Exhibit 10.3
MANUFACTURING AGREEMENT
This Agreement is entered into by and between Who?Vision Systems, Inc., a
Delaware corporation, with its principal place of business at 10315 102nd
Terrace, Sebastian, Florida (hereafter referred to as "WVS"), and SPOT
TECHNOLOGY, Inc., a Taiwanese corporation, with its principal place of business
at No. 115 Community 4, Chang 16, Tung Kuang Li, Kuan Hsi Town, Hsinchu Hsien,
Taiwan, ROC (hereafter referred to as "SPOT").
BACKGROUND
WHEREAS, WVS has certain expertise in fingerprint solutions and has
proprietary technical information in the areas of fingerprint acquisition,
processing and verification that may be used to create complete fingerprint
solutions for the computer industry, and is developing a finger print module
(hereafter referred to as "FPM");
WHEREAS, SPOT has developed expertise in manufacturing computer related
equipment and peripherals in significant volumes;
WHEREAS, both parties acknowledge that there is a specific market window
for fingerprint technology and products. Therefore, the parties agree to use
their reasonable efforts to work together to make the best use of each partners
capabilities;
WHEREAS, SPOT and XL Vision, Inc. previously entered into a Strategic
Distribution and Manufacturing Agreement dated November 19, 1997 (the "XLV
Agreement").
NOW THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, and intending to be legally bound hereby, the parties agree as
follows:
AGREEMENT
1.0 Definitions. As used in this Agreement, the following terms shall have the
respective meanings assigned to them below:
1.1 Calendar. The calendar used herein is the western calendar currently in
common use in the United States. For the purposes of this Agreement, quarters
are defined as:
Q1 January 1 - March 31
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Q2 April 1 - June 30
Q3 July 1 - September 30
Q4 October 1 - December 31
Should these dates fall on non-working days, the quarter shall begin on the
first working day following the date shown and end on the last working day
before the date shown.
1.2 "FPM" shall mean WVS's finger print module comprised of:
a) A finger sensing surface that generates an image of the
fingerprint
b) An image sensor that can translate the finger image to an
electronic signal
c) Lens-based air gap optics that translates the image from the
finger surface to the sensor.
d) A signal processing and interface chip, that processes the
fingerprint image into a form suitable for transportation to a
PC host via USB and/or parallel port.
e) Firmware for the signal processing and interface chip.
f) An API that runs on the PC and allows development of PC
applications that makes use of the FPM. The API will include
fingerprint matching functions and functions for accessing the
FPM hardware via USB and/or Parallel Port.
g) Any insufficient parts, or future upgrade will be granted into
"FPM."
1.3 "Object Code" shall mean computer programming code, routines and
programs in machine executable form.
1.4 "Third Party Software" shall mean the computer programming code,
routines and programs in Object Code form (and also in Source
Code if available), and the documentation thereof, which make up
part of the FPM, and which are owned by, or proprietary to
persons other than WVS or any of its affiliates.
1.5 BOM means Bill of Material for the FPM as described in 1.2 of
this Agreement.
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2.0 Responsibilities.
2.1 WVS License. WVS hereby grants SPOT a license in all its most up
to date technology, know-how and information concerning or
pertaining to the FPM subject to all other terms of this
Agreement, and a sublicense to all Third Party Software, if
available, to permit SPOT to manufacture quality and marketable
FPM at affordable prices and in quantities necessary to meet
WVS's demand. The schedule for transfer of such technology and
know-how is attached hereto as appendix B. (such transfer will
not be later than 31 December, 1997.)
2.2 SPOT's Engineering and Manufacturing Responsibilities
a) SPOT or its designated subsidiary or affiliate, agrees
to manufacture all of its own generated FPM requirements
and [xxxxxxxxxxxxxxxxxxxxxx] to be able to produce the
unit volumes per 2.3(c) of this agreement.
b) SPOT agrees to sell in U.S. dollars all manufactured
FPMs to WVS or its designated subsidiary/affiliates
using the following formula; hereinafter called SPOT
Sell Price:
[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]
c) SPOT agrees to tool for increases in capacity above
2.3(c) volumes, due to WVS generated requirements as
long as WVS provides SPOT notice of such increases 3
months before such volume increase is required, and the
aggregate cost of additional tooling for said increase
does not exceed [xxxxxxxxxxxxxxxxxx] per year for a
minimum 50% increase in quantity.
d) Spot agrees to purchase, at SPOT / WVS best
manufacturing cost in US dollars, all necessary Tactile
sense material for use with its FPM, plus shipping,
handling, taxes, insurance and duties. WVS agrees to
provide SPOT with monthly financial records related to
manufacturing and supply of the tactile sense material.
e) SPOT shall establish a manufacturing transfer team
with qualified engineers no later than 31 December1997.
