SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO.2 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______
Commission file number 0-12829
GRADCO SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 95-3342977
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3753 Howard Hughes Pkwy, Ste 200,
Las Vegas, Nevada 89109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 892-3714
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No par value
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(Title of Class )
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Cover page (cont'd)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
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The aggregate market value of voting stock held by non-affiliates of the
Registrant (based on the closing sales price of Gradco common stock on the
NASDAQ National Market System on June 7, 1996) was $27,749,546.
The number of outstanding shares of each class of the Registrant's common stock
outstanding at June 7, 1996 was: common stock, no par value--7,798,909 shares.
EXHIBIT 10.19
CONFIDENTIAL TREATEMENT
Note: Confidential treatment has been requested for portions of this Exhibit,
and these portions have been removed from this filing in the places
labeled "CONFIDENTIAL TREATMENT."
AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into as of the seventeenth day of
August, 1995 by and among Gradco (Japan) Ltd., a Japanese corporation having
its principal place of business at Nagai Memorial Hall, 12-15, 2-Chome,
Shibuya, Shibuya-ku, Tokyo 150 Japan and Gradco (USA) Inc., a California
corporation and a wholly-owned subsidiary of Gradco (Japan) Ltd., having its
principal place of business at 39 Parker, Irvine, CA 92718, USA (hereinafter
collectively referred to as "Gradco") and Xerox Canada Ltd., a company
continued under the laws of Canada having a place of business at 3060 Caravelle
Drive, Mississauga, Ontario, Canada L4V 1L7(hereinafter referred to as "Xerox")
with respect to the basic business terms and conditions for the development,
production, purchase and sale of certain paper handling devices between the
parties,
Witnesseth:
WHEREAS, Gradco is engaged in the business of research, development and
production of certain paper handling devices for sale to original equipment
manufacturers for use with office copiers and printers utilizing technologies
developed by Gradco and has recently developed a new sorter with patented and
patentable technology under its project name of Comet and desires to have a
third party make versions of such sorter for Gradco for resale of certain
sorters to various OEM customers.
WHEREAS, Xerox has engineering and manufacturing capacities and desires to use
such capacities to make versions of such sorter for Gradco for resale of
certain sorters to various OEM customers.
WHEREAS, prior to this Agreement, Gradco has completed technology transfer of
certain presently known versions of such sorter to Xerox for Xerox to start
production design and engineering as soon as possible.
NOW, THEREFORE, in consideration of the above and mutual covenants set forth
below, Gradco and Xerox agree to the following,
1 Products
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This Agreement shall cover the versions of the Comet sorter defined in
Exhibit A (hereinafter "Products") to be manufactured by Xerox as agreed
between Xerox and Gradco for Gradco's customers.
2 Manufacture and Sale of Products
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During the term of this Agreement, Gradco shall perform product planning,
marketing and sales of the Products and Xerox shall perform production
design and engineering including modifications and improvements based on
the basic design concept and technology of the Products provided by Gradco
and manufacture of the Products for Gradco.
3 Purchase Orders
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3.1 All purchases and sales shall be covered by individual purchase orders
issued by Gradco and accepted by Xerox. All necessary information
pertaining to individual deliveries of the Products, not covered under
this Agreement, including but not limited to (i) purchase order number;
(ii)customer name; (iii) Product versions and/or their model numbers; (iv)
unit price; (v) quantity per model; (vi) destination for transactions;
(vii) shipping week shall be covered under the individual purchase orders.
The terms and conditions of this Agreement shall prevail in the event of
any inconsistencies with the written terms and conditions of the
individual purchase orders.
3.2 The standard order lead time of Xerox is eight (8) clear weeks FOB
Exfactory after receipt of purchase order from Gradco. Xerox shall accept
purchase orders from Gradco on a weekly basis to be received by Xerox by
noon Friday EST. If Xerox has production flexibility issues with Purchase
Order, Xerox will communicate these concerns to Gradco within five (5)
working days, standard lead-time will then begin when such issues are
resolved.
3.3 Gradco shall issue to Xerox upon written request from Xerox a Material
Authorization to acquire parts or material required to satisfy Gradco's
purchase orders which have lead time in excess of Xerox's normal eight (8)
weeks FOB Exfactory lead time.
3.4 Xerox shall make a best effort to satisfy Gradco's inside of lead time
emergency requests for the Products and spare parts.
3.5 Xerox requires five (5) months lead-time to increase manufacturing capacity
for requests that drive total monthly requirements to a level greater than
one hundred and twenty (120%) of manufacturing capacity to be agreed upon
between the parties.
3.6 Gradco understands the importance and difficulty of maintaining production
line by Xerox without a long-term commitment from Gradco. Xerox
understands the nature of Gradco's business with OEM and the difficulty to
obtain a long-term commitment from such OEM. Therefore, Gradco shall use
its reasonable best efforts to keep monthly production quantity level of
Xerox without a major increase or decrease, and provide Xerox with non-
binding twelve (12) months forecast by the end of each calendar quarter.
