Digico Fabrication Électronique - Manufacturing Agreement

Digico Fabrication Électronique - Manufacturing Agreement

MANUFACTURING AGREEMENT

SECTION 0.0 PREFACE AND PARTIES

This Manufacturing Agreement (“Agreement”) is made and entered into as of ______, 20__ by and between ______ (______), having its place of business at ______, and Digico Fabrication Électronique. (DIGICO) having its place of business at 950 rue Bergar, Laval, Québec, Canada.

SECTION 1.0 AGREEMENT TO MANUFACTURE

1.1   Scope of Work. During the term of and subject to this agreement, ______shall purchase from DIGICO an annual quantity of Product Units at the prices attached to this agreement as Exhibit A. The units will be produced according to ______’s specifications, and a description of the products and their specifications shall be attached as Exhibit B. ______agrees to purchase from DIGICO all products manufactured in accordance with the terms of this agreement. ______shall issue a blanket purchase order, attached to this agreement as Exhibit C for the purchase of the total quantity for the Product Units in accordance with Exhibit A.

1.2   Client-supplied Materials. Upon notice to DIGICO, ______may supply materials to DIGICO. All materials will be delivered to DIGICO in sufficient time and in sufficient quantities, including normal attrition levels, to allow DIGICO to meet scheduled delivery dates for the applicable products. All consigned materials shall be in good condition and working order. ______assumes complete liability for the quality of all such materials and DIGICO shall not be responsible for any defects or deficiencies therein. In such cases, the customer shall be considered a supplier. DIGICO will issue a purchase order for the subject material at ______’s standard cost.

SECTION 2.0 PURCHASING AND CANCELLATIONS

2.1   Purchase Orders. ______will order products by issuing Purchase Orders to DIGICO. Purchase Orders may be delivered to DIGICO by any reasonable means, including but not limited to postal delivery, courier delivery, facsimile transmission, and electronic mail. Purchase Orders sent via facsimile or electronic mail may be confirmed by DIGICO, but DIGICO shall have no obligation to do so. No Purchase Order shall be binding upon DIGICO unless and until it is accepted by DIGICO in writing. Within 2 days of receipt of a Purchase Order, DIGICO shall either accept or reject the same. If DIGICO is unable to meet the delivery schedule set forth in a proposed Purchase Order or finds the same to be unacceptable for some other reason, DIGICO and ______shall negotiate in good faith to resolve the disputed matter(s).

2.2   Purchase Order Releases. ______shall issue DIGICO firm purchase order releases a minimum of 12 weeks prior to the required delivery date. In addition, ______shall provide DIGICO with a 12 month non-binding rolling forecast on a monthly basis to be used for procurement planning purposes. DIGICO shall only make purchase commitments to suppliers based upon the written Purchase Orders received from ______.

2.3   Purchase Order Contents. ______shall specify the Product Units to be delivered by DIGICO under the terms of this Agreement by issuing written purchase order releases as stated in Item 2.2. These releases shall contain the following information:

A.   The quantity and type of Product Units to be shipped.

B.   The Product Unit price.

C.   The Product Unit revision level.

D.   The delivery schedule.

E.   Destination.

F.   Required method of shipment.

G.   Reference to this Agreement.

2.4   Rescheduling of Released Orders. ______may reschedule delivery of Product by sending DIGICO a written change order. Deliveries may be rescheduled in accordance with the following schedule:

Number of Business Days Advance Notice % of Shipment Rescheduled

0 - 20 NONE

21 - 35 0 - 15%

36 - 50 16 - 25%

51 - 65 26 - 50%

66 - 90 51 - 100%

______shall assume full burdened inventory responsibility for DIGICO purchases of components within the purchase order periods plus any long lead or non-cancelable/ non-returnable (NCNR) items purchased on ______’s behalf with ______’s prior authorization. . ______responsibility shall include any premium charges for expedites. Should one or more shipments be rescheduled with a delay of greater than 30 days, inventory carrying charges of 1.5% per month will accrue.

2.5   Engineering Design Changes. DIGICO will advise within 2 days, how soon and at what cost Engineering Change Orders can be implemented. ______agrees to take financial responsibility for any increase in costs due to an Engineering Change Order.

