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Exhibit
10.1
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CONFIDENTIAL PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE
“COMMISSION”) |
AGREEMENT FOR THE
MANUFACTURING & SUPPLY OF VLU5 PRODUCTS
| 1. |
PARTIES & EFFECTIVE DATE |
AGREEMENT (this “
Agreement ”), effective 1 January 2008 (“
Effective Date ”) is made between: Plextek Limited, a
company registered in England (No. 2305889) and having its
registered office at London Road, Great Chesterford, Essex, CB10
1NY, UK (“ Plextek ”), LoJack Equipment Ireland
Limited whose registered office is at 25-28 North Wall Quay, Dublin
1 (“LEI”) and LoJack Operating Company, L.P, a Delaware
Limited Partnership having its principal place of business at
Meditech Executive Center, 200 Lowder Brook Drive, Suite 1000,
Westwood, MA 02090 (“LOC” and, collectively with
LEI, “Customer”).
Plextek and Customer desire
to enter into a contract on the terms stated herein for Plextek to
continue to manufacture and supply to Customer VLU5 stolen vehicle
recovery products (including all variants thereof) (“
Products ”) in accordance with the terms and
conditions set forth in this Agreement. This Agreement supersedes
the Design, Manufacturing and Supply Agreement of December 29,
2003, as amended, and all other agreements and understandings with
respect to the manufacture and supply of VLU products, except the
Technology Escrow Agreement of January 1, 2006, and the
Agreement of June 20, 2006 among Plextek, Customer and Clarion
(Malaysia) Sdn Bhd.
This Agreement governs
supporting Customer’s previous Product designs including any
engineering and design required for manufacturing, maintaining or
commencing volume production, all coordination with the approved
contract manufacturer, preparation of the manufacturing line for
volume production, and the supply of such Products by Plextek to
Customer during the term.
| 4. |
PRODUCT AND SERVICES SUPPLY |
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4.1
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Notwithstanding anything
herein to the contrary, Customer shall not be restricted from
having 3 rd parties manufacture and supply products other than VLU5
Products without remuneration to Plextek.
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| 4.2 |
Customer
agrees to purchase from Plextek, and Plextek agrees to sell to
Customer not less than ** VLU5 Products (the “
Minimum Volume Commitment ”) from ** to
** subject to the terms and conditions of this Agreement. At
Customers option, the number of units which Customer
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shall Purchase and Plextek
shall supply may be increased by up to ** additional units,
and the production period but not the period within which the
Minimum Volume Commitment must be purchased may be extended by up
to ** .
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| 4.3 |
Plextek shall continue to use the current contract manufacturer
for the Products to be produced pursuant to this
Agreement. |
| 4.4 |
Plextek shall share with Customer all information relating to
the production, development, and supply of the Products. Without
limiting the foregoing, Plextek shall provide Customer on a timely
basis the complete bill of materials, schematics, gerber files,
source code, object code, and manufacturing test code for each
Product, together with all updates and revisions thereto, and
complete cost information for all goods and services, whether
provided directly by Plextek or by subcontract or
purchase. |
| 4.5 |
Plextek shall use commercially reasonable efforts to
continuously reduce the cost of the Products, while maintaining or
exceeding Customer’s quality standards and specification
requirements. |
| 4.6 |
The parties shall continue to use the already established
Executive Steering Committee whose processes are to communicate
high level issues related to services and products provided by
Plextek as defined in this agreement. The Executive Steering
Committee shall maintain its current structure and shall continue
to meet twice per year. The Operating Team will continue to meet on
a weekly basis to address ongoing operational issues. |
| 4.7 |
Without Customer’s prior written consent,
(i) Plextek shall not produce for, or sell to, any third party
any LoJack System products, services or components, and
(ii) Plextek shall cause the contract manufacturer for the
Products not to produce for, or sell to, any third party any LoJack
System products, services or components, except for Permitted
Products. “Permitted Products” shall mean products not
in excess of ** units per annum which (i) incorporate a
circuit design or circuit board designed for the VLU5 product,
(ii) are sold to a governmental agency for national security
or military purposes, (iii) are not for tracking, location and
recovery of vehicles, goods in transit, people and valuable or
important mobile objects, and (iv) do not incorporate Customer
proprietary information other than that created by NRE under a
contract between Customer and Plextek in connection with the
circuit or circuit board design. The foregoing is not intended to
preclude the use of a VLU5 radio circuit for communications in a
device which determines location by GPS or other technology without
use of Customer proprietary information. In the event that Plextek
has a market for Permitted Products in excess of ** units
per annum, the parties will negotiate in good faith for an
equitable remuneration to Customer on a per unit basis. Such
remuneration shall not exceed the lesser of $ ** /unit or
** % of the VLU5 derived element of Plextek’s margin
on such units. Plextek shall not restrict the contract manufacturer
for the Products (or any supplier) from contracting with,
manufacturing for, or selling to, Customer. |
| 5.1 |
Unit pricing for all products shall be as set forth in Exhibit
A hereto. |
| 5.2 |
All pricing and payments hereunder shall be denominated and
paid in US Dollars. |
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| 6. |
ORDER, PLANNING AND FORECAST PROCEDURE |
| 6.1 |
2008 Plan . Customer will deliver to Plextek a plan with
volumes through December 2008 or any applicable extended term.