4 Specifications
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4.1 Basic specification of the Products shall be agreed to by and between
Gradco and Xerox with respect to the Products purchased by Gradco from
Xerox to reflect the changes necessary, if any, to satisfy the requirements
of Gradco's customers, and shall be added to Exhibit A.
4.2 Gradco and Xerox shall negotiate and amend the basic specifications, at the
time such amendment is deemed necessary by both parties or those resulting
from unintended causes.
4.3 Terms and conditions specified in the Purchase Orders, such as unit price,
quantity, delivery date, shall be renegotiated by Gradco and Xerox, if they
are affected by amendment to the specifications.
5 Delivery, Title and Risk of Loss
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5.1 Delivery of the Products shall be FOB Exfactory Xerox dock. Title and risk
of loss shall pass to Gradco from Xerox upon such delivery.
5.2 It is understood that delivery is the essence of this Agreement. In the
event that there is a delay not attributable to Gradco, its customer or
causes specified in Article 15, Xerox agrees to discount two percent (2%)
for delays in delivery of greater than two (2) weeks and five percent (5%)
for delays in delivery of greater than four (4) weeks from the total
invoice amount of the corresponding shipments. This provision will not be
in effect during the first three months of production of any new version of
the Product, but Xerox agrees to use its best efforts to avoid any delay in
delivery.
6 Price and Payment
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6.1 The basic unit price of the Products shall be FOB Exfactory and as
specified in Exhibit B set in US Dollars and/or in Japanese Yen and will be
amended yearly by mutual agreement.
6.2 Gradco and Xerox are committed to a best effort to achieve a minimum of
"CONFIDENTIAL TREATMENT" per cent year over year cost productivity provided
Gradco orders quantities of the Products to justify price reductions.
Currency impacts greater than plus or minus "CONFIDENTIAL TREATMENT" per
cent of the unit price of the Products shall be shared equally by Gradco
and Xerox. All cost adjustments shall be reviewed annually.
6.3 Payment by Gradco to Xerox shall be made by wire transfer to the designated
bank account of Xerox by the twenty fourth (24th) day of the following
month against all invoices issued by Xerox to Gradco for the Products
delivered during each month. The penalty for late payments by Gradco to
Xerox will be at a rate of twelve percent (12%) annual interest compounded
daily for payments not remitted by the last day of the month due.
6.4 Gradco shall be responsible for all goods and services taxes and provincial
taxes that are required for deliveries to Canadian customers.
7 Tooling
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7.1 Gradco generic tooling as defined in Exhibit C and all unique tooling of
Gradco's customer to be defined from time to time shall become the sole and
exclusive property of Gradco and/or its customer upon the completion of
amortization or payment by Gradco to Xerox under the terms and conditions
to be agreed upon between the parties in each instance. Such tooling shall
be used for the sole purpose of manufacturing the Products ordered by and
for delivery to Gradco.
7.2 Tool life is guaranteed by Xerox for three hundred thousand (300,000) units
of the Products for tooling that is common across versions of the Products
as defined in Exhibit C and added from time to time. Tool life for tooling
that is unique to particular versions of the Product will be defined from
time to time and added to Exhibit C. Xerox shall use its best efforts to
preserve and protect, normal wear and tear excepted, all tooling which is
in the care, custody or control of Xerox, and shall promptly notify Gradco
in the event of any casualty to or loss or destruction of such tooling and
take such action as is necessary to save Gradco harmless.
8 Inspection and Warranty
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8.1 Xerox shall perform outgoing in-house inspection of each of the Products
prior to shipment, in accordance with the outgoing in-house inspection
standards as determined by the agreement of Gradco and Xerox. Gradco
or its designated agent (including Gradco's customer) may attend such an
inspection. Gradco may perform sampling tests on each shipment of the
Products. If any outgoing in-house inspection of the Products fails the
outgoing in-house inspection standards, Xerox shall withhold such shipment
and repair such failed Products promptly at its cost and expense. If Xerox
cannot effectively repair such shipment within thirty (30) days, Gradco may
cancel the order of such failed shipment of the Products.
8.2 Xerox warrants that each of the Products sold by Xerox to Gradco shall
conform to the specification and shall be free from defects in material and
workmanship for twelve (12) months following installation on a Gradco's
customer's copier or printer or eighteen (18) months from the date of
delivery, whichever comes first. In the event of a breach of such
warranty, Xerox shall be liable for repairing the Products or furnishing to
Gradco replacement of defective part, promptly after Gradco notifies Xerox
thereof. Xerox shall bear the costs for repairing the Products and for all
necessary replacement parts, freights, duties, insurance and other expense
in repairing the Products and furnishing such replacement parts to Gradco.
