Terms and Conditions

These Terms and Conditions shall be applicable to all shipments of Product to Buyer, prior to the execution of a Manufacturing Agreement or Master Ordering Agreement between Outsource Manufacturing, Inc. (Manufacturer) and Buyer. Where a Manufacturing Agreement or Master Ordering Agreement has been executed by both parties, such Agreement shall be controlling and shall take precedence over these Terms and Conditions, as of the Effective Date of the Manufacturing Agreement or Master Ordering Agreement.

Recitals

Manufacturer is an electronic manufacturing services provider that furnishes the necessary personnel, material, equipment, services and facilities to manufacture products for original equipment manufacturers and other third parties in accordance with detailed specifications provided by such OEM’s and third parties.

Buyer desires to engage Manufacturer to manufacture certain of Buyer’s products per Buyer’s specifications, in accordance with orders to be issued from time to time by Buyer.

Manufacturer is willing to accept Orders to manufacture Buyer’s products upon terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, it is hereby agreed between the parties hereto as follows:

1. DEFINITIONS.
(a) Forecast. “Forecast” means the estimate set forth in the applicable Product Schedule of Buyer’s anticipated Orders of the Product during the Forecast Period.

(b) Forecast Period. “Forecast Period” means the period set forth in the applicable Product Schedule covered by the Forecast for the Product during which the applicable Purchase Price is effective.

(c) Inventory. “Inventory” means the materials and components required to manufacture the Products.

(d) Long Lead Inventory. “Long Lead Inventory” means the Inventory that has a long lead time from a supplier and must be purchased in advance of receipt of an Order in order for Manufacturer to be able to meet the delivery schedule for Products as set forth in the applicable Product Schedule.

(e) Minimum Buy Inventory. “Minimum Buy Inventory” means Inventory that may only be purchased in minimum lot sizes.

(f) Minimum Order Size. “Minimum Order Size” means the minimum dollar or quantity amount that Buyer must order per Product on each individual Order as specified in the applicable Product Schedule.

(g) NCNR Inventory. “NCNR Inventory” means all inventory that is (i) in Manufacturer’s possession and not returnable to the vendor/supplier, or usable within a reasonable time not to exceed six (6) months from purchase, for other accepted Orders, or other buyers or (ii) on order and not cancelable.

(h) Order. “Order” means an Order meeting the requirements of these Terms and Conditions submitted by Buyer for acceptance by Manufacturer.

(i) Product Schedule. “Product Schedule” means a schedule, as amended from time to time by mutual agreement of the parties that sets forth information relating to Product to be manufactured for Buyer pursuant to these Terms and Conditions and applicable Orders, and incorporated herein.

(j) Products. “Products” mean the Products that Manufacturer will produce for Buyer pursuant to these Terms and Conditions as set forth in applicable Product Schedule or as provided on the Order.

(k) Purchase Price. “Purchase Price” means the unit price for a Product as set forth in the applicable Product Schedule.

(l) Safety Stock Inventory. “Safety Stock Inventory” means Inventory that, unless purchased in advance of Orders, may not be available in sufficient quantities to manufacture Products as set forth in the applicable Product Schedule.

(m) Specifications. “Specifications” means the bill of materials, schematics, assembly drawings, designs, test specifications, current revision number, approved vendor list and other manufacturing information for each Product.

2. STATEMENT OF WORK.
Buyer hereby engages Manufacturer, and Manufacturer hereby accepts Buyer’s engagement, to furnish the necessary personnel, material, equipment, services, and facilities to manufacture Products in accordance with the applicable Specifications as required by Orders issued by Buyer and accepted by Manufacturer in accordance with Section 4(a) herein.

3. INTENTIONALLY OMMITTED.

4. ORDERING.
(a) Performance under these Terms and Conditions shall be initiated by Purchase Orders issued by Buyer and accepted by Manufacturer. Buyer shall be under no obligation to purchase, and Manufacturer shall be under no obligation to manufacture, Products hereunder unless and until Buyer issues an Order and Manufacturer has accepted the Buyer’s Order. Buyer’s Orders shall set forth for each Product ordered:

1. the Buyers Part number, quantity, and description
2. the applicable Purchase Price and total price
3. the delivery and shipping instructions, and
4. the requested delivery schedule,
5. All Orders shall be subject to and governed by these Terms and Conditions, which shall not be changed or supplemented by an accepted Order unless such changed or supplemental terms and conditions are set forth on the face of the Order, and specifically reference this Section 4(a).
6. Buyer acknowledges that pre-printed terms and conditions on its Order form, if any, shall not apply to the Order.