Projected volumes will include a break-out of volumes by frequency
variations. |
| 6.2 |
Rolling Forecast . Each month Customer will provide to
Plextek a schedule (“Recon”) that outlines monthly
requirements by derivative and variant. Customer and Plextek will
develop mutually agreeable forecasting and ordering procedures, it
being understood that Customer’s and Plextek’s
objective is to have such procedures be consistent with the
following: |
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6.2.1 |
The first month of the succeeding quarter shall constitute a
firm order for the specified quantities. The second month shall
constitute a firm order, which may be adjusted for each Product up
or down not more than 15% by Customer by written notice given
during the first month; provided, however, that Plextek agrees to
negotiate in good faith with the contract manufacturer to obtain
additional flexibility with minimal impact to Customer’s
total cost. The third month shall constitute a firm order, which
may be adjusted up or down not more than 25% by Customer by written
notice given during the first month, and not more than 15% by
written notice given during the second month. |
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6.2.2 |
In the event specialized inventory is required to build
inventory for Products that are designed to operate in countries
where a small quantity of Products generally are sold each year,
then Customer agrees to reimburse Plextek (at cost) for any excess
component or material inventory purchased for such small volume
variants due to bulk purchasing requirements. Inventory
reconciliation shall be made every six months during the term.
Notwithstanding the foregoing, Customer’s reimbursement
obligation shall not accrue so long as there is an ongoing forecast
of unit purchases for such small volume variants. |
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6.2.3 |
Plextek shall be required to accept and deliver orders
consistent with this Section 6.2 provided that if Plextek
determines in good faith that compliance with this obligation would
result in Plextek being unable to continue to perform its
obligations under this Agreement without jeopardizing its ability
to operate as a going concern, then the parties agree to use good
faith efforts to negotiate a mutually acceptable resolution, such
resolution potentially including without limitation Plextek
relinquishing its remaining obligations to Customer at a price (if
any) to be determined based on the circumstances and in exchange
for transferring to Customer all Plextek’s rights and
responsibilities under this Agreement and under any associated
supply agreement with the contract manufacturer. |
| 6.3 |
Conference Calls . There shall be a weekly conference
call to finalize weekly shipping information, and to give insight
into future periods in accordance with the above
schedule. |
| 6.4 |
Purchase Orders . Customer will issue a blanket purchase
order that shall be amended periodically to reflect orders becoming
firm and changes in quantities pursuant to Section 6.2.1 and
for other changes agreed by the parties. Only written or secure
electronically dispatched purchase orders issued by Customer shall
be valid. Verbal orders, additions or changes, shall be legally
binding solely to the extent confirmed in writing by facsimile or
secure electronic means by Customer and accepted by Plextek in
writing (including by facsimile or secure electronic means).
Plextek shall confirm purchase orders, or additions or changes
thereto, within five (5) working days of receipt. |
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| 6.5 |
Inventory . Plextek shall maintain a piece part
inventory to support Product mix and frequency shifts to
accommodate short term shifts in demand in accordance with the
discretion provided for in Section 6.2.1. Availability of
materials to support production will be maintained at an agreed
upon level, and reviewed monthly. The parties agree to negotiate in
good faith on a case-by-case basis, any fluctuations within lead
times that may become necessary. |
| 6.6 |
Approved Vendor List . Plextek shall maintain an
approved vendor list for all components used in the production of
Products for Customer, subject to review and approval by
Customer. |
| 6.7 |
Production Procedures . Production of Products shall
include procedures for supplying secret codes, serializing,
packaging, and labeling as specified by Customer. |
| 6.8 |
Disaster Recovery . Plextek will continue to execute the
manufacturing of Products in two separate facilities with similar
capacity levels to mitigate the loss of production and testing
capacity should one of the facilities suffer an incident such as
fire or explosion that would render all or part of the
manufacturing capacity useless. |
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6.9
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Contingency for 2
nd
Source for
Manufacturing .
