontinuance, as follows:
(i) The prevailing contract price of all Products, ready for delivery
in Contractor's possession;
(ii) The cost of material inventory, whether in raw form or work in
process, which are not returnable to the vendor, or usable for
other Contractor's customers, including economic order quantities
of unique parts.
(iii) the cost of materials on order which cannot be cancelled.
(iv) to the above applicable compensation, the Contractor shall be
entitled to a handling fee of 3% of the compensation due.
(v) payment shall be made to Contractor against delivery of the
compensated Products and materials to Customer. The above
compensation shall be the sole compensation due to Contractor as a
result thereof.
7.5 Contractor shall undertake all possible efforts to cancel all applicable
materials purchase orders and reduce materials inventory through return
for credit programs or allocate materials for alternate programs, if
applicable.
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8.0 PRICE AND PRICE REVIEWS
8.1 Pricing conditions for manufacturing services supplied under this
Agreement are defined in Appendix B. All prices will be quoted in US
Dollars.
8.2 Price Review. Contractor and Customer will meet every three (3) months,
during the term of this Agreement to review pricing and determine the
actions required by both sides in order to achieve cost reduction. The
new prices that will be agreed to and the said new prices will come into
effect, will be reflected in the Purchase Orders submitted after such
review.
8.3 It is agreed that, for the sake of facilitating uninterrupted
manufacturing, Contractor may purchase materials for Customer's Products
at prices higher than those agreed to with the following limitations:
(i) For price change which has a cost impact less than 500US $, based
on one (1) quarter consumption will not require prior
authorization from Customer. Contractor will be obliged to submit
comprehensive written report to Customer, subsequent to such
event.
(ii) For price change which has cost impact greater than 500 US $,
based on one (1) quarter consumption will require prior written
authorization from Customer.
(iii) Customer shall answer urgent requests for approvals for price
change, within three (3) working days.
(iv) Contractor and Customer will meet every three (3) months, during
the Term of this Agreement to review price changes, during the
previous three (3) months.
9.0 DELIVERY AND INSPECTION, TITLE AND SHIPPING
9.1 Delivery
(i) Contractor undertakes to report once (1) a week, or per customer
request to Customer the quantity of Products ready for delivery.
(ii) Customer will notify Contractor, from time to time, quantities of
Products and destinations to which to ship the Products.
(iii) If the delivery destination is within Israel and not more southern
than the imaginary horizontal line crossing Israel from east to
west at Rehovot (inclusive) ("Limited Delivery Territory") than
the delivery shall be made by Contractor to such destination of
delivery and all risk of loss, responsibility and cost shall be
borne by the Contractor.
(iv) Delivery to other destinations outside the Limited Delivery
Territory, including for export shall be made by the Customer and
all risk of loss, responsibility and cost shall be borne by the
Customer. It is hereby clarified that even if a delivery's
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final destination is outside the Limited Delivery Territory, the
Customer may indicate an interim delivery point within the Limited
Delivery Territory from which the responsibility, risk and cost
shall be transferred to the Customer.
(v) To each delivery, Contractor shall include all required
documentation as the manufacturer or the Products (e.g. xxxx of
lading). Upon delivery to Customer, Customer will sign the xxxx of
lading. Such signature shall only be deemed as acknowledgement of
receipt of the delivery and not confirmation as to the delivered
Products' condition and quality nor the compatibility between the
contents of the delivery and the xxxx of lading.
(vi) Subject to the above limitations, the Contractor will ship and
deliver the Products according to Customer's instructions in the
best and safest means of transportation.
10.0 TERMS OF PAYMENTS
10.1 Contractor will invoice Customer, once a Month, on the last day of that
Month, for fully assembled inspected and packaged Products, ready for
delivery. On the invoice must be all purchase order details, and the
finished products s/n. The invoice will be quoted in US Dollars.
10.2 Contractor and Customer agree to terms of payments of thirty (30) days
from the date of that invoice. Payment shall be affected in US Dollars.
