Agreement
This Agreement is entered into and effective as of June 6, 2005.
BETWEEN:
(1) LUNG HWA ELECTRONICS CO., LTD. (hereafter referred to as LHE) a Taiwan
Corporation having its office and principal place of business at 3F, 248, Pei
Sheng Rd. Sec. 3, Sheng Keng, Taipei Hsien, Taiwan, R. O. C.
(2) I/OMAGIC CORPORATION (hereafter referred to as IOMC), a Nevada
corporation, having its office and principal place of business at 4 Marconi,
Irvine, CA 92618.
WHEREAS, IOMC desires to use LHE as IOMC's International Purchasing Office
(hereafter referred to as "IPO") to purchase certain computer peripheral
products for IOMC.
WHEREAS, IOMC has the desire to purchase from LHE and LHE desires to sell
certain computer peripheral and digital entertainment products manufactured by
LHE ("OEM Sales")
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follow:
Terms Applicable to IPO Business Model:
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1. IOMC instructs LHE to purchase consumer/computer products from its
designated suppliers for IOMC in the territory of the North
America.
2. Price Transparency: LHE shall not renegotiate the price on IOMC's
purchase order to LHE for products to be purchased with the
designated suppliers, unless the supplier and LHE offer IOMC the same
reduction in price for such products. LHE agrees to provide and execute
a Tri-Party Agreement to be negotiated and entered into between IOMC,
LHE and each supplier that IOMC instructs LHE to purchase products from.
LHE agrees that the Tri-Party Agreement shall include, but not be
limited to, LHE's agreement that LHE shall not renegotiate prices with
the supplier.
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3. Handling Charge as Being IPO
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LHE shall charge 5% handling charge based on the supplier's unit price.
If IOMC reaches an average running monthly purchasing volume of $750,000
per month under either the IPO and/or OEM Sales Business models
combined, LHE shall reduce the handling charge by 2% as a volume discount
to IOMC. LHE shall credit any volume discounts on handling charges to
IOMC by issuing a credit note based on the invoices.
4. Returns
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IOMC shall return nonconforming or defective products directly to the
supplier. LHE agrees to issue IOMC a credit for the 3% or 5%
handling charge on the returned products in the event that the supplier
issues a return credit to LHE for IOMC returned products. Returns to
suppliers will be negotiated and handled pursuant to a Tri-Party
Agreement executed by LHE, IOMC, and supplier.
Terms Applicable to IPO and OEM Sales Business Model:
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1. Purchase Order
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IOMC shall issue purchase orders to LHE during the term of this
Agreement.
2. Credit Line
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US $15 million
3. Payment:
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(a) Net 120 days for the IPO Sales Business Model; Net 90 days for
the OEM Sales Business Model
(b) Payment should be made on the 121st day for IPO Sales and the
91st day for OEM Sales, beginning on the date the invoice is
issued with funds paid via wire transfer to bank account
specified below (hereinafter referred to as "Bank"):
(c) Bank information
Bank: CHANG HWA COMMERCIAL BANK, LTD. PEI HSIN BRANCH
Account name: LUNG HWA ELECTRONICS CO., LTD.
Account No. 5623-22-06271-500
SWIFT CODE: CCBCTWTP562
(d) Interest shall accrue on any past due accounts at a rate of 0.5%
per month.
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4. Early Payment
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Upon effectiveness of this Agreement, the amount of $1,500,000
US dollars ("Early Payment Funds") shall be wired from IOMC to LHE.
These funds will be used to pay all IOMC invoices coming due for payment
to LHE. Any Early Payment Funds remaining after the payment of all IOMC
outstanding invoices to LHE three months after the date of this
Agreement shall be refunded to IOMC immediately. Once the Early Payment
Funds have been used to pay all outstanding IOMC invoices, or three
months from the date of this Agreement has expired, whichever is sooner,
IOMC shall pay LHE 10% of the purchase price on any purchase orders
issued to LHE, as a down payment for products ordered, within one week
of the date of IOMC's purchase order to LHE.
5. Cancellation
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If IOMC cancels the Purchase Order, the cancellation penalty would depend
on the supplier's request stated on quotation or contract.
6. Shipment
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IOMC shall determine the method of shipping on all Purchase Orders unless
agreed upon otherwise in writing by both parties.
7. Non-Competition
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During the term of, or any extension of the term of, this Agreement, LHE
shall not export, market, design, manufacture or sell any products
similar to, or which either alone in conjunction with some other
goods, perform as or which might otherwise compete with IOMC in the
North America.
8. Duration
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This Agreement shall remain valid for 1 year from the signing of this
Agreement onwards. In the end of the term of this Agreement if either
party would like to terminate the Agreement the terminating party shall
provide the other party with at least 30 days written notice of
termination. Otherwise, the Agreement will be continuously valid
without signing a new Agreement.
9. Monthly Statements
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LHE shall fax or e-mail a statement indicating all open items to
IOMC within 15 days after the end of each month.
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10. Applicable Law
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This Agreement shall be subject to the laws of California and each
party hereby submits to the exclusive jurisdiction of the courts in
Orange County, California and irrevocably waives any rights it may have
to bring proceedings in any other jurisdiction (including without
limitation on the grounds of inconvenient forum.)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized representatives on the date and year first above written.
I/OMAGIC CORPORATION LUNG HWA ELECTRONICS CO., LTD.
/s/ Tony Shahbaz /s/ Peter Pai
By: Tony Shahbaz By: Peter Pai
Its: President and CEO Its: CEO
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