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MANUFACTURING SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is effective November 27, 2000, by and between
Celerity Systems, Inc., a Delaware corporation (hereinafter referred to as
CUSTOMER) located at 122 Perimeter Park Drive, Knoxville, Tennessee 37922 and
Nextek, Inc. (hereinafter referred to as NEXTEK) an Alabama Corporation, located
at 201 Next Technology Drive, Madison, Alabama 35758, for the purchase and sale
of various products (Product) as detailed in the CUSTOMER's purchase orders
under the following teams and conditions:
1.0 TERM
The term of this Agreement shall be for a period of not less than twelve
(12) months from the effective date hereof; but shall automatically extend
to include the term of any CUSTOMER purchase order.
2.0 PRICES AND DELIVERY
Prices are as defined in NEXTEK quotations, and agreed to in writing by
each CUSTOMER purchase order, and are based on the configuration specified
in each purchase order by referencing the desired assembly drawing package
revision. Pricing is valid for all deliveries occurring during the term of
the respective purchase order, unless otherwise specified. Product
ordering and delivery shall be in accordance with the schedule or method
of releases by purchase orders. Unless otherwise specified, prices include
NEXTEK designed packaging according to best commercial standards. All
product shipments shall be F.O.B. Madison, Alabama and freight collect.
2.1 Schedule or Method of Purchase Order Releases
CUSTOMER shall provide NEXTEK with an initial ninety (90) day firm
purchase order commitment and a non-binding forecast for product
requirements for an additional six (6) months. The next month, the first
non-binding forecast month shall automatically become part of the current
ninety (90) day purchase order commitment, a new non-binding forecast
month shall be defined by the CUSTOMER in writing, and a new firm purchase
order issued within five (5) working days, so that a rolling firm purchase
order commitment of ninety (90) days is maintained. If material lead-times
exceed the 90-day firm commitment the CUSTOMER shall provide specific
purchase order coverage for long lead-time items if NEXTEK is to place
orders for said material.
3.0 PAYMENT TERMS
Payments for any Products, services or other costs to be paid by CUSTOMER
hereunder are 2% ten (10), net thirty (30) days from the date of invoice.
If CUSTOMER is late with payments, NEXTEK reserves the right to add
interest to the invoice at the rate of 1.5% per month from maturity to
date of payment.
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4.0 CHANGES
4.1 Product pricing shall remain firm for those quantities which the CUSTOMER
has issued NEXTEK purchase order releases. The CUSTOMER may be responsible
for certain additional charges constituting costs and expenses not
contained in the quoted price, where the cause is due to CUSTOMER actions
and falls into one of the following categories.
(a) 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 interruptions are caused by:
(1) Engineering Changes in product specification pursuant to the
provisions of Section 4.2;
(2) Failure to provide sufficient quantities or a reasonable quality
level of consigned materials where applicable to sustain the
production schedule.
(b) Any inventory rendered excess and/or obsolete as a result of a CUSTOMER
engineering, manufacturing, design, test, or other change that could not
be consumed by other CUSTOMER orders within thirty (30) days, or could not
be returned to suppliers; provided, however, such obsolete and/or excess
inventory may be delivered to CUSTOMER by NEXTEK, F.O.B. shipping point,
at CUSTOMER expense and risk upon request.
(c) Expenses incurred due to CUSTOMER engineering changes, manufacturing,
design, test, or other change.
4.2 CUSTOMER may request, in writing, that NEXTEK incorporate an Engineering
Change in the Product. Such request will include a description of the
proposed change sufficient to permit NEXTEK to evaluate its feasibility.
NEXTEK's evaluation shall be in writing and shall state the cost increase
or decrease, if any, expected to be created by the Engineering Change, and
its implementation date. If CUSTOMER requests NEXTEK in writing to
incorporate an Engineering Change into the Product, the product
specification and pricing schedule set forth in the affected CUSTOMER
purchase order(s) will be amended as required within five (5) working
days. NEXTEK shall not unreasonably refuse to incorporate CUSTOMER
Engineering Changes in the Product when requested by the CUSTOMER.
4.3 NEXTEK may, as appropriate, during manufacture of product make suggestions
for cost saving design changes. The parties shall share equally in any
NEXTEK proposed design changes accepted by CUSTOMER which result in cost
savings.
5.0 RESPONSIBILITY FOR EQUIPMENT PERFORMANCE
Unless otherwise stated, CUSTOMER bears design responsibility for the
subject product. NEXTEK bears responsibility for good workmanship and
operational performance as it is affected by proper manufacture,
procurement of materials and test compliant with specifications of the
respective purchase order.