(b) Modification, Cancellation, or Schedule Changes by Buyer. Orders may be modified or cancelled, and scheduled shipments may be deferred or brought forward, only (i) upon Buyer’s prior written notice and Manufacturer’s written acknowledgement and (ii) upon terms, satisfactory to Manufacturer, that compensate Manufacturer for all reasonable and customary costs incurred by reason of such modification, cancellation, deferment or expedition of orders.

5. FORECASTS.
(a) Manufacturer’s Reliance on Forecasts. Buyer understands and acknowledges that Manufacturer calculated the Purchase Price for each Product assuming that Buyer would order at least the estimated quantity set forth in the applicable Forecast for that Product during the Forecast Period and that Manufacturer will also use the Forecast, among other things, to determine the amount of Inventory to purchase.

(b) Failure to Order Forecast Quantities. Buyer agrees to provide Manufacturer an annual rolling forecast for each Product for purposes described in Section 5(a). Buyer will issue Purchase Orders from time to time in fulfillment of the rolling forecasts. These purchase orders shall be deemed as firm and non-cancelable with reasonable allowances for changes in actual delivery to Buyer in fulfillment of Buyers needs. In the unlikely event that orders are modified or cancelled, the manufacturer shall be compensated for unrecoverable costs reasonably incurred by Manufacturer in reliance on the firm and non-cancellable Orders including supplier restocking fees and the costs associated with Inventory specifically ordered in fulfillment of Buyer’s needs. Manufacturer shall use all reasonable commercial efforts to return unused Inventory and to cancel pending orders with suppliers. Manufacturer shall submit its request for an equitable reconciliation and compensation not later than sixty (60) days after the end of the applicable Forecast Period. The parties agree to negotiate such request in good faith.

(c) Inventory Purchased Beyond Purchase Order Quantities. Buyer acknowledges that Manufacturer may need to occasionally purchase inventory beyond Buyer purchase order quantities under certain special circumstances. Such Inventory may include Long Lead Time, Minimum Buys, NCNR, and Safety Stock Inventory. Buyer agrees that if any such Inventory is not consumed for Buyer’s Orders, and cannot be returned or used on other orders within six (6) months of purchase, then Buyer shall purchase any such Inventory at Manufacturer’s cost.

(d) Inventory Disposition. Upon Manufacturer’s receipt of payment for any Inventory under Sections 5(b) and (c), Buyer shall have the option to: (i) direct Manufacturer to ship the Inventory to Buyer, at Buyer’s cost, or (ii) request Manufacturer store the Inventory for use on future Orders for a period of up to six (6) months or as the parties may otherwise mutually agree.

6. SHIPMENT AND DELIVERY.
Manufacturer shall ship Products in accordance with each accepted Order, subject to these Terms and Conditions. Delivery of Products shall be made F.O.B. at the loading dock of the Manufacturer’s facility on the dates specified in the applicable Order. Title to, and risk of loss for, Products shall pass to Buyer at the time of delivery of possession of the Products to a common carrier. Shipment to Buyer shall only occur according to Buyer delivery schedule.

7. ACCEPTANCE.
The Products shall be deemed accepted when Manufacturer has (i) tested and inspected the Product in accordance with the contracted level of testing and inspections as set forth in the Specifications and (ii) delivered the Product to Buyer.

8. PRICES; OTHER COSTS; PRICE CHANGES; INVOICING.
(a) Prices, Taxes. Buyer shall pay Manufacturer the Purchase Price set forth in the applicable Product Schedule, or in the absence of a Product Schedule, on the Order, which Purchase Price may be adjusted from time to time pursuant to the terms of these Terms and Conditions. The Purchase Price is exclusive of the costs of packaging, shipping and insurance and any applicable federal, state and local taxes, which shall be borne by Buyer.

(b) Price Changes. In addition to other provisions in these Terms and Conditions allowing for changes in the Purchase Price, if significant fluctuations occur at any time in the costs of Inventory, assembly, testing or labor, Manufacturer and Buyer will review the impact of such fluctuations and mutually agree to an increase or decrease in the Purchase Price arising for Products whose costs are affected by such fluctuations on a purchase order basis.

(c) Tooling/Non-Recurring Expenses. Buyer and Manufacturer shall negotiate in good faith over the costs, ownership, maintenance and upkeep of Product specific Tooling and Non-Recurring Expenses. Tooling, fixtures and other Product specific Non-Recurring Expenses for the account of the Buyer shall be individually listed on purchase orders. In these instances, the Buyer shall pay for, or obtain and consign to Manufacturer the Product specific tooling. The Manufacturer shall cause Buyer owned tooling to be clearly marked as being the property of the Buyer. Manufacturer shall maintain all tooling in sound working order and shall notify the Buyer when replacement tooling is warranted.

