EXHIBIT 10.20
MANUFACTURING AND SUPPLY AGREEMENT
MADE AND ENTERED INTO BY AND BETWEEN:
DESA INTERNATIONAL, INC.,
AND
TANGIBLE IND. CO., LTD.,
AND
SHINN FU CORPORATION
MANUFACTURING AND SUPPLY AGREEMENT
Entered into as of March 1, 1992, between DESA International, Inc., with its
principal place of business located in Bowling Green, Kentucky, U.S.A.,
hereinafter referred to as DESA, and Tangible Ind. Co., Ltd., with its principal
place of business located in Taipei, Taiwan, R.O.C., hereinafter referred to as
Tangible, and Shinn Fu Corporation with its principal place of business located
in Taipei, Taiwan, R.O.C., hereinafter referred to as SF.
WITNESSETH:
Whereas, DESA is engaged in the development, design, distribution and marketing
of I. Manual Stapleguns II. Electric Stapleguns III. Electric Nailguns IV. Cable
Tackers, with its packaging, warnings and instructions, hereinafter referred to
as the Products;
Whereas, Tangible is engaged in and possesses considerable experience, skill and
knowledge in manufacturing of the Products;
Whereas, SF is engaged in sourcing and sale of the Products from Tangible;
Whereas, DESA agrees to appoint Tangible as its exclusive manufacturer of the
Products and SF as its exclusive supplier of the Products;
Whereas, Tangible desires to develop its capabilities of manufacturing the
Products for DESA and, SF desires to supply and sell the Products to DESA; and
-2-
Whereas the parties intend to establish a trustworthy and mutual relationship
between DESA, Tangible and SF regarding the manufacture and purchase of said
Products.
Now, therefore, in consideration of these premises and of the representations
and agreements hereinafter set forth, DESA, Tangible and SF do hereby covenant
and agree as follows:
1. DEFINITIONS
1.1 Pricing for "Products" as per the attached appendix "A".
1.2 On December 1, 1992 and subsequently on December 1 thereafter
during the term of this agreement, Tangible and SF will
document material price increases for Products which will be
passed through to DESA as part of price schedule found in 1.1.
1.3 COST REDUCTIONS
Product cost reductions brought about by design changes
developed jointly among DESA, Tangible and SF shall benefit
the parties according to the following schedule:
1. 50% of cost savings to DESA after full
recovery of any tooling cost related to the
change by DESA.
2. 50% of cost savings to Tangible/SF after
tooling cost is recovered by DESA.
2. DISTRIBUTION
2.1 SCOPE OF DISTRIBUTION
During the term of this Agreement, DESA will have the sole and
exclusive right to sell and to promote the sale of electric
tool Model ET-801 in U.S.A. designed
-3-
and developed by Tangible and approved by DESA prior to this
agreement. DESA will permanently maintain the sole and
exclusive rights to sell and to promote the sale of manual and
electric products designed during the manufacturing agreement.
A non-exclusive license to market and to sell the Products
(except ET-801) outside of North America will be granted to
Tangible and SF upon agreed terms.
2.2 INDEPENDENT PURCHASE STATUS
This agreement does not create an agency relationship. DESA is
and will be an independent purchaser and seller of the
Products. Neither parties to this agreement shall be
authorized to make any contract or representation or to incur
any obligation or liability of any kind on behalf of the other
parties. Each party to this agreement shall be solely
responsible for all of its own expenses under the contract and
the acts of its employees.
3. PRODUCTS
3.1 PRODUCT SPECIFICATION
All products manufactured by Tangible and sold by SF to DESA
pursuant to this agreement shall be manufactured strictly in
accordance with DESA's specifications, as set forth in the
physical characteristics outline in Appendix B-1 through B-6,
and mutually agreed upon performance specifications.
3.2 Delivery tests of the Products shall be carried out in
accordance with the specifications as provided by DESA.