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6.0 ACCEPTANCE FOR TITLE TRANSFER
Acceptance shall occur at NEXTEK's facility based upon satisfactory
completion of a mutually agreeable Acceptance Test Procedure or Inspection
designed to demonstrate specification compliance or at CUSTOMER's facility
no later than fifteen (15) days after receipt. Product shall be deemed
accepted if not rejected within this period. Risk of Loss shall pass to
CUSTOMER upon delivery by NEXTEK to the carrier.
7.0 CUSTOMER FURNISHED EQUIPMENT, MATERIAL AND DOCUMENTATION
Equipment, materials or documentation as outlined in the respective
purchase order or as otherwise documented shall be provided by CUSTOMER to
NEXTEK for use in the performance of this agreement. Any CUSTOMER
furnished equipment, material, or documentation shall be fit for its
intended purpose and delivered to NEXTEK in a timely manner. CUSTOMER
shall be responsible for schedule delay, reasonable inventory carrying
charges and allocated equipment downtime charges associated with late or
non-delivery of CUSTOMER furnished items. Documentation, including, but
not limited to, bills of material, drawings, artwork, program code, CAD
and Gerber data shall be current and complete NEXTEK shall be responsible
for reasonable diligence and care in the use and protection of any
CUSTOMER furnished equipment, but shall not be liable for repair or
replacement due to normal failure or wear and tear or maintenance costs
unless agreed to in writing by NEXTEK.
8.0 ORDER OF PRECEDENCE
When interpreting this Agreement precedence shall be given to the
respective parts in the following descending order:
(1) This Agreement
(2) If purchase orders are used to release product, those portions
of the purchase order that are not pre-printed.
9.0 CONFIDENTIAL DATA
All written information and data exchanged between the parties for the
purpose of enabling NEXTEK to manufacture and deliver product under this
Agreement that are marked "Confidential" or the equivalent shall be deemed
Confidential Information. The party which receives such Confidential
information agrees not to disclose it directly or indirectly to any third
party without the prior written consent of the disclosing party.
Confidential Information disclosed pursuant to this Agreement shall be
maintained confidential for a period of five (5) years after the
disclosure thereof. No right or license either expressed or implied is
granted to either party under any patent: patent application, or any other
intellectual property right as a result of such disclosure.
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10 INDEMNITY
10.1 CUSTOMER agrees, at its expense, to defend and indemnify NEXTEK in any
suit, claim or proceeding brought against NEXTEK alleging that any product
or part hereof manufactured pursuant to this Agreement directly or
indirectly infringes any patent, copyright, trademark or mask work
provided CUSTOMER is promptly notified, given assistance required, and
permitted to direct the defense.
10.2 CUSTOMER agrees, at its expense, to defend and indemnify NEXTEK in any
suit, claim or proceeding brought against NEXTEK which alleges loss,
damage, expense or injury, including without limitation total or partial
product recalls, which arise from any failure to warn relating to the
product or defect in design of CUSTOMER product, providing CUSTOMER is
promptly notified, given the assistance required and permitted to direct
the defense.
11.0 ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder shall be
transferred or assigned by either party without the written consent of the
other party, which consent shall not be unreasonably withheld.
12.0 NOTICE
Notice under any provision of this Agreement shall be deemed good and
sufficient if sent by any method providing for return receipt to:
Celerity Systems, Inc. NEXTEK, Inc.
Attn: President Customer Service Representative
122 Perimeter Park Drive 201 Next Technology Drive
Knoxville TN 37922 Madison, AL 35858
13.0 TAXES AND DUTIES
13.1 All taxes or charges other than those based on net income imposed by any
taxing authority upon the manufacture, sales, shipment or use of the
product which NEXTEK is obligated to pay or collect, shall be added to the
purchase price paid by the CUSTOMER.
13.2 Any cost increase of components due to the increase or addition of a duty,
tariff or Fair Market Value by any government entity after the effective
date of the respective CUSTOMER purchase order shall be added to the
purchase price paid by the CUSTOMER.
14 WARRANTY AND DISCLAIMER
14.1 Unless otherwise agreed to is writing, NEXTEK's warranty period is for one
(1) year from date of manufacture and such obligation shall be limited to
correction of defects in NEXTEK workmanship. Additionally, NEXTEK shall
pass all material warranties through to CUSTOMER. NEXTEK shall, at its
option, repair and replace or issue a credit for product found defective
during the warranty period. This warranty does not apply to (a) materials,
consigned by CUSTOMER to NEXTEK; (b) defects resulting from CUSTOMER's
design of the products; (c) Product that has been abused, damaged, altered
or misused by any person or entity after title passes to CUSTOMER.