8.3 Xerox's obligation hereunder is conditioned upon the immediate submission
within fifteen (15) days to Xerox by Gradco of a service report which
specifies the defect in detail with such information as the Products'
serial number and delivery date. When practicable and at Xerox's request,
the defective Products shall be returned as promptly as is feasible with
all shipping, insurance and other charges prepaid and reimbursed to Gradco,
either to Xerox's factory or to some other place mutually agreeable to
Xerox and Gradco. Xerox shall return the Products to Gradco or its
customer with all shipping, insurance, and other charges prepaid. If the
Products are found to be outside warranty or not defective, Gradco shall
pay for all real and reasonable expenses incurred by Xerox.
8.4 In the event that Xerox receives a service report from Gradco and fails to
repair the defective Products or fails to replace the defective parts,
within thirty (30) days Gradco may undertake to repair the defective
Products which are delivered to Gradco, provided that Xerox shall reimburse
to Gradco reasonable costs of parts and labor charges required for
repairing the defective Products upon receipt of a detailed written report
of such costs from Gradco. Xerox shall furnish to Gradco, if requested by
Gradco, technical information required to repair the defective Products.
8.5 Any claim arising under this paragraph shall be settled by the amicable
cooperation between Gradco and Xerox in the best possible way to minimize
and to avoid unnecessary expense and time.
9 Modification and Improvement of Products
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9.1 Xerox shall be entitled to improve or modify the Products with regard to
performance, reliability and overall quality with prior written consent of
Gradco, which shall not be unreasonably withheld, provided that such change
shall not adversely affect the form, fit or function of the Products.
9.2 Any modification to the Products which may be requested by Gradco and
accepted by Xerox is subject to an equitable price change agreed to in
each instance in writing by both parties.
10 Replacement Parts, Service
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10.1Xerox shall maintain a supply of replacement parts, enabling prompt supply
of replacement parts upon request from Gradco. The delivery of the
replacement parts shall be within two (2) months from the date of order for
the Products in production. The delivery of replacement parts for the
Products no longer in production shall be negotiated by both parties.
Should Gradco move the production of any version of the Products to another
manufacturer and terminate Xerox's manufacture of such version of the
Products, Xerox shall no longer hold any liability to provide replacement
parts for such version of the Products. In such instance, at termination,
Xerox shall provide Gradco the opportunity for a one time purchase of
component parts, terms and conditions of such purchase to be negotiated at
that time.
10.2Price, minimum order quantity and emergency order handling charge for
replacement parts shall be in accordance with the price list issued by
Xerox and accepted by Gradco. The price of a full set of spare parts for
units shall not exceed the price of one unit of the Products, plus or minus
any cost specifically related to spare parts. Price is to be confirmed
based on each order for replacement parts for the discontinued Products.
10.3a) The expected replacement life and price of individual replacement parts,
as defined in Exhibit D, shall be agreed upon by the parties.
b) Xerox shall maintain a supply of replacement parts for a term of seven
(7) years after the date of final delivery of any individual Product,
subject to a shorter term upon agreement of the parties. This seven (7)
year term shall commence upon the failure of Gradco to order for delivery
an average monthly volume of one thousand (1,000) units of the Products for
any period of three consecutive months, subject to short term volume
fluctuations below the rate of one thousand (1,000) units accepted by
Xerox. This seven (7) year term will commence with respect to unique parts
for any individual version of the Products, when Gradco either i) gives to
Xerox six (6) months notice of discontinuation of that individual version
of the Products or ii) fails to order that individual version of the
Product for six (6) consecutive months, unless Gradco confirms by a
forecast reflecting future orders for that individual version of the
Products.
c) Discontinuation of any parts or destroying of tooling materials shall be
negotiated between the parties, on a case by case basis.
10.4Gradco shall be responsible for maintenance service for its customers.
Xerox shall cooperate with Gradco for such service upon Gradco's request,
provided that the reasonable cost and expense of Xerox shall be borne by
Gradco.
11 Principal to Principal
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11.1The relationship between Gradco and Xerox shall be that of Buyer and
Seller. Unless otherwise agreed upon separately, no license is granted by
Gradco to Xerox or Xerox to Gradco under any patent or patent rights of
either party.
11.2Neither party is in any way a legal representative or an agent of the other
party for any purpose whatsoever. Neither party has any right or authority
to assume or create, in writing or otherwise, any obligation of any kind,
expressed or implied, in the name of or on behalf of the other.
11.3Gradco, during and after the term of this Agreement, may manufacture by
itself or have a third party manufacture the Products.
12 Industrial Property Rights
--------------------------
12.1Gradco shall defend at its expense and hold Xerox harmless from all claims,
suits, damages arising out of actions or proceedings charging infringement
of any and all patents, registered designs, copyright or other industrial
property rights in any country of the world by reason of use of Gradco's
data, technology (including but not limited to know how) by Xerox for
manufacturing and sale of the Products pursuant to this Agreement.
