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Technical Consumer Products - Manufacturing And Supply Agreement
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MANUFACTURING AND SUPPLY AGREEMENT
By and Between
TECHNICAL CONSUMER PRODUCTS, INC.
and
SHANGHAI ZHEN XIN ELECTRONIC ENGINEERING CO., LTD. and
SHANGHAI JENSING ELECTRON ELECTRICAL EQUIPMENT CO., LTD.
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Dated as of January 17, 2002
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TABLE OF CONTENTS
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Page
ARTICLE I. DEFINITIONS......................................................1
Section 1.1 Other Capitalized Terms.....................................1
ARTICLE II. MANUFACTURE OF PRODUCTS..........................................3
Section 2.1 Manufacture and Supply......................................3
Section 2.2 Performance of Work.........................................3
Section 2.3 Inspection, Reports and Services............................4
Section 2.4 Place of Work...............................................4
Section 2.5 Development of Products.....................................4
Section 2.6 Right to Cover..............................................4
ARTICLE III. PRODUCT FORECASTS AND PRODUCTION REQUIREMENTS....................5
Section 3.1 Product Sales Forecasts.....................................5
Section 3.2 Production..................................................5
Section 3.3 Shipment and Delivery.......................................5
Section 3.4 Risk of Loss................................................5
Section 3.5 Rejection and Return........................................5
ARTICLE IV. PRICING; PAYMENT.................................................5
Section 4.1 Pricing.....................................................5
Section 4.2 Accounting for Product Costs................................6
Section 4.3 Invoicing and Terms of Payment..............................7
Section 4.4 Currency....................................................7
Section 4.5 Taxes.......................................................7
ARTICLE V. WARRANTY.........................................................7
Section 5.1 Warranty....................................................7
ARTICLE VI. EXCLUSIVITY......................................................8
Section 6.1 Exclusivity.................................................8
ARTICLE VII. CONFIDENTIALITY AND PROTECTION OF PROPRIETARY RIGHTS.............9
Section 7.1 Confidential Treatment......................................9
Section 7.2 Permitted Disclosure........................................9
Section 7.3 Compelled Disclosure........................................9
ARTICLE VIII. TERM AND TERMINATION.............................................9
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Page
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Section 8.1 Term........................................................9
Section 8.2 Termination................................................10
Section 8.3 Effect of Termination......................................10
ARTICLE IX. REPRESENTATIONS, INSURANCE AND INDEMNIFICATION..................11
Section 9.1 Representations............................................11
Section 9.2 Indemnification by Suppliers...............................12
Section 9.3 Indemnification by TCP.....................................12
Section 9.4 Limitation on Indemnity....................................12
Section 9.5 Indemnification Procedures.................................12
ARTICLE X. RELATIONSHIP OF THE PARTIES.....................................13
Section 10.1 No Joint Venture...........................................13
ARTICLE XI. MISCELLANEOUS...................................................14
Section 11.1 Notices....................................................14
Section 11.2 Assignment.................................................14
Section 11.3 No Sub-Contracting.........................................15
Section 11.4 Governing Law..............................................15
Section 11.5 Arbitration................................................15
Section 11.6 Waiver.....................................................16
Section 11.7 Integration; Amendments....................................16
Section 11.8 Force Majeure..............................................16
Section 11.9 Severability...............................................17
Section 11.10 Headings...................................................17
Section 11.11 Counterparts and Facsimile.................................17
Section 11.12 Translation................................................17
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MANUFACTURING AND SUPPLY AGREEMENT
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THIS MANUFACTURING AND SUPPLY AGREEMENT (this "AGREEMENT"), dated as of January 17, 2002, is made and entered into by and between Technical Consumer Products, Inc., presently having its principal place of business at 300 Lena Drive, Aurora, Ohio, United States ("TCP"), and Shanghai Zhen Xin Electronic Engineering Co., Ltd., and Shanghai Jensing Electron Electrical Equipment Co., Ltd., presently having their principal places of business at No. 61 Kai Jiang Road, East, Si Jing, Song Jiang, Shanghai 201601, China (jointly and severally, "SUPPLIERS" and each individually a "SUPPLIER").