NEXTEK MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESSED,
IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR
COMMUNICATION WITH CUSTOMER, AND NEXTEK SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTY OR CONDITION OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
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14.2 NEXTEK shall concur in advance on all products to be returned for repair
or rework. CUSTOMER must obtain a Returned Material Authorization (RMA)
number from NEXTEK prior to return shipment. All returns will be processed
in accordance with NEXTEK's RMA procedure. A handling charge may be
assessed for invalid or no defect found returns.
14.3 Neither party shall be liable for consequential, special, indirect or
incidental damages including loss of profits as a result of the breach of
this Agreement.
15.0 FORCE MAJEURE
15.1 Neither party shall be responsible for any failure to perform due to
unforeseen circumstances or causes beyond its control and without its
fault or negligence. Example of such causes are acts of nature or of the
public enemy, war, riot, embargoes, acts of civil or military authorities,
fire, floods, unusually severe weather, accidents, strikes and shortages
of transportation facilities, fuel, labor or materials.
15.2 If, however, NEXTEK fails to perform any of its obligations for reasons
defined above, for a cumulative period of ninety (90) days or more from
the date of NEXTEK's notification to CUSTOMER, then CUSTOMER at its option
may extend the corresponding delivery period for the length of the delay,
or cancel this Agreement for convenience in accordance with Paragraph 16.
16.0 CANCELLATION
CUSTOMER may cancel this Agreement; any supplement thereto or purchase
order, at any time, for any reason at its own convenience. In such case,
CUSTOMER will be responsible for all reasonable cancellation charges.
Cancellation charges shall include, but not be limited to, full price for
completed product required to fill open CUSTOMER orders, charges related
to material ordered to meet forecasts within component lead times, labor
and materials relating to work-in-process, vendor cancellation and
restocking charges (if any), and a reasonable profit not to exceed 20%.
Excess material will be shipped to CUSTOMER upon receipt of payment.
NEXTEK shall make available to CUSTOMER for its inspection, inventory,
work-in-process, documents and other evidence bearing on the payment of
the cancellation charges. The following specific terms shall apply to the
cancellation of any order with relation to materials:
a. Any materials purchased pursuant to CUSTOMER direction that
are considered Non-Cancelable/Non-Returnable will be invoiced
with markup at time of cancellation.
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b. The residual material resulting from the purchase of minimum
reel quantities or minimum order quantities will be invoiced
including markup at such time that no further requirements for
the material are evident.
17.0 TERMINATION
Either party may terminate this Agreement for default if other patty
materially breaches this Agreement. However, no right of default shall
accrue until thirty (30) days after the defaulting party is notified in
writing of the material breach and has failed to cure or give adequate
assurances of performance within the thirty (30) day period after notice
of material breach.
18.0 RESCHEDULING OF ORDERS
CUSTOMER may reschedule all or part of a scheduled delivery one (1) time
per twelve month period far a period not to exceed forty-five (45) days in
accordance with the table below. At the end of this forty-five (45) day
period, CUSTOMER shall either accept delivery of rescheduled finished
units and/or pay the material cost associated with rescheduled units not
yet built including material markup.
Days Before P.O. Delivery Date Percentage Reschedule Allowance
0-30 0%
31-60 25%
60-90 50%
(greater than) 90 100%
18.1 NEXTEK shall use its best efforts to accommodate any upside schedule
changes beyond the firm order periods. CUSTOMER will pay any expedite
fees, express freight charges, and overtime associated with a requested
expedite. NEXTEK will advise in advance in writing of these premium
charges. NEXTEK will use due diligence to commit to premium charges on
only those material items with component lead-times beyond the purchase
order delivery date.
19.0 ENTIRE AGREEMENT
As stated above, this Agreement and any other Agreement incorporated by
reference, including the respective EXHIBITS to this Agreement, constitute
the entire agreement of the parties, superseding all previous Agreements
covering the subject matter, It shall not be changed or modified except by
written Agreement, specifically amending, modifying and changing this
Agreement, signed by NEXTEK and an authorized representative of the
CUSTOMER. If CUSTOMER's purchase order is used to release product under
this Agreement, any terms relating to CUSTOMER's purchase order shall not
apply unless otherwise agreed to by NEXTEK.
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20.0 GOVERNING LAW
This Agreement shall be constrained in accordance with and governed by the
laws of the State of Alabama.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the date on page one, by their officers, duly
authorized.
NEXTEK, INC. CUSTOMER
BY: /s/ JAMES L. HARRIS BY: /s/ KENNETH D. VAN METER
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Signature Signature
Typed Name James L. Harris Kenneth D. Van Meter
President and CEO
Title VP Marketing, Sales &
Customer Service
November 21, 2000 November 22, 2000
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