12.2Xerox shall defend at its expense and hold Gradco and its customers
harmless from all claims, suits, damages arising out of actions or
proceedings charging infringement of any and all patents, registered
designs, copyright or other industrial property rights in any country of
the world by reason of use of Xerox's data, technology (including but not
limited to know how) by Xerox for manufacturing and sale of the Products
pursuant to this Agreement.
12.3In the event that either party becomes aware of any claim, suit, action or
proceeding set forth above, such party shall promptly notify the other
party thereof in writing and shall cooperate with the other in the defense
thereof.
12.4It is understood and agreed between Gradco and Xerox that Xerox shall
advise Gradco of Xerox's intention to file any patent application relating
to the Products which may be implemented to the Products, and Gradco shall
have the right to determine the implementation of any of the patents owned
by Xerox into the Products and the right to request that improvements in
the Products developed by Xerox under this Agreement shall not be
implemented if they are patented. Xerox and Gradco shall determine in
advance whether a Xerox patent implemented into the Products shall or shall
not require a royalty payment in the event that Xerox no longer continues
to manufacture the Products. Xerox agrees to permit Gradco to make, use,
import and sell the Products under any such patent or patents subject or
not subject to a royalty payment as agreed to in advance.
13 Product Liability
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Xerox agrees to indemnify, hold harmless, and defend Gradco, its
subsidiaries and affiliates, and their customers from and against claims,
damages, liabilities, costs, and expenses, including attorney's fees
(hereinafter "Claim"), that may be claimed or asserted against them on
account of any actual damage to property or any actual injury or death
arising out of, in connection with, or resulting from the Products provided
and/or services performed by Xerox under this Agreement, including poor
workmanship or use of unauthorized material or parts in the Products,
provided that any such Claim is not caused directly or indirectly by Gradco
customer's host machine on which the Product is used or by any
modification of the Products made by Gradco and/or its customers; provided
that the design of the Products or selection of any part or construction
method is deemed responsible for such Claim and utilized by Xerox was not
at the specific direction of Gradco; provided that Xerox is promptly
notified in writing of any Claim, given all reasonable assistance required,
and permitted to direct the defense. Xerox shall have no liability for
settlements or costs incurred without its consent.
14 Secrecy
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14.1During the term of this Agreement and three years thereafter, neither party
shall use the confidential information of the other nor disclose it within
its own organization, without prior written consent of the other party
which shall not be unreasonably withheld, except to the extent necessary
for:
(a) negotiations, discussions and consultations with personnel or
authorized representatives of Gradco;
(b) supplying Gradco with results of development services;
(c) preparing bids, estimates and proposals for submission to Gradco;
(d) any purpose that Gradco may hereinafter authorize in writing.
The obligations of either party shall terminate with respect to any
particular portion of the confidential information which:
(a) was in the public domain at the time the communications were received;
(b) entered the public domain through no fault of either party subsequent
to the time of communication thereof to either party.
(c) was in either party's possession, free of any obligation of confidence,
at the time of communication thereof;
(d) was rightfully communicated to either party free of any obligation of
confidence, subsequent to the time of communication; or
(e) was developed by employees or agents of either party independently of,
and without reference to, information that either party has disclosed
in confidence to any third party.
14.2Xerox shall advise its personnel, who have a need to know, of the existence
of this Agreement, the fact that Xerox, subject to the issuance of
Purchase Orders from Gradco, will be manufacturing products for third
parties who are competitors of Xerox Corporation with respect to similar
products, and that the use of the knowledge of the existence of this
Agreement, or the content or details related to any Purchase Order received
from Gradco under this Agreement for product delivery to any such third
party, would be detrimental to both Xerox and Gradco and is forbidden as a
matter of Xerox Policy.
15 Force Majeure
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Neither Gradco nor Xerox shall be liable in any manner for failure or delay
in fulfillment of all or part of this Agreement, directly or indirectly,
owing to acts of God, governmental orders or restriction, war, threat of
war, warlike conditions, hostilities, sanctions, mobilization, blockade,
embargo, revolution, riot, strike, lockout, plague or other epidemics,
fire, flood, earthquake, labor troubles that are not caused by Xerox fault
or negligence but are causing cessation, slowdown or interruption of work,
inability to procure materials, accessories, equipment or parts, or any
other cause or circumstances beyond its control, provided that the party so
affected shall give the other party a notice immediately after the
occurrence of such failure or delay and that the parties involved shall
hold discussions in good faith to settle the matter.
16 Term
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16.1This Agreement shall become effective on the date and year first above
written and, unless sooner terminated, shall remain in force for a period
of three years after such effective date.
16.2Thereafter, this Agreement shall be automatically renewed from year to
year under same terms and conditions unless termination notice is given by
either party six months prior to the end of the term then in effect.
16.3In the event of the expiration of this Agreement, all orders placed by
Gradco but not yet fulfilled by Xerox prior to the expiration date of this
Agreement shall be valid and fulfilled by Xerox and all parts purchased by
Xerox in accordance with Gradco's commitment in writing prior to the date
of expiration of this Agreement shall be purchased and paid by Gradco.