RECITALS
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A. Prior to the date hereof, Suppliers have been manufacturing for, and supplying products and/or services to, TCP and its predecessors. The period during which a Supplier manufactured and/or supplied products or services to TCP or its predecessors is referred to herein as the "ORIGINAL SERVICE PERIOD."
B. To memorialize the relationship between TCP and Suppliers that has developed over the years and to set forth the terms of the continuing relationship between TCP and Suppliers, TCP and Suppliers desire to enter into this Agreement to provide that Suppliers will continue to manufacture and package products exclusively for TCP.
C. Prior to the execution of this Agreement, TCP and Suppliers have entered into a Technology Licensing Agreement (the "LICENSING AGREEMENT") that defines the rights and obligations of TCP and the Suppliers with respect to the ownership, use, licensing and development of certain Technology (as defined herein).
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual covenants of this Agreement, the parties agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1 OTHER CAPITALIZED TERMS. Except as otherwise defined herein, capitalized terms used herein will have the following meanings:
"AFFILIATE" will mean, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person.
"CONFIDENTIAL INFORMATION" will mean any and all information that is not generally known to the public or that would constitute a trade secret under the laws of the State of Ohio and that is (i) disclosed to or otherwise obtained by any Supplier, whether disclosure is made in writing, by samples, orally, visually or otherwise, in connection with this Agreement regardless of whether provided under this Agreement or provided prior to the execution of this Agreement, or (ii) that is developed by a Supplier or TCP under this Agreement, or that was developed during the
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Original Service Period, including, in each case, without limitation (A) TCP Technology, (B) know-how, prototypes, drawings, manuals, and software programs, (C) Resulting Technology, (D) technical information pertaining to development work, manufacturing processes, dimensions, clearances, tolerances, specifications, or materials, (E) operational and performance information and data, (F) business information pertaining to marketing, pricing, profits, operating costs, sales information, vendors, customers, employees, forecasts, accounting records and research and development costs, (G) such information that may be from time to time provided under SECTION 6.1(B) of this Agreement, and (H) such other information with respect to a Product as is provided to a Supplier to enable a Supplier to understand the use, nature, operation, performance and maintenance, sale, marketability and profitability of a Product. Notwithstanding the foregoing, Confidential Information does not include (i) any information that was publicly available at the time of disclosure, (ii) any information that became publicly available after disclosure through no fault of a Supplier, or (iii) with respect to information that is disclosed to or otherwise obtained by a Supplier, either directly or indirectly, any information that was (y) in a Supplier's possession prior to disclosure, and was not the subject of an earlier confidential relationship, or (z) rightfully acquired by a Supplier from a third party, who was lawfully in possession of such information and was under no obligation to maintain its confidentiality.
"PERSON" will mean an individual, partnership, limited liability company, corporation, joint stock company, unincorporated organization or association, trust or joint venture, or a governmental agency or political subdivision thereof.
"PRODUCT(S)" will mean the products identified on ANNEX A attached hereto, as amended from time to time pursuant to SECTION 2.1(c).
"PURCHASE ORDER" will mean any purchase order, production schedule or other production forecast that TCP provides a Supplier from time to time under this Agreement setting forth the Products that TCP desires to have manufactured by a Supplier under this Agreement.
"RESULTING TECHNOLOGY" will mean all Technology, of whatsoever nature and description, or any interest therein, that arises directly out of (i) TCP's performance under this Agreement, (ii) that is developed by TCP under this Agreement, or (iii) that is developed by a Supplier for TCP under this Agreement, including, without limitation, innovations relating to, or improvements on, the Products.
"TECHNOLOGY" will mean all proprietary ideas, formulae, compositions, technology and know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data or information relating to lighting products and accessories, and all copies and tangible embodiments thereof, including, without limitation, all patents and patent applications, including any and all extensions, reissues, divisions, continuations and continuations-in-part with respect to any of the foregoing any where in the world, product specifications, software programs, data and related documentation, all copyrightable works in any form or medium now in existence or hereafter created, copyrights and registrations, applications and renewals for any of the foregoing, and other intellectual property rights.
