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Exhibit 10.3
PRODUCT SUPPLY AND PURCHASE AGREEMENT
This Product Supply and Purchase Agreement ("Agreement") is entered
into this
1st day of October, 2009 ("Effective Date") by and between Franklin
Wireless
Corporation, a Nevada corporation, with its principal office at
5440 Morehouse
Drive, Suite 1000, San Diego, CA 92121, USA (hereinafter referred
to as
"Franklin"), and Diffon Corporation, a Republic of Korea
corporation, with its
principal office at Digital Tower Aston Suite 1505 505-15 Gasan,
Geumcheon,
Seoul 153803, Republic of Korea (hereinafter referred to as
"Diffon"). Franklin
and Diffon are referred to individually as "Party" and collectively
as the
"Parties."
RECITALS
Whereas, Diffon is in the business
of designing, developing, and
manufacturing wireless technologies and communication products;
Whereas, Franklin desires to
purchase the Products (as defined below) from
Diffon;
Whereas, Diffon desires to sell the
Products and provide services related
thereto to Franklin on a world-wide exclusive basis, as described
in, and in
accordance with the terms and conditions of, this Agreement;
NOW, THEREFORE, in consideration of
the promises and mutual obligations
contained herein and for other good and valuable consideration, the
receipt and
sufficiency of which are hereby mutually acknowledged, Diffon and
Franklin agree
as follows:
ARTICLE 1 - SCOPE OF AGREEMENT; DEFINITIONS
1.1 SCOPE. This Agreement is to define the general business
relationship between
the Parties relating to (i) the Products supplied by Diffon to
Franklin; (ii)
the terms and conditions by which both Parties must abide; and
(iii) any
purchase by Franklin of the Products.
1.2 DEFINITIONS.
(a) "Products" means all wireless data products,
including without limitation,
modems and modules designed, developed, produced, marketed and/or
manufactured
by Diffon, including, but not limited to, those products
specifically identified
in the attached EXHIBIT A.
(b) "Territory" means the entire world.
ARTICLE 2 - APPOINTMENT; RESPONSIBILITIES
2.1. APPOINTMENT AND RELATIONSHIP. Subject to the terms and
conditions of this
Agreement, Diffon hereby appoints Franklin as the exclusive buyer
for the
Products produced by Diffon, subject to Franklin selling the
Products in the
Territory according to the terms and conditions in subsection 2.2
below.
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2.2. RESPONSIBILITIES OF FRANKLIN. Franklin hereby accepts such
appointment as
the exclusive buyer for the Products in the Territory and agrees
that it shall
use its commercially reasonable efforts to promote sales of the
Products within
the Territory.
2.3. RESPONSIBILITIES AND REPRESENTATIONS AND WARRANTIES OF
DIFFON.
(a) During the Term (as defined in Section 3
below):
(i) Diffon shall
manufacture and supply the Products exclusively to
Franklin for the sales of Products in the Territory during the
Term. Diffon
shall not manufacture, supply, sell, market, and/or distribute the
Products to
any entity or individual other than Franklin or an affiliate of
Franklin during
the Term; provided that, in the event that Franklin elects not to
sell the
Products in a particular region or area in which it cannot
effectively sell the
Products (the "Non Covered Region") Diffon may, upon receipt of
written notice
by Franklin, distribute, market and sell the Products, using the
Franklin
Wireless brand, only in the Non Covered Region.
(ii) The Products shall be
branded as "Franklin Wireless," unless
otherwise agreed upon by the Parties in writing.
(iii) Diffon shall inform Franklin
in writing of all inquiries and/or
orders for the Products that Diffon receives, directly or
indirectly, from
potential customers in the Territory.
(iv) Franklin may dispatch
Franklin's buyers and/or customers to Diffon's
factory for an inspection, study, and tour.
(v) Diffon shall furnish
to Franklin, at no cost, a reasonable quantity
of available catalogues, quotation sheets, specifications and
technical data for
use in the promotion and sales of the Products in the
Territory.
(vi) Diffon shall supply the
Products according to all reasonable
requirements of Franklin.
(vii) Diffon shall obtain Franklin's
prior written approval for any OEM
business it desires to conduct with any entity or individual other
than
Franklin.
(b) Diffon represents and warrants that the following
are true and accurate as
of the Effective Date of this Agreement, and will survive the
execution of this
Agreement:
(i) Diffon has the legal
power, right and authority to enter into this
Agreement and to consummate the transactions contemplated by this
Agreement. All
requisite action has been taken by Diffon in connection with
entering into this
Agreement and the consummation of the transactions contemplated by
this
Agreement. The individual executing this Agreement on behalf of
Diffon has/have
the legal power, right, and actual authority to bind Diffon to the
terms and
conditions of this Agreement.