[Confidential Treatment requested for redacted portion of document]
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f) SPOT shall participate with WVS in reviewing WVS's
designs and drawings for the FPM and the component piece
parts in order to ensure compatibility with SPOT
industrial design and manufacturing requirements, but
WVS shall solely be responsible for proper designs.
g) SPOT will be responsible for ensuring cost
effectiveness, quality and reliability of the
manufacturing process and the manufactured products.
h) SPOT shall ensure that its facility and systems
substantially comply with ISO 9002 standards.
i) WVS shall provide SPOT with quality control criteria.
SPOT shall perform quality control procedures jointly
developed by SPOT and WVS on all manufactured units. In
the event more than a specified number or percentage of
units do not pass quality control tests, product
acceptance and shipping shall be suspended until SPOT
determines the source of failure and takes appropriate
corrective action at its ownership/granted
responsibility.
j) Upon mass production, SPOT shall certify to WVS with
each invoice that it has performed the mutually agreed
upon quality control procedures on all manufactured
units covered by the invoice.
k) SPOT shall obtain at its own expense all safety
approvals, quality certificates, manufacturing permits
and licenses as may be required to manufacture and ship
FPMs, and WVS will be responsible for such approvals,
certifications, permits, and licenses to license the
technology to SPOT.
2.3 WVS Manufacturing Related Responsibilities
a) WVS shall work with SPOT to provide mechanical interface
drawings and information to SPOT on the FPM no later than 1
December 1997.
b) WVS shall work with SPOT to provide a complete design and
documentation package to SPOT for use in manufacturing no later
than 31 December 1997.
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c) WVS is responsible for providing SPOT a design of the FPM
described in 1.2 of this Agreement, whose Bill of Material will
not exceed the following costs based on the following volumes:
1998 [xxxxxxxxxxxxx xxxxxxx]
1999 [xxxxxxxxxxxxx xxxxxxx]
2000 [xxxxxxxxxxxxx xxxxxxx]
2001 [xxxxxxxxxxxxx xxxxxxx]
(assumes an exchange rate of 29.00 Taiwanese dollars to 1 US
dollar or better)
The above pricing reflects a software per unit cost in the BOM
of [xxxx xxxxxxxxxx] for the years and quantities respectively.
If a customer does not require the WVS supplied Software, the
BOM cost will be reduced by the above software per unit figures.
Any increases in the BOM due to special housing, packaging,
connectors, or other requirements requested by SPOT shall be
excluded in determining whether the BOM is within the maximum
price.
d) WVS agrees to establish a manufacturing team with qualified
engineers no later then December 31, 1997 to provide SPOT with
technology.
e) WVS shall prepare and deliver to SPOT prior to commencement of
production, quality control procedures to be applied to
manufactured units.
2.4 Purchases, Forecasts and Orders
a) Purchases
WVS agrees to purchase a minimum of [xxx] of all its FPM and
stand-alone requirements from SPOT of this agreement, as long as
SPOT remains cost competitive, meets delivery needs and quality
criteria. SPOT acknowledges that WVS intends to enter into a
manufacturing agreement with 1 or more other manufacturers of
the FPM, for other non-related products in additional
distribution channels than those exclusively reserved for SPOT
under any distribution agreement. Such minimum purchase
requirement will not apply to requirements of such other
manufacturers or their affiliates.
[Confidential Treatment requested for redacted portion of document]
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b) Forecasts
Beginning in ________ 1998, WVS will provide SPOT with a rolling
6-month forecast of unit purchase requirements. Forecasts are
"Non-binding Forecasts", provided as good-faith estimates to
help SPOT plan production, and manage inventory levels to meet
WVS's requirements.
c) Order Placement
Only authorized employees of WVS may place purchase orders
(P.O.). SPOT is not authorized to accept purchase orders from
any other entity. All P.O.s shall specify a price, delivery date
and, if available, destination. All requested delivery dates
will be subject to reasonable approval by SPOT.
d) Order Acknowledgment
An acknowledgment of purchase orders will be returned to WVS
within four working days of receipt of an order. If SPOT is
unable to comply with some conditions of the order, for example,
the delivery date, SPOT should still acknowledge orders,
confirming all accepted data (quantity, price, etc) and
informing WVS of the issue.
e) Invoices and Payment
SPOT will invoice WVS for FPM units upon delivery on board the
ship or other shipping mode.