"TCP TECHNOLOGY" will mean all Technology, of whatsoever nature and description, or any interest therein, that TCP has (i) developed or acquired as of the date of this Agreement or
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(ii) that TCP developed or acquired previously or that may be developed or acquired during the term of this Agreement, including all improvements, upgrades, enhancements, modifications and/or updates made or acquired during the Original Service Period or during the life of this Agreement, and that TCP provides or otherwise makes available to Suppliers in connection with the matters contemplated by this Agreement.
ARTICLE II. MANUFACTURE OF PRODUCTS
Section 2.1 MANUFACTURE AND SUPPLY.
(a) During the term of this Agreement, Suppliers will:
(i) manufacture and package the Products for TCP; and
(ii) deliver the Products as required by TCP Purchase Orders or as otherwise specified by TCP.
TCP may communicate Purchase Orders either in writing or orally in accordance with SECTION 11.1.
(b) Except as otherwise permitted under SECTION 6.1(b) of this Agreement, during the term of this Agreement, Suppliers will not manufacture, assemble or package Products except for TCP. Subject to SECTION 6.1(b) of this Agreement, this obligation remains even if TCP is purchasing product from other vendors pursuant to SECTION 2.6.
(c) TCP has delivered to Suppliers the drawings, bills of material and other specifications necessary for Suppliers to manufacture and package the Products identified on ANNEX A. From time to time, TCP may add or change the Products to be manufactured by Suppliers, by delivering the drawings, bills of material and other specifications necessary for Suppliers to manufacture and package the new or modified Products. Any of such other specifications may be communicated to Suppliers either in writing or orally in accordance with SECTION 11.1. Thereafter, Suppliers will manufacture and package such Products under the terms of this Agreement and in accordance with Product specifications.
(d) All tools and tooling necessary to manufacture Products for TCP under this Agreement is the property of Suppliers. Suppliers are responsible for the proper maintenance, repair and replacement of any tools or tooling.
(e) TCP is responsible for obtaining any government approvals or other Product approvals or certifications required by TCP's customers or the jurisdiction in which TCP resells Products. Suppliers are responsible for obtaining any governmental, regulatory, export or other approvals necessary or appropriate to manufacture, package and deliver the Products to TCP.
Section 2.2 PERFORMANCE OF WORK.
(a) Suppliers will maintain ISO 9002 certification for all manufacturing facilities and if improved manufacturing techniques or practices enable manufacturers to achieve other quality or technical certification, Suppliers will use all commercially reasonable efforts to obtain such other
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certification. Suppliers will train all employees or others who work on the manufacture or packaging of Products to maintain Product quality.
(b) In performing their obligations under this Agreement, Suppliers will comply with all applicable laws and regulations.
Section 2.3 INSPECTION, REPORTS AND SERVICES.
(a) Upon TCP's reasonable request, TCP will be entitled to inspect any or all facilities of Suppliers to confirm compliance with this Agreement. This includes, without limitation, the right to (i) review and approve Suppliers' component material suppliers, components and raw materials, (ii) send representatives to inspect the manufacturing, packaging and any other activities being performed by Suppliers under this Agreement, (iii) inspect deliverables and otherwise evaluate the ongoing results of Suppliers' manufacturing and packaging of the Products. Suppliers will make available, upon the request of TCP and at no charge, results of internal or external qualification tests performed by Suppliers for the Products manufactured by Suppliers.
(b) If requested by TCP, Suppliers will make reports to TCP as TCP may request regarding production and packaging activities and any Resulting Technology under this Agreement. Reports will be in a format, in such detail, and in such timeframes as TCP may reasonably request from time to time.
(c) From time to time TCP may render to a Supplier management and advisory services, including, without limitation, management and advisory services relating to expansion, quality control, production, component sourcing, accounting, freight and logistics in connection with its manufacture and supply of Products as contemplated hereby. As consideration for such services provided by TCP, Suppliers will pay TCP such amounts as TCP and Suppliers agree prior to TCP providing such services.
