UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0 - 23426
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REPTRON ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
Florida 38-2081116
- --------------------------------- -----------------------------------
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
14401 McCormick Drive, Tampa, Florida 33626
- ------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 854-2351
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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 preceding 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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6,147,119 shares of common stock issued and outstanding as of May 10, 1999.
- --------- -------------
REPTRON ELECTRONICS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Statements of Operations - Three
months ended March 31, 1999 and March 31, 1998 3
Consolidated Balance Sheets -- March 31, 1999
and December 31, 1998 4
Consolidated Statement of Shareholders' Equity
-- Three months ended March 31, 1999 and year
ended December 31, 1998 5
Consolidated Statements of Cash Flows - Three
months ended March 31, 1999 and March 31, 1998 6
Notes to Consolidated Financial Statements -
March 31, 1999 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three months ended
March 31,
(Unaudited)
-------- --------
1999 1998
-------- --------
<S> <C> <C>
Net sales $ 77,384 $ 70,836
Cost of goods sold 67,299 59,363
--------- ---------
Gross profit 10,085 11,473
Selling, general and administrative expenses 12,614 10,734
--------- ---------
Operating income (loss) (2,529) 739
Interest expense, net 2,142 1,862
--------- ---------
Loss before income taxes (4,671) (1,123)
Income tax benefit (1,794) (622)
--------- ---------
Net loss $ (2,877) $ (501)
========= =========
Net loss per common share - basic $ (0.47) $ (0.08)
========= =========
Weighted average common shares outstanding - basic 6,147,119 6,088,477
========= =========
Net loss per common share - diluted $ (0.47) $ (0.08)
========= =========
Weighted average common stock equivalent
shares outstanding - diluted 6,147,119 6,088,477
========= =========
The accompanying notes are an integral part of these financial statements
</TABLE>
3
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
(Unaudited)
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,682 $ 10,065
Accounts receivable - trade, less allowances
for doubtful accounts of $483 and $350, respectively 46,442 49,503
Inventories 69,315 69,331
Prepaid expenses and other current assets 7,085 9,296
Deferred tax benefit 4,090 2,295
------- -------
Total current assets 131,614 140,490
PROPERTY, PLANT & EQUIPMENT - AT COST, NET 37,397 38,273
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET 25,281 25,527
OTHER ASSETS 5,397 5,794
------- -------
TOTAL ASSETS $199,689 $210,084
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 23,056 $ 25,542
Current portion of long-term obligations 4,731 3,866
Accrued expenses 5,204 9,183
Deferred revenue 60 70
------- -------
Total current liabilities 33,051 38,661
LONG-TERM OBLIGATIONS, less current portion 127,389 129,297
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred Stock - authorized 15,000,000 shares
of $.10 par value; no shares issued - -
Common Stock - authorized 50,000,000 shares
of $.01 par value; issued and outstanding,
6,147,119 and 6,147,119 shares, respectively 61 61
Additional paid-in capital 21,676 21,676
Retained earnings 17,512 20,389
------- -------
TOTAL SHAREHOLDERS' EQUITY 39,249 42,126
------- -------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $199,689 $210,084
======= =======
The accompanying notes are an integral part of these financial statements
</TABLE>
4
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
Common Stock
-------------------- Additional Total
Shares Par Paid-In Retained Shareholders'
Outstanding Value Capital Earnings Equity
----------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 6,088,369 $61 $21,378 $ 33,536 $ 54,975
Exercise of stock options 58,750 - 298 - 298
Net loss - - - (13,147) (13,147)
--------- -- ------ ------- -------
Balance at December 31, 1998 6,147,119 61 21,676 20,389 42,126
Net loss (Unaudited) - - - (2,877) (2,877)
--------- -- ------ ------- -------
Balance at March 31, 1999 (Unaudited) 6,147,119 $61 $21,676 $ 17,512 $ 39,249
========= == ====== ======= =======
The accompanying notes are an integral part of these financial statements
</TABLE>
5
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended
March 31,
(Unaudited)
1999 1998
-------- --------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net loss $ (2,877) $ (501)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,624 2,208
Deferred income taxes (1,795) -
Change in assets and liabilities:
Accounts receivable - trade 3,061 5,058
Inventories 16 14
Prepaid expenses and other assets 2,211 1,450
Other assets (253) (511)
Accounts payable - trade (2,486) (1,891)
Accrued expenses (3,979) (2,971)
Deferred revenue (10) (6)
------- -------
Net cash provided by (used in) operating activities (3,488) 2,850
Cash flows from investing activities:
Purchases of property, plant and equipment (621) (1,210)
Proceeds from sale of property, plant and equipment 89 -
------- -------
Net cash used in investing activities (532) (1,210)
Cash flows from financing activities:
Proceeds from exercise of stock options - 11
Proceeds from long-term obligations 8,000 -
Payments on long-term obligations (9,363) (1,006)
------- -------
Net cash used in financing activities (1,363) (995)
------- -------
Net decrease in cash and cash equivalents (5,383) 645
Cash and cash equivalents at beginning of period 10,065 55,135
------- -------
Cash and cash equivalents at end of period $ 4,682 $ 55,780
======= =======
Supplemental cash flow information:
Interest paid $ 2,744 $ 3,615
======= =======
Income taxes paid $ - $ -
======= =======
Non cash investing and financing activities:
Reptron incurred approximately $320 of obligations under capital leases for acquisition of equipment during
the period ended March 31, 1999. No capital leases were entered into during the three month period ended
March 31, 1998.
The accompanying notes are an integral part of these financial statements
</TABLE>
6
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
NOTE A -- BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnote disclosure required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements as of March 31, 1999 and for the three months ended March 31, 1999
and March 31, 1998 are unaudited and reflect all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim periods. The results of operations for the three
months ended March 31, 1999 are not necessarily indicative of results that may
be expected for the year ending December 31, 1999. The consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, included in the 1998 Form 10-K.
NOTE B -- INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
1999 1998
---------- ------------
Reptron Distribution:
Inventories $36,715 $37,026
K-Byte Manufacturing:
Work in process 10,931 9,043
Raw Materials 21,669 23,262
------ ------
$69,315 $69,331
====== ======
7
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1999
(Unaudited)
NOTE C-- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Reptron has two industry segments: Distribution and Contract Manufacturing.
Distribution purchases a wide variety of electronic components, including
semiconductors, passive products and electromechanical components, for
distribution to manufacturers and wholesalers located in the United States.
Reptron Distribution's customers are in diverse industries including robotics,
telecommunications, computers and computer peripherals, consumer electronics,
healthcare, industrial controls and contract manufacturing. Contract
Manufacturing manufactures electronic products according to customer design,
for primarily customers in the telecommunications, healthcare,
industrial/instrumentation, banking and office products industries.
The following table shows net sales and gross profit by industry segments for
the three months ended March 31, 1999 and March 31, 1998.
Three months ended
March 31,
(in thousands)
-------- --------
1999 1998
-------- --------
Net Sales
Distribution $39,506 $40,321
Contract Manufacturing 37,878 30,515
------ ------
$77,384 $70,836
====== ======
Gross Profit
Distribution $ 6,601 $ 7,798
Contract Manufacturing 3,484 3,675
------ ------
$10,085 $11,473
====== ======
NOTE D -- SUBSEQUENT EVENT
On May 13, 1999, Reptron announced the repurchase of $25.0 million of
Reptron's convertible subordinated bonds at a cost of approximately $10.4
million, generating a net after tax extraordinary gain of $8.2 million or
$1.34 per share.
8
REPTRON ELECTRONICS, INC
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This document contains certain forward-looking statements that involve a
number of risks and uncertainties. Such forward-looking statements are within
the meaning of that term in Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Act of 1934, as amended. Factors
that could cause actual results to differ materially include the following:
business conditions and growth in Reptron's industry and in the general
economy; competitive factors; risks due to shifts in market demand; the
ability of Reptron to complete acquisitions; and the risk factors listed from
time to time in Reptron's reports filed with the Securities and Exchange
Commission as well as assumptions regarding the foregoing. The words
"believe", "estimate", "expect", "intend", "anticipate", "plan" and similar
expressions and variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were made. Reptron
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those indicated in the forward-
looking statements as a result of various factors. Readers are cautioned not
to place undue reliance on these forward-looking statements.
RESULTS OF OPERATIONS
Net Sales. Total first quarter net sales increased $6.6 million, or 9.2%
from $70.8 million in the first quarter of 1998 to $77.4 million in the first
quarter of 1999.
Reptron Distribution's 1999 first quarter net sales decreased to $39.5
million as compared to $40.3 million for the first quarter of 1998. The
electronic component market has continued to experience a marked softness
primarily due to component oversupply and declining average selling prices,
and Reptron Distribution's sales were impacted by this market condition.
Sales of semiconductors, passive components and electromechanical components
accounted for 72.4%, 20.5% and 7.1%, respectively, of Reptron Distribution's
1999 first quarter net sales, and 58.9%, 31.2% and 9.9%, respectively of the
divisions' 1998 first quarter net sales. Reptron Distribution's sales
generated from the top four vendors accounted for approximately $13.8 million,
or 35.0% of Reptron Distribution's 1999 first quarter net sales, as compared
with approximately $12.8 million or 31.8% of Reptron Distribution's 1998 first
quarter net sales.
K-Byte Manufacturing net sales increased $7.4 million, or 24.1%, from $30.5
million in the first quarter of 1998 to $37.9 million in the first quarter of
1999. This increase is attributed to the acquisition of Hibbing Electronics
Corporation ("Hibbing"), which was completed in May 1998. Hibbing's net sales
for the first quarter of 1999 totaled approximately $13.3 million for the
first quarter of 1999. This increase was off-set by a net decrease in net
sales of approximately $5.9 million attributable to reductions in customer
orders from the previously established K-Byte Manufacturing customer base. K-
Byte Manufacturing transacted business with approximately 81 customers,
inclusive of 48 Hibbing customers. The largest three customers represented
approximately 7.3%, 6.7% and 6.6%, respectively, of first quarter 1999 net
sales (3.6%, 3.3% and 3.2%, respectively of total Company first quarter net
sales) as compared to 16.0%, 13.1%, and 7.5%, respectively, of first quarter
1998 net sales (6.9%, 5.6% and 3.2% respectively, of total Company first
quarter net sales). Sales from the Hibbing, Minnesota plant accounted for
approximately 34.9% of K-Byte Manufacturing 1999 first quarter net sales. The
Tampa, Florida manufacturing facility generated approximately 34.3% of K-Byte
Manufacturing 1999 first quarter net sales with the remaining net sales,
approximately 30.8%, originating from the Gaylord, Michigan location.
Gross Profit. Total 1999 first quarter gross profit decreased $1.4
million, or 12.1%, from $11.5 million in the first quarter of 1998 to $10.1
million in the first quarter of 1999. The gross profit percentage of Reptron
decreased from 16.2% in the first quarter of 1998 to 13.0% in the first
quarter of 1999.
Reptron Distribution's gross profit decreased $1.2 million, or 15.4%, from
$7.8 million in the first quarter of 1998 to $6.6 million in the first quarter
of 1999. The gross margin decreased from 19.3% in the first quarter of 1998
to 16.7% in the first quarter of 1999. This decrease in gross margin is
primarily attributed to the continuing industry-wide decrease in average
selling prices and a sales mix shift to lower margin products.
9
K-Byte Manufacturing's gross profit decreased $191,000, or 5.2%, from $3.7
million in the first quarter of 1998 to $3.5 million in the first quarter of
1999. However, after eliminating the gross profit dollars generated from the
Hibbing customer base, acquired in May 1998, K-Byte Manufacturing's gross
profit decreased by $1.4 million. Gross margin decreased from 12.0% in the
first quarter of 1998 to 9.2% in the first quarter of 1999. This decrease in
gross margin is primarily attributed to the under utilization of fixed costs
at current sales levels.
Selling, General, and Administrative Expenses. Selling, general and
administrative expenses increased $1.9 million, or 17.5%, from $10.7 million
in the first quarter of 1998 to $12.6 million in the first quarter of 1999.
The acquisition of Hibbing accounted for approximately $1.3 million of this
increase. The remaining increase is primarily attributable to investments in
manufacturing engineering and manufacturing operations consultants. These
expenses, as a percentage of net sales, increased from 15.2% in the first
quarter of 1998 to 16.3% in the first quarter of 1999.
Interest Expense. Net interest expense increased $280,000, or 15.0%, from
$1.9 million in the first quarter of 1998 to $2.1 million in the first quarter
of 1999. The increase is primarily attributable to the decrease in interest
income as a result of the decrease of approximately $48.1 million in the
average cash balance during the first quarter of 1999 to $7.4 million from
$55.5 million during the first quarter of 1998. Reptron used approximately
$30.0 million of cash in connection with the May 1998 acquisition of Hibbing.
LIQUIDITY AND CAPITAL RESOURCES
Reptron primarily finances its operations through subordinated notes, bank
credit lines, operating cash flows, capital equipment leases, and short-term
financing through supplier credit lines.
Reptron has entered into various capital lease transactions with several
leasing companies to finance capital expenditures, primarily in K-Byte
Manufacturing. These leases had an aggregate balance outstanding of
approximately $6.0 million as of March 31, 1999. The leases bear interest at
rates ranging from 7.5% to 11.1% and expire at various dates through July,
2002.
Reptron's operating activities used cash of approximately $3.5 million in
the first quarter of 1999. This use of cash was primarily due to a $4.0
million decrease in accrued expenses, a $2.5 million decrease in accounts
payable and a net loss of $2.9 million. These items were partially offset by
a $3.1 million decrease in accounts receivable and a $2.2 million decrease in
prepaid expenses and other assets. Reptron Distribution and K-Byte
Manufacturing annualized inventory turns for the first quarter of 1999 were
approximately 3.8 times and 3.6 times, respectively. Reptron's accounts
receivable collections averaged 52 days as of March 31, 1999.
Capital expenditures, including capitalized leases, totaled approximately
$1.0 million in the first quarter of 1999. These capital expenditures were
primarily for the acquisition of manufacturing and data processing equipment.
Net payments on long-term obligations used approximately $1.4 million of cash.
On May 13, 1999 Reptron used approximately $10.4 million of cash to
repurchase $25.0 million of its outstanding convertible subordinated bonds.
Reptron believes that available cash reserves and credit facilities will be
sufficient for Reptron to meet its capital expenditures and working capital
needs for its operations as presently conducted. Reptron's future liquidity
and cash requirements will depend on a wide range of factors, including the
level of business in existing operations, expansion of facilities and possible
acquisitions. In particular, if cash flow from operations and available
credit facilities are not sufficient, Reptron will be required to seek
additional financing. While there can be no assurance that such financing
will be available in amounts and on terms acceptable to Reptron, Reptron
believes that such financing likely would be available on acceptable terms.
10
YEAR 2000 STATEMENT
The Year 2000 issue encompasses the required recognition of computer
hardware and software systems and computer controlled devices, including
equipment, used in Reptron's manufacturing and distribution operations to
properly acknowledge the change from Year 1999 to Year 2000. The failure of
any hardware and software systems or equipment to timely and accurately
recognize such change could result in partial or complete systems failure. In
the normal course of business, Reptron relies on products and services from
critical vendors, customers and other third parties whose computer
systems must also be Year 2000 compliant in order for Reptron to realize the
uninterrupted flow of its business operations. Reptron is actively taking
steps to ensure that its systems and equipment will be Year 2000 compliant,
including assessing the scope of work, prioritizing, certifying compliance,
and testing compliance. Reptron is also actively assessing the Year 2000
compliance status of its primary vendors, customers and other third party
service providers.
Reptron has identified those systems and equipment in its Reptron
Distribution and K-Byte Manufacturing (including Hibbing) divisions and in its
central corporate operations that are considered to be critical to Reptron's
day to day operations. Approximately 80% to 85% of the systems and equipment
utilized in Reptron Distribution and Reptron's central corporate operations
were tested for Year 2000 compliance during November 1998, with such systems
and equipment being certified as Year 2000 compliant as of March 15, 1999.
Reptron expects to complete the balance of its Year 2000 compliance testing of
these systems and equipment during the middle of 1999. K-Byte Manufacturing
has received written assurances from its third-party software providers that
the software used in its manufacturing operations is Year 2000 compliant.
Although K-Byte Manufacturing has not begun validating such third parties'
Year 2000 representations, it has conducted preliminary internal tests of
certain of its hardware and software systems, and expects to complete such
validation and testing during the middle of 1999.
