Terminal Products Manufacturing Agreement

Terminal Products Manufacturing Agreement

THIS TERMINAL PRODUCTS MANUFACTURING AGREEMENT (this "Agreement") is made as of by and among , a ("Supplier"), , a and , a (collectively referred to as "Customer").

WITNESSETH:

WHEREAS, Supplier and are parties to the Asset Purchase Agreement dated whereby Supplier purchased certain of the assets and assumed certain liabilities of and and (the "Asset Purchase Agreement");

WHEREAS, as part of the Asset Purchase Agreement, Supplier has purchased certain terminal products inventory (the "Initial Terminal Products Inventory") which has agreed to purchase for use by its wholly-owned subsidiary pursuant to the terms of this Agreement;

WHEREAS, Supplier will also sell to Customer, and Customer agrees to purchase from Supplier, fully assembled, tested and packaged terminal products manufactured by Supplier in accordance with the specifications and definitions provided to Supplier by Customer pursuant to this Agreement and as set forth on Attachment A (which along with the Initial Terminal Products Inventory are referred to as the "Goods"); and

WHEREAS, subject to the foregoing, the Supplier desires to sell and Customer desires to purchase the Goods on the terms and conditions herein set forth.

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Term of Agreement

1.1 The term of the agreement shall be three (3) years from the date set forth in the preamble (the "Term").

1.2 At the expiration of the Term, the Supplier shall have the right (along with such other parties as Customer may select) to bid on a manufacturing agreement on such terms as Customer may specify.

1.3 This Agreement may not be terminated by Customer during the Term, except as otherwise provided for herein.

1.4 Upon expiration or termination of the Agreement, the Supplier shall complete any outstanding purchase orders which purchase orders shall be honored by the Customer.

2. Sole Supplier of Goods

2.1 The Supplier shall be the sole supplier of the Goods.

3. Forecasting and Ordering

3.1 Orders will be placed in accordance with the procedures in Attachment B, which Attachment may be amended from time to time by mutual written agreement of the parties.

3.2 The Customer will cover the cost of purchase of all components procured by the Supplier in accordance with:

3.2.1 Firm orders placed by the Customer.

3.2.2 Any other cover that may be agreed formally by the Customer and the Supplier to meet unanticipated demand, including but not limited to the finished, tested PCB's.

3.2.3 The cover of any components that, by virtue of long procurement lead times are outside the period covered by formal purchase order instruction or three (3) month forecast, that have been identified as such and with the written agreement of the Customer.

3.3 For the avoidance of doubt, the Customer agrees to pay for the cost of components as set forth in Section 3.2 in the event that any such orders are cancelled. Supplier shall, to the extent possible, repurchase any such components for use in future orders. In addition, Supplier shall utilize such portions of the Initial Terminal Products Inventory, to the extent possible, before purchasing inventory for firm orders.

4. Delivery

4.1 Unless specifically agreed in writing the lead time from receipt of order to delivery of the Goods to the Customer shall be in accordance with Section 6.1.1 of Attachment B.

4.2 Where circumstances are such that a delivery cannot be made within the lead-time specified and agreed in Section 6.1.1 of Attachment B, the Supplier shall advise the Customer in writing to that effect within a reasonable period of time after learning delivery cannot be made at such time. Supplier shall use commercially reasonable efforts to expedite delivery if it is unable to make the specified lead-time.

4.3 Deliveries shall be made in accordance with Sections 6.1.4-6.1.9 of Attachment B.

4.4 Notwithstanding anything in this Agreement, at a minimum, Customer agrees to purchase from Supplier, and Supplier agrees to sell to Customer, the entire quantity of the Initial Terminal Products Inventory during the 1st year of this Agreement. Exhibit 4.4 sets forth the Initial Terminal Products Inventory and the procedure for calculating a schedule of delivery of and payment for the Initial Terminal Products Inventory.

5. Pricing and Invoicing

5.1 Supplier and Customer agree to prices based upon the ultimate selling price that the Customer charges to their customers for each order, and as detailed in Exhibit 5.1.

All information pertaining to the calculation of the quoted prices shall be held available for audit by the Supplier. Such audits may take place no more than once each quarter.