Plextek will develop and maintain a business relationship with at
least one alternative contract manufacturer which could be used to
produce Products promptly following any force majeure event
involving the then current contract manufacturer, or any failure of
the then current contract manufacturer to perform as
agreed.
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| 6.10 |
Service Level Commitments . Plextek and Customer will
jointly develop appropriate service level commitments relating to
such matters as delivery schedules, quality standards, process
controls, invoice accuracy, and forecast accuracy. |
| 6.11 |
Information Requirements . Plextek and Customer will
utilize existing appropriate information reporting requirements
covering such matters as advance shipping notices, production
schedules, inventories, production yields, and in-transit
materials. |
| 6.12 |
Quality and Reliability Standards . Plextek shall build,
and shall cause its contract manufacture to build, all Products
utilizing professional workmanship and quality standards consistent
with the standards maintained by experienced high quality
electronics manufacturers of similar products. |
| 7.1 |
Unless agreed
otherwise, payment of all valid invoices rendered under this
Agreement for goods sold to Customer shall be made in US Dollars
within 30 days from the later of (i) receipt of invoice at
Customer’s accounts payable department. Invoices not paid by
the Receipt Date plus 45 days will accrue interest from the date
due until paid at the rate of one percent (1%) per month (12%
per annum). All invoices shall include detail regarding amounts
payable to the contract manufacturer and amounts payable to
Plextek. Customer shall pay Plextek and the contract manufacture
for the respective amounts payable to each of them set forth on
such invoices. Plextek shall have the option at any time to have
all amounts be payable directly to Plextek (and for Plextek, in
turn, to pay the contract manufacturer), such option to
be
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exercisable by Plextek
delivering written notice to Customer, which notice shall become
effective on the later of the next invoice date or 45 days after
receipt by Customer of such notice.
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| 7.2 |
Plextek may terminate this Agreement if Customer fails to make
timely payment of sums due to Plextek, and such condition has not
been cured within sixty days of written notice thereof by Plextek;
provided, however, that, Plextek may not suspend performance or
terminate this Agreement for reason of non-payment by Customer of
any amounts disputed in good faith. In the event of the alleged
failure of Customer to pay any dollar amount or portion thereof
when such amount is due, if the obligation is disputed in good
faith by Customer, this Agreement shall continue in effect and
Plextek shall continue to provide goods and services hereunder
until the earlier of its expiration pursuant to its terms or the
failure of Customer to pay such dollar amount or portion within
twenty (20) days of a resolution of the disputed amount in
favor of Plextek. |
| 8.1 |
Products will be made available “Ex Works”
(Incoterm 2000) at the factory of the contract manufacturer.
Customer will arrange for collection of goods, arrange for shipment
of US-bound product and notify licensees of availability of their
product for shipment arrangements. |
| 8.2 |
Any liability of Plextek for non-receipt of goods by Customer
shall be limited to replacing the goods within a reasonable time or
issuing a credit note against any invoice raised for such
goods. |
| 8.3 |
All Products shall be delivered with all regulatory and other
governmental approvals necessary for the sale and marketing in such
jurisdictions as Customer shall specify from time to time;
provided, however, that Customer shall bear the cost (without
mark-up) of obtaining regulatory approvals necessary for the sale
and marketing of Products in jurisdictions which do not follow the
regulatory requirements of the United States of America or European
Union. |
| 9.1 |
Plextek shall be responsible for deliverables of each contract
manufacturer and supplier selected by Plextek, notwithstanding any
final approval of such selection by Customer. |
| 9.2 |
Notwithstanding the above, in the event of any delays caused by
Customer Deliverables, Plextek shall make all commercially
reasonable efforts to ensure that any resulting delay to Plextek
Deliverables is minimised. |
| 10. |
ACCEPTANCE OF PRODUCTS |
| 10.1 |
The provisions of this Section 10 shall apply only with
respect to Products that have been produced for commercial
sale. |
| 10.2 |
Customer shall be entitled to reject Products (“
Rejected Products ”) that are found: |
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(a) |
to have been materially damaged prior to Delivery,
or |
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(b) |
not to comply with any specification for the Products agreed in
writing between Plextek and Customer. |
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| 10.3 |
The Customer shall notify Plextek in writing of Rejected
Products within ten business days of Delivery and will return
Rejected Products at Plextek’s expense and risk to
Plextek’s designated repair site. Before returning any
Rejected Products, Customer will discuss with Plextek via telephone
Customer’s reason for such rejection. Notwithstanding any
such discussions, Customer shall be entitled to return such
Rejected Products after ten business days of commencing any such
discussions with Plextek. |