Payment by WVS shall be due NET 60 days after receipt of
invoice. All invoices and payments shall be in U.S. dollars.
Late payments shall bear interest at 1% per month.
f) Title and Risk of Loss
All shipments of FPMs shall be made F.O.B. manufacturer's
origin. Title for FPMs (if not passed per paragraph (i) above)
and risk of loss for FPMs shall pass to WVS when the FPMs are
placed on board the ship or other shipping mode.
g) SPOT shall provide to WVS on a monthly basis with its 6 month
rolling unit prices for FPMs based on WVS' forecasted volume
requirements. SPOT shall provide supporting detail for its
prices to confirm compliance with the formula in paragraph
2.2(b).
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3.0 Project Managers; Personnel; Progress Reports.
3.1 WVS Project Manager and Personnel
a) WVS shall appoint a project manager to coordinate WVS's
activities and responsibilities relating to SPOT. WVS shall
provide written notice to SPOT of the name and business address,
daytime telephone number and telefax address of the WVS Project
Manager. The initial WVS Project Manager shall be Tzu-Chiang
Hsieh. WVS shall also appoint a full time manufacturing liaison,
who will be responsible for the transition of the WVS FPM design
to SPOT for manufacture, and will assist in its initial
implementation.
b) From time to time, personnel of WVS may perform work at
the facilities of SPOT. WVS shall be solely responsible
for any and all losses, liabilities, suits, claims, and
expenses incurred by any of its personnel for damage to
property or bodily injury, unless such damage to
property or bodily injury was caused by the gross
negligence or intentional misconduct of SPOT. While at
the facilities of SPOT, all WVS personnel shall observe
and follow the work rules, policies, and standards of
SPOT.
3.2 SPOT Project Manager and Personnel
a) SPOT shall appoint a project manager to coordinate
SPOT's activities and responsibilities relating to WVS.
SPOT shall provide written notice to WVS of the name and
business address, daytime telephone and telefax number
of the SPOT Project Manager. The initial SPOT Project
Manager shall be Paul Yang.
b) From time to time, personnel of SPOT may perform work at
the facilities of WVS. SPOT shall be solely responsible
for any and all losses, liabilities, suits, claims, and
expenses incurred by any of its personnel for damage to
property or bodily injury, unless such damage to
property or bodily injury was caused by the gross
negligence or intentional misconduct of WVS. While at
the facilities of WVS, all SPOT personnel shall observe
and follow the work rules, policies and standards of
WVS.
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3.3 Progress Report Meetings
(a) WVS and SPOT shall each provide to the other a monthly
written progress report. Reports shall be in Microsoft
Office format and shall indicate the following:
Status of progress to current scheduled milestones.
Short description of problems in meeting such milestones.
Proposed recovery method to meet next milestone.
Probability of meeting next milestone.
Any other information reasonably requested by either party with
respect to the Project.
4.0 Deliverable & Acceptance
4.1 The deliverables from WVS for the manufacturing effort are as
follows (also, the deliverables should contain an FPM sample described in
section 1.2):
Theory of Operation - a detailed, written description of the functional
nature of the FPM design. It shall include functional and circuit block
diagrams, data flow and timing diagrams, and a detailed description of the
functional flow.
Schematic Diagrams - a full set of electronic schematic circuit
diagrams. The drawings for these items shall be in the OrCad DSN format.
Mechanical Drawings - These shall include all relevant drawings required
to implement the design into SPOT's manufacturing process. Included will be
detailed drawings for piece parts designed by WVS, source control documents for
all components specified by WVS, and a preliminary Bill of Materials. These
documents will be created and delivered in the AutoCad DWG format. WVS will
participate with SPOT in reviewing industrial Design and package drawings and
will determine how the overall Industrial Design will impact the design and
layout of specific piece parts (for instance, Printed Circuit Boards), but WVS
shall not be responsible for providing overall envelope drawings. Since SPOT
will be responsible for the implementation of the FPM into other parties'
industrial designs, WVS will provide only the mechanical drawings necessary to
support SPOT's industrial design and manufacturing requirements.
Software - All firmware and interface drivers will be developed by WVS
and delivered to SPOT. This delivery shall be in the form of executable code.