17 Termination
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17.1If either party shall (i) become insolvent, file or have filed against it a
petition of bankruptcy, (ii) make general assignment for the benefit of
creditors, or (iii) be in breach of or default in any provision of this
Agreement and not cure such breach of default within thirty days after
notice thereof, the other party in addition to any of its other rights and
remedies as a result thereof, shall have the right to terminate this
Agreement by giving a written notice thereof.
17.2If it becomes impossible to continue manufacture and sale of the Products
by reason of infringing any right of a third party, either party shall have
the right to terminate this Agreement, provided that both parties shall
negotiate in good faith terms and conditions for all orders not yet
fulfilled at the time of such occurrence.
17.3In the event of termination, Gradco owns all tooling and product design.
In the event that the contract is terminated before Gradco has completed
payment for tooling, Gradco shall at the time of termination pay for all
tooling and take ownership of said tooling.
17.4After termination, Gradco will within 30 days notify Xerox how to dispose
of all tooling.
18 Notice and Other Communications
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18.1Except as either party may hereafter notify the other in writing with
respect to itself, the addresses of the parties for purposes of this
Agreement shall be:
Gradco (Japan) Ltd.
Attn.: Tony Shinomiya, Senior Vice President
Nagai Memorial Hall,
12-15, 2-Chome, Shibuya, Shibuya-ku,
Tokyo 150 Japan
Xerox Canada Ltd.
Attn.: Les Moore, Director Canadian Manufacturing Operations
3060 Caravelle Drive, Mississauga
Ontario, Canada L4V 1L7
18.2All orders, notices, reports, payments and communication pursuant hereto
are to be delivered to the intended receiving party by hand or registered
mail, or by confirmed facsimile, to the address provided in paragraph 18.1
hereof, and shall be deemed delivered when handed or mailed to the intended
receiving party.
19 Severability
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This Agreement is intended to be valid and effective throughout the world
and, to the extent permissible under applicable law, shall be construed in
a manner to avoid violation of or invalidity under any applicable law.
Should any provision hereof nevertheless be or become invalid, illegal or
unenforceable under any applicable law, the other provisions hereof shall
not be affected, and to the extent permissible under applicable law, any
such invalid, illegal or unenforceable provision shall be deemed amended
lawfully to conform to the intent of the parties.
20 Governing Law
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In the event either party discovers any doubts or differences of
interpretation in this Agreement, both parties endeavor to resolve such
issues amicably out of court for mutual benefit. If the dispute has not
been resolved by negotiation as provided herein, the parties shall endeavor
to settle the dispute by minitrial under the then current Center for Public
Resources (CPR) Model Minitrial Procedure. The parties will agree on a
neutral advisor with assistance of CPR. The laws of New York State shall
govern in interpretation of this Agreement.
21 Non-Assignability
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This Agreement shall not be assigned or transferred by either party without
the written consent of the other, except in the event of any reorganization
of Xerox, or except to a successor in ownership of all or substantially all
the assets of the assigning or transferring party, and which successor
shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by the assigning or
transferring party as if it were named herein the place of the assigning or
transferring party.
22 Entire Agreement, Modifications
22.1This Agreement constitutes the entire understanding of the parties relating
to the subject hereof and supersedes all other agreements and
understandings, whether written or oral.
22.2This Agreement may be amended or modified only in writing signed by the
duly authorized representatives of the respective parties.
23 Non-Waiver
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All rights and remedies of the parties hereto are separate and cumulative,
and no one of them, whether exercised or not, shall be deemed to limit or
exclude any other rights or remedies which the parties hereto may have.
The parties hereto shall not be deemed to waive any of their rights or
remedies under this Agreement except by a duly executed written waiver. No
delay or omission on the part of either party in exercising any right or
remedy shall operate as a waiver of such right or remedy or any other right
or remedy. A waiver of any right or remedy on any one occasion shall not
be constructed as a bar to or waiver of such right or remedy on any future
occasion.
24 Disclaimer
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In no event shall either party be liable to the other for lost contracts or
lost profits or any special, indirect, incidental or consequential damages
in any way arising out of or in connection with this Agreement however
caused under a claim of any type or nature based on any theory of liability
(including contract, tort, or warranty) even if the possibility of such
damages has been communicated. This disclaimer does not apply to the
indemnification of the other party specified in this Agreement nor to the
obligations under Article 14.
25 Headings
--------
Headings contained in this Agreement are solely for the convenience of the
parties hereto and shall not be deemed to or be used to define, construe or
limit any of the provisions hereof.
26 Publicity
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Neither party shall issue a press release or other like publicity of any
nature regarding this Agreement without the other party's written approval;
provided, however, that such approval shall be deemed to have been given to
the extent such disclosure is required to comply with governmental rules,
regulations or requirements. In such event, the publishing party shall
review the text of such disclosure with the other party prior to such
disclosure. Without prior written consent of Xerox, Gradco shall not (a)
make any news release, public announcement, denial or confirmation of this
Agreement or its subject matter, or (b) advertise or publish any facts
relating to this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representative.