10.3 For as long as there are outstanding purchase orders, the Customer shall
provide and maintain for the benefit of the Contractor a bank guaranty in
the amount of US $_50,000 in order to secure the due and timely payment
of purchase orders. Such guaranty maybe presented for exercise 15 days
after the Customer has duly sent a demand notice of payment via
registered mail addressed to the Customer demanding payment within 14
days of such unpaid invoice/s and such payment shall still be due. The
sum of the above mentioned bank guarantee will be reviewed by the parties
every 6 month.
11.0 QUALITY
11.1 Contractor shall manufacture the Products in compliance with Customer's
Statement of Work (Document No. DC0342A) and other quality & standards
requirements to be mutually agreed to.
11.2 Contractor shall permit Customer to audit its quality procedures, upon
one (1) day advance notice to Contractor and shall provide all assistance
which is reasonably necessary for Customer to evaluate the quality of the
Products.
11.3 Contractor shall maintain quality assurance standards in accordance with
ISO 13488, Seller's Quality Assurance, Control and Inspection shall be in
full compliance with ISO 13488 standards during the Terms of this
Agreement.
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12.0 ENGINEERING CHANGES
12.1 Customer may, upon advance written notice to Contractor, submit
engineering changes for incorporation into The Product. Contractor will
make all the efforts to review the engineering change and report to
Customer within three 3) working days of any implications of the proposed
changes. The report should include all possible implications on
materials, delivery schedule, manufacturing process, quality and product
cost and shall also quote the Contractors costs for implementing the
changes.
Customer and Contractor will agree on all aspects of implications and
shall accordingly make revisions in outstanding Purchase Orders - if
requested by Customer.
12.2 Contractor shall undertake all efforts to assure quick implementation of
engineering changes.
13.0 INVENTORY MANAGEMENT
13.1 All Customer's materials, tooling and equipment furnished to Contractor
or paid for by Customer in connection with this Agreement shall:
(a) Be clearly marked and remain the Customer's property.
(b) Be kept free of liens and encumbrances.
(c) Contractor is responsible for the maintenance of the tooling and
equipment.
13.2 Contractor shall hold Customer's property at its own risk and shall not
modify the property without the written permission of Customer. Upon
Customer's request, Contractor shall return the said property to Customer
in the same condition as originally received by Contractor with the
exception of reasonable wear and tear.
14.0 TERMINATION
14.1 Termination for cause
If either party fails to meet anyone or more of the terms and conditions
as stated in either this Agreement or the Appendices, Contractor and
Customer agree to negotiate in good faith to resolve such default. If the
defaulting party fails to cure such default or submit an acceptable
written plan to resolve such default within thirty (30) days following
notice of default, the non - defaulting party shall have the right to
terminate this Agreement by furnishing the defaulting party with sixty
(60) days written notice of termination.
14.2 Termination without cause
Notwithstanding anything to the contrary stated in this Agreement, either
party may terminate this Agreement at any time without cause by giving to
the other party, not less than four (4) months written notice.
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14.3 A Party may immediately terminated this Agreement should the other party:
(i) become insolvent;
(ii) enter into or filing a petition, arraignment or proceeding seeking
an order for relief under the bankruptcy/insolvency laws of its
respective jurisdiction,
(iii) enter into a receivership of any of its assets or,
(iv) enter into a dissolution of liquidation of its assets or an
assignment for the benefit of its creditors.
15.0 EFFECT OF TERMINATION
15.1 In the case of termination and unless otherwise stipulated, Contractor
will deliver all services and/or deliverables and Customer will pay for
all items mentioned on a Purchase Order or Change Order accepted by
Contractor before expiration or termination date.
15.2 Accept where the termination is a results of Contractor's default
Customer agrees to compensate Contractor for Products and materials as
stipulated in section 7.4 of this Agreement.
15.3 Each party will promptly return to the other party, all technical
documentation (e.g. drawings, work instructions, data and design sheets)
and/or Confidential Documents related to the present Agreement.
15.4 Contractor will return to customer all consigned materials, equipment and
tooling stipulated in section 13 of this Agreement.