(ii) Diffon has a staff of
skilled employees or other laborers, tools,
and facilities necessary and appropriate to perform its obligations
as and when
set forth in this Agreement.
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(iii) Neither the execution and
delivery of this Agreement, nor the
incurrence of the obligations set forth in this Agreement, nor the
consummation
of the transactions contemplated by this Agreement, nor compliance
with the
terms of this Agreement, will conflict with or result in a breach
of any of the
terms, conditions or provisions of, or constitute a default under,
any bond,
note or other evidence of indebtedness or any contract, indenture,
loan, or
other agreement or instrument of which Diffon is a party.
ARTICLE 3 - TERM & TERMINATION
3.1 TERM. This Agreement shall commence as of the
Effective Date and continue
for a period of three (5) years ("Initial Term"). Following the
expiration of
the Initial Term, and unless otherwise notified by Franklin in
writing, this
Agreement shall automatically, without notice, renew for three (3)
year periods
(each, a "Renewal Period"). For the avoidance of doubt, each three
(3) year
period following the Initial Term is considered a Renewal Period.
The Initial
Term and any Renewal Period(s) shall be collectively referred to as
the "Term."
3.2 TERMINATION.
(a) Franklin may terminate this Agreement at any time
upon written notice and
subject to the cure provisions set forth in clause (i) such
termination will be
effective immediately upon the date set forth in the notice if
Diffon: (i)
commits a material breach of any material provision of this
Agreement and fails
to cure such breach within thirty (30) days after receiving written
notice
describing such breach in reasonable detail from Franklin;
provided, however, if
such breach is of a nature that it can not reasonably be cured
within thirty
(30) days, then Diffon shall have an additional reasonable period,
up to ninety
(90) days, to cure such breach, providing it immediately commences
and
thereafter diligently prosecutes such cure to completion; or (ii)
sells,
assigns, exchanges, transfers or otherwise disposes of (in one
transaction or a
series of transactions) all or substantially all of its assets;
(b) Franklin may terminate this Agreement at any time
upon written notice, and
such termination will be effective immediately upon the date set
forth in the
notice, if (i) Diffon attempts to sell, assign, delegate or
transfer any of its
rights and/or obligations under this Agreement including without
limitation by
merger, operation of law or otherwise without having obtained
Franklin's prior
written consent thereto, or (ii) if there is any material change in
the
management, ownership or control of Diffon; and
(c) Diffon may terminate this Agreement at any time
upon written notice, and
such termination will be effective immediately upon the date set
forth in the
notice, if (i) C-Motech Co., Ltd acquires a majority interest in
Franklin; or
(ii) during any six (6) month period Franklin does not sell any
Products in the
Territory.
Notwithstanding the forgoing, Diffon's obligations under this
Agreement shall
remain in full effect while any purchase order ("Purchase Order")
is open and/or
unfulfilled.
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ARTICLE 4 - CERTIFICATION
4.1 PRODUCT CERTIFICATIONS. As required by all Purchase Orders
issued by
Franklin to Diffon, Diffon shall ensure that the Products comply at
all times
with any and all United States federal, state and municipal
statutes, laws,
codes and regulations including any Federal Communications
Commission ("FCC")
and CDG and GCF/PTCRB testing regulations and any other
governmental
requirements of the countries in which Franklin sells and
distributes the
Products that may apply to the content, composition, packaging,
labeling,
shipment and operation of the Products.
4.2 PRODUCT CERTIFICATION AND TESTING COSTS. Diffon shall be
responsible for the
costs of supporting all necessary testing of Products as required
to approve the
Products on the carrier system. This includes, without limitation,
CDG and
GCF/PTCRB, IOT tests, carrier prescribed tests, HAC, and any other
industry
standard testing required by Franklin's customers. Diffon shall pay
for all
certification and testing costs, including without limitation, FCC
certification
and testing. Diffon shall be responsible for all costs associated
with
supporting the testing, including engineering, staff, expenses, all
other costs
related to the testing and approval of the Products, and the
necessary testing
as described in Section 4.1 of this Agreement.
4.3 CERTIFICATION FAILURE. If any Product, in connection with this
Agreement,
fails any certification that is required or requested and which is
not an
elective certification, Diffon shall be responsible for and shall
hold Franklin
harmless from any cost, claim or liability that arises from such
failure,
including, without limitation, the retesting, reconfiguration,
software,
development, and/ or any other technical or non-technical issue
that arises from
the resolution of a failed certification test.