Gradco (Japan) Ltd. Xerox Canada Ltd.
By:____________________________ By:____________________________
Masakazu Takeuchi Les Moore
President Manager, Input/Output Business Centre &
Director, Canadian Manufacturing
Operations
Gradco (USA) Inc.
By:____________________________
Masakazu Takeuchi
President
EXHIBIT A
"COMET SPECIFICATION"
(TO BE AMENDED BY THE PARTIES FROM TIME TO TIME, AS AGREED)
Comet
10 Bin and 20 Bin Sorter Stapler
Preliminary
Product Specifications
April 4, 1995
Rev. Date
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A 4/4/95
B 4/14/95
C 8/7/95
D 8/11/95
Table of Contents Page
- -----------------
1 PRODUCT SUMMARY 4
2 PRODUCT CONFIGURATION 4
2.1 Number of Bins 4
2.2 Physical Size 4
2.2.1 With Stapler 4
2.2.2 Without Stapler 4
2.3 Host Feed Speed / Inter-Copy Gap 4
2.4 Electrical Configuration 4
2.4.1 With / DC Power Supply 4
2.4.2 No Power Supply - DC Supplied from the host 4
2.5 Customer Appearance and Accessory 4
2.5.1 Color and Finish 4
2.5.2 Manuals and Labels 4
2.5.3 Cover Gap 4
3 PERFORMANCE 5
3.1 Paper Size 5
3.2 Paper Weight 5
3.2.1 Non Sort Mode 5
3.2.2 Sort / Group / Staple Mode 5
3.3 Bin Capacity 5
3.4 Set Registration 5
3.4.1 Staple Mode 5
3.4.2 Other Modes 5
3.5 Stapling 5
3.5.1 Staple Capacity 5
3.5.2 Staple Location 5
3.5.3 Staple Cartridge Capacity 5
3.6 Staple Mode 6
3.6.1 Auto Staple Mode 6
3.6.2 Manual Staple Mode 6
3.6.3 Offline Staple Mode 6
3.7 Stapling Speed 6
4 HOST MACHINE 6
4.1 Speed (sheets per minutes) 6
4.2 Exited Paper Registration 6
5 AUDIBLE NOISE 6
6 RELIABILITY 6
6.1 This Product 6
6.1.1 Product Life 6
6.1.2 Jam Rate 6
6.1.3 Mis-sort Rate 6
6.1.4 MTBF 6
6.1.5 MTTR 6
6.2 Stapler 6
6.2.1 Product Life 6
6.2.2 Staple Jam 6
7 ELECTRICAL CHARACTERISTICS 7
7.1 Electrostatic Discharge Susceptibility 7
7.2 Impulse Noise Immunity 7
7.3 Low Voltage (Brown-Out) 7
8 ELECTRICAL INTERFACE 7
9 AGENCY COMPLIANCE 7
9.1 Safety Agency 7
9.2 Noise Emission 7
9.3 Others 7
Page 2
Page
10 MAINTENANCE 7
11 ENVIRONMENT 7
11.1 Operating Environment 7
11.2 Storage and Transportation Environment 7
11.3 Standard Environment 7
12 PACKAGING 8
12.1 Drop Test 8
12.2 Vibration Test 8
12.3 Compression Test 8
13 DELIVERABLES 8
13.1 Phase 1 - 1st Proto Type 8
13.2 Phase 2 - 2nd Proto Type 8
13.3 Phase 3 - Pilot Build Unit 8
13.4 Preproduction 8
Page 3
PRELIMINARY PRODUCT SPECIFICATIONS
Comet Sorter Stapler
1 PRODUCT SUMMARY
The Comet is targeting Segment 2-3, for mid end market. The concept of
this product is COMPACT and LOW COST. There are four (4) variations of
Comet, such as 10 bin with stapler, 10 bin without stapler, 20 bin with
stapler and 20 bin without stapler. Without stapler version does not come
equipped with Stapler assy / Paper Aligner assy.
2 PRODUCT CONFIGURATION
2.1 Number of Bins
10 or 20 Bins (Including Top Tray)
2.2 Physical Size - Target
2.2.1 With Stapler
Depth: 550mm
Height: 260mm (10 Bin), 450mm (20 Bin)
Width: 350mm
Weight: 14kg (10 Bin), 20kg (20 Bin) - No Paper
2.2.2 Without Stapler
Depth, Height and Width are same as with Stapler version.
Weight: 10kg (10 Bin), 15kg (20 Bin) - No Paper
DRAWING OMITTED
Drawing indicates that depth of sorter is measured from the
front of the host copy machine to the back, width is measured
from the host copy machine to the start of the paper trays and
height is measured from top to bottom of the sorter.