While Reptron is actively seeking assurances of Year 2000 compliance from
each of its key suppliers, customers and other third-parties with whom Reptron
conducts business, this assessment primarily relies upon such third-parties'
representations of Year 2000 compliance. A lack of response or inadequate or
inaccurate information from such third parties could materially affect
Reptron's assessment of Year 2000 readiness. Until these assessments are
completed, which is expected to occur during the middle of 1999, Reptron
cannot predict whether the failure of any such third-party to be Year 2000
compliant will have a material adverse effect on Reptron's business.
To date, the costs incurred by Reptron to address Year 2000 issues have
been immaterial, and Reptron expects that the costs to complete Year 2000
compliance certification, testing and verification will also be immaterial.
Where appropriate, Reptron will develop contingency plans in areas it
determines that Year 2000 readiness is insufficient. However, no assurances
can be given that Reptron's Year 2000 efforts are appropriate, adequate or
complete. In addition, Reptron is unable to fully determine the effect of a
failure of its own systems or those of any third-party with whom it conducts
business, but any significant failures could have a material adverse effect on
Reptron's financial condition, results of operations and cash flows.
11
REPTRON ELECTRONICS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Employment Agreement between Paul J. Plante and Reptron, dated
January 5, 1999.
10.2 Employment Agreement between Jack Killoren and Reptron, dated
January 14, 1999.
10.3 Distributor Agreement between Mosel Vitelic Corporation and
Reptron, dated April 1, 1999.
10.4 Distribution Agreement between JAE Electronics, Incorporated
and Reptron, dated January 15, 1999.
10.5 Distribution Agreement between Silicon Storage Technology, Inc.
and Reptron, dated March 23, 1999.
10.6 Industrial Distribution Agreement between Advantage Memory
Corp. and Reptron, dated February 16, 1999.
27.1 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 31, 1999.
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 13, 1999
----------------
REPTRON ELECTRONICS, INC.
(Registrant)
By: /s/ Michael Branca
----------------------------------------
Michael Branca, Chief Financial Officer
(Principal Financial and Accounting
Officer)
13
EXHIBIT 10.1
EXECUTIVE
EMPLOYMENT AGREEMENT
This Employment Agreement is made this 5th day of January, 1999.by
and between Reptron Electronics, Inc., a Florida corporation whose
corporate office address is 14401 McCormick Drive, Tampa, FL 33626
(hereinafter "Company") (for purposes of Paragraphs 8, 9, and 10
"Company" shall additionally include the Company's subsidiaries and
Affiliates, as defined below), and Paul Plante whose address is 4220
Swann Avenue, Tampa, FL 33609 (hereinafter "Executive").
IN CONSIDERATION of the mutual covenants hereinafter contained, the
Company and the Executive agree as follows:
1. This Agreement shall continue until terminated as herein
provided. This Agreement supersedes all prior employment agreements
or arrangements existing as between the Company and the Executive.
2. The Company engages the Executive and the Executive accepts the
engagement to provide the services hereinafter described for the
period and upon the terms and conditions hereinafter described.
3. At the execution hereof, the Executive shall be employed as Chief
Operating Officer. The Executive shall perform the duties
commensurate with such position and such other duties as are
assigned to him and as directed and specified by the Chief Executive
Officer or the Board of Directors. The Executive agrees that his
title and responsibilities are subject to change from time to time
as directed by the Chief Executive Officer of the Company or the
Board of Directors. The Executive agrees that he shall serve the
Company to the best of his abilities and devote his full time and
effort in completing and fulfilling his duties and responsibilities.
4. During the term of this Agreement, the Executive shall be
compensated as follows:
(a)(i) The Company shall pay to the Executive base salary ("Annual
Base Salary") of $300,000, payable in bi-weekly installments.
(ii) The Annual Base Salary shall be increased on January 1 of
each year commencing with January 1, 2000 by an amount equal to the
product of (i) the Annual Base Salary or the Adjusted Annual Base
Salary, defined below, as the case may be, and (ii) the greater of
(x) 3% and (y) CPI Increase, defined below, (as increased, the
"Adjusted Annual Base Salary"). For purposes of this Agreement, the
term "CPI Increase" shall mean the amount of the percentage
increase, if any, in the Consumer
1
Price Index (as defined below) for the twelve-month period ending on
the last day of the calendar year immediately preceding each January
1st adjustment date during the term of this Agreement. The Consumer
Price Index as used herein shall mean the Consumer Price Index for
the U.S. city average for all urban consumers, unadjusted, all
items, as promulgated by the Bureau of Labor Statistics of the U.S.
Department of Labor, using the base years 1982-84=100. In the event
that the Consumer Price Index referred to herein ceases to
incorporate a significant number of the items as currently set forth
therein, or if a substantial change is made in the method of
establishing the Consumer Price Index, then the Consumer Price Index
shall be adjusted to the figure that would have resulted had no
change occurred in the manner of computing the Consumer Price Index.
In the event that the Consumer Price Index (or successor or
substitute index) is not available, then the Company shall use,
subject to Employee's reasonable approval, another governmental or
nonpartisan publication evaluating the information previously used
in determining the Consumer Price Index in lieu of the Consumer
Price Index.
(iii) In the event of the death of the Executive, the Annual
Base Salary or Adjusted Annual Base Salary, as the case may be,
shall be paid to the end of the then bi-weekly installment period.
In the event of the permanent disability of the Executive, the
Annual Base Salary or Adjusted Annual Base Salary, as the case may
be, shall be payable through the date benefits under the disability
policy maintained by the Company becomes first payable, but in no
event for a period longer than 90 days following the onset of the
illness or injury causing such disability.
(b) The Executive shall receive an annual cash bonus payable by
March 31 following the calendar year in which earned determined as a
factor of the Company's earning per share (EPS) as at the December
31st of the calendar year for which the bonus is calculated.
Cash Bonus As A
% of Annual Base Or Annual
Adjusted Base Salary,
EPS As the Case May Be
less than $.80 0
$.80 to $1.00 20%
$1.01 to $1.20 40%
$1.21 to $1.40 60%
$1.41 to $1.60 80%
$1.60 to $1.80 100%
(i) If the Executive's employment is terminated: (x) by reason
of death or permanent disability, (y) if following a Change of
Control (as
defined in Paragraph 5) the Executive's employment is terminated
for his refusal to perform his duties and responsibilities other
than on
2
an occasional basis consistent with past practice in a location
other than Tampa, Florida, or (z) the Executive's employment is
terminated without cause as hereinafter defined, the bonus amount
shall be calculated to the end of the calendar year in which the
termination occurs and paid to the Executive, or his written
designated beneficiary or estate, as the case may be, not later than
the next following March 31. Notwithstanding the foregoing, the
bonus amount shall be prorated to the date of termination if such
termination results in the payment of the Severance Payment, as
defined below.
(ii) In addition to holidays or days off provided generally to
all employees, the Executive shall be entitled to four (4) weeks
vacation (20 working days). Any vacation days in a calendar year so
provided and not taken by the Executive shall be waived.
(iii) The Executive shall participate in and receive comparable
benefits as are provided generally by the Company to its senior
management personnel as a group from time to time except as modified
or amplified by this Agreement.
(c) The Company shall provide the Executive with an automobile
allowance of $1,000 per month and shall further pay the Executive's
expenses related thereto, including all costs of fuel, maintenance,
repairs and comprehensive automobile insurance insuring the
Executive as a named insured on the vehicle and all other drivers of
that vehicle providing for liability insurance of not less than
$3,000,000 combined single limit.
5. For purposes hereof, Change of Control shall mean:
(a) Any replacement of more than 50% of the directors of the
Company which follows, and is directly or indirectly a result of,
any one or more of the following:
(i) A cash tender offer or exchange offer for the Company's
common stock other than by Executive, Michael L. Musto ("Musto"), an
Affiliate of Executive or Musto, or a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 ("Group"), of which
Executive, Musto or an Affiliate of Executive or Musto is a member;
(ii) A solicitation of proxies other than by Executive or
Musto, an Affiliate of Executive or Musto, a Group of which
Executive, Musto or an Affiliate of Executive or Musto is a member,
the Company's management (inclusive of the Executive and _ Musto) or
its board of directors;
(iii) Acquisition of beneficial ownership of shares having 50%
or more of the total number of votes that may be cast for the
election of
3
directors of the Company by a third party or a Group for the purpose
of changing control of the Company, other than by Executive, Musto,
an Affiliate of Executive or Musto, or a Group of which Executive,
Musto or an Affiliate of Executive or Musto is a member; or
(iv) Any merger, business combination, sale of assets or other
extraordinary corporate transaction undertaken for the purpose of
changing control of the Company, other than by Executive, Musto, an
Affiliate of Executive or Musto, or a Group of which Executive,
Musto or an Affiliate of Executive or Musto is a member. For
purposes hereof, the proposed merger between All American and a
subsidiary of the Company shall in no event be deemed to be a Change
of Control of the Company.
For purposes of this Agreement "Affiliate" means, with respect to
another individual or entity (a "person"), (a) any person directly
or indirectly owing, controlling or holding with power to vote 5% or
more of the outstanding voting securities of such other person; (b)
any person 5% or more of whose outstanding securities are directly
or indirectly owned, controlled or held with power to vote by such
other person; (c) any person directly or indirectly controlling,
controlled by or under common control with such other person; (d) if
such other person is an officer, director, employee or partner, any
company or other entity for which such person acts in any such
capacity; and (e) any close relative or spouse of the specified
person.
6. With the exception of those provisions which survive termination
as herein specifically provided, this Agreement and the Executive's
employment shall terminate upon any of the following:
(a) the voluntary termination of employment by the Executive,
(b) the death, or permanent disability of the Executive during the
term of this Agreement (permanent disability being determined at
such time when disability insurance coverage maintained by the
Company for the Executive becomes payable), or, if no such insurance
is then in existence, the date by which three medical doctors or
psychiatrists (as applicable), at least one of whom shall be
selected by Executive or his legal representative, have examined
Executive and concluded (as set forth in a letter delivered to the
Company) that Executive has a permanent disability which has
rendered him incapable of substantially performing his customary
duties for at least six consecutive months, with such determination
effective retroactively as of the end of such six-month disability
period), or
(c) discharge of the Executive by the Company with or without
cause or prior notice.
Upon any such termination, except as otherwise provided herein, all
compensation and benefits other than those required by law to
continue, shall thereafter likewise
4
concurrently terminate.
7. As additional consideration of the services to be performed by
the Executive and the undertakings hereby assumed by the Executive,
the Company shall make a "Severance Payment" subject to the
following conditions as follows:
(a) The amount of the Severance Payment shall equal 2.99 times the
average annual base compensation as defined and determined under
Section 280G of the Internal Revenue Code of 1986, as amended.
(b) The Severance Payment shall be payable upon:
(i) a termination of employment by the Company (or its
successors) for whatever or no reason (other than as described in
subparagraph (b)(iii)(x) below) within 180 days prior to, or within
one year following, a Change of Control, or a termination of
employment within one year following a Change of Control for the
reason stated in sub-paragraph 6(b), or
(ii) failure of the Executive and the Company (or its successor)
to execute an employment agreement prior to the first annual
anniversary of a Change of Control, which addresses the Executive's
employment beyond said anniversary date, and the employee quits
within 30 days of said anniversary, or
(iii) A termination of employment by the Company without cause.
If the Executive's employment is terminated by the Company for
reasons other than the following, such termination for the purposes
hereof shall be one without cause:
(x) Employee is convicted (by a jury verdict, guilty plea or
plea of nolo contendere, any of which are not reversed on appeal) of
a felony under state or federal law; or
(y) Executive's failure, after thirty (30) days written notice
(which notice shall be given only after approval or authorization
thereof by the Company's Board of Directors), to cure a material
default of any of the provisions of this Agreement or the Executive
wilfully violates a written Company policy or procedure that is
material to the business of the Company and has failed to cure such
violation after thirty (30) days written notice, (which notice shall
be given only after approval or authorization thereof by the
Company's Board of Directors). In order to be effective said notice
must clearly specify the material default or violation and must
notify Executive of the Company's intention to terminate this
Agreement in the event the described material default or violation
is not cured within said thirty (30) days; provided, however, no
notice shall be required when the Company has been materially
damaged as a result of such default or
5
violation and, by its nature, the default or violation cannot be
cured. A termination of the Executive with cause shall be effected
only upon the vote of a majority of the Board of Directors.
(c) The Severance Payment shall be paid in 36 monthly
installments, each equal to 1/36th of the Severance Payment,
commencing on the first day of the calendar month next following
such termination of this Agreement.
(d) The Severance Payment shall be forfeited by the Executive if
he shall breach any provision of paragraphs 8, 9, or 10 hereof. Any
installments made prior to such breach shall be immediately returned
to the Company by the Executive.
(e) If the Executive shall die prior to all of the installments
having been paid, the remaining installments of the Severance
Payment shall be payable to the estate of the Executive or to such
designee as the Executive shall have directed in writing to the
Company.
(f) Receipt of the Severance Payment, to the extent payable, shall
act as a full release by the Executive of all claims the Executive
may have against the Company except for unpaid wages, benefits or
sums to be paid to the Executive post-termination of this Agreement
as herein provided.
8.(a) Executive acknowledges that during the course of his past
employment with the Company, and as his employment continues, he has
and will have direct access to and knowledge of the Company's trade
secrets and other confidential and proprietary information and
documents, including but not limited to the Company's customer list,
customer requirements and information, price lists, all training
materials, product information, operating procedures, marketing
information, selling strategies, and supplier information
(collectively "Confidential Information"). Notwithstanding the
foregoing, Confidential Information shall not include:
(i) Information which, at the time of disclosure is in the
public domain or which, after disclosure, becomes part of the public
domain by publication or otherwise through no action or fault of
Employee;
(ii) Information which is in Employee's possession at the time
of disclosure and was not acquired from the Company or an Affiliate;
(iii) Information which was received by Employee from a third
party having the legal right to transmit that information; or
(iv) Information that is independently developed by Employee
without the use of Confidential Information.
(b) The Executive agrees that all Confidential Information shall
remain the property of the Company, shall be kept in the strictest
of confidence, used solely for the benefit of the Company and shall
not be disclosed, either directly or indirectly, to any other
6
person or entity except as is required in the furtherance of the
Company's business and for its benefit. Executive further agrees
that all such Confidential Information (and any copies thereof
regardless of how maintained, including that which has been reduced
to electronic memory) shall be returned to the Company upon
termination of this Agreement for whatever reason. The terms of this
paragraph are in addition to, and not in lieu of, any common law,
statutory or other contractual obligations that Executive may have
relating to the Company's Confidential Information. Further, the
terms of this paragraph shall survive indefinitely the termination
of this Agreement.
9. The Executive acknowledges that the Company has made a
significant investment in developing and training a competent work
force and customer base and that the scope of the abilities of, and
compensation paid to, the Company's various employees is valuable
and confidential information. Further, the Executive acknowledges
that the Company's continued viability and success is in large part
contingent upon maintaining a stable, trained and competent work
force and its customer base. Consequently, during the course of his
employment, and for a period of one year thereafter, regardless of
the reason for termination thereof, the Executive will not directly
or indirectly solicit, entice, encourage, or cause, any salaried
employee of the Company to leave the employment of the Company.
Further during said one year period, the Executive will not directly
or indirectly hire, or cause another person or entity to hire, any
salaried employee of the Company. Additionally, the Executive will
not, directly or indirectly, for the one year period following his
termination of Employment, regardless of the reason for termination
thereof, solicit or submit a quotation for the electronic component
distribution business of, or offer to sell or sell any product or
service offered by the electronic component distribution business of
the Company to, any customer of the Company existing at the time of
such termination or within one year prior thereto or, for a period
of two years following said termination of employment, regardless of
the reason for termination thereof, solicit or submit a quotation
for, or offer to sell or sell any product or service offered by, the
contract manufacturing business of the Company, to any customer of
the Company existing at the time of such termination or within one
year prior thereto.
10. Executive acknowledges and agrees that the covenants set forth
in Paragraphs 8 and 9 are necessary and reasonable to protect the
Company's Confidential Information, its intangible business assets,
its legitimate business interests and goodwill, and that the
breadth, time and geographic scope of the limitations set forth
therein are reasonable and necessary to protect the same. The
Executive expressly acknowledges and agrees that the Company would
not have an adequate remedy at law in the event of his breach, and
or threatened breach of the covenants set forth in Paragraphs 8 or g
of this Agreement. Consequently, in addition to such other remedies
as the Company may have, the Company, shall be entitled to obtain,
and Executive agrees not to oppose a request for, equitable relief
in the form of specific performance, ex parse temporary or
preliminary injunctive relief, other temporary or permanent
injunctive relief, or other equitable remedy fashioned by a court of
competent jurisdiction enjoining the Executive from any such
threatened or actual breach.
7
11.If during the term of this Agreement, the Company is a
participant in a consolidation or merger, or the Company should sell
substantially all of its assets, the Company agrees that as a
condition of closing any such transaction, the surviving entity to
such consolidation or merger, or the purchaser of such assets, shall
in writing assume this Agreement and become obligated to perform all
of the terms and provisions hereof applicable to the Company.
Without limiting the generality of the foregoing, the covenants
contained in Paragraphs 8, g and 10 may be enforced by the assignee
or successor of the Company.
12. If any of the consideration paid or made available to the
Executive under this Agreement, or other benefit or consideration
provided to the Executive as an employee of the Company, is
accelerated as a consequence of a change of control as provided
under Section 280(G) of the Internal Revenue Code of 1986, as
amended, or such other provision of law of similar effect ("Code")
results in the imposition of an excise tax under Section 49gg of the
Code, the Company shall pay to the Executive an amount ("Grossed-Up
Excise Tax Payment") be computed by dividing the excise tax so
imposed by a number equal to one minus the sum of (i) the highest
combined marginal U.S. federal, state and local individual income,
social security, medicare and unemployment tax rate (or such other
combined tax rate that is similar to or replaces such combined tax
rate)applicable to Employee (taking into account the deductibility
of any such federal, state and local taxes) that is in effect at the
time the excise tax is imposed and (ii) the excise tax rate
applicable to Executive. For example, if the excise tax is $100, the
highest combined marginal tax rate applicable to Employee at such
time is 45% and the Excise Tax rate is 20%, the Grossed- Up Excise
Tax Payment would be $285.71. The Company shall pay the Grossed-Up
Excise Tax Payment to the Executive less any Excise Tax withheld and
remitted by the Company not later than March 31st following the
calendar year in which the consideration or benefit is received by
the Executive for which the excise tax is payable.
13. Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Board of Directors in writing and
delivered or mailed by certified or registered mail to 14401
McCormick Drive, Tampa, Florida 33626, or such other primary
business address of the Company. Any notice to be given to Executive
hereunder shall be delivered or mailed by certified or registered
mail to him at 4220 Swann Avenue, Tampa, FL 33609, or such other
address as he may hereafter designate.
14. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company, including without
limitation, the purchaser of substantially all of the operating
assets of the Company. Unless clearly inapplicable, reference herein
to the Company shall be deemed to include any such successor. In
addition, this Agreement shall be binding upon and inure to the
benefit of the Executive and his heirs, executors, legal
representatives and assigns; provided, however, that the obligations
of Executive hereunder may not be delegated without the prior
written approval of the Board of Directors of the Company. The
provisions of Paragraphs 7, 8, 9, 10, 11 and 12 shall survive the
termination of this Agreement.
8
15. This Agreement may not be altered, modified or amended except by
a written instrument signed by each of the parties hereto.
16. This instrument (including attachments and exhibits thereto and
documents and agreements referred to therein) embodies the whole
agreement of the parties. All previous negotiations or agreements
between the parties, either verbal or written with respect to the
subject matter hereof not herein contained are hereby withdrawn and
annulled. This contract shall supersede all previous communications,
representations, or agreements, either verbal or written, between
the parties hereto with respect to the subject matter hereof.
17. The failure of either party at any time to require performance
by the other party of any provision of this Agreement shall not be
deemed a continuing waiver of that provision or a waiver of any
other provision of this Agreement and shall in no way affect the
full right to require such performance from the other party at any
time thereafter.
18. The invalidity or unenforceability of any Paragraph or
Paragraphs, or subparagraphs of this Agreement, shall not affect the
validity or enforceability of the remainder of this Agreement, or
the remainder of any Paragraph or sub-paragraph. If as provided by
law, a court of competent jurisdiction is unable to modify any such
violative Paragraph or sub-paragraph to result in the same not being
invalid or unenforceable, this Agreement shall then be construed in
all respects as if any invalid or unenforceable Paragraph or
subparagraph(s) were omitted.
l9. The Executive represents to the Company as follows:
(a) That the Executive has been advised by the Company to have
this Agreement reviewed by an attorney representing the Executive,
and the Executive has either had this Agreement reviewed by such
attorney or has chosen not to have this Agreement reviewed because
the Executive, after reading the entire Agreement, fully and
completely understands each provision and has determined not to
obtain the services of an attorney.
(b) The Executive, either on his own or with the assistance and
advice of his attorney, has in particular reviewed Paragraphs 8, 9
and 10, understands and accepts the restrictions thereby imposed and
agrees the same are reasonable in all respects and necessary for the
protection of the property rights, goodwill and the intangible
business assets of the Company.
(c) That no force, threats of discharge, or other threats or
duress have been used by the Company, directly, indirectly or by
innuendo, in connection with the Executive's execution of this
Agreement.
20. This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Florida without regard to
conflicts of laws. Further, the Executive agrees that any action
relating to the terms of this Agreement shall be
9
commenced and only commenced in a state or federal court sitting in
Tampa, Florida.
21. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements and travel expenses in addition to any other relief to
which he or it may be entitled, before and at trial, whether or not
trial on the merits occurs, and at all tribunal levels.
22. Subject to and limited by Paragraph 10 hereof, all disputes
which may arise under this Agreement shall be settled by arbitration
pursuant to the rules of the American Arbitration Association by a
single arbitrator that the Company and Employee agree upon. Such
arbitration shall take place in Tampa, Florida. If the Company and
Employee do not so agree on a single arbitrator, the arbitration
shall be by a board of three members, to be composed of one person
appointed by the Company, one person by Employee and the third
person selected by said two appointees. The Company and Employee
shall each designate in writing to the other party its respective
appointee within 30 days after the determination, by written notice
by either party, that they cannot agree as to a single arbitrator.
If the two appointees fail to select a third person within 30 days
after the designation of the two appointees, the third person shall
be designated by the American Arbitration Association upon
application by the Company or Employee. The decision of the single
arbitrator, or of any two of a three person board of arbitrators,
shall be binding on the parties to the controversy and their
representatives. Such decision shall be enforced with the same force
and effect as a decree of a court having jurisdiction over the
matter. The fees and expenses including attorneys' fees which may be
incurred in connection with any such arbitration shall be paid by
the party whose contention is rejected by the decision of the
arbitration, or if only partially rejected, as allocated by the
decision of the arbitrator or board of arbitrators.
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date opposite their signatures.
REPTRON ELECTRONICS,
INC.
Date: By:/s/ Michael L. Musto
Name: Michael L. Musto
Title: Chief Executive
Officer
Date: 1/5/99 /s/ Paul J. Plante
Paul J. Plante
EXHIBIT 10.2
Executive
Employment Agreement
This employment agreement is made the 14th day of January, 1999 by
and between Reptron Electronics, Inc., a Florida corporation whose
corporate office address is 14401 McCormick Drive, Tampa, FL 33626
(hereafter "Company") and Mr. Jack Killoren whose address is 812
Woodlyn Drive, Tampa, Florida, 33609
The Company and Mr. Killoren agree as follows:
1. This agreement shall be in effect until terminated as herein
provided. This agreement supersedes all prior employment agreements
between the Company and Mr. Killoren.
2. At the execution of this agreement, Mr. Killoren shall be
employed as Vice President - P/E/D Marketing/Operations and report to
the COO. The Executive agrees that his title and responsibilities are
subject to change as directed by the COO.
3. Mr. Killoren will be compensated as follows:
a) $4230.77 per week, payable biweekly. In the event of death
of Mr. Killoren, the base salary will be paid to the end of the
biweekly period. In the event of disability of Mr. Killoren, the base
salary will be paid for six months from the date the Company's
disability insurance takes affect.
b) Mr. Killoren will be eligible to receive an annual bonus
payable by March 15 following the calendar year end as follows:
i) A grant of stock options under the Company 's Employee
Incentive
Stock Option' Plan, the terms under which such option
grant is
computed shall be developed annually by the COO.
ii) A cash bonus, the terms under which such a cash bonus is
computed shall be developed annually by the COO. The cash
bonus
earned for Calendar year 1998 shall total $30,000.00.
iii) If Mr. Killoren's employment is terminated by the
Company due
to the Company failing to pay Mr. Killoren for any
reason
other than as outlined in section 4 or one year after a
change
in control or 180 days after the management group from
an
acquired company takes control of the distribution
division/group, the bonus amount shall be calculated
(a), to
the end of the calendar quarter in which termination
occurs
and annualized through the end of the then current
fiscal
year, or (b), or the prior year's bonus, whichever is
greater and paid to Mr. Killoren or his beneficiary.
c) In addition to holidays or days off provided to all
employees, Mr. Killoren shall be entitled to 3 weeks per year
vacation. All unused vacation in any given year is forfeited.
d) Mr. Killoren shall receive comparable benefits as are
provided by the Company to its other personnel except as modified or
amplified by this agreement.
4. The Company may terminate this agreement for Cause which shall
exist upon any of the following:
a) Any intentional misapplication of the Company's funds
intended to result directly or indirectly in significant gains at the
expense of the Company, or any act of gross dishonesty committed by
Mr. Killoren in connection with the Company's business.
b) Mr. Killoren's conviction of a crime of moral turpitude.
c) Mr. Killoren's gross non-performance of duties or
responsibilities assigned to him or the breach of any material term
of the agreement resulting in significant harm to the Company if such
breach or non-performance shall continue for a period of 15 business
days after written notice from the Company.
d) Any other action involving willful malfeasance or gross
negligence in the performance of duties.
5. If following a change of control, or after a management group
from an acquired company takes control of the distribution
division/group, Mr. Killoren is terminated for his refusal to perform
his duties in a place other than Tampa, Florida it shall not be
considered termination for cause.
6. A Change of Control will be deemed to have taken place if:
a) Any replacement of 50% or more of the directors of the
Company which follows and is directly or indirectly a result of any
one of the following:
i) A cash tender offer for the Company's common stock.
ii) A solicitation of proxies other than by the company's
management or board of directors.
iii) Acquisition of beneficial ownership of shares by a singe
entity
or entities operating as a group to obtain more shares
than
Michael Musto and filing with the SEC other than as a
passive
investor(s).
iv) Any merger, business combination, sale of assets or other
extraordinary corporate transaction undertaken for the
purpose
of changing control of the company.
b) The board of directors determines that any other proposed
action presented to the Board of Directors or the shareholders, if
taken, would constitute a Change of Control.
c) The operations of the distribution business or division are
sold or becomes controlled by a company other than Reptron, Inc.
7. This agreement shall terminate upon any of the following:
a) The voluntary termination of employment by Mr. Killoren.
b) The death, or partial or permanent disability of Mr.
Killoren where he can no longer perform essential job functions six
months after the Company's disability insurance becomes payable.
c) Discharge for Cause.
d) Failure of the Company to pay Mr. Killoren constituting
termination without Cause.
e) Twelve months following a change of control.
f) 180 days after the management group from an acquired company
takes control of the distribution division/group.
If Mr. Killoren is terminated for 7a or 7c, all compensation and
benefits shall cease accept as otherwise specifically provided for in
this agreement.
8. If this agreement is terminated for reasons stated in section
7d, or 7e, Mr. Killoren's severance payment will be paid as follows:
a) The amount of the Severance Payment shall be one year's base
compensation.
b) Plus one year's incentive to be determined by annualizing
the then current quarter or the prior years incentive, whichever is
higher.
c) All outstanding options shall immediately vest.
Unless prior to the expiration of one year from a change of
control or the sale of the business operations of the distribution
division, Mr. Killoren executes an employment agreement beyond said
one-year period.
d) The Severance Payment shall be paid in monthly installments
commencing on the first day of the calendar month following
termination under this agreement.
e) The severance shall be forfeited by Mr. Killoren if the
conditions of paragraphs 10 or 11 are breached.
f) If Mr. Killoren dies prior to all the installments being
paid the remaining payments will go to his legal heirs.
9. If this agreement is terminated for reasons stated in section
7f, Mr. Killoren's severance payment will be paid as follows:
a) The amount of the Severance Payment shall be one year's base
compensation.
b) Plus one year's incentive to be determined by annualizing
the then current quarter or the prior year's incentive, whichever is
higher.
c) All outstanding options shall immediately vest.
Unless prior to the expiration of 180 days from the date of the
management group of the acquired company taking control of the
distribution division/group, Mr. Killoren executes an employment
agreement beyond said 180-day period.
d) The Severance Payment shall be paid in monthly installments
commencing on the first day of the calendar month following
termination under this agreement.
e) The severance shall be forfeited by Mr. Killoren if the
conditions of paragraphs 10 or 11 are breached.
f) If Mr. Killoren dies prior to all the installments being
paid the remaining payments will go to his legal heirs.
10. Mr. Killoren agrees that all confidential Company information
remains property of the Company and shall be kept in the strictest
confidence except where necessary to further the Company's business
interests. At termination any confidential information in any form
shall be returned to the Company.
11. Mr. Killoren acknowledges that if he receives a Severance
Payment under this agreement that for a period of one year he will
not solicit, hire, encourage or cause any salaried employee to leave
employment of the Company.
12. If the Company is a participant in a combination, merger or
sells its assets the Company agrees that as a condition of closing
any such transaction that the surviving entity of such action shall
assume this agreement.
13. Any notice given to the company pursuant to this agreement
shall be deemed sufficient if addressed to the Company at 14401
McCormick Drive, Tampa, Florida 33626 or other location as the
Company may designate. Any notice given to Mr. Killoren should be
sent to his then current residence.
14. Any alteration of this agreement by either party must be
mutually agreed upon in writing.
15. Any portion of this agreement found to be invalid or
unenforceable shall not effect the enforceability of the remainder of
the agreement.
16. Mr. Killoren:
a) Has had this agreement reviewed by legal counsel and fully
understands its provisions.
b) Understands the solicitation restrictions if he receives a
Severance Payment under this agreement.
17. This agreement shall be governed by, construed and enforced
in accordance with the laws of the state of Florida without regard to
conflicts of law. Mr. Killoren agrees that any action relating to the
terms of this agreement shall be commenced in a state or federal
court in Tampa, Florida
Reptron Electronics, In
By:/s/ Paul J. Plante Date: 1/15/1999
------------------ ---------
Paul J. Plante
Chief Operating Officer
By:/s/ Jack Killoren Date:1/18/1999
----------------- ---------
Jack Killoren
EXHIBIT 10.3
MOSEL VITELIC CORPORATION
3910 NORTH FIRST STREET, SAN JOSE, CA 95134
DISTRIBUTOR AGREEMENT
THIS AGREEMENT effective this 1st day of April, 1999, between MOSEL VITELIC
CORPORATION, having its principle place of business at 3910 NORTH FIRST
STREET, SAN JOSE, CA, 95134, hereinafter called "MOSEL VITELIC," and Reptron
Electronics, Inc., hereinafter called "Distributor."
IT IS AGREED that Distributor is appointed MOSEL VITELIC's non-exclusive
domestic distributor for the sale of MOSEL VITELIC products identified in
MOSEL VITELIC Distributor Price List as revised from time to time. This
appointment is governed by the following terms:
1. MOSEL VITELIC SALES EFFORTS:
MOSEL VITELIC will furnish Distributor without charge a reasonable supply of
price lists, sales literature, books, catalogues, etc., as MOSEL VITELIC may
prepare for national distribution and shall also provide Distributor with such
technical and sales assistance as MOSEL VITELIC may deem to be necessary to
assist Distributor in effectively carrying out its activities under this
Agreement.
2.DISTRIBUTOR SALES EFFORT:
At Distributor's expense, Distributor shall:
A. Take an active part in MOSEL VITELIC's sales programs.
B. Participate in distributor product training courses.
C. Maintain adequate facilities to ensure the prompt handling of all business
generated under this Agreement.
D. Carry a representative inventory of MOSEL VITELIC products to ensure
adequate and timely "off-the-shelf' delivery to customers.
E. Maintain an adequate, competent, and aggressive sales force to sell MOSEL
VITELIC products.
F. Exercise his/her best efforts to do whatever else may be necessary to
secure and maintain a volume of sales consistent with the potential of the
market.
G. Distributor agrees to take all reasonable and necessary precautions to
prevent ultimate consignment of MOSEL VITELIC products to Communist-dominated
countries where prohibited by rules or regulations of the United States
Government.
3. RELATIONSHIP OF THE PARTIES AND WARRANTIES:
Distributor is an independent contractor and in no way and agent of MOSEL
VITELIC, it being expressly agreed that the only relationship created by this
Agreement is that of vendor and vendee. Distributor agrees not to make any
contract, commitment, representation, promise, guarantee or warranty on MOSEL
VITELIC's behalf or in its name. Distributor further agrees that it has no
authority to assume or create any obligation on MOSEL VITELIC's behalf,
expressed or implied regarding MOSEL VITELIC's most current standard warranty
as applicable to the particular product. NO WARRANTY MERCHANTABLITY OR FITNESS
FOR A PARTICULAR PURPOSE, NO WARRANTY AGAINST INFRINGEMENT OF ANY TYPE, NOR
ANY OTHER WARRANTY EXPRESSED, STATUTORY, IMPLIED, OR OTHERWISE, SHALL APPLY TO
THE PRODUCTS. IN NO EVENT SHALL MOSEL VITELIC BE LIABLE FOR DAMAGES BY REASON
OF FAILURE OF ANY PRODUCT TO FUNCTION PROPERLY OR FOR CONSEQUENTIAL OR SPECIAL
DAMAGES.
1
MOSEL VITELIC DISCLAIMS AND SHALL HAVE NO OBLIGATION OF DEFENSE OR INDEMNITY
WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT TO ANY OF THE PRODUCTS
FURNISHED HEREUNDER OR ARISING IN ANY WAY IN CONNECTION WITH SUCH PRODUCTS, OR
THEIR USE.
Exception: Mosel Vitelic will indemnify, defend and otherwise hold harmless
DISTRIBUTOR for liability arising from any litigation against DISTRIBUTOR to
the extent such litigation is based on an allegation that the Products, any
part thereof, or their distribution or use infringe any patent, copyright,
trademark, trade secret, or right in any mask work, if DISTRIBUTOR notifies
MOSEL VITELIC of any such proceeding promptly after it becomes known and
provides all the assistance and cooperation to MOSEL VITELIC that is
reasonably requested. MOSEL VITELIC will not be liable to DISTRIBUTOR under
this paragraph to the extent that any claim is based on a use for which the
Product was not designed, or an alteration of the Product by DISTRIBUTOR or at
its direction which caused the infringement. THESE REMEDIES SHALL BE THE SOLE
AND EXCLUSIVE REMEDIES OF DISTRIBUTOR FOR ANY INFRINGEMENT OF THIRD PARTY
RIGHTS BY THE PRODUCTS.
4. TERMS AND CONDITION OF SALES:
MOSEL VITELIC's standard sales terms and conditions as set forth in MOSEL
VITELIC's purchase order acknowledgment form shall apply to all sales
hereunder. Any terms and conditions set forth on DISTRIBUTOR's purchase order
form shall be of no effect. MOSEL VITELIC shall notify DISTRIBUTOR of standard
purchase order acknowledgment form of the estimated shipment dates of the
products cover by purchase orders accepted in accordance with the standard
terms and conditions. However, MOSEL VITELIC shall not be obligated to accept
DISTRIBUTOR's orders and shall not be liable for delay or failure to make any
shipment or delivery. While it is MOSEL VITELIC's usual policy not to accept
orders from OEM customers in quantities fewer than 1000 units per item, but to
refer such orders to its distributors, MOSEL VITELIC reserves the right to
fill any such OEM orders directly, at it sole discretion.
The prices to DISTRIBUTOR for all products shall be MOSEL VITELIC's standard
distributor prices as set forth on the MOSEL VITELIC Distributor Price List in
effect at the time of shipment. The minimum order quantities shall be MOSEL
VITELIC standard minimums established from time to time and as in effect at
the time DISTRIBUTOR orders are acknowledged.
4a. TERMS OF PAYMENT:
Terms of payment allow a one (1) percent discount on the net amount of payment
when invoices received the 1st through the 15th are paid by the 25th of the
same month, and invoices received the 16th through the end on the month are
paid by the 10th of the following month. Invoices paid with no discount
received the 1st through the 15th are paid on the 10th of the following month,
and invoices received the 16th through the end of the month are paid on the
25th of the following month. MOSEL VITELIC has the option of FAXING invoices
to DISTRIBUTOR to confirm the receipt date.
5. TRADE NAMES:
In connection with the sales promotion or advertising of MOSEL VITELIC
products, DISTRIBUTOR shall use the name and type number designated by MOSEL
VITELIC for each such product. DISTRIBUTOR shall not in any way alter MOSEL
VITELIC labels or other identifying marks on its products. DISTRIBUTOR further
agrees not to use the name "MOSEL VITELIC CORPORATION or "MOSEL VITELIC" or
any other tradename or trademark used by MOSEL VITELIC or any name similar to
any such tradename or trademark, except to advertise that DISTRIBUTOR is an
authorized distributor of MOSEL VITELIC products. DISTRIBUTOR acknowledges
that MOSEL VITELIC's permission to use its tradename and trademarks for such
limited purposes confers only a limited license and no claim of title or other
right in DISTRIBUTOR to the ownership or use of the same. In no event shall
DISTRIBUTOR's advertising create the impression that the DISTRIBUTOR or any
person other than MOSEL VITELIC is the manufacturer of MOSEL VITELIC products.
All DISTRIBUTOR advertising that includes use of MOSEL VITELIC trademarks or
trade names shall designate such trademarks or trade names with the
identification symbol ~ where federally registered, and TM where not federally
registered. All DISTRIBUTOR advertising must be submitted to MOSEL VITELIC for
clearance prior to publication. DISTRIBUTOR agrees to make any changes in such
advertising required to comply with the above upon request for such changes by
MOSEL VITELIC.
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6. SALES RECORDS:
DISTRIBUTOR will provide MOSEL VITELIC by the 10th day of the month with a
list of customers that purchased MOSEL VITELIC products during the previous
month and report will include product description, quantity and price (for
purposes of verifying the commissions payable by MOSEL VITELIC) and to have
access to its sales records for the purpose of determining same. DISTRIBUTOR
will provide MOSEL VITELIC each month with a new list of products in
DISTRIBUTOR's inventory as of the first day of each month or will permit a
designated representative of MOSEL VITELIC to review such inventory.
The review of such inventory will be at MOSEL VlTELIC's sole expense. MOSEL
VITELIC will give DISTRIBUTOR reasonable advance notice and will not disrupt
or otherwise materially adversely impact the conduct of DISTRIBUTOR's
business.
7. PRICE CHANGES:
In the event of a reduction in the price of a product set forth in MOSEL
VlTELIC's published Distributor Price List, MOSEL VITELIC shall grant to
DISTRIBUTOR a credit with respect to all items of such product then in
DISTRIBUTOR's inventory equal to the difference between DISTRIBUTOR's original
purchase price from MOSEL VITELIC for such item, adjusted for any credits
previously given with respect to such item pursuant to this paragraph 7, and
the new Distributor Price List price for that item. DISTRIBUTOR will furnish
MOSEL VITELIC with such information to enable MOSEL VITELIC to determine the
amount of such credit as MOSEL VITELIC may reasonably request and shall permit
MOSEL VITELIC TO HAVE ACCESS TO IT'S PLACE OF BUSINESS AND ITS BOOKS AND
RECORDS IN ORDER TO VERIFY SAME. Inventory reports from DISTRIBUTOR for the
issuance of price credits shall be received by MOSEL VITELIC within thirty
(30) days after the effective date of the price changes. NO SUCH CREDIT WILL
BE DUE DISTRIBUTOR IF DISTRIBUTOR FAILS TO FURNISH SUCH INVENTORY REPORT
WITHIN SAID TIME AND IF A MONTHLY INVENTORY REPORT IS NOT IN MOSEL VITELIC's
FILES AS CALLED FOR IN SECTION 6 OF THIS AGREEMENT AT THE TIME THE DEBIT MEMO
IS ISSUED BY DISTRIBUTOR.
MOSEL VITELIC shall furnish DISTRIBUTOR a separate listing of all products
listing old cost and new cost. This form shall be completed by DISTRIBUTOR and
submitted with amounts due DISTRIBUTOR within thirty (30) days. All products
in transit are also eligible for price protection.
MOSEL VITELIC ALSO RESERVES THE RIGHT TO OFFER PRODUCT ON A COMMODITY COST
BASIS TO DISTRIBUTOR. SUCII PRODUCT MAY BE OFFERED BY ADDENDUM TO THE
FRANCHISE AND IS NOT SUBJECT TO THE NORMAL PROTECTION OFFERED HEREIN. SPECIAL
TERMS AND CONDITIONS FOR SAID PRODUCT WILL BE LISTED ACCORDINGLY.
8. RETURNS:
8A. All initial stocking orders for (1) newly established distributor
authorizations or (2) new MOSEL VITELIC product introductions are granted a
100% return privilege. This return privilege shall apply on a FIFO basis and
shall apply only if the returned products have not been in DISTRIBUTOR's
inventory for more than twelve (12) months after shipment from MOSEL VITELIC.
All products returned hereunder must be shipped prepaid and accompanied with
MOSEL VlTELIC's written authorization, which will not be unreasonably refused.
8B. DISTRIBUTOR may return for credit against future or pending purchase
orders, a quantity of products from DISTRIBUTOR's inventory the aggregate
value of which (as adjusted where appropriate pursuant to paragraph 7) does
not exceed 5% of the net sales invoiced to DISTRIBUTOR by MOSEL VITELIC for
products shipped to DISTRIBUTOR in the six (6) months immediately preceding
such return. No return shall be permitted within six (6) months of a prior
return pursuant to this subparagraph B of paragraph 8. This return privilege
shall apply only if:
(1) The returned products have not been in DISTRIBUTOR's inventory for more
than twenty-four (24) months after shipment from MOSEL VITELIC;
(2) The returned products have not been damaged, altered or misused;
(3) The returned products have been and are currently approved by MOSEL
VITELIC for Distributor stocking;
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(4) At the time of this return, DISTRIBUTOR must order a quantity of products
the dollar value of which equals the dollar value of the products returned;
(5) All returns must be within the time periods specified above;
(6) All products returned hereunder must be shipped prepaid and accompanied by
MOSEL VITELIC written authorization. DISTRIBUTOR agrees to furnish MOSEL
VITELIC, upon written request, a detailed inventory report in a form and time
acceptable to MOSEL VITELIC and the DISTRIBUTOR, as requested from time to
time.
8C. MOSEL VITELIC will periodically notify DISTRIBUTOR of discontinued,
obsolete or modified products, which may be returned within ninety (90) days
of such notification for credit against future or pending purchase orders.
Credit will be given on the basis of DISTRIBUTOR's actual purchase price, as
adjusted where appropriate pursuant to paragraph 7. No returns will be
permitted after ninety (90) days of MOSEL VlTELIC's notification.
9. TERMINATION AND CANCELLATION:
This Agreement shall be in effect upon the date thereof and may thereafter be
terminated at any time by either party upon the giving of not less than thirty
(30) days' written notice by Registered or Certified Mail to the other party.
However, if the DISTRIBUTOR's account is past due at the time of shipment,
MOSEL VITELIC, at its discretion, may require cash in advance, hold up
shipment until account is brought up to date, or may cancel any order to be
shipped if the account is not brought up to date on or before the effective
date of termination.
When ownership of DISTRIBUTOR changes, DISTRIBUTOR has effectively terminated
the Agreement and the MOSEL VITELIC DISTRIBUTOR authorization is therefore
automatically terminated for cause. If the newly owned Distributor wishes to
maintain the previous relationship, a new application must be submitted to
MOSEL VITELIC and if agreed to, a new Distributor Agreement will be issued.
MOSEL VITELIC shall not be liable in any manner on account of the termination
or cancellation of this agreement. DISTRIBUTOR shall immediately discontinue
all advertising or references to MOSEL VITELIC products upon such termination
or cancellation. The right of termination as set forth herein is absolute.
Both DISTRIBUTOR and MOSEL VITELIC are aware of the possibility of
expenditures necessary for preparing for performance hereunder and the
possible losses and damages which may occur to each in the event of
termination. Both parties clearly understand that neither shall be liable for
damages of any kind by reason of the termination of this Agreement.
If MOSEL VITELIC terminated this Agreement, MOSEL VITELIC will repurchase from
DISTRIBUTOR, at DISTRIBUTOR's election, for cash payable within thirty (30)
days of final restocking, all current standard products in DISTRIBUTOR's
inventory, provided that such products are in saleable condition and provided
such products have not been in DISTRIBUTOR's inventory for more than twenty-
four (24) months. The repurchase price will be the DISTRIBUTOR's actual
purchase price, as adjusted where appropriate pursuant to paragraph 7. If
DISTRIBUTOR terminated, or if MOSEL VITELIC terminated following DISTRIBUTOR's
material breach of any of the terms of this Agreement, a 10% restocking charge
will apply. In the event the parts to be returned by DISTRIBUTOR are in
original unopened MOSEL VITELIC BOXES, there will be no restocking charge.
10. GOVERNING LAW:
This Agreement shall be governed by and construed in accordance with the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
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11. ARBITRATION:
Any controversy or claim arising from or relating to this Agreement, or the
breach or termination hereof, shall be settled by arbitration in the City of
Santa Clara, California, in accordance with the then existing rules of the
American Arbitration Association, provided, however, that the arbitrators
shall not have any authority to change or revise any decision made by MOSEL
VITELIC/DISTRIBUTOR where, by the terms of this Agreement, MOSEL
VITELIC/DISTRIBUTOR has been given sole discretion, and provided further, that
judgment upon any reward rendered may be entered in any court having
jurisdiction thereof.
12. WAIVER:
The failure of MOSEL VITELIC to enforce, at any time or for any period of
time, the provisions hereof of the failure of MOSEL VITELIC to exercise any
option herein shall not be construed as a waiver of such provision or option
and shall in no way affect MOSEL VlTELIC's right to alter enforce such
provision or exercise such option.
13. ASSIGNMENT:
MOSEL VITELIC/DISTRIBUTOR may not assign its rights or duties under this
Agreement without MOSEL VITELIC/DISTRIBUTOR's prior written consent, executed
in the same manner as this Agreement. MOSEL VITELIC/DISTRIBUTOR may assign
only to a subsidiary or successor in interest.
14. CONFIDENTIALITY:
Certain materials provided to MOSEL VITELIC/DISTRIBUTOR by DISTRIBUTOR MOSEL
VITELIC must be considered confidential. These materials include, but are not
limited to, price lists, specifications, prints, point of sales reports,
inventory reports and related items. MOSEL VITELIC/DISTRIBUTOR will not use
these materials in any way contrary to the directions of MOSEL
VITELIC/DISTRIBUTOR and shall not copy, reproduce, loan, or use these
materials in any manner which would allow them to fall into the possession of
persons other than those authorized to have access to them within MOSEL
VITELIC/DISTRIBUTOR's organization.
15. INTEGRATION:
This Agreement cancels and supersedes any previous understanding or agreements
between the parties relating to the subject matter hereof, including any
existing distributorship agreement. This Agreement expresses the complete and
final understanding of the parties with respect to the subject matter hereof
and may not be changed in any way except by an instrument in writing signed by
both parties in the same manner as this Agreement.
16. CO-OP ADVERTISING:
To assist DISTRIBUTOR in advertising and promoting the products, MOSEL VITELIC
shall accrue into a special advertising fund one-half percent (1/2%) of the
net sales dollars invoiced to DISTRIBUTOR each month. Amount in such fund
shall be used by DISTRIBUTOR in connection with advertising and other
promotional efforts approved by both DISTRIBUTOR and MOSEL VITELIC.
17. SHIP FROM STOCK AND DEBIT:
From time to time, DISTRIBUTOR and MOSEL VITELIC will enter into a sale
whereupon the actual value to the end customer will warrant a price decrease
for the DISTRIBUTOR. In such cases, DISTRIBUTOR must obtain authorization from
the Sales Representative in his area, at which time the Sales Representative
will give DISTRIBUTOR an authorization number. After the product has shipped,
at DISTRIBUTOR's original cost, DISTRIBUTOR may then debit MOSEL VITELIC for
the agreed to difference in cost of said product.
DISTRIBUTOR will have forty-five (45) days from the time of shipment to end
customer to claim and submit debit memos. Debit memos submitted after this
period will be billed back.
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IN WITNESS THEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
DISTRIBUTOR
By: /s/Keith W. Steenland
Name: Keith W. Steenland
Title: Vice-President Marketing Semi.
MOSEL VITELIC CORPORATION:
By: /s/Bruce Baird
Name Bruce Baird
Title: National Distribution Mgr.
MOSEL VITELIC CORPORATION DISTRIBUTOR AGREEMENT
EXHIBIT 10.4
DISTRIBUTION AGREEMENT
between
JAE ELECTRONICS, INCORPORATED
142 Technology Drive, Suite 100
Irvine, CA 92618
(949) 753-2600
A subsidiary of
Japan Aviation Electronics Industry, Ltd.,
of Tokyo, Japan
and
REPTRON ELECTRONICS
14401 McCormick Drive
Tampa, FL 33626
(888) 737-8766
Revision No. E
1 April, 1998
1
INDEX
EXHIBIT A .DISTRIBUTOR AGREEMENT
ATTACHMENT I .PRODUCT CATEGORIES
ATTACHMENT II ....AUTHORIZED DISTRIBUTOR LOCATIONS AND
PERSONNEL
ATTACHMENT III .POLICY STATEMENT
ATTACHMENT IV ...OPERATIONAL POLICY
ATTACHMENT V ....INVENTORY ADJUSTMENTS AND RETURN
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DISTRIBUTOR AGREEMENT
AGREEMENT entered into as of the first day of August, 1998, between JAE
ELECTRONICS, INCORPORATED, 142 Technology Drive, Suite 100, Irvine, California
92618 and RETRON ELECTRONICS, whose principal address is, 14401 McCormick
Drive, Tampa, FL 33626 herein referred to as "DISTRIBUTOR".
A.WHEREAS, JAE Electronics Incorporated is a wholly owned
subsidiary of Japan Aviation Electronics Industry, Ltd.
A Japanese corporation, hereinafter referred to as
"JAE", responsible for the marketing of their products
in North Americas and
B.WHEREAS, JAE desires to designate Distributor Sales
companies throughout North America to re-sell it's
products therein; and
C.WHEREAS, JAE desires to retain it's right to deal and sell directly to it's
established customers or sell such products within North America; and
D.WHEREAS, Distributor desires to re-sell JAE's product under the terms and
conditions set forth in this agreement.
NOW, THEREFORE, in consideration of the premises, JAE and DISTRIBUTOR agree as
follows:
APPOINTMENT & TERMS
A.JAE ELECTRONICS, INC. hereby appoints the DISTRIBUTOR to sell JAE products
cited in Attachment 1 at the locations shown in Attachment II. The appointment
shall commence on 15 January, 1999 and shall continue thereafter from year to
year unless sooner terminated, pursuant to Section 12.
B.JAE further reserves the right to modify, alter, improve change or
discontinue any or all of the products covered by this Agreement. This
Agreement shall cover the sale of such products as they may be modified,
altered, improved, or changed; provided, however, that the DISTRIBUTOR shall
have the right to refuse to handle or sell such products.
2.PRICING, COST AND TERMS
3
A. JAE will supply DISTRIBUTOR with suggested resale price lists for products
authorized for sale by DISTRIBUTOR. JAE reserves the unrestricted right to
revise the price list without prior notice, by addition or deletion of
products, or by revising prices or pricing policies.
Upon notification of price increases, DISTRIBUTOR will have thirty (30) days
to place orders at the old price. After the thirty (30) days, all prices will
increase as noted. All orders shippable within a ninety (90) day period of the
effective date of the price increase, will be billed at the original price.
All orders requested to be shipped after the ninety (90) day period, will be
billed at the new price.
B. JAE will provide the DISTRIBUTOR with costing of the offered product as
follows:
1. All Class A product, as defined in Attachment I, will be offered for sale
to DISTRIBUTOR at a specified cost per item, subject only to minimum purchase
quantities specified in Section 3 and the Standard Distributor Cost List.
2. Class B and C products, as defined in Attachment I, will be offered for
sale to DISTRIBUTOR at a cost specified in the Standard Distribution
Operational Policy, Attachment IV, paragraph 3.
C.Price lists, cost lists and individual product quotations issued by JAE are
"Company Confidential" and are for the exclusive use of the DISTRIBUTOR and
it's sales personnel. DISTRIBUTOR agrees neither to use, nor publish,
communicate, divulge or disclose to unauthorized persons this price or cost
information without the prior written consent of JAE during the period of this
AGREEMENT or at any time subsequent thereto.
D. Terms of payment are Net thirty (30) days from invoice date.
E. All JAE costs are FOB Irvine, California unless otherwise mutually agreed
upon in writing.
3. ORDERING:
A. The DISTRIBUTOR will be required to initially order and
4
maintain stock levels of JAE's product commensurate with area and customers
served. Sufficient levels of stock shall be maintained as determined by JAE
and the DISTRIBUTOR to satisfy repeat customers and area needs.
B. The minimum acceptable purchase order values from the DISTRIBUTOR to JAE,
are defined in Attachment IV, paragraph. 5.
C. Orders must be entered through JAE. Drop or direct shipments to the
DISTRIBUTOR'S customers will not be made by JAE unless mutual prior approval
is obtained from both DISTRIBUTOR and JAE in writing.
4. RETURNED MATERIALS
A. Unless otherwise mutually agreed upon in writing (and noted on Purchase
Order) by both DISTRIBUTOR and JAE, items in Classes B & C categories are not
returnable except for quality and/or workmanship considerations as stated in
the standard JAE warranty policy.
B. The initial stocking of inventory shall consist mainly of Class A products,
50% of which may be exchanged once in it's lifetime, on a dollar for dollar
basis after six (6) but prior to twelve (12) months from the date initial
stocking inventory shipped from JAE to DISTRIBUTOR. Attachment V contains a
complete and detailed product return policy.
C.Credit of original DISTRIBUTOR purchase order cost of each item will be
issued for returned product, subject to terms outlined in Attachment V.
5. STOCKING MAINTENANCE:
A. DISTRIBUTOR shall send a report to JAE on a monthly basis, containing
contents of it's JAE inventory. This report shall include JAE part number, and
current inventory quantities
B. The obligatory initial stocking package for DISTRIBUTORS, shall consist of
products mutually agreed upon between JAE and Distributor. The product package
will be designed to serve both the area and customer needs. A purchase order
for the package will be required with the return of the signed DISTRIBUTOR
AGREEMENT.
C. The DISTRIBUTOR shall maintain a minimum overall stock level of product
sufficient to service recurring customers in the area. It is recommended that
additional stock be maintained to service new or potential customers in the
area.
6. PRICE PROTECTION:
A. Authorized distributors will be "Price Protected" on Class A products up to
the last column of pricing in the Distributor Price List.
B. In the event of price reduction of JAE's Standard Price List at Distributor
participation levels, JAE may choose to lower the prices in the Standard
Distributor Cost List. If an adjustment is made, all affected part numbers in
DISTRIBUTOR'S stock for twelve (12) months or less, will qualify for the
adjustment. The DISTRIBUTOR will be required to furnish purchase order numbers
and purchase dates of all materials to be adjusted.
Pricing in competitive situations - See Attachment IV.
7. DISTRIBUTION AUTHORIZATION:
A. DISTRIBUTOR shall exert it's best effort and ability to promote and sell
JAE products in the best interest of JAE.
B. The DISTRIBUTOR shall cooperate with local JAE Sales Representatives in
every reasonable manner, inclusive of obtaining information which will assist
in expanding product usage, data with regards to customer requirements,
problems, or prototype activity.
C. The DISTRIBUTOR may not encumber any JAE product stock until such products
have been fully paid for by the DISTRIBUTOR.
8. REFERRALS AND LOCAL SALES SUPPORT:
A. JAE shall make every reasonable effort to refer customers to DISTRIBUTOR up
to the price protected quantity levels. Referrals to specific DISTRIBUTORS in
an area shall be based upon proximity to the customer,
6
and available inventory.
B. JAE will direct it's local Representatives when possible, to assist
DISTRIBUTORS in obtaining approval of JAE product, and to suggest additions in
inventory stock. -
C. Commissions shall be paid by JAE to JAE Sales Representatives on sales made
by authorized DISTRIBUTOR to Customers in the Representative's territory,
based upon Point of Sale Reports described in Section 11.
9. LITERATURE:
At the discretion of JAE, reasonable quantities of catalogs and other
literature will be supplied to the DISTRIBUTOR at no charge.
10. SALES PROMOTION:
JAE will share in the cost of advertising based upon DISTRIBUTORS yearly
purchases of JAE product. Yearly sales shall be computed on the calendar year
unless otherwise approved by JAE. Prior written approval by JAE must be
obtained for advertising and supporting documents submitted for payment (i.e.
copies of invoices, ad reprints, etc.). JAE portion of advertising shall not
exceed 1% of total Distributor sales for the calendar year.
11. POINT OF SALE REPORTS:
A. DISTRIBUTOR shall provide JAE with a Monthly Point of Sale Report. The
report is to include customer information, (name and address), resale dollar
valuations by product groups (per JAE terminology, i.e. "PS" or "SRC"
etc....), or by other mutually agreed upon means of identification breakdown.
See Attachment IV, paragraph 7, of the Standard Distribution Operational
Policy for required information. Such reports are due at JAE's facility on or
before the last day of the month following the month in which the product was
shipped.
B. The product price shall include only the value of JAE product. "Value
Added" costs are not to be included in the POS. See Attachment IV, paragraph
7.I.
12. TERMINATION:
7
Subject to the terms of Section 13, either party may terminate this AGREEMENT
upon thirty (30) days prior written notice. For purposes of this paragraph,
"Written notice" shall be deemed given when it has been properly addressed to
the party's principal place of business, postage prepaid for transmittal by
certified mail, return receipt requested and deposited in the mail.
A. Should the DISTRIBUTOR voluntarily terminate this AGREEMENT, JAE will
accept the return of Standard Class A stock only, freight prepaid, at a
restocking charge of 20% of the purchase price. All stock must be in original
package and condition (as shipped from JAE to Distributor), must be
marketable, and is subject to the acceptance of JAE's Quality Control
Department.
B. Should JAE terminate this AGREEMENT, JAE will be obliged to repurchase only
the Class A Stock, plus all Class B stock remaining from the original stocking
order at DISTRIBUTOR'S purchase cost. All stock must be in original package
and condition (as shipped from JAE to DISTRIBUTOR), must be marketable, and is
subject to the acceptance of JAE'S Quality Control Department.
C. This AGREEMENT, shall be deemed terminated by DISTRIBUTOR, pursuant to
Section 12, paragraph A, without further act of either party if the
DISTRIBUTOR has;
1) filed, or has filed against it, a petition for Bank-ruptcy; or
2) sought or is seeking reorganization, arrangement or other relief under the
Bankruptcy act or other insolvency or similar act: or
3) made an assignment for the benefit of creditors; or
4) ownership of DISTRIBUTOR changes.
D. Should the DISTRIBUTOR be an individual, this AGREEMENT, upon his death,
shall be deemed terminated without further act on behalf of either party,
pursuant to Section 12, paragraph A.
E. JAE may waive any of the conditions set forth in Section 12, and may elect
to continue it's relationship with DISTRIBUTOR under such terms and conditions
as may be agreed upon.
8
13. TRANSFER OF AGREEMENT:
This AGREEMENT shall inure to the benefit of and shall be binding upon the
parties hereto as well as their respective successors and assigns subject to
the provisions of Section 12. No Assignment shall be made by the DISTRIBUTOR
without the prior written consent of JAE.
14. INDEMNIFICATION:
Supplied shall indemnify, defend and otherwise hold harmless DISTRIBUTOR, its
affiliates and its customers, and each of them, from all costs, loss, damage,
liability, or expenses of whatsoever nature, including attorney's fees,
arising from or in any way connected with any proceeding (legal or equitable)
or claim brought or asserted against DISTRIBUTOR, its affiliates or its
customers, and each of them, arising from or in any way connected with the
manufacture, sale, possession or use, including demonstration of or display of
warranty, of Products purchased under this Agreement by DISTRIBUTOR or a
customer of DISTRIBUTOR, based on an allegation that the Products, or any part
thereof, or their distribution or use infringe any patent, copyright,
trademark, trade secret, or violation of the Semiconductor Chip Protection
Act, or any similar legislation now or hereafter enacted, or like or similar
claim, if DISTRIBUTOR promptly notifies SUPPLIER of any such proceeding or
claim after it becomes known to DISTRIBUTOR and DISTRIBUTOR provides all the
assistance and cooperation to SUPPLIER that is reasonable requested. SUPPLIER
shall not be liable to DISTRIBUTOR, its affiliates or its customers under any
provision of this Subsection to the extent that any claim is based upon (i) a
use for which the Product or part was not designated, or (ii) an alteration of
the Product or part, which alteration has caused the infringement action.
15. APPLICABLE LAWS:
The conditions contained herein, shall be interpreted in accordance with the
laws of the State of California.
16. FORCE MAJUERE:
Neither party shall be responsible for any failure to comply with the terms of
this AGREEMENT, or for any delay in performance of, or failure to perform, in
whole or in part, under any AGREEMENT entered into between the parties hereto
as contemplated in this AGREEMENT, where such failure or delay is due to fire,
explosion,
9
flood, riot, strike, or other differences with workmen, shortage of utility,
material or labor, freight embargo, transportation delay, breakdown or
accident, act of God or public enemy, compliance with or other action taken to
carry out the intent or purpose of any law or regulation, or any other cause
beyond the reasonable control of JAE or DISTRIBUTOR.
17. DISTRIBUTORS AND ARBITRATION:
The parties agree that any disputes or questions arising here-under,
including, the construction or application of this AGREEMENT, shall be settled
by arbitration in accordance with the rules of the American Arbitration
Association then in force, and that the arbitration hearings shall be held in
the city in which the principal office of the party requesting the arbitration
(with the American Arbitration Association), is located. If the parties can
not agree upon an arbitrator within ten (l0) days of the demand, either or
both parties, may request the American Arbitration Association to name a panel
of five (5) arbitrators. JAN shall strike the names of two (2) from the list,
the DISTRIBUTOR shall then strike the names of two (2) from the list with the
remaining name to be the arbitrator. The decision of the arbitrator shall be
final and binding upon the parties both as to the law and fact, and shall not
be appealed to in any court in any jurisdiction. The expenses of the
arbitrator shall be shared equally by the parties, unless the arbitrator
determines that the expenses shall be otherwise assessed.
18. ENTIRE-AGREEMENT:
This AGREEMENT contains the entire AGREEMENT of the parties hereto and
supersedes any and all previous AGREEMENTS. Any amendments, alterations or
changes, shall, accordingly, be binding only upon the execution of a written
document executed by both parties.
10
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be
executed by a duly authorized officer on the date first above written.
(Witness):DISTRIBUTOR
By: /s/ Jack Killoren
Title: VP/ Marketing
Date: 12/16/98
JAE ELECTRONICS, INCORPORATED
A subsidiary of
Japan Aviation Electronics, Industry, Ltd.
By: /s/Yasuo Takagi
Title: President
Date 1/6/99
By:/s/
Title: General Manager
Date: 5 January 1999
By: /s/
Title: Sales Director
Date 1/5/99
EXHIBIT 10.5
Silicon Storage Technology, Inc.
Distribution Agreement
(North America)
THIS AGREEMENT is made and entered into as of March 23, 1999, by and between
Silicon Storage Technology, Inc., (hereafter referred to as "SST") a
California corporation, with it's principal place of business at 1171 Sonora
Court, Sunnyvale, California, 94086, and Reptron Electronics, Inc . a Florida
Corporation, with its principle place of business at
14401 McCormick Drive, Tampa, FL 33626 (hereafter referred to as
"Distributor").
Now, Therefore, the parties, in consideration of the mutual promises contained
herein, intending to be legally bound, agree as follows:
1. General
This Agreement governs all transactions hereafter entered into between SST and
Distributor concerning SST brand products listed in the Distributor Price List
of SST. Such products, if they have been sold by and through SST, are
hereafter referred to as "Product(s)".
2. Appointment
Subject to the terms set forth in the Agreement, SST hereby appoints the
Distributor, and the Distributor accepts the appointment by SST, to be a
non-exclusive, independent distributor of the Products set forth on the
attached Schedule "A". Distributor shall be authorized to handle additional
Products, only if SST signs an appropriately revised Schedule "A".
3. Territory Distributor shall promote, sell and distribute Products to
customers located only in the geographic area (the "Territory") set forth in
Schedule "B" hereto, except as may be approved in advance in writing by SST's
Distribution Sales Director in a particular instance. SST reserves the right
to make sales directly or indirectly or to designate others to make sales, to
customers located within the Territory.
4. Term
This Agreement shall become effective on the date of execution, to be renewed
annually unless terminated as provided in Section 16 of the Agreement.
5. Distributor Locations The principal place of business of distributor, and
such other locations as are set forth on Schedule "C" hereto, shall be the
only locations at or from which Distributor may promote sell or distribute
Products. Distributor shall not establish any new, different or additional
sales locations for Products without prior written consent of SST.
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6. Purchases Distributor shall order and purchase Products from SST in
accordance with the terms and conditions of this Agreement, and in accordance
with such additional order processing procedures as outlined in the SST
"Policy and Procedure Manual" and as may be established by SST from time to
time. SST may set such procedures forth in written communications, such as
bulletins, letters, or the like. The terms and conditions of the Agreement
will be deemed incorporated in all orders by Distributor for Products and will
apply irrespective of (and in lieu of) any other items which may be contained
in any forms or correspondence submitted by Distributor to SST. SST's
acceptance and Distributors submission of such orders is expressly conditioned
on the terms and conditions of this Agreement applying to such orders. The
following terms shall be deemed incorporated in all orders place by
Distributor:
(a) The prices for Products shall be those set forth on SST's Distribution
Price List in effect on the date of delivery by SST to Distributor
(b) Price Protection: In the event SST decreases the price of a Product in
its Distribution Price List, Distributor may apply for credit equal to the
difference between the actual price paid to SST for each such Product (less
any credits previously issued by SST) and the new lower price for such
Products then in the Distributor's inventory at each Location on the effective
date of the price decrease. On the date of the price decrease a physical count
must be taken by Distributor of the Products which are being decreased in
price and for which Distributor requests credit. Distributor to SST must
submit the results of the count in writing within 30 days of the effective
date. SST shall have the right to audit Distributor's books and accounts and
to inspect Distributor's inventory to verify the accuracy of such count and
report. Credit will be issued only upon authorization of the National
Distributor Sales Manager or functional equivalent, and Distributor will not
be eligible for such credit if Distributor fails to submit in writing within
aforementioned thirty day period the inventory count, or has failed to submit
each of the monthly sales and inventory reports specified in l9 (c) hereof or
fails to permit SST to audit the accuracy of such reports.
(c) All Distribution Price Lists are subject to change by SST without
notice, except that SST shall use its best efforts to give prior notice to
Distributor of price increases.
(d) All prices, unless otherwise specified, shall not include any applicable
federal, state, or local sales, advalorem, use or similar taxes, all of which
shall be the responsibility of Distributor.
(e) All orders placed by Distributor for Products shall be acknowledged by
SST and scheduled for a delivery date(s). Orders are firm and non-cancelable
by Distributor once the scheduled delivery date for a Product is thirty (30)
days or less, except (l) in the event of SST's delaying delivery as set forth
in the subsection (h) below, or (2) with respect to those Products for which
SST has given notice of an increase in price after placement of Distributor's
order.
(f) All prices are EWE, (Ex Works Factory) SST, Sunnyvale, California. SST
shall be deemed to have delivered all Products when such are put in the
custody of a carrier at
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SST's shipping dock, at which time all risk of loss and/or damage shall pass
to Distributor. Distributor shall bear all costs of freight, freight insurance
and associated costs. Within thirty (30) days after receipt of any Products,
Distributor shall notify SST in writing of any damage or defects in such
Products. Failure to do so shall be deemed conclusive proof that such damage
or defects are not attributable to the fault of SST and shall constititute a
waiver of all claims against SST arising out of such damage or defects (except
for SST 's warranty obligations as set forth in Section 9 of this agreement).
(g) SST shall invoice Distributor for each shipment, such invoice to be sent
on or after date of shipment by SST. Unless otherwise stated by SST, terms of
payment are thirty (30) days net from date of invoice. Credit, if any, is
subject to prior approval by SST as to the amount and terms. SST reserves the
right at any time, to require payment in advance or to modify or revoke credit
or credit terms, either generally or with respect specific orders. SST may at
any time, in SST's sole discretion, refuse, vary, change or limit the amount
of duration of credit to be allowed Distributor. Invoice not paid within
thirty (30) days after they are due shall be subject to interest at a rate of
two percent (2%) per annum above the interest rate charged by Citibank N. A.
to substantial and responsible corporate borrowers, computed on the basis of a
year of 360 days and the actual days elapsed.
(h) Delivery dates given by SST for orders for Products placed by
Distributor shall be considered SST's best estimates only and SST reserves the
right to apportion Products among its customers in it sole discretion. To
cancel a purchase order for delay in delivery, Distributor must first give
written notice thereof to SST, and SST shall have until the end of five (5)
full business days after such notice is actually received by SST in which to
deliver, after (but not before) which such order shall be deemed cancelled.
7. Inventory and Stock Adjustments
(a) Distributor agrees to maintain an adequate inventory of all Products to
meet the sales forecast for the Territory.
(b) Products may be returned to SST only if authorized in writing in
advance. If SST approves a return, SST will first issue to Distributor a
Return Material Authorization (RMA) number. Return Material Authorization
numbers shall appear on the outside of all boxes being returned. Unauthorized
returns or returns without a proper RMA number shall be returned to
Distributor, transportation charges collect. All Products returned to SST must
be properly packed in original packing tubes, or unbroken dry packs and must
be shipped freight prepaid and are subject to SST's verification and
inspection prior to replacement, repair or credit.
(c) Notwithstanding the foregoing, Distributor may return twice a year (in
the particular months each year that SST has scheduled Distributor for stock
rotation) up to ten percent (10%) of the value (value being the actual
purchase price paid to SST less any credit previously issued by SST) of
Distributor's then existing inventory of products based on prior month's
inventory report provided that the Products that Distributor requests be to
return are those listed in SST's then most current Distribution Price List.
The return request must be accompanied by an offsetting purchase order for
other Products (minimum of 25% in the same family) of equal or greater value.
All requested
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shipment dates on the offsetting purchase order must be within thirty (30)
days of the order date.
(d) SST will give written notice of the discontinuance of any Products.
Within 30 days of receipt of such notice, Distributor shall notify SST in
writing of its inventories of such Discontinued Product. Thereafter, SST will
issue an RMA to Distributor authorizing the return of the Discontinued
Products to SST. Provided that the Distributor has complied with all the
requirements set forth in subsection (b) above and the Discontinued Product is
returned to SST within thirty (30) days after issuance of an RMA, Discontinued
Product returned for exchange will be credited at either the current
Distributor Price or at the original purchase price paid by Distributor, less
any credits received by Distributor, whichever is less. Any RMA issued
pursuant to this subsection shall be and become null and void if Distributor
fails to return the subject Discontinued Products within said thirty-day
period. Discontinued Products not returned within authorized time period would
be deemed NON RETURNABLE.
8. Product Development
SST reserves the right, in its sole discretion, to, at anytime, make
modification, improvements or changes to Products or to discontinue the sale
of any products without incurring any liability whatsoever to Distributor or
others.
9. Cooperative Merchandising Program
(a) Distributor agrees to participate in SST's cooperative merchandising
program, which may cover such joint activities as cooperative advertising,
sales promotions, trade show participation and other merchandising efforts
approved by SST. Under the provisions of the program, each fiscal quarter SST
will contribute to the fund an amount of one percent (1 %) of the
Distributor's net purchases of the Products from SST for prior fiscal quarter
up to a maximum of $25,000. Thereafter, for the balance of the fiscal year the
rate of contribution will be reduced to one-half percent (0.5%) of such sales.
The contributions will be cumulative in the fund for any fiscal year, except
that any contributions from the first three (3) fiscal quarters of any fiscal
year not utilized at the end of such fiscal year will revert to SST. SST's
contribution to the fund in the fourth fiscal quarter ( along with the
contributions from the prior three fiscal quarters) and any balance remaining
from such fourth fiscal quarter contribution shall remain in the fund and be
available for use during the first fiscal quarter of the subsequent fiscal
year. Any fourth quarter contribution remaining in the fund at the end of the
first fiscal quarter of the subsequent fiscal year will revert to SST.
(b) Upon the expenditure for advertising or promotion being made by SST, the
Distributor and the fund will each be billed for one-half of such expenditure.
Upon expenditure for advertising or promotion being made by Distributor,
Distributor for one-half of such expenditure will bill the fund. Billings by
either party must be verified by supporting detailed invoices. Any party must
have the prior written approval of the other party including consent of
Distributor allowing SST to use the trade name and trademarks of the
Distributor in connection therewith. Any unpaid amounts owed by either party
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to the other pursuant to this Section 9 shall be paid in full no later than
the effective termination date of this Agreement.
10. Warranty
SST warrants solely to the end-user, that Products will be free from defects
in material and workmanship under normal use and service for a period of one
(1) year from date of delivery of the product, in new condition, to the end
user. This warranty is void if the Product is subject to accident, misuse,
neglect, improper handling, improper installation, and improper repair or is
modified or altered. The sole and exclusive obligation of SST under this
warranty, is the repair or replacement by SST or by its Distributor (at there
option) of such defective or missing parts as are causing the malfunction with
new or refurbished parts. If SST or its Distributor does not replace or repair
such part, the end-user's sole remedy against SST shall be to obtain a refund
of the price charged by SST's Distributor within the warranty period and no
later than thirty (30) days after the occurrence of such malfunction,
whichever occurs first. To obtain service under this warranty, the end-user
must bring the malfunction to the attention of SST or one of SST's
Distributors within the twelve (12) month period and no later than thirty (30)
days after the occurrence of such malfunction, whichever occurs first. THERE
ARE NO OTHER WARRANTIES, WHICH EXTEND BEYOND THE FACE OF THIS WARRRANTY. ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF
MERCHANTIABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FITNESS FOR USE, ARE
HERE EXCLUDED. No SST Distributor and no person other than the President of
SST may extend or modify this warranty. No such modification or extension is
effective unless it is in writing. No other statement of fact or promise made
by SST or its employees or its representatives by words or actions constitutes
a warranty. Distributor is obligated to make its customers and end-users aware
of the terms of SST's warranty prior to the sale of the Product to an
end-user. Distributor shall actively participate in the resolution of customer
complaints and shall cooperate with SST in providing warranty service. In
particular, Distributor is responsible for Products returned to SST under this
warranty (1) be accompanied by a Return Material Authorization (RMA) issued by
SST; (2) be accompanied by the Distributor's customer's failure analysis
report or the like; (3) be received by SST no later than sixty (60) days
following the date on which such Products were returned by Distributor's
customer and (4) otherwise comply with SST's warranty service procedures. SST
shall not be liable under this warranty unless SST's examination of such
product shall disclose, to its satisfaction, that such defects have not been
caused by misuse neglect, improper handling, improper installation, improper
repair, modification or alteration.
11. Limitation of Liability IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER ANY
PROVISION OF THIS AGREEMENT FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS, TRVENUE DATA, OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY,
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WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF THE
OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. SST's INABILITY FOR DAMAGES UNDER THIS AGREEMENT SHALL IN NO EVENT
EXCEED THE AMOUNTS ACTUALLY PAID BY DISTRIBUTOR TO SST UNDER THIS AGREEMENT
FOR THE PRODUCTS TO WHICH SUCH LIABILITY RELATES. SST hereby disclaims any
representation or warranty that the Products are compatible with any
combination of other hardware products or software products, other than the
SST-designated system components. Distributor may, however, connect with the
Products devices other than SST specified Products. The provisions of section
10 allocate the risks under this Agreement between SST and Distributor. SST's
pricing reflects this allocation of risk and the limitation of liability
specified herein. SST shall have no liability for any direct, indirect,
incidental, special or consequential damages related to or arising out of any
Products altered by or on behalf of Distributor. Distributor assumes any and
all risks and liabilities related to or arising out of any such alteration.
12. Indemnity
(a) SST will defend Distributor against a claim that Products furnished and
used with the scope of this agreement infringed any issued (as of Effective
Date) United States Patent ("Claim"), and SST will indemnify Distributor for
any damages awarded or paid in settlement based upon a Claim, provided that:
(1) Distributor notifies SST in writing within five (5) days of any Claim, (2)
SST has sole control of the defense and all related settlement negotiations,
and (3) Distributor provides SST with the assistance, information and
authority necessary to perform the above. SST will reimburse Reasonable out
- -of -pocket expenses incurred by Distributor in providing assistance.
(b) SST shall have no liability for any claim of infringement based on (1)
use of a superceded or altered release of the Products if such infringement
would have been avoided by the use of current unaltered releases of the
Products that SST provides to Distributor, (2) the combination, operation or
use of any of the Products furnished under this Agreement with products or
data not furnished by SST if such infringement would have been avoided by the
use of the Products without such Products or Data, or (3) any markings or
branding not applied or authorized by SST, or if same was applied at the
request of Distributor.
(c) In the event the Products are held or are believed by SST to infringe,
SST shall have the option, at its expense, to (1) modify the Products to be
non-infringing, (2) obtain for Distributor and its customers the right to
continue using the Products, or (3) terminate this Agreement with respect to
the infringing Products and refund the fees paid for those Products, less a
reasonable sum for use, wear and tear.
(d) This section 12 states Distributor's exclusive remedy and SST's entire
liability for any infringement.
13. Proprietary Rights
(a) Ownership of Proprietary Rights. SST shall retain all copyrights,
trademarks, trade secrets, patents, mask works and all other intellectual
property embodied in the Products
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including any improvements or enhancements to the Products. Except as
otherwise expressly provided in this Agreement, Distributor has no right,
title or interest in the Products or any intellectual property relating to the
Products and shall not copy, reproduce, reverse engineer, disassemble, or
otherwise use, tin whole or in part, the Products.
(b) No Modification or Implied Licenses. All Products Distributed by
Distributor shall be Distributed only in the form shipped by SST, and
Distributor shall not alter, modify, or change any Product or its package or
use in relation to any product or any trademark of or carried or offered by
Distributor or any third party without the prior written consent of SST. The
Products are offered for sale and are sold by SST subject in every case to the
condition that such sale does not convey any license, expressly or by
implication, to manufacture, duplicate or otherwise copy or reproduce any of
the Products. Distributor shall take appropriate steps with it customers, as
is reasonably prudent or as SST may request to inform them of and assure
compliance with the restrictions contained in this subsection.
(c) Trademarks and Trade Names. Distributor hereby acknowledges the validity
of the trademarks of SST, and the other marks and trade names now or hereafter
affixed to Products or used in connection with SSTs business, and Distributor
agrees that SST exclusively owns such and the Distributor shall not contest
it. Distributor agrees not to remove such marks or names from Products, or
alter or deface same. Distributor is hereby granted a non-exclusive right t
use in the Territory in connection with the sale of Products such trademarks
or names as SST uses in connection with such Products, and to refer to itself
as an Authorized SST Distributor in connection with the promotion, sale,
marketing or service of Products in the Territory, but all such rights shall
cease immediately upon the termination of the Agreement. Not with standing the
foregoing, Distributor shall not use, and is strictly prohibited from using,
any such trademarks or trade names as part of Distributor's trademark or name
or in any manner which SST concludes, in its sole judgment, is unfair,
confusing or misleading to the public or which otherwise adverse reflects upon
the good name and reputation of SST. The parties acknowledge that the goodwill
associated with the marketing of Products belongs to SST and that Distributor
shall have no vested or proprietary rights thereto.
(d) Nondisclosure. By operation of and performance under this Agreement, the
parties may have access to information that is confidential to one another
(the "Confidential Information"). The Confidential Information shall include
all intellectual property and technology comprising or underlying the
Products, all technical and marketing information relating to Products and
SST's other products and business, and all information clearly marked as
confidential. A party's Confidential Information shall not include information
which (1) is or becomes a part of the public domain through no act or omission
of the other party; (2) was in the other party's lawful possession prior to
such access to or the disclosure of same, and had not been obtained by the
other party either directly or indirectly from the party granting such access
or making such disclosure, all of which is so documented by the other party;
(3) is lawfully disclosed to the other party by a third party without
restriction on such disclosure; or (4) with respect to information that is the
same as or substantially identical to the Confidential Information, is
independently developed and is so documented by the other party. The
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parties agree, both during the term of this Agreement and after the
termination of this agreement, and of all rights granted hereunder, to hold
each other's Confidential Information in confidence. The parties agree not to
disclose or make each other's Confidential Information available, in any form,
to any third party or to use each other's Confidential Information for any
purpose other than as permitted by this agreement Each party agrees to take
all reasonable steps to ensure that Confidential Information is not disclosed
or distributed by its employees or agents (who have access to same only
because of and on a need to know basis) in violation of any provision of this
Agreement.
14. Compliance With Laws
(a) Export Law Compliance. Distributor understands and recognizes that the
Products and other materials made available to it hereunder may be subject to
the export administration regulation of the United States Department of
Commerce and other United States government regulations related to the export
of technical data and equipment and products produced therefrom. Distributor
is familiar with and agrees to comply with all such regulation, including any
future modification thereof, in connection with the Distribution of the
Products. Distributor agrees to obtain the same agreement from each of its
dealers and end users. Distributor hereby agrees to indemnify and hold SST
harmless from any breach of this Section.
(b) Foreign Corrupt Practices Act. Distributor hereby agrees that it shall
comply with the requirements of the United States Foreign Corrupt Practices
Act (the "Act") and shall refrain from any payments to third parties which
would cause SST or Distributor to violate the Act. Distributor hereby agrees
to indemnify and hold SST harmless form any breach of this Section.
15. Force Majeure
SST shall not be responsible for any liabilities, loss or damage to the
Distributor or others arising out of or in connection with strikes, riots,
fire, insurrections, wars, acts of civil or military authorities, restraints
of governments, acts of the elements, embargoes, failures of carriers,
shortages, acts of God or of the public enemy or any cause beyond the direct
control of SST.
16. Optional Termination
(a) This Agreement, or the authorization for any of Distributor's Locations,
may be terminated by either party without cause and solely for the convenience
of the terminating party, by giving thirty (30) days written notice to the
other party.
(b) Either party may terminate this Agreement forthwith, by giving written
notice to other party in the event such other party commits a breach of any of
the terms and conditions of this Distributor Agreement, suffers a change in
ownership or control, ceases to function as a going concern or to conduct its
operation in the normal course of affairs, makes an assignment for the benefit
of creditors, files a voluntary petition under the federal bankruptcy laws or
any state law of similar importance without having the same dismissed within
thirty (30) days of its filing or makes any bulk transfer of its assets.
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(c) in the event this Agreement is terminated by SST for the convenience of
SST, and without the fault of Distributor, SST's sole obligation shall be to
repurchase, at Distributors option, Distributor's inventory of Products (but
limited to those listed in SST's then most current Distributor Price List), at
the lower of either the actual price paid to SST less credits previously
issued by SST for such Products or SST's then prevailing prices, freight cost
to be borne by SST.
(d) In the event authorization for one or more of Distributor's Locations
(but not the Agreement) is terminated by SST for the convenience of SST, and
without fault of Distributor, SST's sole obligation shall be to repurchase, at
Distributor's option, Distributor's inventory of Products (but limited to
those listed in SST's then most current Distributor Price List) provided that
SST shall not be obligated to repurchase such inventory in excess of the value
of the Products (value being the actual purchase price paid to SST for such
Products less any credits issued by SST) sold by Distributor from and through
such terminated Distributor location(s) during the ninety (90) days prior to
such notice of termination, and further provided that the price SST shall pay
for the repurchase of such inventory shall be at the lower of either the
actual purchase price paid to SST, less credits issued by SST to Distributor
for such Products or SST's then prevailing price for such, freight cost to be
borne by SST.
(e) In the event this Agreement is terminated by Distributor for the
convenience of Distributor, or by SST upon notice to Distributor pursuant to
Subsection (b) hereof, then Distributor shall resell to SST at SST's option,
all or part, as SST may elect, of Distributors inventory of Products, at the
lower of either the actual price paid to SST less any credits previously
issued by SST for such Products, or SST's then prevailing price for such less,
in either case, a fifteen percent (15%) restocking charge, freight costs to be
borne by the Distributor.
(f) Upon termination of this Agreement, Distributor shall have thirty (30)
days of date of termination, pay to SST, any debt balance it has with SST.
(g) Upon termination of this Agreement neither party shall be liable to the
other party for damages, expenditures, loss of profits or prospective loss of
profits of any kind or nature sustained or arising out of, or alleged to have
arisen out of such termination. There are no third party beneficiaries to this
Agreement and no customer or end-user of Distributor shall have any rights
against SST as a result of the termination of this agreement.
(h) On termination, Distributor will promptly follow SST instructions
regarding disposition of price lists, data sheets, data books, and other
promotional literature pertaining to the Products, and make Distribution
inventory and records and accounts of transactions involving Products
available for SST inspection and audit, if requested. Distributor shall
promptly cease any and all use of SST trademarks, and SST may expressly
authorize trade names except as in connection with the sale of remaining
inventory of Products.
17. Dispute Resolution
Except for violations as to confidentiality under section 13, in the event
that at any time during the term of this Agreement a disagreement should arise
as to the interpretation or
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performance under this Agreement, the parties will attempt in good faith to
resolve their differences before resorting to termination procedures provided
in section 16 of this Agreement. If the project Directors (or functional
equivalent) of the parties cannot resolve the disputed matter within ten ( l
O) days, it shall be referred to the Vice President (or functional equivalent)
of SST and the Vice President (or functional equivalent) of Distributor. If
these individuals cannot resolve the matter within fifteen (15) days, it shall
be referred to the President of SST and the President of Distributor. If these
individuals cannot resolve the
matter within twenty-one (21) days, either party shall be free to take any
other proper action, including submission of the matter to appropriate
judicial authorities, so long as the jurisdiction and venue for any proceeding
related to such action is within Santa Clara County, California, U.S.A. The
parties by agreement may, but are not required to, submit any disagreement
concerning an obligation of confidentiality under Section 13 to any of the
dispute resolution methods described above.
18. Applicable Law This Agreement and all acts and transactions pursuant
hereto shall be governed, construed and interpreted in accordance with the
laws of the State of California, U. S. A., as such laws are applied t
agreements between California residents entered into and to be performed
entirely within California.
19. Sales Activities
(a) Distributor shall diligently pursue sales objectives for Products in the
Territory, assisting SST and its representatives in every reasonable manner in
expanding sales of Products.
(b) Distributor shall meet with SST or its representatives quarterly for the
purpose of mutually developing a six-month rolling sales forecast for
Products.
(c) Distributor shall prepare and submit to SST all reports required by SST
including but not limited to a monthly computer printout, magtape or floppy
disc Point of Sales report and an end of inventory Report of Product at each
Distributor allocation. Such Point of Sales and Inventory Reports are due by
the fifth (5th) of the following month.
(d) SST reserves the right to audit and review Distributor's business
records pertaining to SST transactions. Distributor agrees to maintain
complete, current and adequate records of all purchases of Product,
inventories of Product, sales of Product as well as records of all debit
memorandums pertaining to the distribution of Products. Distributor
agrees to make available for inspection all supporting documentation for
purchases, sales, inventories, debit claims as well as claims for cooperative
merchandising and promotion. SST will provide written notification to
Distributor it the audit and review requires visual on site inspection by SST
or its external audit firm.
20. Miscellaneous
(a) Severability. If any part of this agreement is found invalid or
unenforceable, that part will be amended to achieve as nearly as possible the
same economic effect as the original provision and the remainder of this
Agreement will remain in full force.
c:\eh\DA99.doc
10
1171 Sonora Court, Sunnyvale, CA 94086, U.S.A. Tel: (408) 735-9110 Fax: (408)
735-9036
Silicon Storage Technology' Inc.
(b) Distributor Purchase Order Terms and Conditions Superceded. It is
expressly agreed that any of the terms and conditions of Distributor's
purchase order or the like shall be superseded by the terms and conditions of
this Agreement. SST hereby rejects all teens and conditions that Distributor
attempts to apply to the transactions contemplated by this Agreement.
(c) Safety Hazards. Installation, warranty, technical support, consulting
services and other services performed by Distributor's facility may not be
performed if SST believes conditions at such facility represent a safety or
health hazard to any SST employee.
(d) Standard Commercial Use. SST Products and other SST products are
developed and manufactured for standard commercial uses and are not intended
to be sold for use in critical safety systems in nuclear facilities. SST may
require additional contractual safeguards for other nuclear, mass
transportation and aviation application.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date in
the heading on the first page of this agreement.
SILICON STORAGE TECHNOLOGY, INC.
By: /s/Derek Best
Name: Derek Best
Title: Vice President, Sales & Marketing
Date: 04/05/99
Distributor
By: Reptron Electronics, Inc. .
(Distributors Name)
Name: Keith W. Steenldnd
Signature: /s/ Keith W. Steenland
Date: 3/24/99
c:\eh\DA99.doc
1171 Sonora Court, Sunnyvale, CA 94086, U.S.A. Tel: (408) 735-9110 Fax: (408)
735-9036
EXHIBIT 10.6
INDUSTRIAL DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of February 16, 1999, ("Agreement") by and between
ADVANTAGE MEMORY CORP., having its principal place of business at 25A
Technology Drive, Irvine, California 92618 ("Advantage"), and REPTRON
ELECTRONICS, INC., having its principal place of business at 14401 McCormick
Drive, Tampa, Florida 33626 ("Reptron") (collectively "the Parties").
RECITALS
Whereas, Advantage is engaged in the manufacture and sale of computer memory
products and desires Reptron to sell and distribute its products in that
certain territory as described herein upon the terms and conditions as set
forth below; and
Whereas, Reptron is engaged in the sales and distribution of computer-related
products and desires to sell and distribute Advantage's product upon the terms
and conditions as set forth below,
NOW, THEREFORE, in consideration of the mutual covenants and agreements as set
forth herein below, the Parties agree as follows:
AGREEMENT
Section 1 Distributorship
1.1 Advantage hereby appoints Reptron as its non-exclusive distributor in the
territory ("Territory"), as set forth in Section 2, below, for Advantage's
products ("Product"), as set forth herein, which list of Product may be
modified from time to time by Advantage at its sole discretion.
Notwithstanding such appointment, Advantage may distribute Product within the
Territory directly or through parties other than Reptron.
1.2 Reptron shall actively promote the sales and use of the Product according
to the terms and conditions contained herein.
1.3 Advantage may from time to time refer leads and prospects to Reptron which
are suitable for marketing, sales and support by Reptron.
1.4 Advantage shall not engage in other similar distribution agreements within
90 days of the effective date of this Agreement.
Section 2 Market Area
2.1 Reptron shall sell and distribute the Product in the following Territory:
United States.
Section 3 Term of Agreement
3.1 The initial term of this Agreement shall commence on the effective date
hereof. This Agreement shall remain in effect for an initial term of one (1)
year, unless terminated earlier under the provisions herein, and shall
automatically renew for additional one (1)-year terms thereafter unless either
party advises the other party in writing, not less than thirty (30) calendar
days prior to the commencement of the renewal term, of its intent to terminate
this Agreement, or this Agreement is terminated as otherwise provided herein.
The extended term shall be upon all terms and conditions set forth herein.
Section 4 Products and Prices
4.1 Products to be purchased by Reptron shall include, but not be limited to,
those listed in Appendix A, attached hereto and made a part hereof. Product
prices are subject to change upon Advantage notifying Reptron in writing at
least five (5) business days prior to any increase in prices. Advantage agrees
to provide 15-day price protection on its stock of SIMMS, DIMMS and RIMMS
stored at Reptron, and further agrees to provide 45-day price protection on
its non-standard stock stored at Reptron.
4.2 Product shipped under orders submitted by Reptron prior to the effective
date of any price increase shall be shipped and invoiced at the price in
effect at the time of order of shipment.
4.3 Reptron may cancel delivery of any standard Product scheduled for
shipment, without charge, twenty (20) calendar days or more prior to the
scheduled shipment date. A charge of two percent (2%) of the invoice amount
shall be imposed for a delivery cancellation requested less than twenty (20)
calendar days prior to the delivery date.
4.4 In the event of a delivery cancellation of an order for non-standard
Product, as Advantage from time to time defines such non-standard Product,
Reptron shall pay one hundred (100%) of all charges relating to converting the
non-standard Product to standard Product, provided, however, that such cost
shall not exceed one hundred percent (100%) of the original price.
4.5 The specifications for Product covered by this Agreement are subject to
change at any time by Advantage and Advantage shall provide advance written
notice to Reptron of any such change, as follows:
(a) Any and all Engineering Change Notices (ECN) affecting form, fit,
function or interchangeability of spare parts; and,
(b) Any and all Product Improvement Bulletins (PIB) reflecting improvements
in or to Product.
4.6 Advantage agrees to review special specifications submitted by Reptron;
and, if mutually agreed upon, to provide Product to such specifications at
prices and schedules to be quoted on each such transaction.
4.7 Notwithstanding any other provision in this Section 4 to the contrary,
Advantage and Reptron agree to consider special bid business opportunities
("Special Bids"). Special Bids shall be comprised of unique and/or one-time
business opportunities characterized by special customer requirements, which
opportunities will be negotiated between Advantage and Reptron on a case-by-
case or
2
exception-basis. Upon mutual agreement to a Special Bid transaction, which
transaction shall be identified as such on the applicable Advantage quote
and/or Reptron purchase order(s), the following shall apply:
(a) Upon prior written approval from Advantage, Reptron shall be permitted,
to ship from its inventory a defined quantity of parts to a specific customer
at or below Reptron's cost. Reptron will then issue a debit to Advantage for
the difference between Reptron's current cost of Product (less any prior
credits granted by Advantage on such Product) and the new cost approved by
Advantage, multiplied by the quantity of such Product shipped to the specific
customer. In order to claim such credit, Reptron shall submit to Advantage,
within fifteen (15) calendar days after the date of sale, a debit note
referencing Advantage's approval number in conjunction with Reptron's monthly
POS and Inventory Reports as specified in Section 13.1 of this Agreement; or,
(b) Reptron shall place a purchase order with Advantage for the required
Product if Reptron does not have Product in inventory to fill the Special Bid.
Such Product shall be sold under the terms and conditions agreed upon and
provided, however, the following paragraphs of this Agreement shall not apply:
4.1, 4.2,4.3, 5.1, 5.2, 5.3, 6.1, 20.6, and Appendix A (Prices). All other
terms and conditions of this Agreement shall apply.
Section 5 New Products. Inventory Rotation and Obsolescence
5.1 Subject to the provisions of Section 4.5, Advantage agrees to allow a 15-
day rotation from original invoice date of its stock of SIMMS, DIMMS and RIMES
stored at Reptron, and a 45-day rotation from original invoice date of its
non-standard stock stored at Reptron.
5.2 Reptron may elect to return to Advantage for credit, with the prior
written authorization of Advantage, any of its non-standard Product (which
does not include SIMMS, DIMES and RIMMS) in its inventory purchased from
Advantage within the preceding forty-five (45) calendar days, including slow-
moving, discontinued and obsolete inventory, at the price paid therefor by
Reptron, less any prior credits taken by Reptron on such Product. Return
Product must be in its original sealed packages, unused and undamaged.
5.3 Return Product must be received by Advantage, within sixty (60) calendar
days of its purchase from Advantage. Product not received within said sixty
(60) calendar days will not be accepted by Advantage. On receipt thereof in
satisfactory condition, freight charges prepared by Reptron, Advantage shall
issue a credit based upon the price paid for such Product by Reptron, less any
prior credits taken by Reptron on such Product.
5.4 To return or reject Product, Reptron shall notify Advantage in writing and
request an IRMA. Reptron shall return to Advantage, freight charges prepaid,
such Product with the RMA number displayed on the outside of the shipping
carton. Section 6 Ordering Procedure
6.1 Reptron shall order Product as it requires, taking into account
Advantage's standard lead times, by issuing appropriate purchase orders to
Advantage for deliveries not more than ninety (90) calendar days thereafter.
Later deliveries are subject to mutual agreement.
Section 7 Payment Terms
7.1 Upon approval of credit by Advantage, payment shall be 1% / 10 days, net
thirty (30) calendar days, from date of shipment.
7.2 Advantage reserves the right to refuse, modify or withdraw credit payment
terms at its sole discretion.
7.3 All payments made pursuant to this Agreement shall be made in United
States of America dollars.
Section 8 Financial Representation
8.1 At any time upon Advantage's request, Reptron shall provide Advantage
within ten (10) business days after request, with a written representation of
current public information as to Reptron's
financial condition.
Section 9 Responsibilities of Advantage
9.1 Advantage shall support Reptron in developing the largest possible market
for its Product in the Territory and provide supporting sales assistance to
permit Reptron to discharge its obligations in the most commercially
advantageous manner. In furtherance of this effort, Advantage shall:
(a) Reasonable amounts of sales brochures, technical literature and other
promotional aids to assist Reptron in marketing the Product and to provide
sales leads when available from advertising, trade shows, or other sources;
(b) Provide Product service training at no charge to Reptron for such period
as Advantage deems sufficient, together with a Product sales training seminar
to be held at Reptron, for the purpose of training a reasonable number of
qualified Reptron personnel to ensure proper field service for the Product.
(c) Provide Reptron reasonable technical assistance and advice in situations
and circumstances beyond the capabilities of Reptron, and be available for
telephone assistance as permitted by time differences, and at other times by
special arrangement, to provide service and technical assistance in unusual
circumstances.
Section 10 Responsibilities of Distributor
10.1 Reptron shall purchase Product from Advantage and retain same in its own
inventory. Reptron shall sell and deliver such Product to its customers and
shall invoice its customers directly. Advantage shall not be responsible, or
incur any liability other than its Product warranty and patent indemnity, with
respect to such sales.
10.2 Reptron agrees to use its best efforts to develop the largest possible
market for the Product and to maintain a sales organization of adequate size
and Product knowledge sufficient to aggressively solicit orders and promote
the sale of the Product.
4
10.3 Reptron agrees to refer all prospective customers to Advantage in those
instances when it is unable to aggressively pursue sales to a customer due to
price, volume, custom nature of Product requirement, or any other reason.
Advantage may, at its option, solicit Reptron to offer continuing sales
support to a prospective customer and, if agreeable to the Parties, Reptron
shall receive a commission on paid invoices from Advantage for continuing
sales support.
10.4 Reptron shall inform customers and potential customers regarding Product;
promptly handle all inquiries, quotations, correspondence and orders; counsel
and train customers on selection and proper use of Product; as well as provide
competent technical assistance for Product.
Section 11 Delivery Title and Risk of Loss or Damage
11.1 Advantage's intent is to deliver Product against Reptron orders within
thirty (30) calendar days after receipt of purchase orders and Advantage
agrees to advise Reptron at least two (2) business days prior to the
acknowledged delivery date of anticipated delays. Advantage shall attempt to
meet unforeseen requirements on a best-efforts basis.
11.2 Deliveries shall be made by Advantage to Reptron only. Advantage shall
not deliver the Product to any designated third party unless requested by
Reptron and agreed to by Advantage. The parties agree that Reptron shall be
totally responsible for its sales in the Territory and Advantage's intent
shall be to deal only with Reptron and not its customers.
11.3 All deliveries shall be F.O.B. Advantage. Title and risk of loss and
damage shall pass from Advantage to Reptron upon delivery to the F.O.B. point.
Section 12 Scope and Limitations of Authority
12.1 Reptron shall be an independent contractor only. This Agreement does not
create an employee-employee relationship between Advantage and Reptron, nor an
agency, joint venture or partnership. Reptron shall have no authority to act
for or to bind Advantage in any way, or to execute agreements on behalf of
Advantage or to represent that Advantage is in any way responsible for the
acts or omissions of Reptron.
12.2 Reptron agrees not to apply for registration of any trademarks used by
Advantage without the express written consent of Advantage.
12.3 Except as required in carrying out its obligations under this Agreement
with respect to the sales of the Product, Reptron agrees at all times not to
use or permit the use of any confidential or proprietary data marked or
otherwise identified as such which is given to Reptron by Advantage during the
term of this Agreement concerning Advantage or its Product. Upon the
termination of this Agreement, Reptron shall deliver back to Advantage all
such data and all other Advantage printed materials it then possesses.
Section 13 Sales Cooperation
13.1 Reptron shall provide Advantage by the 15th of each calendar month, an
electronic report containing (i) current inventory of the Product, by Reptron
location, pursuant to NEDA standards, and (ii) a
11
current point of sales report indicating the quantities of all Product sold by
Product type, and such other information pertaining to Reptron purchases under
this Agreement as Advantage may reasonably request. Reptron shall also provide
Advantage weekly inventory reports pursuant to NEDA standards.
13.2 Advantage shall advise Reptron on such marketing information available
from its general activities as it deems may be useful for Reptron's marketing
activities in the Territory.
13.3 Advantage reserves the right to audit the performance of Reptron from
time to time through various means, including sales calls to strategic
accounts without the attendance of Reptron. Subject to Mutual agreement,
Advantage shall participate in so-called "buddy-calls" with Reptron to
existing and prospective accounts.
Section 14 Marketing Funds
14.1 Advantage shall rebate marketing funds to Reptron on a monthly basis, as
follows:
Net Purchase Rebate Percentage
$0 to $100,000.00 1%
$100,00.01 and above 2%
Section 15 Taxes
15.1 Each party shall be responsible for payment of its own taxes or other
such charges, arising from this Agreement, which are levied or required to be
paid by any public authority.
Section 16 Product Warranty
16.1 Advantage warrants Product and spare parts of its manufacture to be free
from defects in workmanship and material under normal use and service as set
forth in Appendix B. Advantage agrees to repair or replace or issue a credit
for another unit, at Advantage's option, within thirty (30) calendar days of
receipt of the unit, for all units which are returned for inspection within
the applicable warranty period; provided, however, such inspection discloses
that the defects are as specified above, and that the Product has not been (1)
altered or repaired other than with the authorization from Advantage and by
its approved procedures; (2) subjected to misuse, improper maintenance,
negligent or accident; (3) damaged by excessive current; or (4) otherwise had
its serial number or any part thereof altered, defaced or removed.
THE WARRANTY STATED HEREIN IS EXPRESSLY IN LIEU OF, AND REPTRON HEREBY WAIVES,
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY
EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND SUCH WARRANTY CONSTITUTES THE ONLY WARRANTY MADE BY ADVANTAGE
WITH RESPECT TO THIS AGREEMENT OR THE PRODUCTS, ARTICLES, MATERIALS,
REPLACEMENT PARTS OR SERVICES TO BE SUPPLIED HEREBY.
IN NO EVENT SHALL ADVANTAGE HAVE ANY LIABILITY FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF ANY WARRANTY
CONTAINED HEREIN OR OTHERWISE.
6
16.2 The warranties set forth in this Section 15 may not be extended or
altered except by an amendment of this Agreement as hereinafter provided.
16.3 Reptron may offer any warranty to its customer as it determines. Any
warranty obligation that Reptron offers in excess of Advantage's standard
warranty stated in Section 15.1 shall be at Reptron's own risk.
16.4 Advantage agrees to support dead-on-arrival ("DOA") Product for the first
thirty (30) calendar days after purchase. If Advantage's technical support
determines that any Product is DOA, Advantage shall accept return of the
Product from Reptron only. Reptron may then replace the DOA Product for its
customer with a new unit from its inventory.
16.5 Reptron agrees to comply with all Advantage's handling and shipping
instructions for Product returns. Product that arrives damaged in shipment,
without an RMA number, or without the required purchase information, shall be
returned by Advantage at Reptron's cost, without repair or replacement.
Advantage recommends the use of original packaging. If original packaging is
not available, alternative packaging shall include individual anti-static,
anti-shielding, and anti-conductive bags, and an appropriately-rated
substitute shipping container designed to prevent jarring or movement, impact
between multiple components, and electrostatic discharge damage.
16.6 Product returns shall be sent to the following address:
Advantage Memory Corp.
25A Technology Drive
Irvine, CA 92618
Reptron shall place the RMA number on the outside of the package along with
Reptron's name and return address. Only one RMA number per package is
permitted. If Reptron has multiple RMA numbers, separate packages shall be
sent. Reptron shall use a traceable carrier when returning Product. Reptron is
responsible for the shipping cost to Advantage and Advantage agrees to pay the
shipping cost to return the Product to Reptron, except as noted above.
16.7 The application of this Section 15 survive the expiration or termination
of this Agreement.
Section 17 Patent Indemnity
17.1 Advantage warrants that to the best of its knowledge and belief, the
Product sold by Advantage to Reptron hereunder shall be delivered free of the
rightful claim of any third party or person by way of infringement of any
copyright, mask-work right, trademark or patent validly in force in the U.S.
and agrees to defend and indemnify Reptron and hold Reptron harmless for costs
incurred in connection with any such claim, provided, however, that Advantage
is promptly notified in writing of any claim of infringement and furnished
with all papers received in connection therewith; and provided further, that
upon receipt of notice of alleged infringement, Advantage shall have the right
to immediately discontinue selling the allegedly infringing Product and to
repurchase Reptron's inventory of such Product at Reptron's landed
7
cost or other mutually agreeable price. However, Advantage agrees to use its
best efforts to obtain the right to continue selling the Product or make same
non-infringing.
17.2 Reptron agrees to defend and indemnify and hold harmless Advantage for
costs incurred in connection with any allegation or claim based on a
combination of Advantage's Product with other product under the control of
Reptron and Reptron hereby agrees to indemnify Advantage against any liability
based on a claim of contributory infringement arising from such combination.
17.3 If any material shall be manufactured or sold by Advantage to meet
Reptron's particular specifications, Advantage shall have no liability under
these provisions, and Reptron agrees to defend, protect, and save harmless
Advantage against all suits, and from and against all expenses (including
attorney's fees), loss, liability, damage, claims and demands for actual or
alleged infringement of any United States or foreign patent, and to defend any
suit or action which may be brought against Advantage for any alleged
infringement because of the manufacture or sale of the materials covered
thereby.
17.4 The application of this Section 16 shall survive the expiration or
termination of this Agreement.
Section 18 Account Protection
18.1 In instances where Advantage custom-designs Product either for or with a
specific Reptron customer, and Reptron has provided the opportunity to
Advantage, the following terms shall prevail:
(a) Said Product shall be assigned a sequential, account-specific
registration number by Advantage;
(b) In the event a Reptron competitor requests that the same product be
designed and built by Advantage for that same customer, Advantage will provide
the competitor with an additional markup on the registered Product; and
(c) Advantage shall in no event sell the registered Product directly to
Reptron's customer.
18.2 Reptron may, at its discretion, provide the names of its large strategic
accounts to Advantage for account protection with the understanding that
Reptron will use its best efforts to validate, specify and utilize Advantage
Product when supplying those accounts. This arrangement will be evaluated by
the management of Advantage and Reptron on a case-by-case basis.
18.3 Reptron shall, within a reasonable timeframe, begin to fulfill customer
requirements utilizing Advantage Product.
18.4 The items contained in this Section 18 are provided in consideration of
Reptron's Strategic partnership with Advantage and shall be adhered to
throughout the duration of the current, active, signed, annual Industrial
Distribution Agreement between Reptron and Advantage.
Section 19 Governing Law; Jurisdiction
8
19.1 This Agreement shall be governed, enforced, and construed by the laws of
the State of California. All disputes or controversies arising out of or
related to this Agreement, or any breach thereof, shall be settled either by
arbitration or by the courts of the State of California, and judgment upon the
award shall be final, conclusive and binding. Notwithstanding, Advantage
reserves the right to proceed in courts where Reptron is located.
Section 20 Attorneys' Fees
20.1 In any action to define or enforce the terms of this Agreement, the
prevailing party shall be entitled, in addition to such other relief as may be
granted, to recover its reasonable attorneys' fees and court costs and other
normally non-reimbursable litigation or court expenses, such as expert witness
fees and investigation expenses.
Section 21 Force Majeure
21.1 Either party shall be excused from any delay or failure in performance
hereunder caused by reason of any occurrence or contingency beyond its
reasonable control, including, but not limited to, acts of God, earthquake,
labor disputes, riots, governmental requirements, or inability to secure
materials and transportation facilities. The obligations and rights of the
party so excused shall be extended on a day-today basis for the time period
equal to the period of such excusable delay. If such delaying cause shall
continue for more than ninety (90) calendar days, the party injured by the
inability of the other party to perform shall have the right, upon written
notice, to terminate this Agreement.
Section 22 Termination
22.1 This Agreement may be terminated by either party for convenience by
providing ninety (90) calendar days' prior written notice to the other party.
22.2 This Agreement may be terminated by Advantage upon written notice,
effective thirty (30) calendar days from the date of such notice, if:
(a) Reptron is in default or in breach in performance of any of the terms of
this Agreement, unless it shall cure such default or breach within said thirty
(30)-day notice period;
(b) Reptron fails to make payment when due unless it shall cure such default
within said thirty (30)-day notice period;
(c) Reptron is acquired, whether by purchase, merger, consolidation, or
other form of reorganization, or its controlling interest is sold. Should this
occur, Reptron shall give prompt written notice to Advantage of the
occurrence; or
(d) Reptron is adjudged bankrupt and such judgment is not vacated within
thirty (30) calendar days thereafter.
22.3 This Agreement may be terminated by Reptron upon thirty (30) calendar
days' written notice if Advantage is adjudged bankrupt and cannot deliver
Product, provided such judgment is not vacated within thirty (30) calendar
days thereafter.
9
22.4 Either of the Parties may terminate this Agreement effective immediately
upon written notice to the other party if at any time:
(a) The other files a voluntary petition in bankruptcy;
(b) A court takes and retains, for at least thirty (30) calendar days,
jurisdiction of the other's assets under a federal reorganization act;
(c) A receiver for all or a substantial portion of the assets of the other
is appointed by the a court and such appointment is not vacated or stayed
within thirty (30) calendar days;
(d) The other suspends business; or
(e) The other makes an assignment of all its assets for the benefit of its
creditors.
22.5 Upon expiration of this Agreement or termination by either party, any
unshipped orders then outstanding shall be shipped by Advantage, but only
against satisfactory assurances of payment, unless specifically cancelled by
Reptron, and Reptron shall be liable for any amounts due, including charges
under Section 4.4.
22.6 In the event of termination of this Agreement, Advantage agrees to
repurchase any or all of its unsold Product in Reptron's inventory, as
designated by Reptron, which was purchased from Advantage during the preceding
forty-five (45) calendar days, at the same price paid therefor by Reptron,
less any prior credits taken on such Product. Such Product must be received by
Advantage within sixty (60) calendar days of notice of termination. Advantage
shall be under no obligation to accept or pay for Product not received during
said sixty (60) day time period.
22.7 The remedies provided for in this Section shall be in lieu of any other
rights or remedies either party may be afforded elsewhere in this Agreement,
by operation of law or otherwise, upon the breach or default of the other
party.
Section 23 Assignment
23.1 It is understood and agreed that neither of the Parties may assign in
whole or in part any interest of this Agreement without prior written consent
of the other. Any sale of a controlling interest by either party shall be
deemed to be an assignment of this Agreement and shall render this Agreement
null and void unless otherwise agreed upon by the Parties. This Agreement
shall be binding upon and inure to the benefit of the heirs, successors and
permitted assignees of the Parties hereto.
Section 24 General Terms
24.1 All section captions are for reference only and shall not be considered
in construing this Agreement.
10
24.2 Waiver by either of the Parties of any breach or alleged breach of any
provision hereunder shall not be construed to be a waiver of any concurrent,
prior or succeeding breach of said provision, or any provision herein.
24.3 This Agreement sets forth the entire Agreement and understanding between
the Parties relative to the subject matter contained herein and supersedes all
other agreements, oral and written, heretofore made between the Parties,
except that it shall not relieve either of the Parties from making payments
which may be owing under any agreement prior to the date hereof. Any amendment
hereto must be in writing and signed by an authorized representative of the
Parties to this Agreement. Should any portion of this Agreement be held
invalid or unlawful, the remainder of the Agreement shall continue to be
binding upon both Parties. This Agreement shall take precedence in the event
of any conflict between this Agreement and any purchase order between the
Parties.
24.4 All notices as referred to herein shall be served either personally or
via certified or registered mail to either party at its address and service
shall be deemed effective as of seven (7) business days after deposit in the
U.S. Mail, properly addressed and with all postage charges prepaid.
Advantage shall be addressed as follows:
Advantage Memory Corp.
25A Technology Drive
Irvine, Callifornia 92618
Attention: John Harriman, President
Reptron shall be addressed as follows:
Reptron Electronics, Inc.
14401 McCormick Drive
Tampa, Florida 33626-3046
Attention: Keith W. Steenland, Vice President
Marketing, Semiconductors
IN WITNESS WHEREOF, the Parties hereto, by their duly authorized
representatives, have executed this Agreement as of the day and year written
below:
ADVANTAGE MEMORY CORP.
By:/s/ John Harriman
John Harriman, President
Dated:2/19/99
REPTRON ELECTRONICS, INC.
By: /s/ Keith W. Steenland
Keith Steenland, Vice President
Marking, Semiconductors
Dated: 2/17/99
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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