| 10.4 |
Upon return of the Rejected Products Plextek will as soon as
reasonably practical (at its own option) either repair, replace or
credit Customer for Rejected Products. The cost associated with any
such repair, replacement or credit will be the responsibility of
Plextek. In the case of replacement or credit, title to the
Rejected Products shall pass to Plextek on delivery to
Plextek. |
| 10.5 |
In the absence of earlier notification of rejection, Customer
will be deemed to have accepted Products ten business days after
Delivery. Customer approval of any sample or acceptance of any
goods shall not relieve Plextek from responsibility to deliver
goods and perform services conforming to specifications, drawings,
and descriptions or waive any warranty rights of
Customer. |
| 11. |
ENGINEERING CHANGE CONTROL |
| 11.1 |
Either party may at any time propose changes to the
specifications of Products by a written Engineering Change Order
(“ ECO ”) to the other party. |
| 11.2 |
The recipient of an ECO will use all commercially reasonable
efforts to provide a detailed response within ten business days of
receipt. |
| 11.3 |
Plextek will advise Customer of the likely impact of an ECO
(including but not limited to delivery scheduling and Prices) on
any current or future Orders. |
| 11.4 |
Neither party will unreasonably withhold or delay agreement to
an ECO and the parties will endeavour to agree and implement at the
earliest opportunity ECOs relating to personal and product
safety. |
| 11.5 |
Until an ECO and any associated impact has been agreed in
writing, the parties shall be entitled to perform their obligations
without taking account of that ECO, and neither party shall be
obliged to implement any changes not covered by an ECO. |
| 11.6 |
Plextek and the contract manufacturer will not deviate from the
approved bill of materials and manufacturing process without first
gaining approval of the proposed change from the Customer’s
engineering department via an approved ECO. |
| 12. |
INTELLECTUAL PROPERTY |
| 12.1 |
Plextek
agrees that all intellectual property resulting from work performed
pursuant to this Agreement will be a “work for hire”
(the “ Work ”) and the Work and all such
materials shall be owned and controlled exclusively by Customer.
Ownership of all intellectual property in the Work shall vest
irrevocably in Customer upon creation. Customer nevertheless shall
have the obligation to pay development phase milestone payments
that Customer becomes obligated to pay in accordance with the terms
of this Agreement; provided that Customer’s ownership of
all
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intellectual property in
the Work shall vest entirely in such portion that has been created
prior to the making of each milestone payment. In the event of a
dispute over the amount due, Customer shall make payment of the
disputed amount under protest and otherwise in accordance with the
terms of this Agreement. Upon resolution of the dispute, to the
extent that the amount paid exceeds the amount ultimately found to
have been due, Plextek promptly shall pay the excess to Customer.
To the extent that for any reason any part of the Work shall be
determined not to be a “work for hire,” Plextek hereby
assigns to Customer without additional compensation all of
Plextek’s right, title and interest in and to such Work, free
and clear of all liens and encumbrances. Customer hereby grants to
Plextek a limited, nonexclusive, perpetual, royalty-free license to
use the intellectual property in the Work (the “ Licensed
IP ”) in other products developed by Plextek;
provided , however , that in no event shall any of
the Licensed IP be used in any product or service that is offered
for sale, marketed, or otherwise made available for the purpose of
tracking, locating or recovering assets or people or for products
for sale to or by any Competitor; and provided further however that
in no event shall Licensed IP include any of LoJack’s
Background IP. The term “ Competitor ” shall
mean any of the following entities (or any of their affiliates),
subject to updating not more frequently than each calendar quarter
by mutual agreement (which agreement shall not be unreasonably
withheld or delayed) for such additional companies as are
identified in the future to then be in competition with Customer or
any of its licensees. **
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Customer agrees to Plextek
continuing its commercial and trading relationship with **
for Products.
| 12.2 |
To the extent that Plextek, in the course of Plextek’s
work or assignments for Customer, utilizes or adapts intellectual
property that Plextek has previously created or with respect to
which Plextek is the owner of any intellectual property rights
(including without limitation any manufacturing techniques used in
the production of Products, Plextek hereby grants to Customer a
nonexclusive, perpetual, transferable, royalty-free license to all
such rights now existing or hereafter arising or created in law or
equity in such intellectual property for use in connection with any
product or service now known or hereafter developed, including
without limitation, the right to sublicense such rights to others
for manufacture or other purposes. Such license shall include
Plextek-developed proprietary factory infrastructure only if
(a) Plextek has ceased all business operations, voluntarily or
involuntarily, (b) Plextek has been adjudicated as bankrupt,
or; has had a receiver or trustee appointed for all or
substantially all of |
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