Section 2.4 PLACE OF WORK. TCP may visit at any time, and from time to time, any of Suppliers facilities where packaging or manufacturing is being performed.
Section 2.5 DEVELOPMENT OF PRODUCTS. Suppliers will cooperate with TCP to identify components and sources of supply for components and parts, and to offer suggestions regarding the design and configuration of Products and of new products under development by TCP as requested by TCP from time to time.
Section 2.6 RIGHT TO COVER. If at any time TCP is in good faith concerned about Suppliers' ability to supply TCP Products in accordance with the terms of this Agreement, TCP may arrange for an alternative source(s) of supply for the Products. Unless Suppliers have notified TCP as contemplated by SECTION 3.2(b) of this Agreement that the delivery date or other terms of a Purchase Order cannot be achieved, if Suppliers cannot timely ship and deliver adequate quantities of Product to TCP, Suppliers will reimburse TCP for such reasonable costs TCP incurs in obtaining substitute performance. Subject to SECTION 6.1(b) of this Agreement, TCP's purchase from another source of supply does not relieve Suppliers from their obligation of exclusivity.
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ARTICLE III. PRODUCT FORECASTS AND PRODUCTION REQUIREMENTS
Section 3.1 PRODUCT SALES FORECASTS. From time to time TCP will provide to Suppliers the projected amount of each Product that TCP requires.
Section 3.2 PRODUCTION.
(a) Suppliers will manufacture and package such quantities of each Product as may be requested by TCP from time to time during the term of this Agreement.
(b) Products will be delivered at the time specified, shipped and packaged as specified in TCP Purchase Orders. Unless a Supplier notifies TCP, which notice may be in writing or orally, as soon as is reasonably possible after receiving a Purchase Order that the delivery date or other terms of the Purchase Order cannot be achieved, Suppliers will deliver and meet the Purchase Order terms.
Section 3.3 SHIPMENT AND DELIVERY. Suppliers will ship and deliver Products as directed in the Purchase Order or otherwise by TCP. Suppliers will target one hundred percent (100%) on time delivery. Purchase Orders will state the dates for Suppliers' committed delivery of Products.
Section 3.4 RISK OF LOSS. Title to, and risk of loss or damage and deterioration of a Product, and parts thereof, will pass from Suppliers directly to TCP upon delivery of the Product to TCP as specified in the Purchase Order or otherwise by TCP. Suppliers will ship the Products to TCP by such carriers as mutually agreed to from time to time by TCP and a Supplier, where, in the case of maritime carriage, unless directed otherwise by TCP, Suppliers will instruct the carrier to transport Products below or under deck to ensure full insurance coverage. Products will be shipped FCA shipping point or such other point designed by TCP for delivery (as defined by Incoterms 2000, as published by the International Chamber of Commerce). Any customer of TCP may, with reasonable advance notice, take delivery of Products Ex Works (Incoterms 2000).
Section 3.5 REJECTION AND RETURN. TCP or its customer may, at its option, inspect the Products upon delivery for the sole purpose of identifying the Products and general verification of quantities in order to provide a basis for payment, if any. Such inspection is not acceptance of any Products. TCP or its customer may reject or return at Suppliers' risk and expense all Products that were not shipped in accordance with applicable Purchase Orders.
ARTICLE IV. PRICING; PAYMENT
Section 4.1 PRICING.
(a) The price for each Product supplied by a Supplier and purchased by TCP hereunder will be determined from time to time by TCP and Suppliers; provided, however, in no event will the aggregate price of all Products purchased from Suppliers under this Agreement in a calendar year exceed, for that calendar year, Suppliers' (i) aggregate cost of materials incurred to manufacture all of such Products, PLUS (ii) aggregate labor costs incurred to manufacture such Products, PLUS (iii) overhead related to the manufacture of such Products, PLUS (iv) a margin of 12% of the total of clauses (i), (ii) and (iii), or such lesser price as the parties agree from time to
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time (the "MAXIMUM AGGREGATE PRICE"). The total of the amounts set forth in clauses (i), (ii) and (iii) are referred to herein as the "TOTAL ANNUAL PRODUCT COST." If Suppliers and TCP cannot mutually agree on the price of a particular Product, at TCP's option, the price of such Product will be calculated using the same formula used to calculate the Maximum Aggregate Price where the costs referred to in clauses (i), (ii) and (iii) will include only those costs incurred to manufacture such Product.