The Supplier shall conduct such audits during normal business hours and upon no less than 5 days notice to the Customer.

All parties participating in such audit will be bound by a confidentiality agreement, the form of which shall be agreed and executed prior to each audit.

5.2 Where the Supplier can demonstrate that additional costs have been incurred: (i) due to extraordinary fluctuations in component prices due to unforeseen world wide shortages of components, (ii) due to minimum quantity purchase requirements, or (iii) due to purchase of components inside agreed lead times at the Customer's request; then the Supplier may request a formal price review by the Customer.

Where such circumstances prevail, the Supplier shall, as soon as practicable, advise the Customer in writing to that effect, giving the amount of any such price amendment, ascertained and determined at the same method of pricing as that contained in the original and agreed quotation.

The Customer shall consider such request in good faith. In the event that Customer and Supplier cannot reach a mutually agreeable price amendment in a reasonable period of time, then either party may request that the matter be resolved at the senior executive level. In such event, the Chief Executive Officer or Chief Operating Officer of the Customer and Supplier shall negotiate in good faith to reach a mutually agreeable price amendment.

6. Non-Warranty Repairs

6.1 Supplier shall provide all Customer non-warranty terminal product repairs.

6.2 Supplier shall invoice for non-warranty repair orders in conformance with the price list and procedures as set forth on Exhibit 6.2, which price list and procedures shall be reviewed annually and may be revised by mutual written agreement of Customer and Supplier.

The parties shall handle the non-warranty repairs as handled by the Customer and WPI Electronics, Inc. prior to the date of this Agreement.

The Customer has the right at any time to direct the Supplier to cease dealing with Customer's clients and Customer shall assume responsibility for billing its clients.

In such event, the Supplier shall bill Customer directly in an amount equal to eighty per cent (80%) of the prices set forth on Schedule 6.2.

7. Passing of Property and Risk to the Customer

7.1 The Goods shall be shipped by Supplier F.O.B. Supplier's manufacturing facility which is presently in Warner, New Hampshire.

7.2 The property and risk in Free Issue Material (as defined below) shall remain with the Customer

8. Acceptance

8.1 The Customer may not reject any Goods which were included in the Initial Terminal Products Inventory which have not been altered by Supplier after the effective date of this Agreement. In the case of Goods in excess of the Initial Terminal Products Inventory shipped by the Supplier that do not conform to this Agreement, whether by reason of failure to meet the Customer's Specification, quality issues or by reason of over quantities shipment, the Customer shall have the right to reject such Goods within fourteen (14) days of their delivery.

8.2 Payment shall not prejudice the Customer's right of rejection.

9. Engineering Change Requests ("ECR")

9.1 The Supplier shall not alter any of the Goods except as directed in writing by the Customer but the Customer shall have the right, from time to time during the Term, by notice in writing to direct the Supplier to add or to omit, or otherwise vary, the Goods.

The Supplier shall carry out such variations and be bound by the same conditions, so far as is applicable, as though the variations were stated in the Agreement.

9.2 Where the Supplier receives any such direction from the Customer which would occasion an amendment to the formula price set forth in section 5, the Supplier shall, as soon as practicable, and before implementing such ECR advise the Customer in writing to that effect, giving the amount of any such price change, ascertained and determined at the same method of pricing as that contained in the original and agreed quotation.

The Supplier shall submit such statement to the Customer in the form attached as Attachment C. The parties shall negotiate in good faith to reach agreement on the amendment to the formula price.

The parties shall also negotiate in good faith with regard to the coverage of certain costs incurred in connection with such ECR, including obsolete inventory, retooling costs, rework costs and technical file modifications.

In the event that the parties cannot reach a mutually agreeable amendment in a reasonable period of time, then either party may request that the matter be resolved at the senior executive level. In such event, the Chief Executive Officer or Chief Operating Officer of the Customer and Supplier shall negotiate in good faith to reach a mutually agreeable amendment.

The Supplier shall not implement the ECR before an agreement is reached by the Supplier and the Customer on the amended price and the coverage of certain costs (if any) as mentioned here above.