16.0 DISPUTE RESOLUTION
16.1 In the spirit of continued cooperation, the parties intend to and hereby
establish the following dispute resolution procedure to be utilized in
the unlikely event any controversy should arise out of or concerning the
performance of this Agreement.
16.2 It is the intent of the parties that any dispute be resolved informally
and promptly through good faith negotiations between Contractor and
Customer. Either party may initiate negotiation proceedings by written
notice to the other party setting forth the particulars of the dispute.
The parties agree to meet in good faith to jointly define the scope and
method to remedy the dispute. If these proceedings are not productive of
a resolution, then senior management of Contractor and Customer are
authorized to and will meet personally to confer in a bona fide attempt
to resolve the matter.
16.3 Should the foregoing procedure not bring a mutually satisfactory solution
within 30 days, each party will be free to proceed according to
applicable law.
17.0 LIMITATION OF LIABILITY
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17.1 Neither party shall be liable to the other for any indirect, incidental,
special or consequential damages resulting from this Agreement, including
but not limited to loss of profit, loss of production loss of contracts,
even if either party or an authorized representative has been advised of
the possibility of such damages.
17.2 Each Party ("Defaulting Party") agrees to protect, defend, indemnify and
hold harmless the other Party ("Innocent Party") from all sums, costs,
expenses and reasonable attorney's fees which the Innocent Party may
incur or actually be obligated to pay as a result of any and all claims,
demands, causes of action or final judgments in favor of any third
person, that relate to or arise from (i) a breach of the obligations of
the Defaulting Party as set forth herein, or (ii) a tort by the
Defaulting Party.
The Innocent Party undertakes to: (i) give the Defaulting Party prompt
notice of any such claims, (ii) render reasonable assistance to the
Defaulting Party thereon, and (iii) permit the Defaulting Party to direct
the defense of the settlement of such claims, provided, that the
Defaulting Party will enable the Innocent Party to be present in meetings
with legal counsel to the defense and court hearings. Settlement of
claims outside of court will require the approval of the Innocent Party
unless as part of the settlement, a full waiver is made in favor of such
Innocent Party.
18.0 PATENTS, COPYRIGHTS AND TRADEMARKS INDEMNITY
18.1 As part of the general indemnification set forth in Section 17.2 above,
each Defaulting Party shall defend, indemnify and hold harmless the
Innocent Party from any claims by a third party of infringement of
intellectual properties resulting from the acts of the indemnifying party
pursuant to this Agreement.
18.2 Customer's product and designs contain certain elements that are
proprietary to Customer. Furthermore, in the course of this agreement,
technical and commercial information of the Customer may be revealed or
become known to the Contractor. Contractor shall keep in confidence all
information relating to the foregoing, shall not use any part of it for
any purpose except the performance of this Agreement and shall not enable
any third party to use it, unless such information becomes public domain
through no fault of the Contractor.
The provisions of this clause 18.2 shall survive termination or
expiration of the Agreement.
19.0 NON - COMPETITION
19.1 The Contractor and the Customer will not be allowed to employ employees
of the other party, directly or indirectly, for one (1) year from the
date the employee has ceased to be employed by the other party. The above
mentioned restriction may be waived by either parties provided that it is
done by a written and specific consent.
19.2 During the Term of this Agreement and for an additional period of two (2)
years from the date of termination of this Agreement, the Contractor
undertakes not to produce on his own account and/or render manufacturing
services to another customer who's equipment
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is in the field of non-invasive devises using light or radio frequency
energy for the medical-aesthetic market.
20.0 GENERAL
20.1 Force Majeure. Neither party shall be liable for any failure or delay in
its performance under this Agreement due to acts of God, acts of civil or
military authority, fires, floods, earthquakes, riots, wars, sabotage,
labor disputes, material unavailability due to unwarranted production
stoppage by supplier or any other cause beyond the reasonable control of
the delayed party provided that the delayed party, (i) gives the other
party written notice of such cause, and (ii) uses its reasonable efforts
to remedy such delay in its performance.
20.2 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable, such provision shall be
deemed null and void, and the remainder of the Agreement shall continue
to be in full force and effect, while the parties shall negotiate in good
faith to replace the provision with another enforceable one reflecting as
closely as possible the parties initial intention.