4.2 Orientation and Training Program. WVS shall provide an orientation
and training program for the purpose of educating SPOT's personnel in the use,
operation, technical support,
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maintenance, management, and assistance for manufacturing of the FPM. WVS shall
also provide to SPOT all improvements with respect to the FPM subject to the
terms of this agreement and, in order to maintain a competitive product, shall
use its best efforts to make incremental improvements to the technology.
5.0 Proprietary Rights
5.1 Proprietary Rights of WVS Defined
a) FPM Design and Configuration - All right, title and interest in
and to (i) the design and configuration of the FPM, including
all deliverables, (ii) all updates and enhancements to the
design and configuration of the FPM, (iii) all documentation
prepared by WVS for the FPM, and (iv) any and all intellectual
property rights inherent in the FPM design and configuration
('i', 'ii', and 'iii' and 'iv' are collectively the "FPM Design
and Configuration"), including without limitation all patent
rights, copyrights, trademarks, know-how and trade secrets, does
and shall belong exclusively to WVS. If any know-how or trade
secrets are jointly developed [or become part of public domain],
they shall be jointly owned by WVS and SPOT.
b) Developed Software - All right, title and interest in and to (i)
software developed for incorporation into the FPM, (ii) all
updates and enhancements of such software, (iii) all
documentation and (iv) any and all intellectual property rights
relating to the foregoing, does and shall belong exclusively to
WVS. If any software is jointly developed or becomes part of the
public domain, it shall be jointly owned by WVS and SPOT.
c) Third Party Software - WVS has at its own expense secured the
rights to fingerprint matching software. WVS shall pass through
(in whatever form) licensing rights and restrictions, which
pertain to third party software and technology.
5.2 Confidentiality. The FPM Design and Configuration and the Developed
Software, and each item included in such, and all materials and copies
containing any part of such, shall be maintained as confidential by SPOT, shall
be disclosed by SPOT only to its employees who need such materials and
information for SPOT to fulfill its obligations and not to any other person or
entity, and shall not be used by SPOT for any other purpose. SPOT's obligation
shall not apply to any information which becomes part of the public domain other
than as a result of SPOT's breach of its obligations under this paragraph. SPOT
shall be responsible for ensuring that its employees comply with its
confidentiality obligations.
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5.3 Trademarks. Neither SPOT nor WVS shall use the other party's trademarks
or tradenames without prior written consent.
6.0 License and Sublicense
6.1 Exclusive License--WVS hereby grants SPOT the rights accorded to
it as provided of this agreement, as long as SPOT meets it's
obligations under this agreement. No other licenses shall be
implied or given.
6.2 Right to Sub-license. SPOT shall not have the right to
sub-license or discuss the potential to sub-license, any of the
rights, privileges and licenses granted hereunder without the
express written consent of WVS, during the period of this
Agreement including to affiliates of SPOT. Any agreement to
sub-license shall be incorporated as an amendment to this
Agreement and therefore carry all requirements as stated herein.
7.0 Term and Termination
7.1 WVS's Right to Terminate. WVS shall have the right to terminate this
Agreement if:
a) SPOT materially breaches its confidentiality obligations
this Agreement;
b) SPOT sells or delivers any FPMs or other fingerprint
sensing/reading device to any unauthorized person in
violation of Section 2.2(l);
c) SPOT materially breaches any other obligation under this
Agreement and the breach remains uncured for 90 days
after written notice of the breach is given by WVS; or
d) If SPOT should become bankrupt or insolvent, or shall
file a petition in bankruptcy, or if the business of
SPOT shall be placed in the hands of a receiver,
assignee or trustee for the benefit of creditors,
whether by the voluntary act of SPOT or otherwise, this
Agreement shall automatically terminate.
7.2 SPOT Right of Termination. SPOT shall have the right to terminate this
Agreement if:
a) WVS fails to pay any amount when due which failure
remains uncured for 30 days after written notice by
SPOT.
b) WVS materially breaches any other obligation under this
Agreement and the breach remains uncured for 90 days
after written notice of the breach is given by SPOT.
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c) If WVS should become bankrupt or insolvent prior to
completing its obligations under the Agreement, or shall
file a petition in bankruptcy, or if the business of WVS
shall be placed in the hands of a receiver, assignee or
trustee for the benefit of creditors, whether by the
voluntary act of WVS or otherwise, this Agreement shall
automatically terminate.
d) SPOT is unable to manufacture quality FPMs under the
design provided by WVS.