10. Free Issue Material, Tooling and Test Equipment

10.1 The Customer has provided the Supplier with the tooling set forth on Exhibit 10.1.

Where the Customer, for the purposes of the Agreement, pays the Supplier the entire cost of the provision of any other tooling or test equipment necessary for the performance of the Agreement the property and risk in tooling or test equipment shall pass to the Customer when the manufacture of the tooling or supply of the test equipment is complete and has been satisfactorily tested.

The Supplier shall maintain such tooling or test equipment in good order and condition, subject to fair wear and tear, and unless authorized in writing by the Customer, shall use such tooling or test equipment solely in connection with the Agreement.

Upon termination of Supplier's obligations to Customer pursuant to the Agreement, the Supplier shall make available to Customer such tooling or test equipment to be removed from Supplier's facility at the sole expense of the Customer.

10.2 If test equipment provided by the Customer is utilized by the Supplier solely in support of the Agreement, the Customer agrees to pay the maintenance costs of the test equipment.

Where the Supplier is authorized to use the test equipment for purposes other than the Agreement, these costs will be shared between the Supplier and the Customer, in proportion to their utilization.

10.3 Where the Customer, for the purposes of the manufacture of Goods pursuant to the Agreement, issues materials free of charge to the Supplier ("Free Issue Materials"), such materials shall remain the property and risk of the Customer.

The Supplier shall maintain all such materials in good order and condition. The Supplier shall use such material solely in connection with the Agreement.

Waste of such materials arising from bad workmanship or negligence of the Supplier shall be made good at the Supplier's expense.

Upon the termination of Supplier's obligations pursuant to the Agreement, the Supplier shall deliver such materials, whether further processed by the Supplier or not, to the Customer on demand.

10.4 On receipt of such Free Issue Materials, the Supplier shall carry out a reasonable visual examination to check that the materials are free from defects or deficiency and accord with the Agreement.

The Supplier shall notify the Customer as soon as is practicable, but in any case, within seven (7) days where any such defects or deficiencies are discovered.

In the event that the Supplier notifies the Customer of any such deficiencies, Supplier may return such defective or deficient materials to Customer at Customer's sole expense.

10.5 The Supplier agrees to introduce and maintain such systems and processes as may be necessary to accurately control the stock holding, movement and analysis of such Free Issue Materials.

The Supplier agrees to provide to Customer, within seven (7) days of demand, such information pertaining to such material as may be reasonably requested by the Customer.

10.6 For the purposes of the Agreements the Customer shall provide the Supplier, for the Term of the Agreement the tooling and test equipment shown in Exhibit 10.1 to the Agreement.

The tooling and test equipment listed shall remain the property and risk of the Customer.

Upon termination of Supplier's obligations to Customer pursuant to the Agreement, the Supplier shall make available to Customer such tooling and test equipment to be removed from Supplier's facility at the sole expense of the Customer.

11. Quality Systems

11.1 The Supplier shall demonstrate and maintain a suitable Quality Assurance system.

The Supplier agrees to disclose all quality assurance information, in relation to the manufacture of the Goods, at any time, as may be reasonably requested by the Customer.

11.2 The Supplier agrees to maintain appropriate records pertaining to the efficiency and reliability of the production processes. These records will include, inventory accuracy measures, production volumes achieved, and quantity of rejections.

11.3 The Customer shall have right of access for inspection of records or processes at any reasonable time and reserves the right to inspect by appointment.

12. Assignment and Sub-Contracting

12.1 Neither the Supplier nor Customer shall assign the Agreement in whole or in part and shall not sub-contract any part or process without the formal, written approval of the other party to this Agreement, provided, however, that Supplier may sub-contract any part or process consistent with the manufacturing process historically employed by WPI Electronics, Inc. in the manufacture of the Goods.

12.2 Notwithstanding the provisions of Section 12.1, in the event of a Change of Control of Customer, the Customer shall assign the Agreement in conjunction with the Change in Control and shall cause any entity that succeeds to a majority of assets of Customer as a result of a Change of Control of Customer to assume this Agreement and is bound by its terms.

13. Payment Terms

13.1 The Customer shall make payment to Supplier for all Goods sold to it and services rendered to it by or on behalf of Supplier within thirty (30) days from the date of invoice.