(d) Invoice and Payment. Manufacturer shall invoice Buyer concurrently with each shipment of Products. A proper invoice shall include Manufacturer’s name, invoice number and invoice date, the Buyer’s relevant Order number, the total quantity, Buyer Part number and descriptions, unit and extended price and the complete mailing address where payment is to be sent. Terms shall be net thirty (30) days upon the date of invoice. Payments shall be made in U.S. dollars.

9. ENGINEERING CHANGES.
Buyer may request in writing that Manufacturer incorporate an engineering change into a Product. Such requests shall include a description of the proposed change sufficient to permit Manufacturer to evaluate it. Manufacturer’s evaluation shall be in writing and state the impact of the requested change on delivery schedule and expected cost including material obsolescence. Manufacturer shall not be obligated to proceed with the requested engineering change until the parties have agreed on the changes to the Product, Specifications, delivery schedule and pricing, including, without limitation the cost to be paid by Buyer for re-assembly, retooling and inventory on hand and on order that becomes obsolete. Pricing for obsolete Inventory as a result of such change shall be based upon the cost of such Inventory purchased by Manufacturer.

10. FORCE MAJEURE.
Neither party shall be liable for its failure to perform hereunder due to any occurrence beyond its reasonable control, including acts of God, fires, floods, wars, terrorism, sabotage, accidents, labor disputes or shortages, governmental laws, ordinances, rules and regulations, whether valid or invalid (including, but not limited to, priorities, requisitions, allocations and price adjustment restrictions), inability to obtain material, equipment or transportation, and any other similar or different occurrence; provided, however, that obligations for payment for Products produced and shipped shall not be relieved or suspended by any event or force majeure. The party whose performance is prevented by any such occurrence shall notify the other party thereof in writing as soon as is reasonably possible after the commencement of such occurrence, and shall promptly give written notice to the other party of the cessation of such occurrence. The party affected by such occurrence shall use reasonable commercial efforts to remedy or remove such event of force majeure as expeditiously as possible.

11. INTELLECTUAL PROPERTY.
(a) Ownership of Intellectual Property; License. Title to and ownership of all of the technology, trade secrets, know-how, and information regarding the Products and the manufacture of the Products supplied by Buyer to Manufacturer hereunder shall be retained by Buyer. Buyer hereby grants Manufacturer a limited, non-transferable, non-exclusive, revocable license to use Buyer’s software, technology, trade secrets, know-how, and other proprietary information (“Buyer’s Proprietary Information”) for the purposes of these Terms and Conditions, free of any claim or allegation by Buyer of misappropriation of Buyer’s Proprietary Information of infringement by Manufacturer of any Buyer intellectual property rights covering Buyer’s Proprietary Information. Title to and ownership of any software, technology, trade secrets, know-how, and information of Manufacturer (“Manufacturer’s Proprietary Information”) shall remain the property of the Manufacturer.

(b) Confidentiality. The parties acknowledge that each party’s Proprietary Information set forth in Section 11(a) in addition to any Confidential Information as defined in the Non-Disclosure Agreement executed between Buyer and Manufacturer, if applicable, contain valuable trade secrets that are the sole and exclusive property of the other party. Each party agrees that it will maintain and protect the confidentiality of the other party’s Proprietary and Confidential Information using the same standard of care that such party uses to protect its own Proprietary Information, which in no event shall be less than reasonable care. The obligation to keep each party’s Proprietary Information confidential under this section 11 shall survive the termination or expiration of this Agreement. If Buyer and Manufacturer entered into a Non-Disclosure Agreement, then such Non-Disclosure Agreement shall co-exist and remain binding on the Buyer and Manufacturer. If there is a discrepancy between this Agreement and the Non-Disclosure Agreement, as it relates to the treatment of confidential information, the Non-Disclosure Agreement shall be controlling.

12. MANUFACTURER RESTRICTIONS AS TO USE OF PRODUCTS.
Buyer acknowledges and agrees that the Products are not designed for and, absent Manufacturer’s express written authorization, are not to be used in equipment where continued performance or performance on demand is critical (e.g. life support systems or critical weapons systems) and where failure or malfunction could lead to possible loss of life or catastrophic property damage.

13. NO WARRANTY

These Terms and Conditions do not provide Buyer any warranty. Warranties are only provided by Manufacturer to Buyer through a Manufacturing Agreement or Master Ordering Agreement.

14. LIMITATION OF LIABILITY.
EXCEPT AS EXPRESSLY PROVIDED IN SECTION 15 (INDEMNIFICATION) OF THESE TERMS AND CONDITONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF OR RELATING TO THIS AGREMANT OR CONNECTED WITH OR RESULTING FROM THE MANUFACTURE, SALE, DELIVERY, RESALE, REPAIR, REPLACEMENT, OR USE OF ANY PRODUCTS OR THE FURNISHING OF ANY SERVICE OR PART THEREOF, WHETHER SUCH LIABILITY IS BASED IN CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAD BEEN WARNED OF THE POSSIBILTY OF ANY SUCH DAMAGES.