ARTICLE 5 - FORECASTS; FUTURE MANUFACTURING; PRICING AND
PURCHASING
5.1 PRODUCT FORECASTS. Franklin shall work closely with Diffon to
create and
communicate Product forecasts and planning efforts (each, a
"Product Forecast").
Diffon shall begin the procurement process for all orders as
Franklin requests.
All Product Forecasts shall be non-binding and for planning
purposes only,
unless otherwise agreed in writing by both Parties. From time to
time Franklin
may offer a firm Product Forecast for which the following rules
apply, unless
otherwise agreed upon in writing: (a) quantities stated for the
first month of
each Product Forecast must equal one hundred percent (100%) of the
quantities
forecast for the second month of the immediately preceding Product
Forecast; (b)
quantities stated for the second month of each Product Forecast
must not be less
than seventy percent (70%), or more than one hundred thirty percent
(130%), of
the quantities forecast for the third month of the immediately
preceding Product
Forecast; and (c) quantities stated for the next four (4) months of
each Product
Forecast shall be for planning purposes only and are
non-binding.
5.2 FUTURE MANUFACTURING. All future manufacturing of the Products
shall require
the prior written consent of Franklin. Diffon may use the C-Motech,
Ltd.
facilities to manufacture the Products; provided that (a) the terms
of
manufacturing are mutually beneficial to the Parties and (b)
Franklin provides
its prior written approval, which may be conditioned, delayed or
withheld in its
sole and absolute discretion.
5.3 PRICING. Pricing shall be on a Product by Product basis, as
specified in
EXHIBIT B. EXHIBIT B may be amended from time to time to
accommodate new
Products and or new pricing for any such Products as agreed upon by
the Parties.
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5.4 PRODUCT LEAD TIME. Unless otherwise agreed upon in writing,
Franklin shall
submit all Purchase Orders in writing at least forty (40) days
prior to the
expected delivery date for Franklin's customer. Diffon shall
provide updated and
detailed production information on all Purchase Orders which have
been accepted.
5.5 PURCHASE ORDERS. All Purchase Orders shall be submitted with
respect to the
lead time and shall be deemed accepted, if the Purchase Order is
not rejected in
writing within twenty-four (24) hours of submission. Franklin
reserves the right
to change and or modify any Purchase Order that has been submitted;
provided
however, that any change and/or modification of the Purchase Order
shall not
cause any monetary and/or financial burden to Diffon. In the event
that Franklin
enters into an agreement with a significant customer, as determined
by purchase
volume over a period of time by Franklin, Franklin shall negotiate
a separate
agreement with that customer and Diffon shall be required to
support Franklin in
order to meet any additional commercially reasonable terms and
conditions as set
forth in any additional agreement(s) that Franklin may enter into
with
individual customers.
5.6 PAYMENT. Diffon may submit an invoice to Franklin only for
Products that are
delivered and received as described in this Agreement and in
accordance with the
appropriate instructions contained in the applicable Purchase
Order. Diffon
shall not provide an invoice for more than the Purchase Order
amount.
5.7 PAYMENT TERMS. Unless otherwise agreed upon by both Parties in
writing,
payment of thirty percent (30%) of the total purchase price must
accompany the
Purchase Order and the remaining seventy percent (70%) will be paid
within 30
days after shipment or Shipper's USANCE LC 60 days, whichever is
earlier.
5.8 CURRENCY. All payments, pricing, and terms shall be calculated
in US
Dollars.
ARTICLE 6 - SHIPPING AND TITLE; ACCEPTANCE
6.1 SHIPPING AND TITLE.
(a) All Products shipped to tier 1 carriers, including,
without limitation,
Sprint, Time Warner, Comcast, Cox, Verizon, T-Mobile and AT&T
(each, a "Tier 1
Carrier") shall be shipped DDP, as modified below. All Products
shipped to other
than a Tier 1 Carrier shall be shipped FCA Korea airport, as
modified below.
Title to the Products shall be transferred upon leaving Korea,
unless otherwise
specified by both Parties in writing. FCA and DDP shall have the
meanings set
forth in Incoterms.
(b) Diffon shall be responsible for proper shipping
from Korea using
Franklin's preferred freight carrier (each, an "Authorized Freight
Company").
Diffon shall only use an Authorized Freight Company that has been
approved by
Franklin in writing. Diffon shall ship all Products in packaging
and
configuration as specified by Franklin in writing. Diffon will bear
and pay, and
otherwise take all responsibility for, causing the Products, and
all shipments
of Products, to satisfy all customs, duty, and other laws and
regulations
imposed by the United States or foreign customs authorities or
other agencies,
including, without limitation, any liability for state and local
sales, use or
other taxes, and will immediately indemnify
Frankli