13.2 All payments shall be made in United States currency by check or wire transfer to an account specified by Supplier.

14. Warranty

14.1 The Supplier warrants that the Goods will conform substantially to the specifications provided by the Customer and will be of satisfactory quality and free from defects in quality and workmanship.

14.2 The Supplier's liability shall be restricted to defects proved to its reasonable satisfaction to have arisen from Supplier's manufacturing and testing process or workmanship or defects in materials (which does not include Free Issue Materials).

14.3 The Supplier shall promptly and at its own expense remedy (by means of a refund or replacement or repair at the reasonable option of the Supplier) all defects in the Goods appearing within twelve (12) months of the date of delivery of the Goods by the Supplier to the Customer.

14.4 The Customer may return (at its own risk and expense) the defective Goods or defective components thereof to the Supplier, who shall return to the Customer (at its own risk and expense) the repaired or replacement Goods, within fifteen (15) working days of the receipt of the Goods by the Supplier, subject to the availability of components.

14.5 THIS WARRANTY SPECIFICALLY EXCLUDES MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

The Supplier will have no obligation under the warranty if the defect is caused by catastrophe or accident, the negligence of the Customer or any third party, improper installation, use or maintenance of the Products in a manner for which they were not designed, or defects caused by any repair or modification made by any party who is not an authorized Customer business partner, or is not authorized by the Supplier, or if the defect is caused by Free Issue Material, as that term is defined in section 10, which defect was incapable of detection by normal, incoming inspection procedures.

14.6 The warranty terms of all Goods delivered by Supplier to Customer pursuant to this Agreement shall be governed by this section and shall explicitly override the warranty terms of the Supplier's standard purchase order.

14.7 Notwithstanding anything in this Agreement, any of the Goods which are delivered to Customer which were included as part of the Initial Terminal Products Inventory shall be deemed to conform to the Customer's specifications and quality, and conform to the warranties as set forth in this Agreement, unless such Goods have been altered by Supplier after the effective date of this Agreement.

15. Confidentiality

15.1 The Supplier shall keep confidential all information obtained from the Customer in connection with the performance of the Agreement and all information in relation to the Customer's affairs, business or business practices, which comes to the Supplier's knowledge during the period of the Agreement.

15.2 The Supplier shall not be bound by the above provisions of this condition in relation to information that is:

15.2.1 published or comes into the public domain otherwise than by a breach of the Agreement;

15.2.2 lawfully known to the Supplier before the commencement of the Agreement;

15.2.3 lawfully obtained from a third party which is free to divulge that information; or

15.2.4 responsive to a legitimate inquiry from a government agency, or required to be disclosed by Supplier in conjunction with litigation.

15.3 The provisions of this Condition shall survive the expiration or termination of the Agreement.

16. Customer's Right of Termination

16.1 If the Supplier commits material or persistent breaches of the Agreement, the Customer shall send written notice of such breaches to the Supplier. The Supplier shall diligently work within thirty (30) days to remedy such breaches to the Customer's reasonable satisfaction. If the nature of the breaches is such that they cannot be remedied within thirty (30) days, the Supplier shall diligently pursue such remedy, provided, however, that no such breaches shall exist for a period of more than ninety (90) days from the date of Customer's notice. If the Supplier is unable to remedy the breaches within the times provided above, the Customer, without prejudice to any other right it may have, shall have the right to terminate the Agreement and any or all orders forthwith, subject to its obligations under section 3.2 of this Agreement, provided, however, that Customer's cover under section 3.2 shall not include any mark-up from material cost.

16.2 Without prejudice to any other rights or remedies it may have, the Customer shall have the right at any time to terminate the Agreement and/or any or all orders forthwith, if:

16.2.1 The Supplier becomes insolvent or ceases to carry on its business as a going concern; or

16.2.2 A Bankruptcy petition or order is presented or made against the Supplier or if a trustee is appointed in respect of its assets and such petition or appointment is not discharged or dismissed within sixty (60) days; or

16.2.3 A receiver or an administrative receiver is appointed in respect of any or part of its assets and such appointment is not discharged or dismissed within sixty (60) days; or

16.2.4 A resolution or petition or order to wind up the Supplier is passed or presented or made or a liquidator is appointed (otherwise for reconstruction or amalgamation) and such resolution or petition is not discharged or dismissed within sixty (60) days.