(b) Suppliers cost methodology and any revisions, modifications, or updates to costing models or programs must be approved by TCP.
(c) The price paid for Product may be reduced for any costs or expenses incurred by TCP that are chargeable to Suppliers hereunder, including, without limitation, amounts described in SECTIONS 2.6, SECTION 3.5 and SECTION 4.2.
Section 4.2 ACCOUNTING FOR PRODUCT COSTS.
(a) During the term of this Agreement, within ninety days after the end of each calendar year, each Supplier will provide TCP, in English, with its financial statements for the most recently completed calendar year, prepared in a manner that presents fairly in all material respects the consolidated financial position of such Supplier at the dates stated in such financial statements and the results of its operations for the periods stated therein. Such financial statements will include a balance sheet as of, and a statement of operations for, the most recently completed calendar year. To the extent that such financial statements have been audited by any private or governmental organization or otherwise, each Supplier will provide TCP with a copy of the auditor's report thereon. If requested by TCP during the term of this Agreement, within forty-five days of TCP's request Suppliers will render a written report to TCP setting forth the Total Annual Product Cost together with a calculation of the Total Annual Product Cost in sufficient detail for TCP to verify such amount. Upon TCP's request, Suppliers will provide TCP documentation supporting the calculation of the Total Annual Product Cost. If any report evidences that TCP has paid more than the Maximum Aggregate Price, TCP may, at its election, either (1) take a corresponding credit against subsequent payments due a Supplier hereunder, or (2) receive a refund from the Suppliers of any such overpayments within forty-five days of TCP's request.
(b) TCP will have the right, upon commercially reasonable advance written notice to a Supplier, to inspect Suppliers' books and records relating to the Total Annual Product Cost, or to designate a representative to make such inspection for the purpose of verifying the Total Annual Product Cost. Any such inspection will be made during normal business hours and on a confidential basis. In the event that TCP designates a certified public accountant to make such an inspection, TCP will bear the expense of engaging such accountant, unless it is determined that TCP has paid the Suppliers more than the Maximum Aggregate Price payable for such calendar year by more than five (5%) percent, in which case Suppliers will reimburse TCP for all out-of-pocket expenses incurred by TCP in connection with such audit. In all events Suppliers will, at TCP's election, either (1) permit TCP to take a corresponding credit against subsequent payments due a Supplier hereunder in the full amount of the overpayment that any such audit indicates or (2) pay TCP in full the amount of the overpayment that any such audit indicates within forty-five days following written notice to TCP of the overpayment indicated by such audit.
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Section 4.3 INVOICING AND TERMS OF PAYMENT.
(a) Following delivery of Products manufactured and delivered by Suppliers, Suppliers will provide TCP with an invoice setting forth the amount due with respect to such Products.
(b) Within a reasonably prompt period of time following delivery of Products to the final destination by the carrier of such Products, TCP will pay the Product price with respect to the invoiced Product (i) in cash, in immediately available funds by wire transfer to an account specified by Suppliers, (ii) by set-off against amounts owed to TCP by a Supplier, or (iii) by such other method as the parties mutually agree.
(c) All payments made by TCP to Suppliers hereunder will be remitted to the address of Suppliers as set forth in SECTION 11.1 of this Agreement, or to such other place as Suppliers may direct. TCP will be entitled to deduct and withhold from any payments to Suppliers hereunder any such withholding or deductions as may be required by law as a result of any of the transactions made or contemplated under this Agreement.
Section 4.4 CURRENCY. All pricing, payments, credits, allowances or other monetary adjustments under this Agreement will be in US Dollars.
Section 4.5 TAXES.