7.3 Effect of Termination. Upon termination of this agreement:
a) All outstanding amounts payable shall be payable in accordance
with the terms of this Agreement,
7.4 Term of License. The term of this Agreement shall commence on the
date thereof and continue through 31 December 2001, subject to earlier
termination pursuant to sections 7.3 and 7.4 of this Agreement. The term shall
review for additional one-year terms unless either party gives written notice at
least 60 days before the expiration of any terms of its intent not to renew. The
parties shall begin negotiating minimum production capacity commitments for each
renewal term at least 120 days before expiration of the prior term.
8.0 Warranties; Product Returns
8.1 Warranties by WVS. In recognition of the fact that SPOT shall be
required to complete the process of developing a manufacturing prototype for the
FPM and shall have the sole responsibility for maintaining the quality control
process associated with the manufacture of the FPM, WVS takes sole
responsibility for any patent infringement related directly, indirectly or
collectively and pertaining to paragraph 1.2, 5.1a and 5.1b.
8.2 SPOT Warranty. SPOT warrants that, for a period of 90 days from
delivery, each FPM unit shall be free from defects in materials or workmanship.
8.3 Mutual Indemnification. WVS will indemnify SPOT in the event of
damages arising from product design, and SPOT will indemnify WVS for damages
attributed to manufacturing. SPOT also agrees to advise and work with WVS in the
area of product liability coverage and insurance, and if possible will include
this product from both a design and manufacturing point of view under its
existing products liability coverage. If appropriate, WVS agrees to pay SPOT for
50% of the cost of additional coverage for this item, in order to provide proper
insurance for XLV and offset any additional cost to SPOT.
9.0 Dispute
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Any dispute arising in connection with this Agreement will be resolved
in the following order;
1) Face to Face negotiations between senior executives of each
company.
2) By mediation in Southern California with a mediator selected in
accordance with procedures of the American Arbitration
Association.
3) If no resolution is achieved within 30 days after mediation is
requested, then both parties agree to binding arbitration in
accordance with commercial arbitration rules of the American
Arbitration Association. If said arbitration is requested by
SPOT, then such action shall take place in Southern California.
If requested by WVS, such action shall take place in Taipei,
Taiwan. This Agreement shall be governed by the laws of the
state of California without regard to choice of law rules.
10.0 Assignability
SPOT and WVS both have the right to assign this Agreement to any of
their majority-owned affiliated companies by providing 30 days prior notice to
the other party. The party assigning the Agreement will not be denied said
assignment by the other party unless it would materially affect the ability of
the non-assigning party to continue under the terms of this Agreement.
11.0 Entire Agreement
This Agreement constitutes the entire agreement between the parties and
there are no representations, warranties, covenants, or obligations except as
set forth herein. This Agreement supersedes all prior and contemporaneous
agreements, purchase orders, understandings, negotiations, and discussions,
written or oral, of the parties hereto.
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12.0 Notices.
Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing, sent by certified mail to the respective parties at
the address below, or to such other address as each party may hereafter specify
in writing to the other.
If to WVS: Who?Vision Systems, Inc.
100 North Pointe Drive
Lake Forest, CA 92630
Telephone: 949-837-5350
Attention: Tzu Chiang Hsieh
If to SPOT: SPOT Technology, Inc.
No. 115 Community 4
Chang 16,
Tung Kuang Li,
Kuan Hsi Town,
Hsinchu Hsien,
Taiwan, ROC,
Telephone: 886-3-587-8966
Attention: Paul Yang
13.0 Relationship of Parties
In making and performing this Agreement, the parties are acting and
shall act as independent contractors. Nothing in this Agreement shall be deemed
to create an agency, joint venture or partnership relationship between the
parties hereto. At no time shall either party make commitments or incur any
charges or expenses for, or in, the name of the other party.
14.0 Amendments.
These terms and conditions may be amended only in writing by an
authorized officer of each party to this document.
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15.0 XLV Agreement.
This Agreement and the Distribution Agreement between WVS and SPOT of
even date replace and supersede the XLV Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representative as of the 16th day of July,
1998.
Who? Vision Systems, Inc. SPOT Technology, Inc.
By: /s/ Alex Dickinson By: /s/ Jose Wong
------------------------------ -------------------------------
Name: Alex Dickinson Name: /s/ Jose Wong
Title: Chief Financial Officer Title: President
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