16.3 Except as otherwise provided herein, termination of the Agreement for whatsoever cause shall not release the Supplier or the Customer from any of it's obligations under this Agreement, which, either expressly or by implication are intended to survive the termination of the Agreement, including but not limited to confidentiality, warranty and inventory cover obligations.

17. Supplier's Right of Termination

17.1 Without prejudice to any other rights or remedies it may have, the Supplier shall have the right at any time to terminate the Agreement and seek Acceleration of Performance (as defined below), if:

17.1.1 The Customer becomes insolvent or ceases to carry on its business as a going concern; or

17.1.2 A Bankruptcy petition or order is presented or made against the Customer or if a trustee is appointed in respect of its assets and such petition or appointment is not discharged or dismissed within sixty (60) days; or

17.1.3 A receiver or an administrative receiver is appointed in respect of any or part of its assets and such appointment is not discharged or dismissed within sixty (60) days; or

17.1.4 A resolution or petition or order to wind up the Customer is passed or presented or made or a liquidator is appointed (otherwise for reconstruction or amalgamation) and such resolution or petition is not discharged or dismissed within sixty (60) days.

17.2 Except as otherwise provided herein, termination of the Agreement for whatsoever cause shall not release the Supplier or the Customer from any of it's obligations under this Agreement, which, either expressly or by implication are intended to survive the termination of the Agreement, including but not limited to confidentiality, warranty and inventory cover obligations.

17.3 In the event that Customer is more than fifteen (15) days late in making payment on an Purchase Order made with Supplier pursuant to this Agreement, the Supplier shall notify Customer that payment must be made within fifteen (15) days of the date of notice (the "Non-Payment Notice"). If Customer does not remit payment within the fifteen (15) day notice period, the Supplier may terminate the Agreement for non-payment and seek Acceleration of Performance (as defined below).

18. Acceleration of Performance.

18.1 In the event that the Customer or Supplier terminates the Agreement pursuant to sections 16 or 17 of this Agreement, the Customer is deemed to request that Supplier accelerate the invoicing of the remaining Initial Terminal Products Inventory ("Acceleration of Performance").

18.2 Notwithstanding section 17.3, in the event of Acceleration of Performance all sums owed to Supplier by Customer for the remaining Initial Terminal Products Inventory invoiced and all other amounts invoiced by Supplier to Customer shall immediately become due and owing.

19. Intellectual Property

19.1 The Customer acknowledges that it is requiring the Supplier to manufacture the Goods in compliance with the Specifications.

The Customer warrants: (i) that any Material (including any part thereof), the Customer's Specifications, the manufacture, the sale and the distribution, use or resale by the Customer or its customers of Products, either separately or as combined with or integrated into other products do not infringe any patent, copyright or other proprietary right of any person or entity, and (ii) that there are no known claims or suits threatened or pending regarding any such proprietary rights or which would adversely affect the Agreement.

The Customer agrees that this is a continuing warranty and therefore agrees that if it is notified of any such claim after the effective date of this Agreement, it shall promptly inform the Supplier.

In the event of any claim of infringement hereunder, the Customer shall defend any actions and shall indemnify and hold harmless the Supplier from and against any and all claims, costs, losses and damage arising from or caused thereby, including reasonable attorney's fees. The Customer shall have sole control over the litigation and/or settlement of any such infringement claims.

20. Endemic Failure

20.1 Endemic design failure. If at least five percent (5%) of the Goods manufactured in one (1) month, are confirmed to have the same or substantially the same design defect as a result of the Customer's design of the Goods, such defect shall be deemed to be an endemic design failure ("Endemic Design Failure"). It shall be the Customer's responsibility to solve such Endemic Design Failure and to pay the Supplier's costs directly associated with the Endemic Design Failure such as, manufacturing stop, work in progress, finished Product in inventory or in transit, cost of components in house or on order, premium working and rework.