2.3 Host Feed Speed / Inter-Copy Gap
TBD
2.4 Electrical Configuration
Customer can select either with AC / DC Power Supply inside the sorter
or not. The unit must operate under the following condition.
2.4.1 With / DC Power Supply
From 85V to 265VAC, 50 and 60 (plus or minus 0.5) Hz
2.4.2 No Power Supply - DC Supplied from the host
24 plus or minus 1 VDC Peak 4.5A
Typical 1.0A
5 plus or minus 0.25 VDC Peak 0.4A
Typical 0.15A
2.5 Customer Appearance and Accessory
Color and physical appearance must be harmonized with the host machine.
2.5.1 Color and Finish
Color and Finish to be complied with Customer's request.
2.5.2 Manuals and Labels
Artworks for Manuals and Labels shall be provided by customer.
2.5.3 Cover Gap
Cover gap must be maintained within 2 plus or minus 1 mm.
Covers must be kept in parallel. Recess must be provided for
visible screw-heads. Covers are preferably backed up, then
operator cannot see through the inside.
Page 4
3 PERFORMANCE
The sorter must comply with the following requirement when standard
condition, as follows, is met.
Standard Condition
------------------
Customer's Genuine Standard Paper (75g/square meter or 80g/square meter)
A4 or Letter Size Paper
Standard Environment
Some degradation is expected when the condition is not standard.
3.1 Paper Size
Paper Orientation
A3/Ledger SEF
B4/Legal SEF
A4/Letter SEF/LEF
B5 SEF/LEF
A5/Stat SEF/LEF
A6/Post Card SEF
Note: "Stat" stands for "Statement, 8 1/2 X 5 1/2 size paper.
DRAWING OMITTED
Drawing indicates direction of SEF (short edge feed) and
LEF (long edge feed).
3.2 Paper Weight
55g/square meter to 200g/square meter
3.2.1 Non Sort Mode
55g/square meter to 200g/square meter
Special materials (such as Transparency, Labels, etc.) to be tested
and agreed for performance prior to specification sign off.
3.2.2 Sort / Group / Staple Mode
55g/square meter to 127g/square meter (2 sheets of 200g/square meter
must be allowed for cover sheet copy mode.
3.3 Bin Capacity
Non Sort Sort Group Staple
A3/Ledger 150 25 15 25
B4/Legal 150 30 20 30
A4/Letter 150 50 35 50
B5 150 50 35 50
A5/Stat 150 N/A N/A N/A
A6/Post Card 150 N/A N/A N/A
3.4 Set Registration
3.4.1 Staple Mode
Side to Side: 1mm
Direction of Feed: 1mm
3.4.2 Other Modes
Side to Side: plus or minus 6mm
Direction of Feed: 12mm
3.5 Stapling
3.5.1 Staple Capacity
50 sheets
3.5.2 Staple Location
DRAWING OMITTED
Drawing indicates staple is to be located 6mm from the top edge
of the paper and 6mm from the left edge at a 45 degree angle.
3.5.3 Staple Cartridge Capacity
5,000 staple wires
Page 5
3.6 Staple Mode
Following 3 modes are available for stapling. To enable manual and
offline staple described below, the unit must have Manual Staple
Button and LED on itself.
Manual Staple Button: This is provided to initiate manual staple.
Manual Staple LED: This is provided to indicate the condition of the
products for staple whether stapling is possible or not.
3.6.1 Auto Staple Mode
In this mode, stapling is automatically performed after the sort
job is completed. This mode is normally selected by pressing
auto-staple select button on host machine. This mode is only
selectable when the host copier has a DADF, or is a printer.
3.6.2 Manual Staple Mode
After sort job is completed, the operator can select and execute
manual stapling by pressing Manual Staple Button on the product
when Manual Staple LED is lit.
3.6.3 Offline Staple Mode
Operator can perform staple for one set by inserting a set on
top tray, then pressing Manual Staple Button.
3.7 Stapling Speed
25 seconds for 20 Bins
4 HOST MACHINE
4.1 Speed (sheets per minutes)
Up to 50cpm Engines
4.2 Exited Paper Registration
Center or Front Registration
5 AUDIBLE NOISE
Less than 49dB(A) - Except stapling noise (60dB(A) for stapling peak)
6 RELIABILITY
6.1 This Product
6.1.1 Product Life
2,500,000 sheets or 5 years when the following duty cycle is
applied.
35% Sort and Staple
15% Sort Only
50% Non Sort
6.1.2 Jam Rate
1/5,000
6.1.3 Mis-sort Rate
1/10,000
6.1.4 MTBF
250,000 sheets
6.1.5 MTTR
30 minutes
6.2 Stapler
6.2.1 Product Life
200,000 shuts
6.2.2 Staple Jam
20/200,000
Page 6
7 ELECTRICAL CHARACTERISTICS
7.1 Electrostatic Discharge Susceptibility
Rise Time: 5nsec max.