20.3 Relationship of the Parties. Each of the parties shall at all times
during the term of this Agreement act as, and shall represent itself to
be, an independent contractor. Neither Party shall have any right or
authority to assume or create any obligations or to make any
representations or warranties on behalf of the other party whether
express or implied, or to bind the other party in a respect whatsoever.
20.4 Governing Law. The construction, interpretation and performance of this
Agreement and all transactions under it shall be governed by the law of
the State of Israel, and both Parties consent to jurisdiction by the
courts of the City of Haifa.
20.5 Choice of Language. The original of this Agreement has been written in
English. Any notices provided by any party as required by this Agreement
shall be written in the English language.
20.6 Notifications. Any and all notices and other communications whatsoever
under this Agreement shall be in writing, sent by registered mail or by,
email or facsimile to the address set forth above. Notices sent via
registered mail shall be deemed to have been delivered within 3 business
days after the date posted. With regards to the normal course of
business, notices sent via email or facsimile shall be deemed to have
been received 1 business day following the date of transmission.
20.7 Entire Agreement. No amendment of this Agreement will be valid unless
made in writing signed by a duly authorized representative of both
parties. No provision of this Agreement will be deemed waived and breach
or default excused unless the waiver or excuse is in writing and signed
by the party issuing it. The terms and conditions contained in this
Agreement terminate and supersede all prior oral or written understanding
between the parties and shall constitute the entire agreement between
them concerning the subject matter of this Agreement.
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20.8 This Agreement may be executed in one or more counterparts, each of which
will be deemed the original, but all of which will constitute but one and
the same document. The parties agree that this Agreement and its
appendices may not be modified except in writing, signed by both parties.
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE DULY
EXECUTED FOR AND ON BEHALF OF:
CONTRACTOR CUSTOMER
Date: September 14, 2003 Date: September 11, 2003
Name: Xxxxx Xxxxx, CEO Name: Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx, VP Finance
Title: Title: CTO
Signature: /s/ Xxxxxxx Xxxxxxxx
Signature: /s/ Xxxxx Xxxxx Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
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APPENDIX A
THE PRODUCTS
**
Initial Forecast: ** units as sub contracting, shipment from October 2003 -
materials from Syneron Medical, this product will be in full Turn Key from next
year.
**
Initial Forecast: ** units as full Turn Key, shipments from December 2003.
** REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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APPENDIX B
PRICING AND MANUFACTURING SERVICES
This Appendix will be filled in its final format not later than December
31, 2003, subsequent to the "Pilot" production (see Appendix C).
The pricing of the manufacturing services will be based on the following
parameters:
1. The management markup charge for Material purchasing will be ** for the
year 2003/4 and ** for the year 2005.
2. The charge for labor will be ** per hour for production personnel,
technician and testing personnel.
3. All cost reduction will be credited in favor of the Customer at the
beginning of every calendar quarter.
** REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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APPENDIX C
PRICING AND PROCEDURES FOR THE INITIAL TURN-KEY PRODUCTION
This document outlines the intent of the Customer and the Contractor to
facilitate the manufacturing of ** units of ** in the shortest time possible and
not later than ** .
1. MATERIALS.
Contractor will provide with a complete set of materials inventory, which
is required to produce, assemble and test the ** units of the ** .
2. WORK PLAN.
The work Plan will consist of two (2) "batches" of the Product:
The 1st. "batch" will be for ** units, to be entered into
production as soon as possible and completed by ** ;
The 2nd "batch" will be for ** , to be entered into production
subsequent to the completion of the 1st "batch" and completed by
** .
3. PRICING.
The 1st "batch" will be priced on the actual labor and other expenses
recorded by the Contractor and monitored by the Customer's personnel who
will participate in all the activities related to the Product in the
Contractor's premises. The Contractor will charge the Customer for the
labor involved in the production of the Product at the rate of ** per
hour for production workers and/or inspection and testing personnel. The
Contractor will submit a pricing proposal for the labor cost for the 2nd
"batch", based on the experience gained in the 1st "batch".
** REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