However, Supplier will provide Customer, at its request technical support in order to correct the design failure at Customer's cost.

20.2 Endemic Failure due to material or workmanship defects. Where more than ten percent (10%) of the Goods supplied by Supplier, and which were not part of the Initial Terminal Products Inventory, fail within any one year due to the same failure in material or workmanship (an "Endemic Manufacturing Failure"), the Supplier shall at its own cost and option:

20.2.1 rectify all of the Goods that are identified as suffering or likely to suffer from such an Endemic Manufacturing Failure and to pay all direct costs actually borne by the Customer due to the Endemic Manufacturing Failure. The time period for such rework to be as agreed between the parties hereto; or

20.2.2 replace all the Goods that are identified as suffering or likely to suffer from such an Endemic Manufacturing Failure and to pay all direct costs actually borne by the Customer due to the Endemic Manufacturing Failure. The time period for such replacement to be as agreed between the parties hereto

20.3 The Customer shall be solely responsible for any costs associated with any Endemic Design Failure or Endemic Manufacturing Failure involving any Goods which are included in the Initial Terminal Products Inventory and which have not been altered by the Supplier after the effective date of this Agreement.

20.4 The provisions of this section shall survive the expiration or termination of the Agreement for a period of 12 months.

21. Liquidated and Ascertained Damages

21.1 Should the Supplier fail to deliver all or any of the Goods by the delivery date specified in the Purchase Order, or any extended delivery date agreed under the Purchase Order, then the Customer shall, in addition to and without prejudice to any other remedies available to it under the Contract, at law and in equity have the right to require the Supplier to pay 0% for the first week that the Goods are delayed, 2% of the Contract price of the Goods, for the second week or part thereof that the Goods are delayed, 3% of the Contract price of the Goods, for the third week or part thereof that the Goods are delayed, and 5% of the Contract price of the Goods, for the fourth week or thereafter that the Goods are delayed. Damages shall be limited to the Contract price of those items in default.

21.2 Should the Customer fail to pay for all or any of the Goods within thirty (30) days of the date of the invoice, then the Supplier shall, in addition to and without prejudice to any other remedies available to it under the Agreement, at law and in equity have the right to require the Customer to pay 1.5% of the invoice amount for each month or part thereof that payment is delayed.

21.3 Supplier shall not manufacture or sell products which are directly competitive with the Goods during the Term.

22. Miscellaneous

22.1 This Agreement shall be governed and construed in accordance with the laws of the State of New Hampshire, without consideration to conflicts of laws principles.

22.2 Any notice required under this Agreement shall be sufficient if communicated in writing and if sent by telecopier with a confirmation of receipt with the original notice sent by first class mail, duly addressed, postage prepaid to the respective addresses as stated in this Agreement or as subsequently changed. For the purposes of section 3.1 only, notices sent by e-mail messages shall be deemed to be effective when received. Any party whose address changes during the term of this Agreement shall notify the other party in writing as to the new address.

22.3 This Agreement together with the attached Exhibits and Asset Purchase Agreement contain all of the agreements, understandings, representations, conditions, warranties, and covenants made between the parties with respect to the subject matter hereof.

22.4 The failure of either party at any time to require performance by the other party of any provision shall not affect in any way the full right to require such performance at any time, nor shall the waiver by either party of a breach of any provision be taken or held to be a waiver of the provision itself.

22.5 A party shall not be deemed to have defaulted or failed to perform hereunder if that party's inability to perform or default shall have been caused by an event or events beyond the control and without the fault of that party, including (without limitation) acts of government, embargoes, fire, flood, explosions, acts of God or a public enemy, strikes, labor disputes, vandalism, civil riots or commotions.

22.6 No modification, amendment, extension, renewal or waiver of any of the provisions contained herein, or any future representation, promise or condition in connection with the subject matter hereof, shall be binding upon either party unless in writing and signed by an officer on behalf of both parties.

22.7 If, in a final judgment of a court of competent jurisdiction, any provision of this Agreement is held to be invalid, said provision shall be considered void to the extent of such invalidity, without invalidating any of the remaining provisions of this Agreement.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each of the parties on the date first above written.