(a) Suppliers will pay all value added, sales or use taxes presently due, or which may become due, in China, with respect to any Product purchased by TCP. Suppliers will pay and be fully responsible for any and all contributions or taxes for unemployment insurance, old age or retirement benefits, pensions or annuities (if any) and all other employee compensation in connection with the work performed hereunder.
(b) TCP will pay all duties and other custom charges presently due, or which may become due, in the United States with respect to any Product purchased by TCP.
ARTICLE V. WARRANTY
Section 5.1 WARRANTY.
(a) Suppliers warrant that, during the warranty period described in SECTION 5.1(b) below, the Products will be merchantable, will conform to the provisions of this Agreement and to the applicable product specifications and will be free of defects in workmanship and materials. Products, at the time of delivery, will be free and clear of liens and encumbrances and claims by others. Suppliers will convey good title to the Products free and clear of any lien, claim or encumbrance.
(b) If at any time in the twenty-four months after delivery of a Product, a defect or breach of warranty is found in five percent (5%) or more of the Products in any shipment or in the Products manufactured on any day (or in any longer period), Suppliers will replace the defective or non-conforming Products at no expense to TCP. TCP will notify Suppliers of any non-conformity promptly upon discovery, and the parties will cooperate to understand the cause and amount of the non-conforming Products. At Suppliers request and expense, TCP will use
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commercially reasonable efforts to (i) provide Suppliers with samples of any non-conforming Products and (ii) will store Products (at Suppliers' expense) for inspection by Suppliers.
(c) If TCP asks for replacement Products under SECTION 5.1(b), Suppliers will deliver the replacement Products as quickly as possible, and will not delay because of any question, dispute or disagreement about the non-conforming Products or about TCP's right to request or receive replacement Products. If the parties later agree or it is otherwise determined that TCP was not entitled to replacement Products, TCP will pay for the replacement Products and the shipping or expediting expense incurred by Suppliers in order to deliver the replacement Products.
(d) Suppliers will have no responsibility or obligation under warranty claims with respect to Products that have been subjected to abuse, misuse, accident, alteration, neglect or unauthorized repair. The warranties and remedies set forth herein are conditioned upon proper storage, installation, use and maintenance, and conformance with any applicable recommendations of Suppliers or TCP.
(e) In addition to its other rights hereunder, TCP may set-off from any amounts owed by TCP to Suppliers under this or any other agreement between TCP and Suppliers any payments due TCP under this Agreement, including this ARTICLE V. The foregoing will in no way limit TCP's right to offset from any payments due to Suppliers under this Agreement amounts owed by Suppliers to TCP under any other agreement between TCP and Suppliers.
ARTICLE VI. EXCLUSIVITY
Section 6.1 EXCLUSIVITY.
(a) Except as contemplated by SECTION 6.2(b) of this Agreement, during the term of this Agreement, Suppliers will not, directly or indirectly, without the prior written consent of TCP, sell, market, offer, manufacture, produce, or otherwise make or distribute, any lamps, ballasts, light fixtures, LEDs or any other products or accessories (collectively, "COMPETITIVE PRODUCTS") that are used for the same or similar purposes as, or that are otherwise competitive with, the Products.
(b) Subject to the last sentence of this SECTION 6.1(b), and without limiting its other obligations hereunder, including, without limitation, its confidentiality obligations under ARTICLE VII, Suppliers may sell, market, offer, manufacture, produce, or otherwise make or distribute Competitive Products, and Suppliers exclusivity obligations under SECTION 6.1(a) will terminate, only if (i) during the prior six months (to be measured on June 30 and December 31 of each calendar year), the aggregate cost of all of the lighting products and accessories that TCP purchased from other suppliers, or manufactured internally, through its or any of its subsidiaries' operations, during such period exceeded 30% of the aggregate cost of all lighting products and accessories that TCP has purchased or manufactured internally during such period or (ii) if during any calendar year the aggregate dollar amount of Products purchased from Suppliers is less than 75% of the aggregate dollar amount of Products purchased from Suppliers in the prior calendar year. Within thirty days of a Supplier's request, after the ...
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