15. INDEMNIFICATION.
Buyer shall defend, indemnify and hold Manufacturer and its parent companies, subsidiaries, affiliates, officers, directors, employees, agents and representatives harmless from any and all claims, demands, liabilities, actions, suits, proceedings, losses, injuries, death including damages, judgments expenses and/or costs (including without limitation reasonable attorney’s fees and related costs) based on or arising out of: (i) any claims or demands that use of Buyer’s Proprietary Information in manufacturing the Products constitutes infringement; (ii) any claims or demands relating to the design or manufacture of the Products; (iii) any claims or demands by any third party that there was a failure to warn of any foreseeable use, improper use, misuse or defects of any Products; (iv) any claims or demands relating to Buyer’s negligence, use, ownership, maintenance, transfer, transportation or disposal of the Products; (v) any claims or demands of Buyer’s violation or alleged violation of any federal, state, or local laws or regulation, including without limitation, the laws and regulations governing product safety, labeling, packaging and labor practices; or (vi) any claims or demands arising out of breach by Buyer of any of these Terms and Conditions, Manufacturer shall give written notice of any claim or potential claim to Buyer within a reasonable time following the time at which Manufacturer first became aware of the circumstances which gave rise to such claim for indemnification hereunder. No suit proceeding shall be settled or compromised without the prior written consent of Manufacturer.

16. DISPUTE RESOLUTION
(a) In the spirit of continued cooperation, the parties intend to and hereby establish the following dispute resolution procedure which shall first be utilized in the unlikely event any controversy should arise out of or concerning the performance of this Agreement.

(b) It is the intent of the parties that any dispute be resolved informally and promptly through good faith negotiation between Manufacturer and Buyer. Either party may initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. Within thirty (30) days following the date of such notice, the parties agree to meet in good faith to jointly define the scope and a method to remedy the dispute. If these proceedings are not productive of a resolution within thirty (30) days, then senior management of Manufacturer and Buyer are authorized to and will meet personally to confer in a bona fide attempt to resolve the matter.

(c) Should any disputes remain existent between the parties after completion of the resolution process set forth above, Manufacturer and Buyer agree to mediate any such dispute, before resorting to arbitration or court action. Mediation fees, if any, shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED.

(d) ARBITRATION OF DISPUTES. Manufacturer and Buyer agree that any dispute or claim in Law or equity arising between them out of the Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of experience relevant to the issue at hand, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law. The parties shall have the right to discovery in accordance with California Code of Civil Procedure Section 1283.05. In all other respects, the arbitration shall be conducted in accordance with Title 9 of Part III of the California Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Interpretation of this agreement to arbitrate shall be governed by the Federal Arbitration Act.

17. MISCELLANEOUS.
(a) Notices. All notices and other communications required or permitted to be given under these Terms and Conditions shall be in writing and hand-delivered, sent by email, or mailed by first-class mail postpaid or sent by an overnight courier with a reliable tracing system. Notices that are mailed shall be deemed to have been given as of the fourth business day following the date of mailing and notices that are hand-delivered, emailed, or sent by overnight courier are deemed to be given the next business day. Either party may change its address for the giving of notice by so notifying the other party by ten (10) days prior written notice given in the manner set forth in this section.

(b) Written Modifications. No amendment, modification or release from any provision of these Terms and Conditions, the Product Schedule or Orders issued hereunder shall be of any force or effect unless it is in writing and signed by both parties hereto and specifically refers to this Section 17(b).

(c) Existence of Business Relationship. Manufacturer may refer to Buyer and mention the existence of a business relationship in conversations, publications, interviews, and other forms of media or publications.

(d) No Waiver. A failure to exercise any right hereunder with respect to any breach shall not constitute a waiver of such right, power, or authority to act or to create any obligation, express or implied, on behalf of the other.

(e) Independent Contractors. Each party is acting as an independent contractor and not as agent, partner, or joint venture with the other party for any purpose. Except as provided in these Terms and Conditions neither party shall have any right, power, or authority to act or to create any obligation, express or implied on behalf of the other.

(f) Governing Law. The validity, interpretation and performance of these Terms and Conditions shall be governed by the laws of the state of California without regard to such state’s conflicts of laws principles.

(g) Entire Agreement. These Terms and Conditions, including all Product Schedules and accepted Orders, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all previous communication, either oral or written, between the parties hereto. There are no understandings, representations or warranties of any kind whatsoever, except as expressly set forth herein. Notwithstanding the previous two sentences of this Provision, if a Manufacturing Agreement or Master Ordering Agreement has been executed between Buyer and Manufacturer, then such Manufacturing Agreement or Master Ordering Agreement shall be controlling between the parties, and shall take precedence over these Terms and Conditions.