2.6   Cancellations. In the event that ______wishes to cancel some quantity of Product Units ordered pursuant to this Agreement, DIGICO upon receipt of such written notice, shall stop work to the extent specified therein. ______'s termination liability shall be limited to the following.

A.   Payment for all Products delivered to ______and in transit, plus finished Products in inventory prior to, and including, the effective date of termination at unit prices applicable to the order;

B.   Payment for all "work-in-process" based upon percentage of completion, as determined by DIGICO, multiplied by the unit price of the Product per Exhibit A, including Products which were in process prior to receipt of notice of cancellation and that could not be completed by the cancellation date. The total unit price for work in process units will not exceed the total unit price for a completed assembly. Additional charges may be incurred as a result of the stop-work. ______may request DIGICO to complete and deliver all Product included in work-in-process.

C.   Payment for the cost plus burden and profit in accordance with agreed material prices of inventory in house and on order which cannot be canceled or returned, provided that such inventory is in support of ______purchase orders.

D.   Payment of any restocking charges, "bill-backs," and cancellation charges received by DIGICO from suppliers for components ordered for the manufacture of Products or to ______forecast plus a 5% handling fee.

DIGICO shall use its best efforts to minimize cancellation charges by returning inventory and material for credit, canceling material on order and applying material to other DIGICO projects (when possible, at the sole discretion of DIGICO) and minimizing all work-in-process and finished goods to support the final production schedule. Upon payment of the cancellation charges, all Product Units, work-in-process, and non-returnable/non-cancelable components in house or on order shall be delivered to, and become the property of ______, EX-WORKS DIGICO.

SECTION 3.0 PAYMENT AND SHIPPING TERMS

3.1   Invoices and Payment. DIGICO shall invoice ______upon shipment. Payment is due net thirty (30) days from date of shipment. Should ______fail to make payment within sixty (60) days after date of invoice, DIGICO may, at its option, (1) cease shipments to ______immediately; and/or (2) make some or all future shipments C.O.D.

3.2   Packaging and Shipping. DIGICO shall package each Product Unit to ______’s specifications, or, if not specified by ______, to good commercial standards. All shipments made by DIGICO to ______shall be Ex-Works. DIGICO. Title, risk of loss and damage shall pass from DIGICO to ______upon delivery to the ______designated carrier. Shipments will be made in accordance with ______’s specific routing instructions, including method of carrier to be used, and all special and incidental charges resulting from the choice of freight carrier shall be borne by ______.

SECTION 4.0 WARRANTY

4.1   Warranty. DIGICO warrants to ______that items assembled or manufactured by DIGICO will conform to mutually agreed upon specifications and be free from defects in workmanship under normal use and service for a period of 90 days after shipment by DIGICO. DIGICO’s responsibility shall be limited to procurement of materials, incoming inspection, and safe handling of the components while in-house at DIGICO. When vendors are expressly specified by ______, ______assumes responsibility for the selection of all materials, as well as ensuring the quality of the vendors and the compatibility of the components. Customer is also responsible for designing a product which does not unduly stress the components being used. DIGICO's obligation under this warranty is limited to replacing, repairing, or issuing credit for any said items that after inspection are deemed defective by DIGICO. All defective products shall be returned to DIGICO manufacturing facility, FCA. ______, with reference to a DIGICO supplied Returned Materials Authorization number (“RMA”). A shipping and handling charge will be assessed for invalid returns or those where no defect is found.

THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE AND FOR ALL OTHER OBLIGATIONS OR LIABILITIES ON DIGICO’S PART.

DIGICO neither assumes nor authorizes any other person to assume for DIGICO any other liability in connection with the sale of the said items. This warranty shall not apply to any of such products which shall have been repaired or altered except by DIGICO or which shall have been subject to misuse, negligence, or accident. A prior written authorization must be obtained from DIGICO before any items can be returned to DIGICO pursuant to a warranty claim. DIGICO is not liable for incidental, consequential or special damage of any kind or for personal injury resulting directly or indirectly from the design, material, workmanship, operation or installation of the items being assembled under this agreement.