Half amplitude width: 30nsec
RC: 200pF, 200ohms
At peak voltage of +15kV: Pass
At peak voltage of +20kV: Fail, but no damage
Test Environment: 18 degrees C/64 degrees F to
25 degrees C/77 degrees F, 40% to 60%RH
7.2 Impulse Noise Immunity
Fast rising, low energy conducted pulse.
Rise Time: from 5 to 10nsec
Pulse Width: from 100 to 800nsec
Pulse value of 1kV: Pass
Pulse value of 2kV: Fail, but no damage
7.3 Low Voltage (Brown-Out)
Correct sorter functionality with the following condition.
V1: 0% of nominal line voltage for 0.5cycles/10msec
V2: 70% of nominal line voltage for 25cycles/0.2msec
V3: 90% of nominal line voltage continuously
8 ELECTRICAL INTERFACE
The product must have RS-422 serial port to communicate with the host
machine. Details of electrical interface will be specified separately by
Interface Specifications.
9 AGENCY COMPLIANCE
This product shall comply with the following requirements.
9.1 Safety Agency
UL1950, CSA22.2 No. 950
TUV-GS (IEC 950)
9.2 Noise Emission
FCC Part 15 Class B
VDE 0871 Class B
9.3 Others
CE Mark
Blue Angel
10 MAINTENANCE
No special tool is required.
11 ENVIRONMENT
11.1 Operating Environment
Temperature: 10 degrees C to 30 degrees C
Humidity: 15% to 85%RH
11.2 Storage and Transportation Environment
Temperature: -15 degrees C to 55 degrees C
Humidity: 10% to 85%RH
11.3 Standard Environment
Temperature: 15 degrees C to 26 degrees C
Humidity: 40% to 60%RH
Page 7
12 PACKAGING
For environment protection, use of Expanded Polystyrene and Glued
Fabrication is not permitted, and packaging material must be recyclable.
Details such as appearance / size of carton are to be described separately
in Packaging Specifications.
12.1 Drop Test
NSTA Project 1A ir JIS-Z0200 Level I and II
12.2 Vibration Test
NSTA Project 1A ir JIS-Z0200 Level I and II
12.3 Compression Test
Packed unit must withstand under the load of units stacked in 5m high
warehouse with safety factor 5.
13 DELIVERABLES
Basic required deliverables from CMOT to Gradco are as follows. Each
prospect may have each individual requirement. Such individual requirements
are to be discussed and agreed at the early stage of each customizing task.
13.1 Phase 1 - 1st Proto Type
Proto 1 Hardware
Principles of Operation
Test Data
13.2 Phase 2 - 2nd Proto Type
Proto 2 Hardware
Test Data
Draft Functional Description
Draft Spare Parts List
13.3 Phase 3 - Pilot Build Unit
Pilot Build Hardware
Test Data
Final Functional Description
Draft Assembly Instructions
Final Spare Parts List
Draft Spare Parts Drawing
Draft Indented BOM
Draft Electrical Schematics & Wiring Diagram
Service Document (Adjustment and Replacement Instruction)
13.4 Preproduction
Preproduction Hardware
Test Data
Quality Plan
Final Assembly Instructions
Final Spare Parts Drawing
Final Electrical Schematics & Wiring Diagram
Final Indented BOM
Complete Drawing Package for all parts
SPC Process Qualification Data
Page 8
EXHIBIT B
BASIC UNIT PRICE
(to be amended yearly, as agreed)
A table listing prices for 20 bin and 10 bin sorters to be made for Xerox
Corporation and Rank Xerox as well as generic versions, both with and without
stapler. The pricing is stated separately for CBOM (consolidated bill of
materials), labor, G&A, profit, subtotal, packaging and transfer price (total).
All prices are subject to "CONFIDENTIAL TREATMENT".
EXHIBIT C
GRADCO UNIQUE TOOLING
A table listing tooling costs (in thousands of dollars) for 20 bin and 10 bin
sorters to be made for Xerox Corporation and Rank Xerox as well as generic
versions, both with and without stapler. The tooling costs are stated
separately for alignment assembly, covers, elevator assembly, latch & mounting,
mechanical frame assembly, miscellaneous, paper feed module, stapler feeder,
transport assembly, tray assembly, subtotal, assembly tooling and total.
Footnotes state that (1) generic 20 and 10 bin with and without stapler will
use the same cover set and (2) unique generic tooling and M&E costs are only
estimates; final tooling and M&E costs are subject to change based on the
specifications required by each customer.
All amounts are subject to "CONFIDENTIAL TREATMENT".
EXHIBIT D
SPARE PARTS LIST
"CONFIDENTIAL TREATMENT"
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: July 9, 1997
GRADCO SYSTEMS, INC.
--------------------
Registrant
By: /s/ Bernard Bressler
------------------------------------
Bernard Bressler
Secretary and Treasurer