3.3 DESIGN
DESA is the sole owner of, and has the exclusive rights to,
the designs, patents and pattern protections, of manual
Products. Tangible and SF may not transfer
-4-
the mentioned to other manual Products for any purpose
whatever. Tangible and SF can freely use the designs of
electric tools not exclusively belonging to DESA and/or
patented by DESA.
4. DELIVERY AND ORDER TERMS
4.1 PURCHASE ORDERS
All purchase orders from DESA for the Products hereunder shall
be made in writing.
4.2 PRODUCTION CAPACITY
Tangible undertakes to maintain production capacity and SF
undertakes to accept purchase orders from DESA corresponding
to volumes forecasted by DESA and anticipated in accordance
with Tangible and SF under Section 4.6 below. The foregoing
only includes the right to the forecast and is not an
obligation for DESA to purchase such forecasted quantities.
4.3 PAYMENTS
Payments for each shipment shall be by* from date of
shipment.*
4.4 TRANSPORTATION
The Products shall be delivered FOB Taiwan. The delivery terms
are to be interpreted in accordance with "Incoterms" then in
effect.
4.5 PURCHASE FORECASTS AND SCHEDULES
After negotiations with, and agreement of, Tangible and SF,
DESA shall indicate to Tangible and SF the anticipated total
volume of annual purchase for each
- ------------------
* Confidential portion omitted and filed separately with the Commission.
-5-
twelve (12) month period of the agreement. In all
circumstances, should the parties not agree, the same volume
in pieces as the foregoing twelve (12) month period +/-20%
should be accepted. Such forecasts shall be provided in
writing before the end of February every year. On the basis of
said forecasts, adjusted as necessary and agreement of DESA,
Tangible and SF, every third month DESA shall issue a six (6)
month schedule, and every month an updated four (4) months
order schedule. Any changes to the four (4) month schedule
cannot be made during the first two (2) months without
approval by Tangible and SF. For new products to be
manufactured at the first occasion DESA is to provide a seven
(7) month schedule.
4.6 DELAYS IN DELIVERY
Products ordered in accordance with the firm order schedule
shall be ready for shipment within two (2) months after DESA's
order. If such orders are not fulfilled in time, Tangible and
SF shall jointly pay the following penalty:
For delays exceeding fifteen (15) days but not twenty-five
(25) days, premium freight cost as required, for delays
exceeding twenty-five (25) days, 3% of the order value, plus
premium freight cost as required; and for delays exceeding
forty-five (45) days, 5% of the order value, plus premium
freight costs as required.
4.7 FORCE MAJEURE
Failure of Tangible/SF to make any delivery for portions
thereof when due, if occasioned in whole or in part by act of
God or the public enemy, fire, explosion, flood, war, riots,
civil insurrection, sabotage, embargo, governmental
requisition
-6-
or other such action of governmental authorities, or strikes
or other labor trouble, or other such occurrence, act, cause
or thing beyond the control of Tangible and SF, shall excuse
any such failure on the part of Tangible and SF. Tangible and
SF shall have no obligation or liability whatsoever arising
out of or in connection with any such failure. If the
fulfillment of an order is delayed by more than six (6)
months, due to circumstances mentioned above, each party shall
be entitled to cancel such order.
5. WARRANTY
Tangible/Sf warrant the Products will be free from defects in material,
workmanship and finish. Tangible and SF warrant that the Products will
conform to the specifications set forth in Appendix B-1 through B-5.
Tangible and SF will assume responsibilities for damages, and expenses
arising from any breach of the foregoing warranties to the following
extent: an average of the last twelve (12) months, or based on
quarterly projections for new products, free charge finished goods
replacement (DESA shall provide evidence).
Tangible and SF shall have no obligation to indemnify DESA for any
defects unless Tangible and SF are given notice of such defect within
eighteen (18) months from the date of the arrival of the Products to a
U.S.A. port or to another port appointed by DESA.