SECTION 5.0 RESPONSIBILITY FOR ADDITIONAL COSTS AND EXCESS INVENTORY

5.1   Excess Inventory. In the event that DIGICO purchases or orders Materials or Parts in order to meet ______’s requirements as set forth in any Purchase Order(s), ______shall be required to purchase the unused portion from DIGICO upon demand if (i) ______fails to purchase Products in accordance with such Purchase Orders(s) and (ii) DIGICO cannot reasonably return, cancel the order for, or otherwise use such Materials or Orders at no cost to itself. The cost of such purchase by ______shall equal total cost(s) plus a 15% handling fee.

______shall also bear full burdened inventory responsibility for unconsumed material caused by supplier’s standard package or minimum order quantities. If such inventories are not consumed within 90 days of the last purchase order, DIGICO will invoice ______for the unused balances.

5.2   Additional Costs. Product Unit pricing shall remain firm for Products on ______purchase orders which have been accepted by DIGICO except as follows:

A.   In the event there is an increase in the cost of materials which affects the Product Unit price, DIGICO shall document such increase in material cost to ______so that both parties may mutually pursue alternative pricing in order to retain the original cost. If such an alternative cannot be attained within a reasonable period of time, the prices in Exhibit A shall be adjusted to reflect the actual cost of the increase.

B.   ______will be responsible for certain charges defined as those charges constituting costs and expenses not contained in the quoted contract price, where the cause is due to ______'s actions, including but not limited to:

1.   Overtime charges and actual expenses incurred as a result of delays in the normal production or interruption in the work flow process where such delays or interruption are caused by: (a) ______change in product specification or product test which impacts a build in progress, or (b) failure to provide sufficient quantities or a reasonable quality level of consigned materials where applicable to sustain the production schedule.

2.   Any inventory rendered obsolete as a result of a ______engineering, field, manufacturing, design, test, or other change. Such obsolete inventory shall be invoiced at the total cost plus 15% handling, and shall be packaged and delivered to ______by DIGICO, EX-WORKS DIGICO shipping point, within 30 days of the change effective date.

3.   Expenses incurred due to ______'s packaging requirements.

SECTION 6.0 TERM AND TERMINATION

6.1   Term and Termination. The initial term of this Agreement shall commence on the date of execution hereof and extend for five years with automatic bi-annual renewals (every 2 years) unless terminated according to one or more of the following provisions:

A.   At any time upon the mutual written agreement of both parties;

B.   At the end of the Initial Term or any subsequent one-year term by either party upon written notice to the other party received not less than sixty (60) days prior to the expiration of any such term;

C.   By either party upon thirty (30) days written notice to the other party following a material breach of the Agreement by the other party and the breaching party’s failure to cure such breach with reasonable promptness in light of all surrounding circumstances;

D.   By either party upon the other party seeking an order for relief under the bankruptcy laws of Canada or similar laws of any other jurisdiction, a composition with or assignment for the benefit of creditors, or the dissolution or liquidation.

Upon any such termination, ______shall be liable, in the event of any cancellation of current purchase orders with DIGICO, according to Section 2.0, Item 2.6, “Cancellations.”

SECTION 7.0 INDEMNIFICATION

7.1   Product Indemnification. ______agrees that it will fully indemnify DIGICO against any and all claims, liabilities, damages or causes of action hereafter brought or asserted by any person or entity arising out of the design, installation or use of any Product(s) manufactured by DIGICO under this Agreement. Such indemnification shall include attorney's fees and all other costs incurred by DIGICO in the defense of such claims, asserted liabilities or causes of actions.

7.2   Patents, Copyright, Trade Secret and Other Proprietary Rights. ______agrees to defend at its expense any suit brought against DIGICO based upon a claim that finished Product(s) manufactured by DIGICO under this Agreement infringes on a patent, copyright, trade secret and other proprietary right, foreign or domestic, and to pay the amount of any settlement or the costs and damages finally awarded provided that DIGICO promptly notifies ______and provides ______with reasonable assistance in the defense of any such action.

8.0   MISCELLANEOUS

8.1   Entire Agreement. This Agreement shall constitute the entire Agreement between the Parties with respect to the transactions contemplated hereby and supersedes all prior agreements and understandings between the Parties relating to such transactions. The Exhibits listed below are considered to be a part of this Agreement: