Exhibit 10.6
DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Who? Vision Systems, Inc., a
Delaware corporation, with its principal place of business at 100 Northpointe
Drive, Lake Forrest, California (hereafter referred to as "WVS"), and SILITEK
Corporation, a Taiwanese corporation, with its principal place of business at
10F, 25 Tun Hwa Road, Sec. 1, Taipei, Taiwan, (hereafter referred to as
"SILITEK").
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, SILITEK has developed expertise for the packaging and selling of
computer related equipment and peripherals in significant volumes, and has
relationships with PC OEM and retail PC distribution channels and desires to
market and sell WVS's FPM for inclusion into computer equipment such as
keyboards and stand-alone units for sale through said channels; and
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;
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
Q2 April 1 - June 30
Q3 July 1 - September 30
Q4 October 1 - December 31
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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.
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 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.
2.0 Responsibilities.
2.1 SILITEK's Distribution
SILITEK shall have the right to market and sell the FPM as described
herein:
a) For incorporation of the FPM into SILITEK keyboards.
b) For distribution of SILITEK keyboards containing the FPM to any
PC OEM firm, but not for integration into or bundling with
notebook computers.
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c) For distribution of SILITEK keyboards containing the FPM into the
following retail channels: list to be determined my merging a
list of retail outlets previously provided by both SILITEK and
SPOT/MAG to avoid channel conflict.
d) For incorporation of the FPM into stand-alone (i.e. not
integrated with any other function) PC peripherals for sale into
any OEM or retail channel.
e) SILITEK agrees that it will not sell FPMs for end uses not
specified above without prior written consent from WVS.
2.2 Distribution Volumes Requirements
a) In order to maintain the distribution right outlined in Section
2.1, WVS requires that Silitek meet the following volume targets:
1999: [xxxxxxxx]
2000: [xxxxxxxx]
2001: [xxxxxxxx]
b) Should Silitek not meet these targets, WVS will have the right to
renegotiate the distribution right outlined in Section 2.1.
c) SILITEK shall obtain and pay for all approvals, certificates,
permits and licenses as may be required to distribute the FPM.
d) SILITEK shall comply with all US export control restrictions,
including reexport restrictions.
e) SILITEK shall be responsible for all technical support and
maintenance requirements of its customers.
[Confidential Treatment requested for redacted portion of document]
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f) SILITEK shall market and sell FPMs in accordance with all
applicable laws and regulations, and shall not advertise or make
claims about the FPM which are inconsistent with the
specifications and descriptions of the FPM provided by WVS.
2.3 WVS's Responsibilities
a) WVS shall train SILITEK personnel in the use, operation,
technical support, maintenance of said FPM.
b) WVS shall provide technology demonstration to SILITEK for initial
management and customer briefings.
c) WVS shall provide product samples to SILITEK for integration into
peripherals for use by SILITEK in order to meet it's obligations
under sections 2.1 and 2.2.
d) WVS will negotiate in good faith to provide Silitek access to
distribute any further fingerprint technologies developed by WVS.
2.4 Forecasts, Orders, Purchases and Deliveries
2.4.1 FORECASTS
a) FORECASTS
Beginning in September 1998, Silitek will provide WVS with a
rolling 4-month forecast, by part number and by eligible
buyer. The forecast will be provided to WVS on the first
week of each calendar month, by fax, from Silitek. The
forecasts will cover the following 4 month period. The
forecasts should specify the quantity of products, by
Silitek part number, and by eligible buyer, which Silitek
expects to call for delivery each forecast month. Forecasts
are "Non-binding Forecasts", provided as good-faith
estimates to help WVS plan production, and manage inventory
levels to meet Silitek's requirements.
For example: The May 4-Months forecast should provide the
estimated monthly delivery quantity demand for June, July,
August and September. The forecast quantity may be adjusted
on a monthly basis by the agreed percentage as specified in
the table below.
Month Adjustment Allowed
Present No adjustment permissible
Following 20%
Following+1 40%
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Following+2 60%
Following+3,4,etc Unlimited
For Example
For the next 4-month forecast(e.g. June forecast for July,
August, September, Oct) the previous 4-months forecast first
month figure cannot be adjusted (June). The production
forecast for two months later can be adjusted 20% up or
down. The forecast for three months later can be eadjusted
40% up or down. Four months later, 60% up or down.
b) FORECAST ACKNOWLEDGEMENT
Acknowledgment of receipt and confirmation of WVS's ability
to meet forecast should be returned to Silitek within
ten(10) working days of receipt of the said forecasts. WVS
should also provide information on planned production for
the 2 months following receipt of such Forecasts, once their
monthly production planning has been completed.
c) PARTS LIABILITY
In the event that Silitek ceases FPM production orders to
WVS, Silitek shall be liable for the value of all FPM unique
parts and raw materials still in inventory or in process at
that time and produced according to Silitek forecast
estimates. In the event of a failure by Silitek to pay such
amounts and take delivery of such inventory within 30 days
after notice and invoice from WVS, WVS shall have all of the
rights of a seller under the California Uniform Commercial
Code in the event of a repudiation by the buyer.
2.4.2 ORDERING PROCEDURES
a) ORDER PLACEMENT
Individual employees designated by the President of Silitek
as authorized buyers will place 8-weeks purchase orders on a
weekly-rolling basis. WVS is not authorized to accept
purchase orders from any other entity. A 8-weeks P.O. will
reflect the quantity Silitek commits to buy from WVS, in
accordance with the cancellation and flexibility conditions
described in this document and on which Silitek and WVS have
agreed. No different or additional terms and conditions in
any P.O. shall be effective unless specifically accepted by
WVS. 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 WVS. All FPMs produced
under P.O.s without a specified destination will be
warehoused by WVS in accordance with Section 2.4.4(a).
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b) ORDER ACKNOWLEDGEMENT
An acknowledgment of purchase orders will be returned to the
ordering authorized buyer within four(4) working days of
receipt of an order. If WVS is unable to comply with some
conditions of the order, for example, the delivery date in
an allocation situation, WVS should still acknowledge
orders, confirming all accepted data (quantity, price, etc)
and informing the authorized buyer of the issue.
c) LEAD TIME
"Lead Time" means the time between receipt of Purchase
Order, by WVS, and delivery of PRODUCT to the agreed FOB
point for the ordering authorized buyer.
d) ORDER STATUS REPORTS- AUTHORIZED BUYERS
WVS will provide a weekly "Open Order Status Report" to
Silitek with the following information.
PO Number
WVS Part Number
Name of Authorized Buyer for each order
Requested delivery date (to Silitek)
Planned delivery date (to Silitek)
Planned delivery quantity
Comments:
e) ORDER STATUS REPORTS- WORLDWIDE PLANNING
The same "Open Order Status Report" information,
consolidated worldwide, should be sent to Silitek along
with:
The worldwide inventory, split by PRODUCT and region
including in-transit inventory and future manufacturing
plans.
On Time delivery performance
Total amount invoiced for the month worldwide
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2.4.3 INVOICES
a) INVOICING
WVS will invoice SILITEK the value of each P.O. delivery
pulled by WVS from a WVS location once POD (Proof of
Delivery) documents have been signed by a SILITEK authorized
representative.
b) INVOICE DELIVERY
WVS shall send all invoices for FPMs shipped to Silitek.
c) INVOICE PERIOD AND PAYMENT PROCEDURE
Payment by Silitek shall be due NET 15 days after receipt of
invoice. All invoices and payments shall be in U.S. dollars.
Payment shall be by wire transfers. Late payments shall bear
interest at 1% per month.
2.4.4 INVENTORY: TITLE AND LIABILITY
a) TITLE TO INVENTORY
For all Purchase Orders without a specified destination, WVS
shall deliver the FPMs to its own warehouse, segregated from
WVS inventory, until Silitek provides WVS with delivery
instructions. Title to the FPMs shall pass to Silitek upon
notice to Silitek of delivery to the warehouse with
appropriate papers evidencing Silitek ownership. WVS shall
insure the FPMs against loss while stored in its warehouse.
b) TITLE TO SHIPMENTS
All shipments of FPMs shall be made F.O.B. manufacturer's
origin. Title for FPMs (if not passed per paragraph (a)
above) and risk of loss for FPMs shall pass to Silitek when
the FPMs are placed on board the ship or other shipping
mode.
c) INVENTORY LIABILITY
Silitek will be charged interest of 1% monthly upon the P.O.
value of FPM inventory still not pulled by WVS from WVS
warehouse 1 month after the Delivery Date specified on the
P.O. for such inventory.
d) WVS shall comply with U.S. and other applicable laws and
regulations regarding export controls covering the FPM.
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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 SILITEK. WVS shall
provide written notice to SILITEK 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 channel
manager to SILITEK to handle all marketing and business related
issues and opportunities.
b) From time to time, personnel of WVS may perform work at the
facilities of SILITEK. 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 SILITEK. While at
the facilities of SILITEK, all WVS personnel shall observe and
follow the work rules, policies, and standards of SILITEK.
3.2 SILITEK Project Manager and Personnel
a) SILITEK shall appoint a project manager to coordinate SILITEK's
activities and responsibilities relating to WVS. SILITEK shall
provide written notice to WVS of the name and business address,
daytime telephone and telefax number of the SILITEK Project
Manager. The initial SILITEK Project Manager shall be John Liu.
SILITEK shall appoint a full time product manager to handle all
marketing and business related issues and opportunities.
b) From time to time, personnel of SILITEK may perform work at the
facilities of WVS. SILITEK 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 SILITEK personnel shall observe and follow
the work rules, policies and standards of WVS.
3.3 Marketing Review Meetings
a) WVS and SILITEK shall cause their channel manager and product
manager, plus at least one other qualified person each, to
participate in regular Marketing Review Meetings to review
marketing, business development, sales, and sales forecasts. The
group will make recommendations to WVS and SILITEK, but will not
have authority to incur any material obligations on behalf of
either party without the approval of the Project Managers of each
company.
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b) SILITEK shall provide WVS a written progress report at least one
week before each Marketing Review Meeting. Reports shall be in
Microsoft Office format.
4.0 Proprietary Rights
4.1 Proprietary Rights of WVS
a) Design and Configuration of FPM - All right, title and interest
in and to (i) the design and configuration of the FPM, (ii) all
updates and enhancements to the design and configuration of the
FPM, (iii) all documentation for the FPM, and (iv) any and all
intellectual property rights inherent in the FPM design and
configuration ('i', 'ii', and 'iii' 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.
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.
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.
4.2 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 SILITEK,
shall be disclosed by SILITEK only to its employees who need such materials and
information for SILITEK to fulfill its obligations and not to any other person
or entity, and shall not be used by SILITEK for any other purpose. SILITEK's
obligation shall not apply to any information which becomes part of the public
domain other than as a result of SILITEK's breach of its obligations under this
paragraph. SILITEK shall be responsible for ensuring that its employees comply
with its confidentiality obligations.
4.3 Trademarks. Neither SILITEK nor WVS shall use the other party's
trademarks or tradenames without prior written consent.
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5.0 Term and Termination
5.1 Term. The term of this Agreement shall commence on the date hereof and
continue through December 31, 2001, subject to earlier termination pursuant to
Sections 5.2 and 5.3. The term shall be renewed for additional one year terms
unless either party gives written notice at least 60 days before expiration of
any term of its intent not to renew. The parties shall begin negotiating minimum
volume requirements for each renewal term at least 120 days before expiration of
the prior term.
5.2 WVS's Right to Terminate. WVS shall have the right to terminate this
Agreement if:
a) SILITEK materially breaches its confidentiality obligations under
Section 4.2;
b) SILITEK fails to pay any amount when due which failure remains
uncured for 30 days after written notice by WVS;
c) SILITEK 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;
d) SILITEK's purchases fall below the minimum requirements and both
parties are unable to re-negotiate within 30 days the conditions
of the Agreement;
e) If SILITEK should become bankrupt or insolvent, or shall file a
petition in bankruptcy, or if the business of SILITEK shall be
placed in the hands of a receiver, assignee or trustee for the
benefit of creditors, whether by the voluntary act of SILITEK or
otherwise, this Agreement shall automatically terminate.
5.3 SILITEK Right of Termination. SILITEK shall have the right to terminate
this Agreement if:
a) 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 SILITEK;
b) 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.
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5.4 Effect of Termination
a) Upon termination of this Agreement,
(i) All outstanding amounts payable shall be payable in
accordance with the terms of this Agreement; and
(ii) SILITEK shall continue to be responsible for support and
maintenance for its customers. WVS recognizes that SILITEK
may require continued WVS support during this interim period
and WVS agrees to provide as is necessary and consistent
with the other terms of this agreement.
b) Upon a termination of this Agreement all outstanding purchase
orders shall remain effective unless the parties agree otherwise,
and SILITEK shall pay for such units at the time of delivery, or
make payment arrangements satisfactory to WVS.
6.0 Warranties, Product Returns; Indemnity.
6.1 Pass Through Warranty. WVS agrees to pass through to SILITEK all
warranties it receives from its' manufacturers. WVS MAKES NO WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.2 Patents. WVS represents that to the best of its knowledge there are no
infringements on third party intellectual property rights or patents.
6.3 Mutual Indemnification. WVS agrees to indemnify, defend, and hold
harmless SILITEK and its affiliates and their respective directors, officers,
shareholders, employees and agents from and against any and all claims, demands,
suits, actions, judgments, costs and liabilities relating to third party claims
of patent infringement by the design of the FPM as delivered by WVS to SILITEK.
SILITEK agrees to indemnify, defend, and hold harmless WVS and its affiliates
and their respective directors, officers, shareholders, employees and agents
from and against any and all claims, demands, suits, actions, judgments, costs
and liabilities relating to (i) third party claims of patent infringement by any
SILITEK-initiated engineering or design efforts under this agreement, and (ii)
for damages attributed to manufacturing and any SILITEK initiated engineering or
design efforts, and to any breach of SILITEK's warranty.
6.4 Product Returns. All defective product returns shall be made directly
to the original manufacturer with a copy of the paperwork supplied to WVS.
7.0 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 60 days after mediation is
requested, then both parties agree to binding arbitration in Southern
California in accordance with commercial arbitration rules of the
American Arbitration Association. This agreement shall be governed by
the laws of the state of California without regard to choice of law
rules.
8.0 Assignability
SILITEK and WVS both have the right to assign this agreement to any of
their affiliated companies, with the consent of the other party. Consent may not
be unreasonably denied.
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9.0 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.
10.0 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 Northpointe Drive
Lake Forrest, CA 92630
Attn: CEO
If to SILITEK: SILITEK
10F, 25 Tun Hwa Road, Sec. 1,
Taipei, Taiwan
11.0 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.
12.0 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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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representative as of the 1st day of July,
1998.
Who? Vision Systems, Inc. SILITEK Corporation.
By: /s/ Alex Dickinson By: /s/ Tony Ke
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Name: Alex Dickinson Name: Tony Ke
Title: Chief Executive Officer Title: Vice President
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