All liability of Tangible and SF under this warranty shall be offset
against amounts payable by DESA under then existing purchase orders for
Products.
-7-
6. INDUSTRIAL PROPERTY RIGHTS
6.1 TRADEMARKS
Products delivered under this agreement shall be marked by
Tangible and SF with DESA's trademarks or trade names in
accordance with such instructions as DESA may from time to
time give to Tangible and SF.
Nothing in this agreement shall be construed to grant to
Tangible and SF any license or right to use any trademark or
tradename of DESA.
6.2 INFRINGEMENT
DESA states that the Products of this agreement do not
infringe upon any third party's intellectual property
including any patents, registered trademarks, or copyrights in
U.S.A.. In case the sale of the mentioned Products results in
an intellectual property claim against Tangible and SF, DESA
shall hold Tangible and SF harmless from any costs or damages
that may be incurred against Tangible and SF in any such case.
7. PRODUCT LIABILITY
7.1 INSURANCE
SF will provide DESA Product Liability Insurance coverage of a
minimum amount totaling one million U.S. dollars using a U.S.
insurance agency.
7.2 LIABILITY
Tangible and SF will not indemnify, hold harmless or defend
DESA against damages, loss, expenses, liability or claims
arising, in whole or in part, out of any deficiency in
packaging, warnings or instructions provided by DESA. If a
claim for damages by an allegedly defective product
manufactured by Tangible is filed
-8-
by a third party against one of the parties to this agreement,
the latter shall inform the other parties thereof as soon as
possible.
The parties hereto shall be obligated to provide each other
with reasonable assistance, including, but not limited to
appearance at court and examining claims by a third party in
connection with litigation concerning alleged defects in a
product.
8. CONFIDENTIAL INFORMATION
Each party has received, and will for the proper performance of this
agreement receive, information from the other party, which the latter
does not ordinarily disclose to outsiders and which the latter
considers confidential and proprietary. It is especially agreed that
Tangible and SF will not be entitled to make any reference for any
purpose whatever as being the manufacturer and supplier of DESA.
Each party guarantees that all information received from the other
party before or during the term of this agreement will be used only to
carry out the terms of this agreement, shall be kept confidential and
shall be protected in the same manner as the receiving party protects
its own confidential information.
The foregoing shall not apply to information:
(A) which become lawfully known or lawfully available to
the receiving party from a third party, who received
the information lawfully and was not under a
continuing obligation of confidence regarding the
information disclosed.
-9-
(B) which came in the receiving party's possession prior
to disclosure by the other party;
(C) which was in or became part of the public domain
through no breach of this agreement by the receiving
party.
9. TERM AND TERMINATION
9.1 INITIAL TERM AND RENEWAL
(A) Unless terminated as provided in Section 9.2 hereof,
this agreement shall continue in full force and
effect for an initial term expiring three (3) years
from the date hereof and hereafter shall be
automatically renewed in successive 3 year terms
unless terminated by either party by written notice
to the other at least 120 days prior to the
expiration of the initial or any renewal term hereof.
(B) All drawings, manufacturing and engineering
specifications or technical information and any
tooling supplied to Tangible or by DESA or paid by
DESA, upon termination of this agreement shall be
promptly returned to DESA within three months from
the termination. All parties should keep
records/receipts of the aforementioned
specifications, technical information, and tooling.
9.2 CAUSES FOR TERMINATION ON NON-RENEWAL
Each party may elect to terminate this agreement prior to
expiration of the initial or any renewal term, or elect not to
renew this agreement, upon written notice to the other
parties, in the event of the occurrence of any of the
following:
(A) If the other parties shall fail to perform any of
their obligations hereunder and fail to remedy such
non-performance within thirty (30) days after
receiving notice specifying the nature of the
non-performance;
-10-
(B) If one party sells, assigns or transfers any of its
rights or obligations under this agreement without
having obtained the written consent of the other
parties;
(C) If one of the parties shall be declared insolvent or
bankrupt, make an assignment or other arrangement for
the benefit of creditors, or if one of the parties is
nationalized or has any material amount of its assets
expropriated.
9.3 DISPOSITION OF STOCK ON TERMINATION
Termination of this agreement shall not affect any firm orders
that may be placed but not shipped. If the agreement is
terminated by DESA and the termination is not based on
Tangible and SF's breach of contract, DESA shall be obligated
to purchase stock of products from Tangible via SF where such
stock consists of products of volumes not exceeding the
quantities stated in the last issued six months order schedule
made by DESA pursuant to Article 4.5 of this agreement. If
Tangible or SF is the party terminating the agreement, DESA
shall have the right to purchase remaining products in stock
from Tangible via SF. In both alternatives shipments shall be
made in such portions as set in the schedule.
10. JOINT VENTURE
Should DESA volume projections in a twelve (12) month period of said
Products (excluding electric stapleguns) reach one million (USD) in
purchase and actual shipment amount reaches half million (USD), a joint
venture program will be developed equally or on a prorated basis.
-11-
11. NOTICES
Every notice required or contemplated by this agreement shall be
telefaxed or delivered in person addressed to the party for whom
notices are intended at the address hereinafter specified. Orders may
be sent by telefax or airmail. Unless otherwise provided in this
agreement, notice by telefax shall be effective after the firm
confirmation from the other parties. A notice sent by registered letter
shall be deemed to be received by the other parties ten (10) days after
it was sent.
DESA International, Inc.
P.O. Box 90004
2701 Industrial Drive
Bowling Green, Kentucky 42102
U.S.A.
Telefax: 502-781-9669
ATTENTION: Director of Materials
Tangible Ind. Co., Ltd.
8, LANE 551, SEC. 1, WAN SHOW RD.
KUEI-SHAN HSIANG, TAOYUAN COUNTY
Taiwan, R.O.C.
Telefax: 02-902-9944
ATTENTION: TED CHANG
Shinn Fu Corporation
9-16, NAN KAN HSIA, NAN KAN
LU-CHU HSIANG, TAOYUAN COUNTY
Taiwan, R.O.C.
Telefax: 03-326-1010
ATTENTION: Manager, OEM Division
12. GOVERNING LAW
The formation, construction, and performance of this agreement shall be
governed by the laws of Taiwan, Republic of China.
-12-
13. SEPARABILITY
If any provisions of this agreement shall be deemed illegal or
unenforceable, such provision shall not affect the validity and
enforcement of all the other legal and enforceable provisions hereof.
In witness whereof, the parties have caused this agreement to be executed on the
date first above written.
DESA INTERNATIONAL TANGIBLE IND. CO., LTD.
By: /s/ Steve Marcum By: /s/ Ted Chang
Name: Steve Marcum Name: Ted Chang
Title: Director of Materials Title: President
SHINN FU CORPORATION
By: /s/ Vickie Huang
Name: Vickie Huang
Title: Vice President
PRICE APPENDIX A
March 1, 1992 Manufacturing and Supply Agreement
Between
DESA International, Shinn Fu and Tangible
Selling Price in USD
Effective 3/1/92
Model Description FOB Taiwan
- ----- ----------- ----------
34302 ET-801 Electric Staplegun *
TBD ET-806 Electric Staplegun *
32003 ET-802 Electric Nailgun *
TBD Professional Staplegun *
TBD Heavy Duty Staplegun *
TBD Light Duty Staplegun *
TBD Cable Tacker *
- ----------
* Confidential portion omitted and filed separately with the Commission.
APPENDIX B-1
ELECTRIC STAPLEGUN
SPECIFICATIONS
DESA Item Number: 34302
Tangible Item Number: ET-801
Description: Electric Staplegun for 1/4 to 9/16
Inch Wide Crown Staples
Power Rating: 120 Volts 10 Amps
UL Listing Required
Control Number: 3B89
Housing: Black
Trigger & On-Off Switch: Gray (Homeease Standard Color)
Clam Shell Packaging - Ultrasonic Sealed
Insert Card - 4 Colors: Blue (Pantone 300), Orange (Pantone 130) White & Black
Instruction Manual: DESA Part Number 099241-01 Revision A
6 Tools Per Shipping Carton: DESA to Provide Artwork
APPENDIX B-2
ELECTRIC STAPLEGUN
SPECIFICATIONS
DESA Item Number: TBD
Tangible Item Number: ET-806
Description: Electric Staplegun for 1/4 to 9/16
Wide Crown Staples
Power Rating: 120 Volts 10 Amps
UL Listing Required
Control Number: 3B89
Housing: Black
Trigger & On-Off Switch: Gray (Homeease Standard Color)
Clam Shell Packaging
Insert Card - 4 Colors: Blue (Pantone 300), Orange (Pantone 130) White & Black
Instruction Manual: DESA Part Number TBD
6 Tools Per Shipping Carton: DESA to Provide Artwork
APPENDIX B-3
ELECTRIC NAILGUN
SPECIFICATIONS
DESA Item Number: 32203
Tangible Item Number: ET-802
Description: Electric Nailgun for 1 Inch Brad Nails
Power Rating: 120 Volts 9 Amps
UL Listing Required
Control Number: 3L25
Housing: Black
Trigger & On-Off Switch: Gray (Pantone Standard Color)
Tooling Marking: Insert Into Housing
Clam Shell Packaging - Ultrasonic Sealed
Insert Card - 4 Colors:Blue (Pantone 300), Orange (Pantone 130) White & Black
Instruction Manual: DESA Part Number 099353-01 Revision A
6 Tools Per Shipping Carton: DESA to Provide Artwork
UPC Number: 0 43593 32003 X
UCC Number: 005 20 500 43593 32003 XX
Outer Carton: Kraft - Cut Case Format
APPENDIX B-4
PROFESSIONAL STAPLEGUN
SPECIFICATIONS
GENERAL
All steel construction
Slide track loading with metal latch
Wire handle latch
Finish: chrome plated
Staple capacity: min. of one strip
Staple size window
Steel handle
PERFORMANCE
Power: equal to arrow T-50
Handle angle: max. 31 degree
Handle force: less than revised Swingline 10060
STAPLES
Heavy duty (.050 wide)
Wide crown
1/4 to 9/16 inch length
LIFE
20,000 staplings
PACKAGING
Clamshell
APPENDIX B-5
HEAVY DUTY STAPLEGUN
SPECIFICATIONS
GENERAL
Plastic body: 2 piece ABS
Steel slide track with metal latch
Steel front cover
Finish: chrome plated
Wire handle latch
Staple capacity: one strip
Staple size window
Steel handle (same as professional tool)
PERFORMANCE
Power: equal to arrow T-50
Handle angle: max. 31 degree
Handle force: less than revised Swingline 10060
STAPLES
Heavy duty (.050 wide)
wide crown
1/4 to 9/16 length
LIFE
15,000 staplings
PACKAGING
Clamshell
APPENDIX B-6
LIGHT DUTY STAPLEGUN
SPECIFICATIONS
GENERAL
Plastic body: 2 piece ABS
Steel front cover - chrome plated
Steel slide track with metal latch
Metal front
Wire handle latch
Staple capacity: one strip
Steel handle
PERFORMANCE
Power: equal to arrow JT-21
Handle angle: max. 26 degree
STAPLES
Light duty (.0235 wide)
wide crown
1/4 to 3/8 inch length
LIFE
10,000 staplings
PACKING
Clamshell
COST ESTIMATES
Tooling est: *
Est. cost: *
- -----------
* Confidential portion omitted and filed separately with the Commission.